Payer Roundtable: Are Drug Coupons a Burden for Payers?

As the debate continues over how the use of drug coupons impacts drug spending—and intensifies in the face of an accelerated shift to value-based care—First Report Managed Care asked a panel of experts to weigh in with their take. They analyzed how coupons can lead to higher spending and utilization, explained how in some cases coupons can improve the value of care, and addressed what payers can do to make sure they are fulfilling their mission in the face of increased coupon use. 

Panel members also shared insight into whether they think the playing field is level between pharma, payers, and pharmacy benefit managers (PBMs)—given the tools both sides can employ to meet their goals. 

We spoke with Charles Karnack, PharmD, assistant professor of clinical pharmacy at Duquesne University; Gary Owens, MD, president of Gary Owens Associates; Edmund Pezalla, PhD, CEO and lead consultant of Enlightenment Bioconsult; Arthur Shinn, PharmD, president of Managed Pharmacy Consultants; Norm Smith, president of Viewpoint Consulting, Inc; Barney Spivack, MD, national medical director of Medicare case and condition management at OptumHealth, and F Randy Vogenberg, PhD, RPh, principal at the Institute for Integrated Healthcare.

In your experience, do coupons eventually lead to overall higher drug spending?

Dr Vogenberg: Information available from 2016 and 2017 shows that drug assistance and coupon programs do lead to higher drug pricing and supply chain costs to purchasers of care. This has now been shown to increase the out-of-pocket costs for patients, as well as drug claim costs for purchasers.

Dr Pezalla: If coupons encourage use of a more expensive medication, then spending will be high over the long-term. 

Dr Owens: I don’t think there is any doubt that coupons lead to higher drug spending, and the data proves it. According to a 2011 Pharmaceutical Care Management Association report, coupons could account for an excess of $32 billion over 10 years. Additionally, a study just published in the American Economic Journal: Economic Policy concluded that “coupons increase branded sales by more than 60%, entirely by reducing the sales of bioequivalent generics.” Researchers found that “during the 5 years following generic entry… coupons increase total spending by $30 to $120 million per drug” they evaluated. 

In my mind, such evidence speaks for the issue well.

Mr Smith: I’ll put it this way: If coupons did not lead to higher spending, no company would use them.

Dr Shinn: Agreed. You don't see coupons for generic drugs, or for cost-effective branded products. I worked in the pharma space for more than 6 years, and I can tell you coupons were used to oppose a program that was considered an impediment to higher sales. The reason for the impediment was simple: It cost more than alternatives, and/or did not offer any clinically different reason for its high cost.

Dr Karnack: Absolutely. Patients like coupons, and will not hesitate to use them even when a cheaper generic drug would be appropriate. 

Pharmaceutical companies argue that coupons provide patients access to medications they might not be able to afford otherwise, and that PBMs and payers have tools at their disposal that help meet their respective objectives. Doesn’t that create a level playing field? 

Dr Vogenberg: While the United States is a free market economy, the rules of insurance and regulations around insurance are limiting by their nature. The increased value of coupons and use of assistance programs now creates a legitimate compliance issue for plan sponsors and patients due to the ACA and ERISA [Employee Retirement Income Security Act]. The plan sponsor has a fiduciary responsibility to their plan members, and patients have a tax responsibility based on their total income and compensation, including benefits.

Dr Owens: Coupons are a countermeasure to limited formularies and pharmaceutical companies are certainly within their rights to do. Coupons make business sense for the manufacturers. Payers then try countermeasures such as refusing coupons.  

Dr Karnack: With direct-to-consumer (DTC) advertising, it's difficult to prohibit or even limit couponing. I am amazed at how some patients with the help of nurse liaisons work around PBMs to obtain medications.  

Dr Pezalla: The difference between brand and generic prices are often large and manufacturers are often trying to promote a brand in a generic arena with a DTC campaign. 

Mr Smith: Where you sit on this issue is all about where you stand. Some PBMs will not cover drugs with a coupon on any tier. That is a problem since almost every branded product uses a coupon to lower or eliminate the copay for the member. Manufacturers have decided that copays are worth underwriting, and can support it with utilization data. Physicians love coupons because they take away the financial barrier a copay can cause. 

However, PBMs and plans think that when a coupon is used, they should get the discount, not the member. 

Dr Shinn: The playing field is not level, so I would argue that it is not pure capitalism. Now if the coupon was good for 50% off any drug including refills, that is a different story. Coupons as they are used today are entrapment. Members are only going to be able to use coupons a certain number of times. After that they are committed to continuing therapy even if the drug is not on a part of their plans, and they will have to pay the full freight. So, it traps the member into using that medication. 

But the member is free to switch to something on the plan once they no longer can use the coupon, correct? 

Dr. Shinn: It’s not that easy. The patient may be required to come into the office for a new appointment. There is going to be a disruption in that patient’s ability to get medicine to treat his or her condition—unless he or she decides to and can pay the full price for the branded drug that is not part of their plan. 

In other words, additional costs are likely to be incurred one way or another? 

Dr Shinn: Yes. A few weeks ago, I saw where a patient received a free 30-day supply of Xarelto (rivaroxaban; Janssen). It was great for the person at first, but after 30 days he needed to pay $180. So, his choice was to spend that, or make another appointment for a new prescription. This is the case even if it is a generic substitution. 

Dr Vogenberg: True. Therapeutic substitution requires prescriber approval, so this becomes an issue for a third party like a PBM to manage or work around.

In your opinion, how is the increasing shift to value-based care impacting the drug coupon issue? 

Dr Karnack: When I think about patients with diabetes who cannot afford some insulin analogs like aspart and glargine, I can see how coupons might be helpful in such instances. Traditional insulin may not be as effective for them. The "barrier" effect and pricing depends so much on clientele and insurance availability. 

Mr Smith: Coupons can increase the value of care, because the member is not paying the copay. There is significant data showing that copays limit both new prescriptions and refills. In diabetes, it really depends on the economic situation of the members. Copays for drugs and supplies can get really expensive, so coupons would help increase compliance, which would make for greater value from that care.

Dr Pezalla: I think that coupons can have a positive impact on value-based care. The market is somewhat distorted by lack of information for consumers and because of third-party payment. One way to signal value to consumers is to lower the price to them.

Dr Vogenberg: There is value in coupons for those not covered by insurance or other government programs. The problem is that pharmaceutical companies moved well beyond the uncovered population to defeat plan designs and drive more market share. This creates new issues post-ACA.

Dr Spivack: Coupons are clearly viewed as interfering with efforts of intelligent pharmacy management. They provide an easy way for beneficiaries to work around the typical higher prices charged usually for no greater value. Some states forbid their use because they negate the efforts of the state/payers to achieve lower costs for pharmacy outlays. Value-based care clearly suffers because consumers don’t look at value from a population or group perspective. They unwittingly help drive drug prices and pharmacy costs unnecessarily upward.

Dr Owens: I agree. The average consumer will only think about the cost to themselves and not about the cost to society. In the end, however, they wind up paying as the cost of their benefits will continue to increase. 

So, in some instances, coupons can help improve the value of care, but once a line is crossed the reverse becomes true. Though not a direct corollary, it sounds a little like the tension that exists between health systems that promote annual mammograms and plans that limit them based on guidelines. 

Dr Owens:  You hit on one of the major issues in the US health care system—the current system is designed to promote overuse, misuse, and waste. Our current reimbursement models are about doing more or providing more services and getting paid more.  

The strategy behind drug coupons is not much different than hospitals promoting expensive technologies that often don’t improve outcomes, but increase revenues to the hospital. Consumers often believe incorrectly that newer is better, more technology is superior, and that medicine will evolve to cover whatever lifestyle indiscretions they choose.  Using a coupon to get a more expensive drug is just one example.

Since coupons appear to be a fixture, what can payers and PBMs do to ensure they are fulfilling their mission of delivering value-based care? And what should they keep in mind?  

Dr Owens: Private payers can follow in Medicare’s footsteps and not allow coupons. Regardless, this will continue to be power struggle between big payers and big pharma to do what they perceive as best for their businesses.  Meanwhile costs go up. 

Mr Smith: Insurers want to pay less and still maintain low-cost members paying premiums. When high-cost specialty drug also come with coupons, payers don’t mind them at all because it may keep members compliant. 

Dr Pezalla: Stricter formulary management comes with a price, both the cost of doing the management on the payer side, and the cost of dealing with it on the patient and provider side. Ultimately what will help is cost transparency, reconsidering the role of Medicaid best price and other mechanisms that create a floor for nongovernment programs, and fairer distribution of rebates/discounts.

Dr Vogenberg: Payers really can’t do much since they are an integral part of the overall problem. There are examples of payers suing each other alleging business practice fraud. 

Meanwhile, purchasers of care are in a position to drive real market change, along with patients who are the true consumers of health care. Consumer involvement is demonstrated in several class action lawsuits currently underway.

Mr Smith: And Congress is now looking at the impact of high copays and deductibles on outcomes. It’s all in the benefit design. Most people don’t get that. Everybody wants everything, and they don’t want to pay for it. 

Imagine the day if and when we get single-payer health insurance!