Higher costs are probably the last thing that comes to mind when most people think of coupons. For insurers and pharmacy benefit managers (PBMs), however, coupons used on non-preferred drugs are contributing to escalating health care costs. That’s why I focused on this topic for my presentation at the annual the specialty-focused conference of the Pharmaceutical Management Association’s (sPCMA) conference on Feb. 8, 2016.
In 2015, the pharmaceutical industry spent upward of $7 billion to fund coupon and copay assistance programs.1 Income-based patient assistance programs make up just 5 to 10 percent of the number. The rest was earmarked to guide patients toward choosing high-priced, brand-name medicines by eliminating their out-of-pocket costs. It sounds like a great deal for members, but in reality, that’s not the case. At a macro level, drug manufacturers are the only ones coming out ahead.
How coupons add costs to the health system
Coupons eliminate members’ cost share for high-cost brand medicine, removing the financial incentive for them to choose a lower-cost generic or preferred brand. This circumvents formulary design, putting the insurer on the line to pay for more, non-preferred brand-name medicine — at a price that is often inflated to recapture manufacturer revenue lost from offering coupons in the first place. This, in turn, leads to higher operational costs, leading to higher future premium increases for members. Almost everyone loses.
The exception to the rule — certain preferred specialty drugs
For traditional drugs, coupons almost always add to waste and excess. For non-preferred specialty drugs, they can lead to use of medicines that are less safe or effective, and higher net costs. However, for certain preferred specialty drugs, they may be beneficial. Our research team found that members were more likely to start certain specialty medicines when their cost share was less than $250.2 Most members already pay a lot less than that. However, for the small subset of member who have high-deductible health plans or high coinsurance, eliminating their cost share could have a positive impact.
Combating coupon use
With specialty drugs costing more than $5,400 per prescription,3 on average, and brand-name, traditional drug prices increasing at alarming rates, insurers and PBMs have developed new tools to fight rising costs. One such tool that gained adoption in 2015 was formulary exclusions. By “locking out” certain brand-name drugs from the formulary, members are driven to use lower-cost generics or preferred brand-name drugs to receive coverage. To date, all of the top PBMs offer or plan to offer these limited formularies to clients. Prime is currently evaluating its own exclusion strategy. Along with utilization management, this tool may prove to be the health system’s best defense against cost-driving manufacturer coupons.
- Koons, C., & Langreth, R. (2015, December 23). That drug coupon isn’t really clipping costs. Retrieved from http://www.bloomberg.com/news/articles/2015-12-23/that-drug-coupon-isn-t-really-clipping-costs
- Starner, C., Bowen, K., Qiu, Y., & Gleason, P. (2014, April 3). Association of specialty drug prescription abandonment with increasing member out-of-pocket expense. Presented at AMCP in Tampa, Florida. Prime Therapeutics.
- Prime internal data. (2013–2015).