HPS Combats the Unnecessary Use of High-cost Drug Coupons

June 16, 2011

Using a drug coupon

Brand-name medication couponing increases plan costs.

The pharmaceutical industry faces an unprecedented number of patent expirations between 2009 and 2013. These expirations include blockbuster drugs like Lipitor, Lexapro, Plavix, and Singulair between now and the end of 2012. Due to impending generic competition, the industry expects to lose 18 percent of total sales, equal to roughly $137 billion.

To combat the loss of revenue, manufacturers have increased marketing efforts to derail the use of new generics and to slow the erosion of the brand agent. Coupons are one of the fastest growing areas of direct-to-consumer advertising. They usually appear in magazines and on the Internet, or are even provided by physicians. According to IMS Health, use of prescription drug coupons, vouchers, and discount cards rose 258 percent in the past four years.

Coupons for expensive drugs cannot match the lower costs of generic equivalents.

While coupons reduce the member's out-of-pocket costs for expensive drugs, they act as a counter-incentive. They steer patients toward more expensive drugs, which wind up costing the consumer less, and the plan more.

Though the patient's use of a coupon will lower his/her own out-of-pocket cost at the time, the patient's cost will inevitably increase once the promotional offer has expired. Furthermore, the plan does not see any discount because the base price of the drug (ingredient costs) does not change. As a result, this practice can actually cost the plan additional money. This increased cost is passed on to fully insured employers and members as increased premiums, and to self-funded employers in the form of higher claims cost. As Eileen Wood, Vice President of the Capital District Physicians' Health Plan, told NPR in 2009, coupons come with a consequence. If everyone started using coupons to get the more expensive drugs, "we'd have to raise premiums," she said. "There's no question about that."

Furthermore, publicly funded plans must also pay the increased price of prescription drug benefits, which is passed on to taxpayers. Any benefit to the coupon user in the form of reduced out-of-pocket expenses is diminished by higher premiums and taxes. That means the only real beneficiaries of these "pharmaceutical subsidies" are the drug companies who offer them.

This issue is not likely to improve overnight.

People being treated for a specific condition may not actually receive better care if they switch from their current medication to a new one simply because of a $10-off coupon. The Food and Drug Administration is planning a study of consumer perceptions of drug coupons to see if, when partnered with a drug ad, the allure of the discount keeps consumers from paying attention to side effects and other risks.

Drug coupons are prohibited for people insured by most federal and state insurance plans, such as Medicare and Medicaid, because the federal and state governments consider coupons a kickback to consumers. However, programs that involve no money back, such as free trials, are often allowed.

As for Humana Pharmacy SolutionsSM, the use of coupons is not prohibited. However, methods are in place to combat the unnecessary use of high-cost medications for which there are generic alternatives. Through utilization management programs like prior authorization or step therapy, patients may be required to try generic drugs first.

Either way, drug company coupons will remain a topic to watch in coming years.

For more information, contact your Humana Representative today.