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Drug Coupons Have Everyone Bamboozled

The government issued a confusing new rule designed to curb the use of drug manufacturer coupons, then delayed its implementation until 2021. We feel their pain.

Drug coupons are everywhere. You’ll find them in the mail, online, and in most magazines. Many patients, especially those with chronic conditions, have come to depend on the co-pay relief these programs provide. For self-funded payers, however, drug coupons can be an expensive nuisance, causing confusion and disruption when it comes to the way they structure and provide benefits on behalf of their employees.

Essentially, by making these coupons so readily available pharmaceutical manufacturers have found a way to raise prices infinitely without reducing demand.[1] Sounds crazy, right? But studies show that a given coupon will put a significant dent in the percentage of prescriptions filled with a generic competitor, and that, as a result, coupons actually increase drug spending.

The problem is messy enough that, as part of its stated goal of bringing prescription prices down, the Trump Administration recently proposed a rule that would allow insurers to ignore the value a drug coupon when calculating progress toward both your deductible and your max-out-of-pocket limit.

In other words – use the coupon, but don’t expect to get credit for cost-sharing as a result.

This rule would apply ONLY in cases where a generic equivalent available, which—combined with the fact that this may be in conflict with IRS rules—was the source of enough confusion that implementation of the rule was delayed until at least 2021.


We shouldn’t blame the doctors who hand these coupons out so readily. Our health care providers want us to be well, to feel better, and drugs don’t work in patients who don’t take them. There is no question that co-payment support helps encourage patients to take their medications as ordered.

And, of course, because prices for drugs that treat chronic conditions continue to skyrocket, many very sick patients depend on both the coupons and the cost-sharing benefits that accrue toward both their deductible and max-out-of-pocket. We are talking thousands of dollars in patient support.

The problem, of course, is that someone is paying full freight.

In America today, that’s most often the employer. Or it’s Medicare. And if, according to Health Affairs, the “Centers for Medicare and Medicaid Services (CMS) is concerned that coupons are incentivizing more expensive brand-name drugs and unnecessarily increasing overall drug costs and premiums,” you probably should be too.[2]

Another problem: what if it is the existence of coupons that is causing prices to spin out of control?

According to a highly-regarded 2017 study[3], branded drugs with coupons experience growth of 12–13% per year, compared with 7–8% per year for branded drugs without coupons. While the percent differences might seem small, the dollars are not. The researchers also found that, “Coupons for 23 branded drugs, for which generics were available, led to increased spending of $700 million to $2.7 billion for those branded drugs over five years!”


From the point of view of the government and other payers (which includes massive, profiteering conglomerates like CVS Caremark and Express Scripts), drug coupons represent an unregulated form of secondary insurance. Some authors refer to them as “side payments,” and suggest that they are designed to undermine insurers attempts to make us smarter drug shoppers.

Scripta has been all over this for a while: “We want to make sure we give kudos to the administration for giving it a go,” says Mindy Bradley, co-founder of the PBM savings consultancy. “Drug coupons play havoc with our best efforts to make sure that our pharmacy benefits programs remain solvent in the face of profit-taking by the drug makers, and for years only a few of us were taking that into account.”

She continues, “As payers, we want to make certain that members have access to the best medicines at the best price. That means encouraging smart shopping while at the same time keeping deductibles under control.”

ProPublica, in a must-read expose, notes that “coupons stymie insurers’ attempts to encourage consumers to factor price into their health-care decisions. And by making the true cost of a drug essentially unknowable, they are yet another example of how medical pricing remains opaque.”[4]

Or, as one commenter put it, “Drug coupons drive increased cost and create rate shocks that effect everyone.”[2]


CVS Caremark, Express Scripts, etc. have reacted to the proliferation of drug coupons by adopting unpopular “copay accumulator programs”—programs that adjudicate what does and doesn’t apply to your deductible.

Easy enough for big, faceless companies to make that call.

The people who manage self-funded plans go to work every day with the people whose benefits they oversee. We want our members to be well, and so we need them to be taking their meds!

Given broad, bipartisan objection to these accumulator programs, some states (Virginia and Arizona, among others) have outlawed them.[5] The final 2020 payment rule was qualified thus: to allow cost-sharing exemptions ONLY when a less-expensive, generic equivalent is available.

But it’s not just generic drugs that cost your plan money.

Defenders of drug coupons rely on a 2012 study that claims, “87 percent of coupons are for drugs that have no generic equivalent. The 13 percent of branded drugs programs in which generic equivalent products are available accounted for only 0.05 percent of all prescriptions filled.”[6]

2012? They might as well be living on a different planet.

Take Restasis, for itchy eyes, a drug that’s proven only 15% effective in clinical trials. There’s no “quote unquote” generic equivalent, so it doesn’t fit neatly into this discussion (that’s how Big Pharma plays the game). As you might expect, there is an equally-effective, over-the-counter option known as Refresh Tears, which retails for about $9.99. You can get Restasis for $0 with a coupon. But we have seen health plans paying as much as $180 a fill!

For one client (1400 employees, 14 of whom had itchy eyes), a simple switch would have saved the plan $36,368 annually.

And that’s one coupon, one drug.

P.S. The end result of all this: until 2021, unless a state prohibits it, insurers and plans can likely continue to exclude drug manufacturer coupons from an enrollee’s annual limit on out-of-pocket costs.




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