Eight drugmakers are being sued by US labour union health funds for offering their members co-pay discount cards and coupons on their prescription drugs, claiming that these constitute "an illegal kickback" and "a form of insurance fraud."

Seven lawsuits filed in US District Courts in Newark, New York, Chicago and Philadelphia by the unions and the national consumer advocacy group Community Catalyst claim that subsidising co-payments for brand-name prescription drugs is illegal under a federal statute - the Racketeer Influenced and Corrupt Organization Act - that prohibits "commercial bribery." This is because the undisclosed payments to patients and pharmacies are made through a "shadow claims" system which is designed to keep information about the presence or amount of these payments from health plans, they say.

"Presenting a co-pay subsidy card to a pharmacist triggers a secondary form of insurance - provided by the manufacturer - that functionally reduces the price of the drug without disclosing that reduction to the insurer," say the lawsuits, which have been brought against Abbott, Amgen, AstraZeneca, Bristol-Myers Squibb, GlaxoSmithKline, Merck & Co, Novaris and Pfizer.

These firms "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 Community Catalyst's Prescription Access Litigation (PAL) project.

Under most health plans, consumers pay a larger co-payment for brand-name drugs. By subsidising all or the majority of a consumer's co-payment, drug companies promote the sale of these products over less expensive but equally effective medications. This drives up the cost of care for health plans, employers and, ultimately consumers, says Community Catalyst.

"In addition, consumer 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 forego important care when they need it," it adds.

The advocacy group points to a recent report by the Pharmaceutical Care Management Association (PCMA), the trade association for pharmacy benefit managers (PBMs), which estimates that, by 2021, drug coupons will have increased US pharmaceutical costs by $32 billion. Federal government health plans like Medicare consider these coupons kickbacks and have banned them; they are also prohibited in Massachusetts under an anti-kickback law, while the Food and Drug Administration (FDA) is currently looking at whether they can mislead consumers about the safety and risks of drug products, it adds.

In 2009, half of the 109 best-selling US brand-name drugs were promoted by coupons, and the number of coupon subsidy programmes has skyrocketed since then, from 86 in July 2009 to 362 in November 2011, says the group. 

"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," it says. In 2010 alone, co-pay coupons were used in one-eighth of all brand-name purchases, or 100 million prescriptions, according to the PCMA report.

"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, one of the health plans filing the lawsuits.  The other plaintiffs are AFSCME District Council 37 Health & Security Plan Trust, the New England Carpenters, and the Plumbers and Pipefitters Local 572 Health and Welfare Fund.

"Drug company coupons are not coupons. They are high-interest loans. We save money now, but we pay the loan sharks later," added William Jordan, a physician in New York City who serves low-income patients.

In a statement responding to the suits, Pfizer comments that it "supports individualised treatment choices by physicians and their patients. Given the larger cost-sharing burden being placed on patients, Pfizer supports the use of company-sponsored programmes which help patients with out-of-pocket expenses," the firm adds.