New bill aims to bring down healthcare costs by limiting use of drug company coupons

Prescription drug coupons can save consumers money on brand-name pharmaceuticals, but a California lawmaker says they can also drive up the cost of health insurance.

Assemblymember Jim Wood (D-Healdsburg) introduced AB 265 which would limit the use of coupons to pay for prescription medicines when there are cheaper FDA-approved equivalents available.

Wood said the coupons are a marketing tool used by drugmakers to get consumers to buy more expensive brand-named drugs. When a coupon  is used to pay for a prescription, the drugmaker picks up some of the out-of-pocket cost. While the consumer saves money, Wood said insurers are left to pick the remaining cost the coupon and customer copay don't cover. 

"The insurance company's going to pay that higher price, and at the end of the day, it's going to be passed back to the consumer in the form of higher premiums," Wood said. "That's what I'm trying to change."

An article published last year in the New England Journal of Medicine concluded consumers tended to buy more expensive brand-named drugs when coupons were available. The researchers focused on 23 drugs in the first five years after a generic equivalent was available. They estimated that total spending on the drugs with coupons over the five year period was as much as $2.7 billion higher than if coupons had not been used.

Matt Schmitt, an assistant professor of strategy at the UCLA Anderson School of Management, said while the study did not measure the direct effect on insurance premiums, it followed that “the more that insurers need to pay for prescription drugs, the more they will charge for prescription drug insurance.”

The industry group Pharmaceutical Research and Manufacturers of America opposes AB 265. Spokeswoman Priscilla VanderVeer said that the intent behind providing coupons was to help patients access medication and that the proposed bill would make that harder.  

“It will significantly increase costs for those patients who need a branded drug for any number of reasons, but typically that's a medical reason, by forcing them to use a lower-cost generic”  VanderVeer said.