Pharma's copay coupons, a key marketing tool, face new limits in California

California state capitol
A California State assemblymember introduced legislation to ban copay coupons when an inexpensive generic would suffice.

As pharma scrambles to defend its pricing practices around the country, a California legislator has set his sights on the industry’s copay coupons, which cut patients' out-of-pocket costs in order to promote branded meds—particularly those facing cheap alternatives.

California State Assemblymember Jim Wood introduced legislation that would ban the use of copay coupons in cases when an inexpensive generic would suffice. Copay coupons, he says, “appear to help the consumer,” but in fact drive overall costs up by sending patients to expensive brands instead of cheaper options.

Similar legislation is pending in New Jersey, according to Wood’s release, and Massachusetts banned the promo strategy in 2012. Copay coupons have drawn scrutiny at the federal level as well; as controversy raged over Mylan's EpiPen price increases, a group of senators took aim at Mylan's copay assistance and its potential effects on overall drug spending.

Pharma companies are increasingly using the coupons, Wood says, and they’re now available for more than 700 drugs. The promo method was responsible for $7 billion in spending in 2015, a considerable increase from $1 billion in 2010.

“The negative implications to health care costs and the consumer have yet to be fully realized, and we have to put a halt to these practices when they are not in the consumer’s best long-term interest,” Wood said in the statement.

Copay coupons have long been a contentious topic, with payers coming out in force against the promo strategy in years past. Express Scripts, CVS Health and UnitedHealthcare each have introduced programs to target dozens of drugs that heavily relied on the coupons.

Back in October, Express Scripts said in a blog post that copay coupons “inject waste” into the healthcare system. The company said these “temporary savings” for patients could “ultimately contribute to higher premiums or fewer benefits.” The PBM industry has supported legislation to limit their use.

Some on Capitol Hill have advanced a similar hypothesis, including a group of 20 senators, led by Sens. Elizabeth Warren and Patrick Leahy, who queried Mylan about its copay programs. “When patients receive short-term co-pay assistance for expensive drugs, they may be insulated from price hikes, but insurance companies, the government and employers still bear the burden of these excessive prices,” the senators wrote in the August letter. “In turn, these costs are eventually passed on to consumers in the form of higher premiums.”

But the pharma industry sees things differently. The trade group PhRMA said in a statement that it "respectfully opposes" the legislation, saying it could have the "unintended consequence of prohibiting patients’ access to certain medicines."

"While the bill purports to move patients to 'lower cost' drugs, patients who need specific drugs will be forced to pay more for the drugs they need," according to PhRMA's statement.

During the November election, the pharma industry recorded a win in California, where voters rejected a price control effort despite backing from Sen. Bernie Sanders.

Editor's note: This story was updated with a statement from PhRMA.