Prescription copay coupon marketing programmes, which encourage insured consumers to select branded rather than generic drugs, will increase US health care costs by $32 billion over the next decade, according to a new study.
Branded drugmakers are now offering copay coupons to undermine efforts to reduce costs by employers, unions and state governments, which assign higher copayments to more expensive branded drugs than to cheaper generics, says the Pharmaceutical Care Management Association (PCMA), the trade association for Pharmacy Benefit Managers (PBM), which released the study.
"The economics of brand copay coupons are simple - each time a drug company can sell a $150 product by helping cover a $50 copay, it gains $100 in revenue which is paid by the employer, union or state government that offers coverage," according to the PCMA.
"Copay coupons are designed to undermine generics, increase sales of more expensive brands and stick employers with the tab," said PCMA chief executive Mark Merritt.
By definition, copay promotions target people who already have prescription drug coverage, and they are not means-tested or designed to help the poor or uninsured, says the report. Such promotions are considered illegal kickbacks by federal health programmes and are banned by Medicare and Medicaid. They are however, permitted in the commercial market, except in Massachusetts.
If Medicare - the federal health programme for seniors and some disabled people - did not enforce its ban on these promotions, costs to its Part D prescription drug benefit would increased by $18 billion over the next decade, the study estimates. Similarly, if Massachusetts were to repeal its ban, prescription drug costs for employers and other plan sponsors in the state would increase by $750 million, it adds.
The study suggests that drugmakers profit from coupon marketing programmes in a number of key ways. First, it says, the copay coupons induce consumers to choose more expensive brands (despite the higher copays which such products carry) over lower-cost competitor products (despite their lower copays). When consumers redeem their coupons, the drug companies process them through a "shadow claims system" that prevents employers and other plan sponsors from knowing when enrolees have used them, it claims.
Also, for consumers to be able to redeem their coupons, drugmakers often require them to submit the kind of confidential, personal information which the firms have long sought but found difficult to obtain. This data enables them to identify and directly target individual patients with "brand loyalty" marketing programmes, it adds.
These programmes create "brand loyalty" to the most expensive products in each therapeutic class of drugs, even among newly-diagnosed patients, the study claims, adding that consumer costs are also increased because manufacturers can simply raise their prices to help cover the $4 billion which they spend each year on such programmes.
"Manufacturers reportedly earn a 4:1 to 6:1 return on investment on copay coupon programmes," according to the PCMA.