Copay Cards Negatively Impact Generic Drug Usage
Increasing the generic dispensing rate is a key area of focus to drive lower cost. The use of generic medications lowers overall drug costs and improves medication adherence, leading to better control of chronic diseases and reduced health care costs.1
Pharmaceutical manufacturers distribute copay cards to eliminate the barrier of higher patient out-of-pocket cost for brand-name medications. This strategy can encourage a patient to start a brand-name medication in place of a generic alternative, or incentivize a patient to keep taking a brand-name even when the generic equivalent becomes available.2
Copay cards are beneficial when the brand-name is the only medication the patient can take. However, the use of copay cards often leads to unnecessary use of brand-name medications. One study estimated that for brand-name drugs facing generic competition, the use of copay cards can boost sales of the brand-name drug by at least 60%.3
Unintended Consequences of Copay Cards:
- Copay cards have a maximum savings limit and expire. Patient then pays full price.
- Copay cards can reduce cost to patients, but payers still pay their full share of brand-name medication, increasing medication spending. The chart below provides an example showing higher costs to the payer for brand-name Januvia, compared to the alternative generic option of alogliptin (see chart).
- Copay cards most often do not contribute to deductibles or out-of-pocket maximums. As a result, they are not actually reducing out-of-pocket spending in many situations.
Key Takeaways:
- Copay cards increase use of brand-name drugs, driving up medication expenditure and lowering generic dispensing rate.
- Use of copay cards can result in unintended costs for payers and patients .
- When a generic equivalent becomes available, it is best to utilize the generic formulation and avoid use of copay cards.
References:
- Choudhry N, et al. Improving Adherence to Therapy and Clinical Outcomes While Containing Costs: Opportunities from the Greater Use of Generic Medications: Best Practice Advice from the Clinical Guidelines Committee of the American College of Physicians. Ann Intern Med. 2016;164:41-49.
- Dafny L, Ody C, Schmitt M. When Discounts Raise Costs: The Effect of Copay Coupons on Generic Utilization. American Economic Journal: Economic Policy, 2017; 9(2): 91-123.
- “Prescription Drug Coupons Actually Increase Healthcare Spending by Billions.” October 3, 2017. https://insight.kellogg.northwestern.edu/article/prescription-drug-copay-coupons-hurt-generic-competition.