This is a post in a series of articles I’m writing called “5 points & 1 resource” (think tl;dr but 5p;1r), where I summarize a list of 5 concepts that would have helped me start learning or re-learning a certain topic. It is intentionally far from a complete source of data.
I recently came by this one reference on the nuances between an individual, their insurance plan and a drug company from an article titled “Is My Drug Copay Coupon a Form of Charity — Or a Bribe?”. I thought it was important enough to be summarized in 5 points below.
Pharma releases a super expensive drug. While R&D costs are high, the pricing of brand name drugs is still disproportionately high compared to their generic alternatives.
Insurance companies set a high co-pay. Insurance companies set co-pays not only to reduce their own costs but also to encourage the use of drugs that favor generics without sacrificing for quality.
Pharma pays the copay on behalf of the individual. To incentivize individuals to select the expensive brand name option, pharma offers financial assistance or copay cards (copay coupons) to reduce or eliminate the individual’s out-of-pocket cost.
Insurance gets a big bill. With the individual leaning towards the brand name drug due to reduced out-of-pocket expenses, the insurance company bears the remaining high cost of the drug.
Pharma gets a tax write-off. Pharma gets a charitable tax write-off for the copay coupon It’s important to note that this is nuanced, and not all copay assistance programs qualify, and can vary by jurisdiction and insurance type or plan.