Legislative Updates
November 28, 2023

How Copay Coupons Drive Up Health Care Costs

Gretchen Blazer Thompson, Director of Government Affairs, Ohio Association of Health Plans

Health care costs are high, and getting higher. We appreciate efforts by the Ohio General Assembly to get those costs under control, but one proposed measure would make matters worse, by driving up the cost of insurance and making it more challenging for businesses to offer this critical benefit.

The underlying intent of House Bill (HB) 177 — to help Ohioans afford their prescription drugs — is certainly one that OAHP supports as Ohio’s leading health insurance trade association. But the bill does this by allowing drug manufacturers to manipulate the terms of our members’ health plans for the drugmakers’ own benefit, maximizing their profits at the expense of the plans. That in turn could force plans to raise premiums, ultimately reducing everyone’s access to coverage — and that hurts everyone.

Here’s the manipulation: Drug companies offer patients coupons to spend toward drug copays — but only for their highest-priced medications. The coupons don’t go to all patients, and not to those who need the help most; they go only to insured patients with cost-sharing obligations (deductibles) to satisfy. Once the deductible is met, the coupons stop and the insurer is left to pay the full price of further refills.

The coupons are a marketing tool, designed to maximize sales of the highest-priced, most-profitable drugs by dampening the patient’s and provider’s incentive to choose more affordable and equally effective alternatives. And, for that purpose, they work: Studies have shown that coupons increase the share of prescriptions filled by branded drugs by 60%. The patient becomes accustomed to the high-priced branded drug and switching to a better-value alternative becomes more difficult.

For more evidence that drug coupons are a manipulative tactic, look no further than the Medicare and Medicaid programs, which consider them to be illegal kickbacks and bar their use.

Health plans have fought back against coupon manipulation with a tool called the copay accumulator. That’s when the insurer does not allow the value of the coupon to go toward satisfying the patient’s deductible. Plans do this because the cost-sharing deductible is such an important tool for containing costs by encouraging the use of the most-affordable effective options.

You may hear a drug manufacturer charge that, when health plans don’t allow a coupon to go toward satisfying a patient’s deductible, they’re “keeping it for themselves,” but that’s not true. The coupon goes to the pharmacist, who redeems it with the drug company for its full value.

Ultimately, the way to help everyone better afford health care is to address the underlying cost drivers, and unreasonably high drug prices are Exhibit A. Prescription drug pricing is extraordinarily complex, but we would do well to consider some key questions:

  • Why is the cost of a drug so high that an individual needs a coupon in the first place?
  • If drug manufacturers can afford to give out coupons for their products, why don’t they just lower the price of the drugs?
  • Why do some people get coupons and not others?
  • Why are we protecting the use of drug coupons in a way that the federal government has deemed illegal under Medicare and Medicaid?

If HB 177 becomes law and insurers can no longer use copay accumulators, health plans will lose an important tool for controlling costs, with reverberations throughout the state’s economy. Recently, a coalition of 20 health care and business organizations joined to oppose HB 177, pointing out that the cost of health insurance is the second-highest expense for many employers and a top-tier concern for all.

The worry is growing, because even as premiums are expected to grow substantially next year, a tight labor market makes it harder for companies to control costs by raising employees’ premium contributions — typically just over one-quarter of the full cost — or adjusting the benefit to make policies more affordable.

Ohio employers caught in this squeeze include public institutions: Ohio State University and Ohio University both asked lawmakers to exempt the self-insured health plans run by public higher-education institutions from HB 177. Failing to do so, the universities said, would add millions to their health care costs and force their public-employee members to pay more out of pocket to keep the plans solvent.

OAHP is eager to work with the General Assembly on real solutions to high health care costs. Barring the copay accumulator — and thereby allowing drug companies to boost sales of their highest-cost drugs at the expense of all ratepayers — would only make that work more difficult.