Repealing Brand Drug 'Copay Coupons' Ban Increases Costs by $750 Million for Massachusetts Employers, Unions, and State Employee Health Programs

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Pharmaceutical Care Management Association

Jun 14, 2012, 10:25 ET

New JAMA Study: Copay Coupons Increase Consumer Costs, Health Insurance Premiums

WASHINGTON, June 14, 2012 /PRNewswire-USNewswire/ --If Massachusetts legislators vote to repeal the state ban on prescription brand drug "copay coupon" programs, costs for employers, unions, and state employee health programs would increase by $750 million over the next decade, according to research released by the Pharmaceutical Care Management Association (PCMA).

This research was highlighted in a new study released by the Journal of the American Medical Association (JAMA) that found copay coupons can increase out-of-pocket consumer costs and health insurance premiums.

Click here to read the new JAMA study.

Brand drug copay coupons induce insured consumers to choose higher-cost brands (despite higher copays) over generics and other, more affordable brands (despite lower copays.) These promotions target only those with prescription drug coverage, not the poor or uninsured (who don't pay copays). Considered illegal kickbacks in federal health programs, copay coupons are banned in Medicare and Medicaid, but not in the commercial market.

"Repealing this ban will absolutely increase costs for employers, unions, and taxpayers by steering consumers away from lower cost alternatives to more expensive drugs," said PCMA President and CEO Mark Merritt.

Copay coupons target employers, which pay two-thirds if the cost of each prescription their enrollees fill, regardless of price. Each time a drug company uses a $25 copay coupon to sell a $175 brand, it reaps $150 more in revenue from the employer, union, or state employee program providing coverage. Nationwide, commercial health costs rise by $3 billion for every one percentage point decline in the generic drug dispensing rate.

According to research from Visante:

(Click here to read the entire study)

If Massachusetts were to repeal its law banning copay coupons, prescription drug costs for employers and other plan sponsors in that state would increase by $750 million over the next decade.

Copay coupons will increase ten-year prescription drug costs by $32 billion for employers, unions and other plan sponsors if current trends continue.

If Medicare's ban on these programs was not enforced, costs to the Part D program would increase by $18 billion over the next decade.

Drug companies profit from coupon marketing programs in several key ways:

Copay coupons induce consumers to choose higher-cost brands (despite higher copays) over lower-cost competitors (despite lower copays). When consumers redeem copay coupons, the drug companies process them through a "shadow claims system" that prevents employers and other plan sponsors from knowing when enrollees have used them.

Drug companies often require consumers to submit confidential, personal information in order to redeem copay coupons. Manufacturers have long sought (but found difficult to obtain) such sensitive patient data, which enables them to identify and directly target individual patients with "brand loyalty" marketing programs.

Coupons can also increase consumer costs in several ways:

To help cover the $4 billion spent annually on copay coupons, manufacturers can simply raise prices. Manufacturers reportedly earn a 4:1 to 6:1 return on investment (ROI) on copay coupon programs.

Copay coupons create "brand loyalty" to the most expensive products in each therapeutic class of drugs, even among newly diagnosed patients.

Copay coupons do little to help the poor and uninsured. By definition, copay coupons target those who already have prescription coverage (i.e., those who pay copays).

Numerous consumer and payer groups oppose repealing the ban on copay coupons, including: Health Care For All, Community Catalyst, Blue Cross Blue Shield of Massachusetts, Massachusetts Association of Health Plans, and MASSPIRG.

PCMA represents the nation's pharmacy benefit managers (PBMs), which improve
affordability and quality of care through the use of electronic prescribing (e-prescribing),
generic alternatives, mail-service pharmacies, and other innovative tools for 216 million Americans.

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SOURCE Pharmaceutical Care Management Association