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Co-Pay Coupons a Headache for Health Insurance Companies

Mary Lou Jay

Co-pay coupons are discounts on co-pays for name-brand drugs offered by pharmaceutical companies. They can be a good deal for consumers. Supporters say they allow doctors flexibility in prescribing costly drugs under a patient’s health insurance plan.

But what customers don’t see is the large bill that these coupons leave with the insurance company, which must make up the difference between the discounted price the customer pays and the drug’s true cost.

Brand vs. generic

The controversy centers on the use of generic vs. name-brand drugs. According to the U.S. Food and Drug Administration (FDA), the cost of a generic drug is about 80 percent to 85 percent lower than that of its name-brand equivalent, although the generic generally performs the same as the brand drug.

Why the difference in pricing? Pharmaceutical companies spend millions on the research and testing required to bring a new drug to market. Manufacturers of the generic drugs simply duplicate the active ingredients in drugs whose patents have expired and can therefore offer them at a lower price. They skip the original research phases, although they do have to submit their generic versions to the FDA to test their safety and effectiveness.

More patients using generic drugs might help rein in health care spending. The FDA cites research showing that total spending on prescriptions in 2006 grew by 8.9 percent, but a year later, that increase was only 4 percent. One of the factors in the slowdown, according to this research, was the increasing availability of generic drugs.


To encourage consumers to switch to lower-priced generics, health insurance companies began to develop tiered medication lists for their plan participants. The insurers set lower co-pays for generic medications (when they were available) and substantially higher co-pays for brand-name drugs.

Drug manufacturers countered by introducing discount programs to help consumers handle those higher co-pays for brand prescriptions. The maker of cholesterol medicine Lipitor, for example, offers a free co-pay card that cuts a person’s out-of-pocket payment to $4 if the co-pay is $54 or less. If the co-pay is $55 or more, the card saves a customer $50 each month on the medication.

Amgen, which manufactures several brand-name products for cancer patients, offers a co-pay coupon program that covers the entire co-pay for an eligible patient’s first injection, and then all out-of-pocket expenses over $25 for each injection, up to a limit of $5,000 every six months.

That’s great for consumers, but the insurers are left to pick up the rest of the bill for the name-brand medication — and their costs are much higher than they would be for the generic equivalent. Insurers have no authority to stop or limit these programs, although one state, Massachusetts, has banned them. Ultimately, these higher costs could be passed on to consumers as higher premiums for health insurance.

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