Report: Brand Drug 'Copay Coupons' Would Raise Costs by $750 Million for Massachusetts Employers, Unions, and State Employee Health Programs

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Pharmaceutical Care Management Association

Nov 03, 2011, 01:16 ET

Promotions Lure Insured Consumers to Switch from Generics to Expensive Brands

WASHINGTON, Nov. 3, 2011 /PRNewswire-USNewswire/ -- If Massachusetts repeals its law banning prescription brand drug "copay coupons," costs for employers, unions and state employee health programs would increase by $750 million over the next decade, according to new research from Visante released today by the Pharmaceutical Care Management Association (PCMA).

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 the commercial market (except Massachusetts).

These promotions pose a special challenge to employers, which pay two-thirds the costs of each prescription their enrollees fill, regardless of price. Each time a drug company uses a $50 copay coupon to sell a $150 brand, it reaps $100 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.

"Copay coupons lure insured consumers to switch from generics to expensive brands. The big losers are the employer, union, and state employee health programs whose costs skyrocket," said PCMA President and CEO Mark Merritt.

Other key findings include:

(Click here to read the entire study)

Copay coupons will increase ten-year prescription drug costs by $32 billion for employers, unions and other plans 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).

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 200-plus million Americans.

Follow PCMA on Twitter http://twitter.com/pcmanet

SOURCE Pharmaceutical Care Management Association