A Healthy Blog

Massachusetts health care — wonky, with a healthy dose of reality

Drug coupons – a pharma company’s best friend

Drug coupons – a pharma company’s best friend

October 30, 2011

Earlier this week, Health Care For All testified before the Joint Committee on Financial Services in opposition to a bill that would allow the pharmaceutical industry to market “coupons” for brand name drugs.  This bill is one among many before the Massachusetts legislature that would open up a whole new marketing ploy for the pharma and medical device industry.

As consumer advocates, we at HCFA see drug coupons as nothing more than a tactic to entice consumers into purchasing more expensive brand-name drugs, when cheaper and equally-effective generics are available.

Drug companies provide coupons in limited quantities and only for expensive name-brand drugs.  As soon as the coupons run out, consumers are forced to pay the high co-pay out of pocket for the duration of the prescription.  In some cases, they may need to take that drug for many years.  In the end, individuals are left with higher out-of-pocket costs, and the drug companies benefit by selling more of their most expensive drugs. If drug companies are serious about helping consumers afford drugs they need, they should simply reduce the drug price.

The health care system as a whole also incurs higher costs when drug coupons are utilized.  Because insurance companies pay the entire of cost of a prescription drug minus the co-payment, drug costs are significantly more when consumers choose to purchase a name-brand rather than a generic prescription drug solely because of a coupon.  In the long-run, this doesn’t benefit consumers but rather leads to increased insurance co-pays and premium costs for everyone.

For an account of how this plays out in the real world, listen to the story presented in this fabulous This American Life report of how a young man was lured by drug coupons into purchasing an acne drug that costs over $600 more than the generic version. NPR’s Planet Money reporter calls drug coupons part of an escalating arms race, as the drug industry tries every way possible to market its high-margin drugs directly to patients.

Coupons are already banned by Medicare and Medicaid, and the Commonwealth’s longstanding policy in this area should be maintained.  Legalizing drug coupons in Massachusetts would represent a significant step backwards in our efforts to control prescription drug costs.

Cost is the most significant health care issue facing the Legislature and the Commonwealth today. There's no question that allowing drug coupons would raise costs. Look at the experience of Union College, which experienced soaring drug costs when coupons expanded:

Beforehand, CDPHP [their health plan] spent roughly $500,000 each year for this class of antibiotic drugs. But by the first quarter in 2008, less than six months after the coupon was introduced, costs soared to $1.2 million, says Eileen Wood, vice president of pharmacy and quality programs at the plan.

CDPHP's cost for a one-month's supply of Solodyn, she says, was $500 with a $50 co-pay, compared to $40 a month with a $10 co-pay for the generic version -- which fewer people used because of the coupon.

"They're problematic because they do increase costs, which carries over, not only to the employer, but to the employee as well," [benefit director Eric Noll] adds. "Employees will end up paying a higher premium than they need to and the plan ends up paying a much higher cost. In the long run, everybody loses."

As we all wrestle with how to get escalating insurance premiums under control, it is important that we not lose sight of the progress we have made in addressing the ways in which pharmaceutical and medical device marketing can drive costs up health care costs.  Massachusetts should not take a step backwards in this fight.
-Alyssa Vangeli