Branded pharmaceutical manufacturers frequently offer “copay coupons” that insulate consumers from cost-sharing, thereby undermining insurers' ability to influence drug utilization. We study the impact of copay coupons on branded drugs first facing generic entry between 2007 and 2010. To overcome endogeneity concerns, we exploit cross-state and cross-consumer variation in coupon legality. We find that coupons increase branded sales by 60+ percent, entirely by reducing the sales of bioequivalent generics. During the five years following generic entry, we estimate that coupons increase total spending by $30 to $120 million per drug, or $700 million to $2.7 billion for our sample alone. (JEL G22, I13, L11, L65, M31)
Branded pharmaceutical manufacturers frequently offer "copay coupons'" that insulate consumers from cost-sharing, thereby undermining insurers' ability to influence drug utilization. We study the impact of copay coupons on branded drugs first facing generic entry between 2007 and 2010. To overcome endogeneity concerns, we exploit cross-state and cross-consumer variation in coupon legality. We find that coupons increase branded sales by 60+ percent, entirely by reducing the sales of bioequivalent generics. During the five years following generic entry, we estimate that coupons increase total spending
In 2015, the U.S. Department of Health and Human Services (HHS) announced a goal of linking at least 50% of Medicare spending to value-based payment models such as accountable care organizations. 1 Health care providers and other stakeholders are now scrambling to reorganize in a way that delivers value while preserving or enhancing commercial success.Although it's not yet clear how providers will respond to value-based payment models, an examination of pharmaceutical industry practices can provide insights into problems that may ariseand practices to avoid.Value-based plan designa term that describes payers' efforts to align consumer cost sharing with the value generated by a service or drugmay sound like a new development in health care, but it's old news for prescription drugs. For years, insurers and pharmacy benefit managers have steered consumers toward generic and other high-value drugs by categorizing drugs into "tiers" and requiring lower copayments for preferred drugs. By 2000, roughly three quarters of enrollees in employer-sponsored health plans had plans with two or more drug tiers.Today, a similar proportion have plans with at least three tiers. Tiering not only encourages consumers to use high-value drugs, it also gives insurers leverage during price negotiations with manufacturers.Under tiering, insurers offer manufacturers favorable tier placement in exchange for better discounts. Placement on a "preferred-brand tier," with a typical copayment of about $30, will yield higher sales than placement on a "nonpreferred-brand tier," with a typical copayment of more than $50. Insurers can also negotiate lower prices for drugs that have therapeutic
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