Co-pay Coupons Are No Bargain for Specialty Pharmacies

Specialty Pharmacy TimesNovember/December 2014
Volume 5
Issue 6

There are notable compliance, business, and operational implications for pharmacies involved in the use of co-pay coupons.

There are notable compliance, business, and operational implications for pharmacies involved in the use of co-pay coupons.

Recent industry events demonstrate that specialty pharmacies (SPs) are inextricably entwined in the continuing struggle over the use of copay coupons. These recent events include:

  • The September 19, 2014, release of the Office of Inspector General (OIG) Special Advisory Bulletin1 and Report2 on coupon use by federal program beneficiaries;
  • Recent commercial payer litigation, including the September 25, 2014, court ruling dismissing Racketeer Influenced and Corrupt Organizations Act (RICO) claims against Abbott Laboratories and AbbVie Inc 3; and
  • Commercial payers’ including prohibitions of coupon use in their contracts.

SPs, as “boots on the ground” enforcing coupon prohibitions, risk False Claims Act (FCA) actions, breach of contract lawsuits, and costly recoupments for failure to comply with regulatory and contractual requirements. This article summarizes some of the current activity in this space and analyzes the compliance, business, and operational implications for SPs, recommending a focused approach to contracting strategies; communications among the compliance, business, and operations teams regarding prohibition obligations; and exploration of workable protocols for honoring both federal program and contractual prohibitions.

Maintaining Patient “Skin in the Game”

Coupon prohibitions are rooted in the theory that cost-sharing influences beneficiaries to make more efficient health care decisions.4-6 In support of this theory, the OIG Report cites an increase in the use of coupons from 86% to 525% from July 2009 to December 2012, many of which were for brand name drugs for which lower cost generics were available. These same concerns are cited by commercial payers. For example, beginning on January 1, 2013, UnitedHealthcare disallowed the use of coupons for a handful of specialty drugs,7 estimating that 45% of its members were choosing higher-cost medication, despite available lower-cost alternatives.8 In fact, as of January 1, 2014, UnitedHealthcare expanded the list of specialty drugs under prohibition to more than 30 drugs, but backed away from its plan to cut out all coupon use by July 1, 2014.9-11 UnitedHealthcare’s approach is not unique in the industry: SPs may have several payer contracts that prohibit coupon use.

In the courtroom, the campaign against coupons became apparent in early March 2012 when a coalition of health care foundations, payers, and other groups filed lawsuits against Abbott Laboratories, Amgen Inc, AstraZeneca PLC, Bristol-Myers Squibb Co, GlaxoSmithKline PLC, Merck & Co Inc, Novartis AG, and Pfizer Inc.12 Many of these cases have been dismissed by the payer plaintiffs; however, some are still active. Generally, the allegations against the manufacturers are that (1) manufacturers violate RICO by instructing pharmacies to process coupons as secondary insurance, which only affects co-pay and not total cost, and (2) manufacturers’ coupons interfere with pharmacies’ contractual obligations to collect co-pays directly from patients. The Abbott/AbbVie litigation involves similar claims, and the court’s recent ruling discusses at length the role of SPs in processing coupons. Ultimately, in the Abbott/AbbVie case the court found that the plaintiff failed to sufficiently allege that the pharmacies joined with the manufacturers “to create a distinct entity” for the purpose of processing the co-pay coupons as secondary insurance, and punted the interference with contract claim on a technicality.3 This ruling, as well as many other rulings stemming from the March 2012 litigation, essentially requires future plaintiffs to allege a more detailed collusive relationship between manufacturers and pharmacies in order to draft a complaint that meets the relevant pleading standards. Moreover, because payers are having minimal success stemming from the use of coupons through suits against manufacturers, payers may target SPs in the future.

Regardless of future actions by payers, SPs are tasked with honoring existing coupon prohibitions. As the OIG publications note, at least for Part D beneficiaries, segregating out precluded beneficiaries is no easy task. The report addresses mechanical and technical efforts to weed out Part D beneficiaries, suggesting giving bigger, bolder, and better-placed notice to beneficiaries, as well as providing safeguards on websites to keep patients from changing answers to questions about age or Part D status. Additionally, the report recognizes that it is difficult, if not practically impossible, to effectively isolate all Part D beneficiaries through claims edits. Far from offering a fail-safe approach, the report acknowledges that “coupons are not transparent in the pharmacy claims transactions system to entities other than manufacturers,” and ultimately recommends that the Centers for Medicare and Medicaid Services cooperate “with industry stakeholder efforts to improve the reliability of mechanisms to determine when copayment coupons are used in connection with the purchase of drugs paid for, in part, by Part D.”

Work Across Teams

Given the significant industry movement and focus on coupons, SPs must take a comprehensive approach to co-pay prohibitions, looping in business, compliance, and operations teams.

For example, business teams should be mindful of the implications of coupons when negotiating contracts. While there may be minimal negotiating room with payers, when contracts contain prohibitions, operations need to be informed of prohibitions and consulted about how the prohibition will be operationalized. With manufacturers, targeted contracting strategies can allocate responsibility and risk between manufacturers and SPs.

Just as business must be sure to keep the operations team abreast of coupon prohibitions, the compliance teams also play an integral role in ensuring protocols are in place to appropriately mitigate the risk improper use of coupons. The OIG publications offer guidance on methods that may increase the effectiveness of protocols to sift out federal program beneficiaries from patients that may use coupons. In concert with the operations teams, policies must be crafted that can be operationalized over a wide range of dispense categories. Consequently, comprehensive strategic planning around SPs’ approach to coupons is key to compliance with contractual network requirements, avoiding FCA, Anti-Kickback Statute, and civil monetary penalty liability, and avoiding recoupments from commercial payers.

While each each payer and manufacturer relationship will require a unique analysis, below are some focus points, which may assist in navigating coupon prohibitions:

  • Ensure that prohibition notices are prominently placed; consider providing notice of commercial payer exclusions
  • Institute policies and procedures that lower the risk of willingly or knowingly processing coupons for federal program beneficiaries; ie, require an affirmative certification for each patient over 65 years that he or she is not a Part D beneficiary
  • Institute policies and procedures that require the business and operations teams to communicate about commercial payer coupon prohibitions
  • Facilitate compliance and operations communications about the best way to segregate out dispenses associated with coupon prohibitions (by patient, disease state, drug, payer, etc)
  • When contracting with manufacturers, consider coupon terms (ie, needed carve-outs for federal or commercial prohibitions) and consider allocating the risk and responsibility of processing coupons. SPT

Click here for more information on the subject of co-pay coupons from Shannon L. Wiley and Michael R. Hess.


  • US Department of Health and Human Services, Office of Inspector General. Pharmaceutical Manufacturer Copayment Coupons. Washington, DC: Office of the Inspector General; September 2014.
  • US Department of Health and Human Services, Office of Inspector General. Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs. Washington, DC: Office of the Inspector General; September 2014.
  • New England Carpenters Health and Welfare Fund v Abbott Laboratories. 1:12cv1662 (ND Ill) dkt 158.
  • US Department of Health and Human Services, Office of Inspector General. Publication of OIG Special Fraud Alerts. 59 Fed Reg 65372. December 19, 1994.
  • US Department of Health and Human Services, Office of Inspector General. Advisory Opinion 97-4. September 25, 1997.
  • US Department of Health and Human Services, Office of Inspector General. Advisory Opinion 99-1. January 20, 1999.
  • UnitedHealthcare to limit acceptance of manufacturer coupon cards.
  • Hernandez R. Benefit plans can influence specialty patients to switch to less costly alternatives. Specialty Pharmacy Times. October 31, 2013.
  • UnitedHealthcare. Specialty coupon list. UnitedHealthcare Services, Inc; August 2013.
  • UnitedHealthcare. Pharmacy retail coupon update. April 11, 2014.
  • UnitedHealthcare. Retail coupon initiative update. April 29, 2014.
  • Johnson LA. Consumer group sues 8 drugmakers over drug coupons. USA Today. March 7, 2012.

About the Authors

Michael R. Hess is a member of Bass, Berry & Sims PLC, in Nashville, Tennessee, and leader of its specialty pharmacy, pharma services, and distribution practice, based in Memphis, Tennessee. He is the former chief counsel and vice president of strategic development at Accredo Health Group and assistant general counsel for Accredo’s parent, Medco Health Solutions.

Shannon L. Wiley is an associate of Bass, Berry & Sims PLC, and its specialty pharmacy practice, and is based in Memphis, Tennessee.

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