Drug coupons may save you money, but they’re keeping prices high

from The Washington Post June 30, 2016

by Charles Ornstein
Charles Ornstein is a senior reporter at ProPublica, a nonprofit investigative news organization based in New York.

A few months back, after returning from a family vacation that involved lots of pool time, my 9-year-old son complained that his ear hurt. A Sunday morning trip to urgent care brought a diagnosis of swimmer’s ear — an infection of the outer ear canal — and a prescription
for ear drops. When my wife went to fill the prescription, for a quarter of an ounce, she was told that our share of the cost would be $135.

Even with the increasingly high cost of drugs, that seemed like a lot. Since I’m a longtime health-care reporter, my wife asked me what to do. “Fill it,” I said, thinking more like a father than a journalist.

Wisely, she didn’t listen. Instead, she searched online for a coupon for the brand-name drug the doctor had prescribed, Ciprodex. She pulled one up on her phone, showed it to the pharmacist and sliced our cost by more than half, to $60.

That was great for us. Like most consumers, we were practically giddy about the savings. But such coupons have hidden effects on health-care costs that most of us don’t ponder.

Drug coupons are a clever marketing tactic increasingly used by pharmaceutical companies for a counterintuitive purpose: to keep drug prices high. By forgoing or reducing patients’ payments for pricier brand-name drugs, they ensure more sales for which insurers foot the bulk of the bill. (The companies get nothing if people choose generics or don’t fill prescriptions at all.) The coupons also stymie insurers’ attempts to encourage consumers to factor price into their health-care decisions. And by making the true cost of a drug essentially unknowable, they are yet another example of how medical pricing remains opaque, despite the promise of the Affordable Care Act.

In essence, it’s a war between two big industries trying to maximize their bottom lines: insurers vs. drug manufacturers. Patients, who often have no clue which drug is best, are stuck in the middle. They definitely enjoy getting what seems like a deal — but in the long run, the coupons help keep health-care costs rising.

The virtues and drawbacks of coupons have been thoroughly debated by health policy wonks for the past few years as they have surged in popularity.Supporters say that insurance companies and pharmacy benefit managers have been jacking up co-pays in pursuit of profits and that lower prices increase the odds that patients will take the medicine they need. Critics say they encourage patients to use brand-name products when cheaper alternatives may be available — and that raises costs, premiums and co-payments for everyone.

Coupons have another little-noticed effect. While health plans increasingly rely on deductibles to control rapidly rising drug costs, coupons are just as rapidly undermining them — which, in another paradox, could wind up driving them even higher.

Deductibles require consumers to pay a certain amount before their insurers start covering costs. Of the $135 our pharmacy initially wantedfor Ciprodex, $100 was to cover my son’s annual drug deductible, and $35 was the standard co-payment for a brand-name drug. With the coupon,
we paid only $60 for the prescription. Still, my pharmacy benefit manager (which manages drug coverage for my insurance company) credited us with spending the entire $135, so we skipped right through the deductible. “It’s kind of like a get-out-of-jail-free card,” said Joseph Ross, an associate professor at the Yale School of Medicine.

Others have had similar experiences. Dave McCulloch, 32, has used coupons from Gilead Sciences to fully cover his out-of-pocket costs for Truvada,an expensive drug that prevents HIV infection for groups at high risk. (The drug is effective both at treating HIV and preventing it.) When he filled his prescription for the first time in March, McCulloch later discovered that his pharmacy benefit manager credited him with paying $350 when he’d actually paid nothing. His insurer, CareFirst, “has no idea that Gilead paid that amount instead of me,” McCulloch said in an

When patients can meet their deductibles with a pharmaceutical company’smoney, as McCulloch and I both did, they have less reason to pay attention to how much money they’re spending on health care — which, in theory, the deductible and co-payments are supposed to make them do.
That means prices can continue rising, pushing insurers to raise premiums, deductibles and copayments in response.

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As a former administrator of a plan that covered about 800 lives, I really had no issue with it. Because most coupons had a termination clause. If it was a limited time script, I figured well ok, it have driven the doctor to prescribe a higher cost medication but in the long run it will run out. By that I mean most scripts are short term short duration.

Since those programs cease, participants might run to the next test strip but for the most part we are loyal, we stick post coupon with the product they first bought our loyalty with. It is human nature in action.

If it is for something like test strips , I always felt the plan would get CO-pays on future purchases. Yes the deductible might drive a higher cost, but we drove the drug plan with four tiers of medications and newly released medications were almost always in tier 3 the next to highest copay. Even insulin, which in my 15 years of doing plan administration, never came off of tier 3 had the next to highest copay.

So yeah there were ways to beat the system with coupons, but when I looked at the data, it was almost always even, meaning if a coupon for say test strips were issued, everyone who used those test strips (about 90 % anyway) got the coupon.

I felt so long as it was fair most people benefited I was ok with the practice

Oh and the deal about insulin, I never had control over tier placement for insulin, trust me I woudl have moved it if I could. I do not think it fair either. But that is a different issue. Just saying.

By the way, I canceled a plan in the late 90’s that moved to no longer cover diabetes as a covered health care issue. I told the guy to get out of my office before i had him arrested for stupidity. He called diabetes a preventable and as such a life style disease that his company would no longer cover to keep costs low.

Like I said he was taking to a 25 year type 1, stupidity.

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Here is what I hate about the whole drug coupon thing. It distorts the market. In the first year or two of a drug being on the market insurance companies won’t cover medications as preferred medications. But this is also a prime profit making time. These drug companies introduce these drugs at hugely inflated prices. Normally, as patients, we wouldn’t buy these drugs because they are not preferred and our co-pay is still too high. But wait, they introduce a “savings card.” So the inflate the price.

That is how this works. You introduce a drug and you price it at 200% of it’s actual price. It isn’t covered as a preferred so patients have to pay a high price. But wait, you introduce a savings card and cover the 20% co-pay for the patients. That means you can still charge 180%.

ps. This doesn’t always apply, some savings cards can and should be applied to the walk-up price (not with insurance coverage) and in that case it operates as a way for the drug company to simply get you “hooked.”

@Rphil2, I don’t believe the time limits help. I used a co-pay card for Apidra for the first year I was on it, and not surprisingly, it made a BIG difference in the cost. But the card has long since expired, Apidra was dropped from my plan’s formulary on January 1, and I now pay $250 per vial.

IMOP, what the limited time periods actually do is buy time. They work to smooth the process, making it easier for people to become dependent on the medication while the true cost remains basically invisible. Then it’s locked in for good. Same principle as a drug dealer giving free samples to get the customer hooked. Once hooked, he has to pay whatever price is demanded.

Then, when the cost gets high enough, the insurers drop coverage, as mine did. So the end game becomes that much worse.

My experience with a discount drug card was interesting. My doc’s office gave me a generic card (“GoodRx”) for a drug my insurance would not cover. The fine print said “not for use with government subsidized insurance”, like VA, Medicaid, Medicare, etc. Despite my advanced age :blush:, I have private medical coverage through my wife’s employment and was going to pay cash for Rx. No matter–as soon as I punched my birthdate into the system, I was kicked out with no opportunity to explain my circumstances. Grrrr.

For new drugs & the situations mentioned in the article I can understand how coupons drive up prices, but copay discount (or “loyalty”) cards don’t always work the same way. We paid 100% OOP for my daughter’s supplies the first 7 months after her T1 dx. We’ve always used the preferred brands of insulin, meters/test strips etc. Since the financial hit of that first few months I’ve used copay discount cards for insulin & test strips, always staying with the preferred brands even though it meant switching brands every year. I seriously doubt that little bit of savings for me can have any effect on overall prices, but it certainly affects my monthly expenses.

If we get a Rx for a “real people illness” (not diabetes related), I always check the formulary (a .pdf file saved in my phone) before leaving the clinic. If the Rx is not in the formulary, I ask for something else. If it’s available in a generic, I request it.

Nothing makes me angrier faster than the attitude that we need more “skin in the game.”