Loyalty cards that encourage patients to buy brand-name drugs have forced Canada’s private-insurance plans to spend nearly 50 per cent more than they would have if patients had filled their prescriptions with cheaper generics, new research has found.
A University of British Columbia study that examined more than 2.8 million prescriptions for 89 medications is the first to reveal the financial impact of the discount cards that pharmaceutical companies began promoting at the start of this decade, when patents expired for a slew of brand-name drugs.
The discount cards – which patients can get from doctors and pharmacists or by signing up online – barely affected government drug spending in Canada, and actually benefited some Canadians who paid out of pocket.
But the cards took a major toll on private-insurance plans, leading those plans to spend, on average, $23.09 more per prescription than they would have if their members had picked a generic instead.
“Ultimately, that’s going to raise the premiums in those plans and that’s going to come up the next time [workers] go into collective bargaining,” said Michael Law, lead author of the study and a UBC professor who holds a Canada Research Chair in Access to Medicines.
“That’s going to mean a cut to something else that would probably provide a lot more benefit than taking a brand instead of a generic when they’re chemically identical.”
The pharmaceutical industry’s discount cards are designed to convince patients to stick with more expensive brand-name drugs, even as the full tab of a brand-name version is often passed on to an insurer.
As an example, if the total cost of a generic prescription was $32, a common co-pay would be $6.40 — that is what a beneficiary would pay if his or her workplace benefit plan covered 80 per cent of prescription drug costs.
If, under the same cost-sharing scenario, a brand-name version of the prescription cost $120, the co-pay would be $24. However, if a patient deployed a discount card, his or her co-pay would be reduced to $6.40, making it seem as though the generic and brand drugs are the same price.
The study found that in 88 per cent of cases, the pharmacy submitted the claim to the private insurance plan before applying the discount card.
“What shocked me is that many of these cards are in fact subsidizing the patient so that the patient will be paying less out of pocket or nothing at all out of pocket,” said Marc-André Gagnon, a pharmaceutical policy expert at Carleton University. “For me, this is a system of bribes. There’s no other word for that."
Dr. Gagnon, who was not involved in the original research, published a commentary alongside the new study titled, “Co-pay cards: Improving choice or institutionalizing bribes?”
Both pieces were published Monday in the Canadian Medical Association Journal.
Dr. Law and three of his colleagues obtained prescription data from more than 1,000 community pharmacies across Canada between 2014 and 2017. They examined brand-name prescriptions filled with loyalty cards and found that private plans spent 46 per cent more than they would have had their members chosen generics.
Government-sponsored drug plans spent only 1.3 per cent more, mainly because they have strict policies enforcing generic substitution. Uninsured patients, meanwhile, saved 7 per cent with the discount cards, or about $3.50 per prescription.
Stephen Frank, president of the Canadian Life and Health Insurance Association, said there has recently been a “rapid increase" in the number of private plans moving to mandatory generic substitution, with 61 per cent of insured Canadians in such a plan last year, up from 44 per cent in 2014.
“Canada’s life and health insurers are strong advocates for reducing costs for prescription medications,” Mr. Frank said by e-mail.
The companies that operate Canada’s two largest drug-discount card programs, RxHelp and InnoviCares, did not respond to requests for comment about the study.
Innovative Medicines Canada, which represents brand-name drug makers, declined to comment.
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Kelly Grant