Brand Drug ‘Copay Coupons’ Undermine Generics, Raise Health Costs by $338 Million in Oregon

Copay ‘Kickbacks’ Banned in Medicare, Unregulated in Oregon

November 29, 2011 -- The proliferation of brand drug “copay coupon” promotions, which lure insured consumers from generics to more expensive brands, will increase costs by $338 million in Oregon over the next decade for employers, unions, and state employee plans, according to new research from Visante and released by the Pharmaceutical Care Management Association (PCMA).

The use of these promotions by state and local government workers alone will cost Oregon taxpayers an extra $58 million over ten years.

However, in Oregon, PEBB, OEBB and Medicaid specifically prohibit the use of these coupons and if a pharmacy is caught accepting them, the pharmacy will be terminated from the network, according to Alissa Robbins, Office of Communications with the Oregon Health Authority. 

Unlike groceries and other goods that are purchased directly by consumers, 2/3 of prescription drug costs are paid by the employers, unions, and government agencies (i.e., taxpayers) that provide coverage, not consumers themselves.

Though banned as illegal kickbacks in federal health programs, copay coupons are unregulated in the commercial market (except Massachusetts).

To minimize premiums and reduce costs, those who offer prescription drug coverage assign higher copays to expensive brands and lower copays to more affordable drugs that treat the same condition. In response, drug companies now offer coupons that cover the higher copays but not the cost of the actual drug.

By covering a $50 copay to sell a $150 brand, drug companies extract an extra $100 from the employer, union, or government agency that offers coverage. This helps explain why copay coupons target only those with insurance (i.e., those who pay copays), not the poor or uninsured.

“Brand copay coupons lure patients from generics to expensive brands and stick employers, unions, and government employee health programs with the extra costs,” said PCMA President and CEO Mark Merritt. “In Oregon, taxpayers will pay an extra $58 million just to cover the use of brand copay coupons by government workers in state and municipal employee health programs.”

Drug companies profit from coupon promotions in several 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 nationally, 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.


To read the study, click here.

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Very good and timely discussion...and as corroboration here is an excerpt from a recent advisory from Express Scripts.... "Pfizer is promoting a “$4” copay discount card for Lipitor patients. The card is designed to offset a patient’s out of pocket expense up to $50 per 30 day supply of Lipitor. It is important to note that the card does not reduce the plan cost in any way. As with all other copay cards, the Lipitor card is not valid for patients covered by federally funded health plans such as Medicare, Medicaid or federal employee insurance. The copay card is not valid in states that do not accept them (e.g. Massachusetts). Express Scripts Home Delivery does not accept copay cards. We anticipate that Pfizer will continue to promote Lipitor via copay cards throughout the duration of the generic exclusivity period. We anticipate that Pfizer will discontinue copay cards after the generic exclusivity period ends and multiple generics enter the market." And people wonder why it is so hard to control rising costs and to actually effectuate reductions???? This is just one example of the challenge... Patrick Pine