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Cite as: CMAJ 2019 November 11;191:E1235-6. doi: 10.1503/cmaj.191447
See related article at www.cmaj.ca/lookup/doi/10.1503/cmaj.190098
Between 2010 and 2015, many patents for blockbuster drugs expired, and pharmaceutical companies were faced with competition from the makers of generic versions ("generics"). It was called the "patent cliff."1 To preserve their market share, producers of brand-name drugs introduced loyalty cards as a critical marketing strategy to promote drugs that were no longer under patent, like Lipitor, Crestor and Nexium. Also called co-pay cards (CPCs), these loyalty cards lower patients' copay amount for a brand-name product to the level it would have been if they had purchased a generic.2 Essentially, pharmaceutical companies act as a second insurance payer through the cards so that patients are free to choose between a (more expensive) brand-name drug or a lower-priced generic without having to pay more out of pocket for the former. In Canada, 2 loyalty card programs dominate the market, covering about 150 products. The introduction of mandatory generic substitution was intended to entirely mitigate the negative effects that CPCs could have on payers' costs. However, the findings of a linked study by Law and colleagues3 suggest that this is not entirely the situation.
Serious concerns related to CPCs have been highlighted previously.4,5 First, use of the cards means that confidential clinical data of individual patients are provided to drug companies. Second, concerns have been raised about the costs and financial incentives associated with CPCs. To illustrate this, let's assume that a drug costs $100 for the brand-name version, $20 for the generic version; the dispensing fee is $10; the pharmacy margin is 10%; and the insured patient pays a co-pay rate of 20%. Public and private drug plans usually use cost-sharing mechanisms like co-pays to steer the insured toward the most cost-efficient choice of medications.6
Box 1 presents some typical payment structures for a prescription based on different scenarios. Scenarios A and B consider the situation where an individual without a CPC chooses between a generic or brand-name drug. Because of the cost-sharing mechanism, the insured would normally pay less out of...