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Budget Analysts Explain the Prescription Coupon Issue to Congress

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What You Need to Know

  • In 2015, coupons were available for more than 700 brand-name drugs.
  • The California law restricting coupons may affect about 20% of the users of the drugs covered by the law.
  • Medicare and Medicaid see use of the coupons as violations of an anti-kickback law.

Prescription drug coupons may make patients happy, but they may also hurt health insurers’ efforts to control drug spending.

Analysts from the Congressional Budget Office, an arm of Congress that helps lawmakers understand bills, laws and trends that affect federal spending, present the case against drug coupons in a new report on U.S. prescription drug spending trends.

“Drug coupons make expensive therapies more affordable and increase manufacturers’ unit sales,” the CBO analysts write. “By covering some or all of an enrollee’s co-payment or coinsurance … coupons reduce or eliminate the cost difference between a more expensive drug and a cheaper generic or preferred alternative. When a coupon induces an enrollee to choose a brand-name drug over a generic, it increases the cost to insurers, because they then must cover the more expensive brand-name drug for that enrollee.”

Pharmaceutical manufacturers were offering coupons for more than 700 brand-name drugs in 2015, up from fewer than 100 in 2009, the analysts add.

The Background

Tamara Hayford, David Austin and other CBO staff members prepared the report at the request of Sen. Ron Wyden, D-Ore., chairman of the Senate Finance Committee.

Prescription drugs can save people’s lives, and they can reduce spending on other, more invasive types of health care such as operations.

But lawmakers, health insurers and government health program managers became concerned in the 1980s, when spending on prescription drugs began to increase rapidly. U.S. spending on prescription drugs increased to $1,073 in 2018, or 10% of total 2018 spending on health care services and supplies, from $140 in 1980, or just 5% of 1980 spending on health care services and supplies.

But after taking negotiated discounts into account, the average inflation-adjusted price of a prescription drug purchased through a Medicare Part D prescription drug plan fell to $50 in 2018, from $63 in 2009.

One reason prescription prices have fallen in recent years is that about 90% of prescriptions filled these days are for generic drugs rather than for brand-name drugs, the CBO analysts note.

The Coupon Fight

Some state officials believe that consumers who have trouble paying for brand-name drugs should have the right to use manufacturers’ coupons or other subsidies to reduce their out-of-pocket costs.

The National Council of Insurance Legislators recently developed a model law that lets states protect patients’ ability to use coupons to defray out-of-pocket drug spending.

California, however, “has banned their use for brand-name drugs that have generic equivalents,” the CBO analysts write.

One study, published by Health Affairs, found that the new California law might affect about 20% of the users of the affected drugs.

“Other states are considering similar legislation,” the CBO analysts say. “In addition, coupons for brand-name drugs cannot be used by Medicare and Medicaid beneficiaries because they constitute a violation of the anti-kickback statute.”

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