BOSTON, MA – Three health plans in Community Catalyst’s Prescription Access Litigation coalition today filed class action lawsuits in four federal courts against major drug manufacturers for illegally subsidizing co-payments for expensive brand-name prescription drugs such as Lipitor and Nexium through the promotion of co-pay coupons.

The lawsuit alleges that the payments by eight drug makers — Abbott, Amgen, AstraZeneca, Bristol-Meyers-Squibb, GlaxoSmithKline, Merck, Novartis, and Pfizer — are illegal under a federal statute that prohibits commercial bribery because the undisclosed payments to patients and pharmacies are made through a ‘shadow claims system’ designed to keep information about the presence or amount of these payments from health plans.

Community Catalyst, a national consumer advocacy organization, warns that while prescription drug coupons appear to save consumers money by reducing or eliminating co-payments, in reality they dramatically increase the cost of health care by driving up health insurance premiums and potentially causing consumers to hit benefit caps or lose coverage altogether.

“Pharmaceutical corporations are duping consumers with misleading coupons that are more about increasing corporate profits than actually reducing the cost of drugs for consumers” said Wells Wilkinson, director of the Prescription Access Litigation project at Community Catalyst. “If not stopped, the use of these deceptive coupons will increase costs for consumers’ health plans by billions of dollars, contributing to higher premiums and the increasing loss of coverage and benefits for Americans.”

A recent report by the Pharmacy Benefit Manager trade association (PCMA) estimates drug coupons will increase drug costs by $32 billion nationwide by 2021. Federal government health plans like Medicare consider these coupons kickbacks and have banned them; they are also banned in Massachusetts under an anti-kickback law.

The lawsuits were filed in New York, Chicago, Philadelphia and Newark by the AFSCME District Council 37 Health & Security Plan Trust, Sergeants Benevolent Association, the New England Carpenters, and the Plumbers and Pipefitters Local 572 Health and Welfare Fund. These health plans provide drug benefits for civilian and uniformed municipals workers, retirees and their dependents throughout the City of New York, plumbers from Florida to Ohio, and carpenters throughout New England. All of these health plans are struggling to keep up with continually rising drug costs.

“Our members are harmed by these unlawful practices by drug companies because coupons offering discounts off of brand drugs don’t save consumers money in the long run.” says Lillian Roberts, Executive Director of AFSCME, District Council 37, a plaintiff in the lawsuit.

“By combining direct-to-consumer marketing and supermarket ‘coupon clipping,’ pharmaceutical companies are steering consumers to higher priced drugs in the pursuit of greater profits” said Edward Mullins, President of the Sergeants Benevolent Association, also a plaintiff in the lawsuit.

Under most health plans, consumers pay a larger co-payment for expensive brand-name drugs. By subsidizing all or the majority of a consumer’s co-payment, drug companies promote the sale of these expensive products over less expensive, equally effective medications. This drives up the cost of care for health plans, employers and, ultimately, consumers. In addition, consumers who stay on expensive brand-name drugs run the risk of reaching their coverage caps sooner, forcing them to either pay out of pocket or forgo important care when they need it.

“Drug company coupons are not coupons. They are high-interest loans. We save money now, but we pay the loan sharks later,” said Dr. William Jordan, a practicing physician in New York City serving low-income patients.

In 2009, half of the 109 best-selling U.S. brand-name drugs were promoted by coupons, and the number of coupon subsidy programs has skyrocketed since then, from 86 in July 2009 to 362 in November 2011. Coupons are aggressively marketed to consumers by TV, radio, Internet ads, and through physicians and pharmacists. And consumers are using them up, unaware of the negative impact on their premiums. In 2010 alone, co-pay coupons were used in one-eighth of all brand-name drug purchases, or 100 million prescriptions, according to the PCMA report.

Coupons also threaten anticipated savings from so called “patent cliff drugs,” the dozens of brand-name drugs going off-patent between 2010 and 2013 and competing for the first time against generic counterparts.

Aside from cost concerns, consumer advocates and policymakers are also concerned about coupons for safety reasons. For instance, the FDA is currently studying whether drug coupons can mislead consumers concerning the safety and risks of drug products.


About Community Catalyst
Community Catalyst is a national non-profit consumer advocacy organization dedicated to quality affordable health care for all. Community Catalyst works in partnership with national, state and local consumer organizations, policymakers, and foundations, providing leadership and support to change the health care system so it serves everyone – especially vulnerable members of society. For more information, visit Read or comment on our blog at Follow us on Twitter @healthpolicyhub.

The 130-member Prescription Access Litigation coalition, a project of Community Catalyst, has played a major role in bringing lawsuits challenging illegal pharmaceutical industry pricing or promotional tactics. One lawsuit resulted in over $360 million in settlements with 29 of the country’s largest drug makers.