Brand drug 'Co-pay Coupons' undermine generics, raise health costs by $1.1 billion in US state of Michigan

The proliferation of brand drug "co-pay coupon" promotions, which lure insured consumers from generics to more expensive brands, will increase costs by $1.1 billion in the state of Michigan, USA, over the next decade for employers, unions and state employee plans, according to new research from Visante and released by the Pharmaceutical Care Management Association (PCMA). The use of these promotions by state and local government workers alone will cost Michigan taxpayers an extra $170 million over 10 years, the report notes.

Unlike groceries and other goods that are purchased directly by consumers, says the PCMA, two-thirds of prescription drug costs are paid by the employers, unions and government agencies (ie, taxpayers) that provide coverage, not consumers themselves. Though banned as illegal kickbacks in federal health programs, co-pay coupons are unregulated in the commercial market (except Massachusetts).

To minimize premiums and reduce costs, those who offer prescription drug coverage assign higher co-pays to expensive brands and lower co-pays to more affordable drugs that treat the same condition. In response, drug companies now offer coupons that cover the higher co-pays but not the cost of the actual drug. By covering a $50 co-pay to sell a $150 brand, drug companies extract an extra $100 from the employer, union or government agency that offers coverage. This helps explain why co-pay coupons target only those with insurance (ie, those who pay co-pays), not the poor or uninsured.