The Cost of Co-Pay Drug Coupons

5:00 minutes

Pills, via Shutterstock
Pills, via Shutterstock

You may have received a coupon at your doctor’s office to reduce the price of one of your medications or searched online for a discount code to cut the cost. These coupons can help you save some money and afford name-brand medicine up front. But what are the long-term costs? Margot Sanger-Katz, a health correspondent for The New York Times, discusses the benefits and costs of co-pay drug coupons.

Segment Guests

Margot Sanger-Katz

Margot Sanger-Katz is a health care correspondent for the New York Times. She’s based in Washington, DC.

Segment Transcript

IRA FLATOW: And now it’s time to play Good Thing, Bad Thing.


Because every story has a flip side. Now earlier this year, there was an uproar over the price of EpiPens. The price tag for two doses of the injection shot up to $600. In 2007, that would have cost just $94.

A pretty hefty price for a life-saving drug, but there are co-pay drug coupons that can knock off about $300 from that big price of $600. So who doesn’t love a discount? These drug coupons can help with prices up front to make certain drugs more affordable, but they do come with a few hidden costs.

And my next guest is here to take us through the good and the bad of these drug coupons. Margo Sanger-Katz is a health correspondent for the New York Times based out of Washington. Welcome back to Science Friday.

MARGO SANGER-KATZ: Thanks so much for having me.

IRA FLATOW: So these are the coupons you get from your doctor, or you can find them online, and you take it to the pharmacy, and they give you a discount?

MARGO SANGER-KATZ: Exactly. So, you know, generally when you buy a drug at the drugstore, you have to pay some amount that your insurance requires you to pay, and these can knock that down so you can get the drug for free or close to free.

IRA FLATOW: Free or close to free? So that’s the good thing, right?

MARGO SANGER-KATZ: That’s great. I mean, if you’re an individual person and you’re buying a drug, especially one that your insurance company was to charge you a high co-payment for it, it can really affect the price of the drug. It might make a drug more affordable that would have been out of reach before.

IRA FLATOW: Mm-hmm. So how do the insurance companies use co-pays to balance out drug costs?

MARGO SANGER-KATZ: Yes, they use it for two reasons. One is sort of obvious, which is to steer you, as the customer– say there’s two drugs, the generic drug, and a brand name drug, and they’re biologically identical. The insurance company wants you to choose the generic drug because it’s cheaper.

So what it does it uses the co-payment as sort of a signaling mechanism. If you take this generic drug, it’s going to cost you $5. If you want to use the brand name version, you might have to pay $50 bucks. And so that is used as a signal to steer you towards the cheaper drugs. So that’s one thing that the co-payment does.

But the other thing is sort of behind the scenes, which is your insurance company is constantly negotiating with drug companies to try to get the best price for the brand name drugs that it does have to buy. So imagine a different scenario where there are two similar drugs that are maybe not exactly the same, but they work kind of the same way, and the insurance company is trying to get both of them to knock down their price as much as possible so they can get a bulk discount.

And the leverage that the insurance company is they say, if you give me a good price, the best price on your drug, then I will put it with a low co-payment, and all of the people who buy my plan are going to choose your drug instead of your competitors. And the co-payment becomes an inducement for the drug company to offer a discount to the insurance company.

IRA FLATOW: So what’s the bad news about all of this?

MARGO SANGER-KATZ: So the bad news is that when these co-pay coupons go into effect, none of those incentives work anymore. So if you are a person who needs a particular drug, let’s say it’s a drug where there’s a generic version, and you could get a coupon for the brand name, and you go to the drugstore and it’s $5 either way, you don’t really have a preference anymore, and your insurance company can’t steer you towards the cheaper thing.

So you may be much more likely to buy the expensive drug. And that ends up driving up the cost of your insurance over time because the co-payment, even though it can be a lot for individual people, generally the co-payment is just sort of the tip of the iceberg.

Many of these drugs may cost your insurance company hundreds or thousands of dollars. So for you, you’re thinking about the difference between $5 and $50, but your insurance company may be thinking about difference between a $20 total price and a $300 total price. And so that can drive up your premiums over time.

But the other bad thing is it really can mess up these negotiations between the drug companies and the insurance companies because if the insurance company can’t effectively steer its patients to the discounted product, if you don’t care between these two brand names because of a coupon, then maybe both of those drugs will get no discount, and the insurance company will have to pay a high price for both of them.

IRA FLATOW: So you get hit in the long run with insurance premiums. There are bans on these coupons in certain areas aren’t there?

MARGO SANGER-KATZ: There are. So Medicare, the drug program for people over 65, does not allow them to be used. And there are some states that have bans including, I think, most prominently, Massachusetts doesn’t allow them.

IRA FLATOW: Is it working there– the ban?

MARGO SANGER-KATZ: So researchers recently did a study where they compared people in Massachusetts to people in New Hampshire– and New Hampshire has no ban. And they looked at just drugs where there is a generic equivalent. And what they found is that people in Massachusetts, where there was a ban, many more of them chose the generic drug, and that the savings were actually quite substantial.

IRA FLATOW: Wow. Thank you, Margo. Margo Sanger-Katz is a health correspondent for the New York Times based out of Washington. We’re going to take a break. When we come back, we’re going to talk with the White House Chief data scientist, DJ Patil. He’s here, ready to chat with us all. Stay with us. We’ll be right back after this break.

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