How drug coupons undermine value purchasing in health: NEJM

Summary: “In 2015, the U.S. Department of Health and Human Services announced a goal of linking at least 50% of Medicare spending to value-based payment models such as accountable care organizations,” Leemore S. Dafny, Christopher J. Ody and Matthew A. Schmitt write in the New England Journal of Medicine. “Health care providers are now scrambling to reorganize in a way that delivers value while preserving or enhancing commercial success. … Value-based plan design — a term that describes payers’ efforts to align consumer cost sharing with the value generated by a service or drug — may sound like a new development in health care, but it’s old news for prescription drugs. For years, insurers and pharmacy benefits managers have steered consumers toward generic and other high-value drugs by categorizing drugs into ‘tiers’ and requiring lower copayments for preferred drugs. By 2000, roughly three quarters of consumers enrolled in employer-sponsored health plans had prescription plans with two or more drug tiers. Today, a similar proportion have plans with at least three tiers. Tiering not only encourages consumers to use high-value drugs, it also gives insurers leverage during price negotiations with manufacturers.Under tiering, insurers offer manufacturers favorable tier placement in exchange for better discounts. … In recent years, drug manufacturers have counterattacked by offering ‘copayment coupons.’ These coupons or discount cards — distributed by physicians’ offices, through the mail, and online — enable the manufacturer to pay some or all of a consumer’s copayment for a prescription. By severing the link between cost sharing and the value generated by a drug, copayment coupons can undo the beneficial effects of tiering. With such coupons, consumers’ cost sharing may actually be lower for higher-tier brand-name drugs than for lower-tier therapeutic substitutes or generic bioequivalents. Since insurers typically cover about 80% of the total price of a prescription, however, the combined amount that the insurer and the consumer spend for higher-tier drugs remains substantially greater. If coupons shift spending toward these higher-priced drugs, the net effect will be higher pharmaceutical spending and, ultimately, higher health insurance premiums.” Leemore S. Dafny, Christopher J. Ody and Matthew A. Schmitt, “Undermining Value-Based Purchasing — Lessons from the Pharmaceutical Industry,” New England Journal of Medicine.