Pharmaceutical Copay Assistance Programs and Patient Drug Choice: Biological Specialty Drugs

In an effort to manage prescription drug spending, health insurers design tiered copay schemes that steer patients towards buying lower-price drugs. In response, pharmaceutical companies issue coupons (called copay cards) that can lower the high co payments insurers assign to non-preferred drugs. This paper exploits the lifting of a ban on coupons in Massachusetts effective July 2012. The paper examines the effect of the ban lift on patients’ choice of drug brand as well as changes in the cost burden shared by insurers and patients. I use pharmacy claims data for biological specialty drugs that treat Multiple Sclerosis and Rheumatoid Arthritis to examine the effect of copay cards on insurers’ costs and patients’ purchasing behavior. I find that brand names that introduced coupons following the ban lift saw a 16% increase in the number of prescriptions (scripts) and patients per quarter relative to brand names that did not offer coupons. Moreover, I find evidence that the likelihood that a transaction had a coupon increases with the co payment. Lastly, I find that for a given drug brand, following the ban lift, transactions with a coupon also had higher co payments. This fact suggests that the introduction of coupons in Massachusetts was offset by a decrease in the share of the drug cost covered by the insurer, resulting in no change in the patient’s out-of pocket
payment.