Today's Managing Health Care Cost Number is $2.7 billion
Coupons are a marketing approach to segmenting customers. The manufacturer using coupons is able to collect a premium price from those purchasers which are not price sensitive, but doesn’t have to sacrifice the volume from price sensitive customers who would otherwise purchase a cheaper product.
This is true in the grocery section - brand name groceries cost more than store brands, but consumers who are price sensitive clip coupons to get a price that's at least sometimes even lower than the store brand. But the brand name food company can continue to command high prices from those who didn't clip coupons.
This is especially true in the pharmaceutical space. Kesselheim and colleagues estimated that pharma coupons increase total medical costs by about $2.5 billion in the US in 2013. In today's New England Journal, researchers note that fully half the revenue from name brand noninjectable medications comes from drugs for which manufacturers offer coupons. This generally raises acquisition costs by 60% - as the coupon decreases member out of pocket spend, but does not decrease insurance company spend.
In recent years, the number of copayment coupons being offered has skyrocketed. We estimate that in 2007, a quarter of noninjectable, brand-name drug revenue derived from drugs with copayment coupons; by 2010, that proportion had more than doubled. The availability of coupons has since become rampant; they now appear even in mainstream magazines. We recently examined how these coupons affect spending for drugs that are facing new competition from a generic bioequivalent.3 We estimate that coupons increase the percentage of prescriptions filled with brand-name formulations by more than 60%. Back-of-the-envelope calculations suggest that, on average, each copayment coupon increased national spending on all drugs by $30 million to $120 million over the 5-year period following generic entry. In our sample, consisting of 85 drugs facing generic competition for the first time between 2007 and 2010, we estimate that spending on the 23 drugs with coupons was $700 million to $2.7 billion higher than it would have been if the coupons had not been issued or had been banned.
Today's article notes that these coupons undermine "value based contracting," and that Medicare, Medicaid, and Massachusetts prohibit drug coupons. (The article is incorrect; Massachusetts lifted the ban on drug coupons in 2012 after substantial pharmaceutical company lobbying). They also note that high priced providers could use similar approaches to retain volume while continuing to charge above-market rates.
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