Last week, prescription drug maker giants Merck (NYSE:MRK) and GlaxoSmithKline (NYSE:GSK) announced that they would stop offering prescription drug co-pay assistance to people who had purchased insurance plans on the exchanges created by the Affordable Care Act, also known as Obamacare.
Insurers and prescription benefit managers (or PBMs) often use higher co-pays to discourage consumers from purchasing the more expensive branded drug when a cheaper generic version is available. Big pharma companies like Merck, GlaxoSmithKline, Sanofi (NASDAQ:SNY) Eli Lilly (NYSE:LLY), and Novartis (NYSE:NVS) have responded by offering co-pay assistance (often in the form of coupons) to make the branded version equally cheap for the end consumer. But that practice may now be under threat among plans purchased on the Obamacare exchanges.
There is confusion regarding whether Obamacare insurance plans fall under regulations that ban co-pay assistance from drugmakers for Medicare and Medicaid members but have not thus far applied to private insurance. HHS Secretary Kathleen Sebelius, who has overseen the entire Obamacare rollout, and the Centers for Medicare & Medicaid Services, which run the federal exchanges where consumers have purchased insurance, have issued seemingly contradictory guidance, leading to confusion and concern throughout the pharmaceutical sector.
In this segment from Thursday's Market Checkup, Motley Fool health care analysts David Williamson and Michael Douglass discuss these developments and what they mean for consumers and your investments in these major drug companies.