Drug company programs to help pay poor patients pay for expensive drugs may have unexpected pricing side effects for consumers

Many drug companies have “patient assistance programs” to aid uninsured or low-income patients to pay for expensive drugs.  These programs sound well-intentioned and do help some people.  On the other hand, they are not necessarily created for altruistic reasons or even for public relations, but sometimes to promote new drugs that are more expensive and not always better than the old drug(s) used for a particular medical condition.

These programs would not seem to affect anyone except their recipients, but they do have some  indirect effect of raising the prices the ordinary consumer pays, because the money used for these patient assistance programs has to come from somewhere, so the company may raise the regular market price a bit to make up the cost. Furthermore, patient assistance programs may steer people to costlier drugs. According Steve Schondelmeyer, a professor of pharmaceutical economics at the University of Minnesota, “There may be a drug available that costs $50 or $100 that is the safest, most effective drug that you should be on. But these programs may take a drug that costs $500 or $1,000 and make it a zero out-of-pocket cost to the patient.”  (See http://www.marketplace.org/topics/business/drug-companys-subsidies-patients-under-review)

The result of establishing the new, more expensive drug as a regular treatment is that insurance, either the employer or a government program, will usually have to pay the extra cost. Then, in future years, premiums will go up to cover the cost for private programs, and taxes will rise to cover the cost for government programs.  This is a variation on a more general phenomenon that, when a program is created to make a product cheaper or free for some, it either results in the price of that product rising for others, or everyone has to pay for the subsidy through fees or taxes.

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