New study reveals the extent to which drugmakers use condition-specific charities to induce spending on costly drugs
It’s well known that pharma companies are interested in and often help patients pay for typically unaffordable drugs, often via drugmaker-funded charities and often at odds with the regulations.
But what a new study in Health Affairs uncovers is just how pervasive this practice has become, with the Harvard-, Northwestern- and USC-affiliated authors noting the “substantial and growing” reach of patient assistance charities from 2010 to 2017.
Federal regulations currently allow biopharma companies to make tax-deductible donations to patient assistance charities, which can help Medicare enrollees pay for their medications.
But the study notes that these donations are not publicly reported, and the authors call for new regulations around such programs.
“We find that the leading manufacturers in many conditions would find it profitable to donate to these charities in spite of these restrictions. Thus, current federal guidance is insufficient to ensure that manufacturers are not earning kickbacks from their donations to patient assistance foundations; this guidance should be rescinded or substantially revised,” Leemore Dafny, professor at Harvard Business School, Christopher Ody, microeconomist at Northwestern University’s Kellogg School of Management, and USC’s Teresa Rokos write.
While the study did not observe which patients in the sample actually received charitable assistance or which manufacturers made donations, as the pharma-backed charities do not publicly disclose their donors, the authors evaluated manufacturers’ financial incentives by calculating patients’ cost sharing and manufacturers’ revenues on claims likely to be eligible for assistance.
Among the 10 costliest conditions, the authors note, where the leading manufacturer accounted for 67% of sales in 2010, rising to 89% in 2017, on average, the top two manufacturers combined accounted for 80% of spending on average in 2010 and 95% in 2017, “indicating that manufacturers could effectively assist in the purchase of their own medications by contributing to condition-specific charities.”
As an example of how a manufacturer could profit from donating to a condition-specific patient assistance fund, the authors point to short bowel syndrome.
The study calculated that 99.6% of all drug spending in this area in 2017 was attributable to Takeda’s Gattex (teduglutide), acquired from Shire in 2018, and which launched at a price of nearly $300,000 per year.
In 2010, a charity for short bowel syndrome did not exist, but the authors note that within 10 days of Gattex’s approval by the FDA in December 2012, a fund for short bowel syndrome appeared on the Patient Access Network Foundation’s website.
So if charitable assistance in 2017 induced just 3% of spending on the top manufacturer’s drugs, the median manufacturer “would have found it profitable to finance all assistance for the relevant condition,” the study says, with the authors concluding that the current regulatory landscape permits donations “that violate the spirit of Medicare’s Anti-Kickback Statute,” adding:
Our results illustrate the ability and incentive for biopharmaceutical manufacturers to skirt antikickback laws by making donations to patient assistance charities. To some degree, that donations induce utilization is not surprising: Cost sharing is known to reduce utilization, so defraying it should logically induce some portion. What our analysis suggests is that given the high prices of drugs treating covered conditions, together with relatively low cost sharing, manufacturers can profit from these donations under current regulations and enforcement, and this is especially true for the most expensive conditions.