Pfizer fights to reduce out-of-pocket medication costs

Kaiser Health News reported on Pfizer's fight to reimburse Medicare patients for out-of-pocket medication costs. Without context, Pfizer's move might sound puzzling: why would a private company fight to reduce patient costs, and why would the government stop a private company from doing so?

To understand the motivations, it is helpful to understand why insurance policies have patients pay a portion of their medical expenses through arrangements known as co-pays, co-insurance, and deductibles. Essentially, if a service or good becomes free to a consumer, the consumer will tend to want to over-consume it. For example, if all doctor appointments were free to patients, many patients would want to schedule more appointments than what they are scheduling now, even if there is not a compelling medical reason (i.e. many patients might choose to see doctors in cases that they would not choose to see them under current circumstances). As a result, insurance policies tend to include some patient responsibility in their coverage. While the patient responsibility will not cover the full cost of the procedure (otherwise, insurance might become pointless), the financial cost to the patient might discourage wanton use of medical services. Patients often are not the direct customers of medical goods and services -- insurance companies are. As a result, patient responsibility is a way for insurance companies to reduce over-consumption.

Turning back to Pfizer's fight, we can now see why they might be interested in reducing patient costs: doing so would remove a barrier for patients to choose their medications, causing the government to pay for more doses. Paying patients directly might be considered too brazen of a kickback; instead, pharmaceutical companies can direct funding through non-profits whose missions are to increase patient access to life-saving medication. Pfizer's lawsuit seeks to gain permission to give funding to non-profits to increase patient access to a specific drug of theirs (the article reports that Pfizer settled with the government three years ago for a similar scheme).

It seems unclear whether the current courts will allow Pfizer to go forward with its strategy; if it does, many companies might follow suit. It could be that new legislation will be necessary to prevent this particular tactic.