Viewpoints: November/December 2014
Concerns with Co-pay Discount Programs
by Tim Kosty, R.Ph, M.B.A. and Don Dietz, R.Ph., M.S.
U.S. Department of Health and Human Services Office of Inspector
General (OIG) released a report in September questioning
pharmaceutical manufacturers’ safeguards to prevent co-pay
card use in federally funded programs, specifically Medicare
Part D (the report can be found by scanning the QR code at the
end of this column). The OIG voices its concern with the
strategies employed by the pharmaceutical
manufacturers and their vendors that facilitate the execution
of co-pay card programs. The OIG defines co-pay card programs
coupons offered to insured patients to reduce or eliminate
patients’ out-of-pocket costs for specific brand-name drugs.
Before reviewing the findings in the report, let’s review the
strategic reasons pharmaceutical manufacturers implement
co-pay card programs.
co-pay card programs for one or more of the following reasons:
new patients who may be using an alternative therapy.
patients when a generic alternative is introduced.
patient adherence on both new and refill prescriptions by lowering the patient cost for the product.
a defensive strategy when they are in an unfavorable
on the payer formulary, to reduce the patients co-pay.
card programs do lower the cost to the patient. As shown in the
at left, the co-pay discounts are typically set to lower the
patient’s cost to a second-tier brand co-pay for insured
patients. In this example, the patient will be indifferent,
from a financial perspective,
as to which product is dispensed. However, the payer will pick
up the difference
in cost between the second-tier and third-tier brand product.
Payers typically do not have a favorable view of these co-pay
card programs, because they mitigate
a benefit design tool, patient co-pay differentials, that has
proven effective in driving utilization of preferred-brand
|Tier 2 Brand||Tier 3 Brand|
|Co-pay Card Program||$0||$25|
|Net Patient Pay||$25||$25|
OIG’s concern is that co-pay cards will increase costs for
Medicare Part D plans and, subsequently, the government’s cost
for the program. Furthermore, the OIG cited two surveys where 6%
to 7% of seniors indicated they were using co-pay coupons on
their Part D prescriptions.
By applying the survey results to all 36 million Medicare Part D
patients, the OIG estimates that co-payment coupons would be
used by over 2 million Medicare beneficiaries.
manufacturers are aware that
their coupon programs should not be used on Medicare Part D
prescriptions, and they employ multiple methods to prevent
their use. These include:
notice to beneficiaries indicating that the co-pay card
program is not eligible for Part D prescriptions.
notice to pharmacists that Part D prescriptions are not
eligible for the program.
of claims-processing edits and alerts to prevent
for drugs covered by Medicare Part D.
claims-processing edits used by manufacturers for processing
co-pay card programs often include:
of birth edit.
For patients over 65, there may be an edit or informational
message reminding the pharmacist that the co-pay program is
not available to Medicare Part D or other government-funded
The NCPDP processor ID number (BIN) is submitted on the
secondary insurance transaction used for the co-pay card
program. However, the BIN is insufficient to identify a
Medicare Part D program, as many payers have multiple lines of
business, including commercial,
Medicare Part D, managed Medicaid, and workers’ compensation.
D benefit stage.
Some co-pay card program processors use the Part D benefit
stage self-reported by the patient to reject co-pay card
claims indicating that the patient isn’t eligible for the
OIG concluded that the claims-processing edits have merit but
don’t prevent co-pay card programs from processing
claims for Medicare Part D beneficiaries because these use
proxies (e.g., date of birth) instead of actual Part D
percent of Medicare beneficiaries are under 62 years old and
covered under the disability program.
BIN/PCN (processor control number) combination
could be effective in identifying Medicare Part D plans. But
the OIG noted that “NCPDP would need to revise its pharmacy
claims transaction standards to enable the PCN to be
transmitted as part of the coupon claim. Revising the NCPDP
standards is an industrywide process that typically takes
true out of pocket (TrOOP) facilitator has access to the Part
D beneficiaries benefit stage, and the OIG concluded that it’s
unclear how co-pay card program sponsors have access to this
bottom line is that there is no easy, systematic way to
prevent the processing of co-pay cards for Medicare Part D
Depending upon the type of co-pay card program used by the
patient, the pharmacy may not even know that a co-pay card
program is being used. Co-pay card formats that are
difficult to identify include electronic coupons, debit
cards, and direct patient reimbursements. In these
situations, the pharmacy may be unaware that these programs
are being used by their Part D patients.
and technicians should be trained to not accept co-pay card
programs for Medicare Part D beneficiaries.
This is a manual process at this time. It may be beneficial
for pharmacy management systems to include an edit on
secondary insurance claims for Medicare Part D plans and
require an override to prevent the inadvertent submission of
OIG did specifically mention actions pharmacies could take
to prevent the submission of co-pay cards for Medicare Part
D beneficiaries, including submitting an E1 eligibility
transaction to determine Medicare Part D eligibility.
the shortcomings in preventing the processing of co-pay
cards for Part D beneficiaries, OIG nevertheless indicated
that pharmaceutical manufacturers
have the responsibility to prevent their use. Furthermore,
they may be implicated under the anti-kickback statute if
they offer coupons to induce the purchase of drugs paid for
by Medicare Part D or any other federal healthcare programs.
Pharmaceutical manufacturers should revisit the controls in
their co-pay card programs and conduct audits to ensure
compliance with the program
the introduction of co-pay card programs with virtually
all new brand products, pharmacists should review their
procedures to prevent submission of co-pay card claims for
Medicare Part D and other federal programs. Finally, the OIG
recommends that all industry stakeholders
cooperate to identify solutions to prevent the use of co-pay
card programs for drugs paid for by Medicare Part
It will be interesting to see how the industry prioritizes
this issue to create a solution that addresses, but may
never meet, the OIG’s goal of preventing the use of any
co-pay card to be used by a Medicare Part D beneficiary. CT
Kosty, R.Ph., M.B.A.,
is president, and Don
Dietz, R.Ph., M.S.,
is vice president, at Pharmacy Healthcare Solutions, Inc.,
which provides consulting solutions to pharmaceutical
PBMs, retail pharmacy chains, and software companies on
strategic business and marketing issues. The authors can be
reached at email@example.com and firstname.lastname@example.org
the code to access the U.S. Department of Health and Human
Services Office of Inspector General (OIG) report. Or visit