Brownstone » Brownstone Institute Articles » Big Pharma’s Co-Pay Coupon Racket
big pharma

Big Pharma’s Co-Pay Coupon Racket


New polling shows that over three-quarters of Americans are dissatisfied with the total cost of healthcare in the US. No one knows this more than the small business community I’m part of, and I lay a lot of the blame for our unmanageable healthcare costs at the feet of Big Pharma. 

Drugmakers rely on shady promotional gimmicks to keep the cost of brand-name medicine high, and you’ve seen them in action. In the many, many, many television commercials you’ve seen for various drugs—and Big Pharma is the second largest advertiser by industry—consider how many mention a coupon the manufacturer offers. In fact, the share of brand-name prescription drug spending that included a coupon rose from 26 percent in 2007 to 90 percent in 2017.

Coupons are complicated and unnecessary since drug companies could easily lower health care costs for patients by reducing the prices they set for prescription drugs. 

Instead, Big Pharma offers co-pay coupons to steer patients toward their own, more expensive brands and away from cheaper options. Later, they stop honoring the coupons, leaving the patient with significant out-of-pocket costs. Once their deductible is met, the employer or health plan has to cough up the rest of the price of the expensive drug, which ultimately leads to higher insurance costs for everyone. 

In order to keep prices down for payers like employers and unions, prescription plans, called pharmacy benefit managers (PBMs), have devised a way to make the most of these co-pay coupons. Through cost relief programs called “co-pay accumulators and co-pay maximizers,” they apply the value of the coupons over the full calendar year and subsidize the rest of the cost. In other words, they let patients have their cake and eat it too—letting them choose a name brand drug and at the same time escape Big Pharma’s big gimmick. 

Frustrated, the drug industry is trying to get legislators across the country to prohibit these cost relief programs. Last year, Big Pharma spent more than any other industry on lobbying. In fact, they spent about as much as the second- and third-highest spenders combined. Now, they have activated their army of lobbyists to push through measures that would prohibit the critical cost relief programs used by PBMs to combat Big Pharma’s sneaky pricing practices. 

Recently, Rep. Earl L. “Buddy” Carter (R-GA), joined by other colleagues, introduced a measure in Congress to ban the use of the cost-saving co-pay accumulators. In typical DC speak, they’re calling it the Help Ensure Lower Patient (HELP) Copays Act but the ones being helped are Big Pharma, not the patients.

Researchers from Harvard and Princeton universities studied how drug co-pay coupons distort the pharmaceutical market to increase prices. They used eight years of claims data from the independent nonprofit Health Care Cost Institute, which provides data to health care researchers, to analyze medications that treat multiple sclerosis (MS). 

They estimated that banning co-pay coupons would lower MS drug prices by 8 percent, which would reduce spending in the US by approximately $1 billion—on MS prescriptions alone. If coupons were banned for all brand-name medications, the savings would be astronomical.

Study co-author Leemore Dafny, an economist and Harvard professor who has studied healthcare costs for over a decade, is calling for expanded co-pay coupon bans, saying, “We need to do much more to reduce out-of-pocket drug costs for patients requiring medications, but relying on pharmaceutical companies to decide which drugs are subsidized is not the way to do that.” She continues, “I’m just saying that co-pay coupons are contributing to higher drug prices, and that’s not helpful in light of our steep health care spending right now.”

As I stated already, drug manufacturers don’t have to offer coupons; they could simply lower their prices. But they don’t want to. They want to pad their profits. And while drug makers add millions of dollars to their already packed coffers, Americans face higher medical costs at a time when financial security is a top concern. 

If legislators want to lower costs for patients—and they should—it’s not that complicated. The use of co-pay coupons is already banned in Medicare and Medicaid. Lawmakers could take the next step and ban them in the commercial health insurance market as well. 

If they’re not going to do that, the least they can do is continue to allow PBMs to protect patients from the Big Pharma’s pricey gimmicks. Americans already spend more per capita on prescription medicine than residents of every other developed country. If legislators want to change that, they should push back on the shady tactics of Big Pharma, not the measures that businesses and insurers use to fight them. That would only hand yet another victory to an industry that has proven time-and-again to be the one major roadblock to lower health care costs.

Published under a Creative Commons Attribution 4.0 International License
For reprints, please set the canonical link back to the original Brownstone Institute Article and Author.


Donate Today

Your financial backing of Brownstone Institute goes to support writers, lawyers, scientists, economists, and other people of courage who have been professionally purged and displaced during the upheaval of our times. You can help get the truth out through their ongoing work.

Subscribe to Brownstone for More News

Stay Informed with Brownstone Institute