Association of California’s Prescription Drug Coupon Ban With Generic Drug Use

Abstract

This pharmacoepidemiology study uses insurance claims data to compare generic substitutions for drugs with vs without manufacturer copayment coupons in California vs surrounding states in the year before and after a January 2018 California ban on coupons intended to incentivize use of more expensive brand-name medication.

Drug manufacturers sometimes offer co-payment coupons to offset patient out-of-pocket costs. Although coupons can help patients afford necessary medications, they increase overall drug spending by encouraging use of expensive brand-name drugs over less expensive generics.^1,2 Coupons are prohibited by Medicare and Medicaid, but they are available for commercially insured patients. Several states are considering restricting coupon use to promote generic substitution and control drug spending. In October 2017, California passed a law that banned use of co-payment coupons for brand-name drugs once interchangeable generic versions of those products have become available.³ We investigated how generic substitution changed in California after its law took effect in January 2018.

Methods

We identified brand-name drugs facing first-time generic competition from 2014 through October 2016, excluding clinician-administered drugs. Archived manufacturer websites and an online drug coupon database were searched to identify whether the manufacturer for each drug offered a co-payment coupon after generic competition began and through December 2018.

From a large national health insurance claims database (IBM MarketScan), we identified commercially insured patients younger than 65 years in California and other Western states (Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington, and Wyoming) who filled prescriptions for these drugs in 2017-2018. We measured the monthly percentage of generic claims in California compared with surrounding states for drugs with coupons (primary cohort) and those without coupons (control cohort). We fit segmented linear regression time-series models assuming first-order autocorrelation (eAppendix in the Supplement) and identified significant changes using a 2-sided P<.05. We obtained approval from the Mass General Brigham institutional review board and analyzed data using the Aetion Evidence Platform (Aetion Inc) and SAS software, version 9.4 (SAS Institute Inc).

Results

We identified 15 drugs with coupons and 26 drugs without coupons, accounting for a combined 1.26 million claims in California and surrounding states (Figure 1).

Figure 1. Claims for Drugs With and Without Coupons, 2017-2018.

HCTZ indicates hydrochlorothiazide. Bars indicate the number of claims for each drug in the cohort in California and other Western states from January 2017 through December 2018.

Among drugs with coupons, generic use increased from January 2017 to December 2018 from 91.3% to 96.3% in California and from 92.1% to 96.9% in surrounding states (Figure 2). Prior to the California coupon ban, the level of generic use was 0.94% lower in California than in surrounding states (95% CI, 0.57%-1.31%; P < .001). After the limited coupon ban took effect, there was a nonsignificant increase of 0.42% (95% CI, −0.06% to 0.90%; P = .08) in the absolute level of generic use in California relative to surrounding states, with no significant change in the trend (P = .63).

Figure 2. Generic Claims Among Drugs With and Without Coupons, 2017-2018.

All drugs faced first generic competition between January 2014 and October 2016. P values are from segmented regression analyses comparing the change in trend (slope) and level (height of the line) of generic use after the coupon ban was implemented in California (January 2018), compared with other Western states. Claims were classified based on a patient’s state of residence, so the small number of patients crossing state lines to fill prescriptions in a neighboring state may be misclassified.

Drugs without coupons had similar increases in generic use, from 90.2% to 95.6% in California and from 90.8% to 96.9% in surrounding states; the coupon ban was associated with a small, nonsignificant decrease of 0.06% (95% CI, −1.14% to 1.03%; P = .92) in the absolute level of generic use in California relative to surrounding states, with no significant change in the trend over time (P = .77).

Discussion

A 2017 California law banning use of co-payment coupons for brand-name drugs with direct generic competitors was associated with no significant increase in generic substitution in its first year.

These findings are less pronounced than a prior study that found that a similarly limited coupon ban in Massachusetts was associated with 3.4% higher generic use for 23 drugs compared with New Hampshire.¹ The prior study, using data from 2007-2010, had lower baseline generic substitution and did not control for within-state changes before and after the Massachusetts legislation.

Study limitations include that only 15 coupon-covered drugs with recent generic competition were assessed, although older drugs would be expected to have even higher levels of baseline generic substitution and consequently less room for improvement from a policy intervention. The effect of the California law may have increased beyond the first year, especially if some pharmacies were slow to change practices. The data set included approximately 10% of California’s commercially insured population but may not be representative.

The California law targets the 8% to 13% of drugs offering coupons that have direct generic competitors.^4,5 Broader coupon bans offer greater potential to promote use of cost-saving generics, but they could raise patient out-of-pocket costs and lower adherence.^2,6 States may consider pairing broader coupon bans with reforms to protect patients from facing excessive cost sharing for essential medicines.

Section Editor: Jody W. Zylke, MD, Deputy Editor.

Supplement.

eAppendix. Methods