In the absence of national action to control the high price of prescription drugs, California is considering a small state rule that could make a big difference. It targets a game that pharmaceutical companies play to keep people spending more than they need to on medicines.
The rule, contained in legislation now on the governor’s desk, would bar the use of coupons to help consumers cover the cost of co-payments for any brand-name drugs for which there is a generic alternative that works as well.
At first sight, this policy looks like a loss for patients, because the coupons it would outlaw enable them to pay less for brand-name drugs than for generic ones. But when coupons are used, insurers still pay full freight, typically more than five times what they spend on generics. By encouraging patients and doctors to choose branded drugs, coupons raise spending, on average, by $6 million to $24 million per drug per year, according to a recent study.
Insurance companies then fold this expense into premiums, raising costs for everyone. The U.S. health care system spends well over $300 billion a year on prescription drugs, and almost three-fourths of that goes to brand-name drugs, even though they make up less than one in eight prescriptions. Most branded drugs have generic competitors. And most private insurers charge their customers significantly lower copays for generic medicines — to steer them toward the thriftier option.
But copay coupons for branded drugs are easy to find — online and in doctors’ offices. Patients can use them without insurers knowing, which makes it difficult for insurance companies to bar their use.
The California rule could bring real savings in health care spending without compromising patients’ health.