The battle to control high drug prices between pharmaceutical companies, insurance companies, and the government continues to rage on. On January 8, Patient Services Inc. (PSI), a patient-assistance charity, launched the newest crusade by suing the Department of Health and Human Services (HHS).
What is a patient-assistance charity?
A patient-assistance charity works to help patients with expensive prescriptions pay for their medication. Though seemingly benign, patient-assistance charities get most, if not all, of their funding from pharmaceutical companies. These are the same pharmaceutical companies that have, since the heyday of Martin Shrekli, been criticized countless times by the media and dragged into Congress for raising drug prices.
This is where a patient-assistance charity comes in and provides a shield for badly bruised companies. Charities help quell public criticism for increased drug prices because companies, by pointing to the charities, are able to ensure critics that patients who need their drugs will be able to afford them. Shrekli even did this for Daraprim, the drug that he raised the price by 5,000%. Within days of raising the price, Turing, the company that manufactures Daraprim, called PSI and created a fund for patients with toxoplasmosis, the infection that is most often treated with Daraprim.
The good publicity is only icing on the cake. The real reason pharmaceutical companies donate to patient-assistance charities is because it is profitable. For every $1 million spent on a charitable donation, the company has the potential to generate $21 million in revenue. The company also receives a tax deduction for their donation. Companies profit because they only have to pay a couple hundred dollars to cover the patient’s co-pay and they will receive thousands of dollars for the remaining cost of the drug from the patient’s insurance company.
The funds also allow drug companies to get around anti-kickback provisions. Pharmaceutical companies cannot give patients enrolled in Medicare or Medicaid a co-pay coupon (coupons that help reduce or eliminate co-pay costs for a certain drug). However, companies are authorized to give to patient-assistance charities that help patients on Medicare or Medicaid.
There are rules governing the relationship between the companies and charities. Companies are not allowed to dictate how the donations are spent, but this doesn’t always play out in practice. An IRS analysis of the Chronic Disease Fund (CDF) found that almost all of the financial assistance went to patients taking drugs from their biggest funder, Genentech. In 2011, Celegene gave CDF $48.8 million to support a fund for multiple myeloma patients and 98% of the money from that fund went to patients taking drugs from Celegene.
Patient Services Inc v. Health and Human Services
In its suit, Patient Service Inc v. Health and Human Services, PSI alleges that the federal oversight of its charity violated its free speech rights by limiting its ability to communicate with donors. PSI says the oversight is burdensome and threatens the existence of the organization.
PSI might be going on the offensive in reaction to the Office of Inspector General (OIG) of HHS revoking its favorable advisory opinion of another patient-assistance charity, Caring Voice Coalition (CVC). OIG rescinded its favorable opinion because CVC gave drugmakers data that could help them see if their contribution was being directed for their own drugs, potentially giving the companies “greater ability to raise the prices of their drugs while insulating patients from the immediate out-of-pocket effects.” The coalition has since announced that it will no longer be able to offer any financial assistance in 2018. On top of this, patient-assistance charities are also feeling the heat from the U.S. Attorney’s Office in Massachusetts and the Internal Revenue Service.