Brand Drug 'Copay Coupons' Raise Health Costs for Employers, Unions, and State Governments by $32 Billion

Promotions Lure Insured Consumers From Generics to More Expensive Brands

(Washington, DC)— Prescription copay coupon marketing programs, which lure insured consumers away from generics and toward more expensive brands, will increase costs by $32 billion over the next decade, according to new research from Visante and released today by the Pharmaceutical Care Management Association (PCMA).

Drug companies now offer "copay coupons" to undermine efforts by employers, unions and state governments to reduce costs by assigning higher consumer copays to expensive drugs and lower copays to more affordable drugs. The economics of brand copay coupons are simple: each time a drug company can sell a $150 product by helping cover a $50 copay, it gains $100 in revenue, which is paid by the employer, union, or state government that offers coverage.

By definition, copay promotions target those who already have prescription drug coverage (i.e., those who pay copays). These programs are not means-tested or designed to help the poor or uninsured. Considered illegal kickbacks in federal health programs, copay coupons are banned in Medicare and Medicaid but are allowed in the commercial market (except in Massachusetts).

The study also found that 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. Likewise, if the law in Massachusetts was repealed, prescription drug costs for employers and other plan sponsors in that state would increase by $750 million.

Click here to read the study

"Copay coupons are designed to undermine generics, increase sales of more expensive brands and stick employers with the tab," said PCMA President and CEO Mark Merritt.

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).

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