Co-pay coupons and prescription drug pricing
PPharmaceutical companies have successfully stimulated demand for high-priced branded drugs by offering coupons to compensate for cost-sharing with patients. While consumers who qualify for these coupons receive immediate benefits, the practice has frustrated insurers’ efforts to manage costs and increased drug spending in the United States, according to a new study.
In (NBER Working Paper 29735), , and Estimate the effects of voucher programs on drug use and prices. They use Medicare Advantage enrollees as a control group because they are prohibited by law from using copayment coupons.
Coupons that reduce co-payment costs for brand name drugs undermine insurers’ efforts to promote more cost-effective drug therapies.
Coupons protect consumers from the cost-sharing incentives that private insurers rely on to promote the use of cost-effective drug therapies, for example, multilevel formularies. For example, the co-payment for a generic drug may be as little as $5 or $10, compared to much higher amounts, often a percentage of the actual cost, for brand name drugs. “Preferred” brands for which an insurer has negotiated a favorable price also generally have lower copayments than non-preferred brands.
Co-pay coupons and related initiatives by pharmaceutical companies are designed to stimulate demand for brand name drugs. Simultaneous marketing by representatives of these companies also helps doctors become familiar with and comfortable with prescribing coupon drugs.
The researchers use two approaches to calculate the impact of coupons on the use of prescription drugs. The first is based on data from a large pharmaceutical benefits manager over the period 2014-2017. It focuses on drugs that were not exposed to generic entry during the study period and had been on the market without a coupon for at least nine months. Price data is based on what insurers paid after discounts and other discounts.
In the 12 months following the introduction of drug coupons, people covered by commercial insurance plans increased their purchases, measured in days of drug provided, by more than 20% on average compared to those enrolled in Medicare Advantage. The researchers found no incremental price effect, which they believe could be due to the relatively short post-coupon analysis period.
The second approach focuses on prices and expenditures for a single class of drugs, disease-modifying treatments for multiple sclerosis. Researchers study claims data from 2009 to 2017 from the Health Care Cost Institute, which includes claims from a quarter of commercially insured consumers and 35% of Medicare Advantage enrollees. They estimate that banning copayment coupons would reduce total spending on these drugs by $950 million, which would translate into a 7.6% cost reduction for insurers. They further estimate that the market shares of coupon drugs would fall by 6-9% if coupons were no longer used, while those of non-coupon drugs would increase.
For Medicare Advantage enrollees, banning coupons would reduce premiums and out-of-pocket costs, since copayments are typically a percentage of the drug price. For those with commercial insurance, out-of-pocket expenses would increase, but the reduction in health insurance premiums could be greater than the increase in co-payments – up to four times greater if insurers and plan sponsors passed on all savings on drug costs to enrollees. The researchers note that a variety of potential mechanisms exist to mitigate the impact of a co-pay coupon ban on commercially insured consumers, such as a lump sum transfer to a health savings account for enrollees with onerous terms. .