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Codey Introduces Bill To Ban Coupons for Prescription Drugs When Lower-Cost Alternative Exists

Senator Richard Codey congratulates Congressman Donald Norcross on his succession to the U.S. House of Representatives.

TRENTON – Senator Richard J. Codey yesterday introduced legislation to ban the use of manufacturer coupons and other discount offers for certain prescription drugs when a lower-cost alternative, such as generic versions of the drug, exists. The bill would address a practice often used by manufacturers to drive consumers to their products with a discount offer, but that actually increases costs for customers – as well as health care costs globally – as it deters the use of the cheaper, generic equivalent.

“This is a scheme used by drug manufacturers to entice consumers into using their products.  Unfortunately, it doesn’t have the ‘advertised’ effect of cutting costs,” said Senator Codey. “While coupons may provide a discount on out-of-pocket expenses, they do not bring down the total cost of the medication and actually can have the effect of increasing health insurance costs that are ultimately passed on to consumers. This is completely counter to the goal of reducing the overall cost of health care for residents in this state and across the country. Restricting these offers when a generic equivalent exists will benefit residents over the long-term and will work to protect against increasing costs in the health care system.”

The bill would prohibit manufacturers from offering discounts, rebates, product vouchers or other reductions in an individual’s out-of-pocket expenses, including co-payments and deductibles, for prescription drug or biological products if a lower-cost alternative is available that has been designated by the U.S. Food and Drug Administration as therapeutically equivalent to or interchangeable with the manufacturer’s product. The bill includes some exemptions to the restriction.

An article published in the New England Journal of Medicine discussed how pharmaceutical manufacturers frequently use coupons and discount offers to encourage consumers to choose that manufacturer’s products. In the short term, the coupons and discounts reduce the consumers’ out of pockets costs for providing the consumer an incentive to choose the products. However, the report stated that the practice raises the cost of providing coverage for health and prescription benefits providers, which in turn results in higher costs for all consumers. Additionally, the practice generally results in higher long-term costs for individual consumers, who frequently continue to use a manufacturer’s product even after the coupon or discount is no longer available, which is generally not effective for more than one year.

A recent New England Journal of Medicine study highlighted in a published report assessed how co-pay coupons affected spending on 23 branded drugs that started to face generic competition between 2007 and 2010. The report stated that, by the researcher’s estimates, coupons actually led to increased spending on those 23 drugs anywhere from $700 million to $2.7 billion in the first five years that generic competition existed.