Better Understand the Criminal Risk
of Using Copay Coupons in Medicare
Health and Human Services officials
provide a layman’s view of how anti-kick-back law impacts senior
citizens, Medicare and taxpayers
Sept. 24, 2014 – The news yesterday
that senior citizens run the risk of criminal prosecution for using
copay coupons to purchase brand name prescription drugs in the Medicare
Part D drug program is a unique occurrence that caused concern among
seniors, who most often are the least likely U.S. citizens to break the
law. A better understanding of this situation and the reason for this
kick-back law has been provided by the
Office of Inspector General of Department of Health and Human Services
and its Office of Evaluation and Inspections.
Why we did this study
Pharmaceutical manufacturers offer
copayment coupons to reduce or eliminate the cost of patients' out of
pocket copayments for specific brand name drugs. The anti kickback
statute prohibits the knowing and willful offer or payment of
remuneration to a person to induce the purchase of any item or service
for which payment may be made by a Federal health care program.
Manufacturers may be liable under
the anti kickback statute if they offer coupons to induce the purchase
of drugs paid for by Federal health care programs, including Medicare
The anti kickback statute applies
to all Federal health care programs, but this study focused on Part D.
The use of coupons by Medicare beneficiaries could impose significant
costs on the Part D program because many coupons encourage beneficiaries
to choose more expensive brand name drugs over less expensive
In two surveys by outside groups,
approximately 6 percent to 7 percent of seniors surveyed reported using
coupons to purchase prescription drugs.
To identify the safeguards
pharmaceutical manufacturers employ to prevent their copayment coupons
from being used for drugs paid for by Part D and to identify
vulnerabilities in those safeguards, we surveyed 30 manufacturers of the
top 100 Part D brand name drugs with coupons and with the highest
We also reviewed selected
safeguards offered for a purposive sample of those drugs. In addition,
we interviewed staff at various organizations involved in pharmacy
claims transactions to understand other vulnerabilities associated with
coupon use in Part D.
What we found
Pharmaceutical manufacturers' current safeguards
may not prevent all copayment coupons from being used for drugs paid for by
Part D. All surveyed manufacturers provide notices directed to
beneficiaries and pharmacists that coupons may not be used in Federal
health care programs.
Most surveyed manufacturers use
pharmacy claims edits to prevent coupons from being processed for drugs
covered by Part D. Most of these edits may not prevent all coupons from
being processed for Part D covered drugs.
Finally, Part D plans and other
entities cannot identify coupons within pharmacy claims.
What we recommend
concurrent Special Advisory Bulletin affirms that pharmaceutical
manufacturers are at risk of sanctions if they fail to take appropriate
steps to ensure that their copayment coupons do not induce the purchase
of Federal health care programs items or services, including but not
limited to, drugs paid for by Medicare Part D.
For this reason, manufacturers may
engage industry stakeholders and CMS in an effort to identify a solution
to ensure that coupons are not used for drugs paid for by Part D. CMS
should cooperate with industry stakeholder efforts to improve the
reliability of pharmacy claims edits and make coupons transparent. CMS
concurred with our recommendation.
Manufacturer Safeguards May Not Prevent Copayment
Coupon Use for Part D Drugs
Two of the government officials involved in the
study and follow-up actions by Health and Human Services discuss these
actions and provide a better layman’s view of the situation
I'm Laura Kordish, Deputy Regional Inspector General in Chicago for the
Office of Evaluation and Inspections. I'm speaking with Melissa Baker, a
team leader from Chicago. We're talking today about your recently
released report about pharmaceutical manufacturers' copayment coupons.
First, what are copayment coupons?
Drug manufacturers offer copayment, or copay, coupons to reduce the
patient's immediate out of pocket cost for brand-name, prescription
Ok, so coupons sound like a good way to save money for seniors who are
on a tight budget.
They can provide immediate savings. But over the long term these coupons
can cost beneficiaries, Medicare, and, ultimately, taxpayers more money.
How can coupons cost more money in the long term?
Coupons may be offered on brand drugs that have lower-cost generic
equivalents. While the coupon lowers the beneficiary's copayment for the
brand drug, it does not reduce the higher cost of the drug, which is
paid for by the beneficiary's insurance company. Paying for more
expensive brand drugs, instead of less expensive alternatives, means
that Medicare, and beneficiaries, could end up paying more for
prescription drug coverage.
Can you explain that a bit more?
Sure. Here's an example. Let's say brand drug X costs the beneficiary's
Medicare Part D plan $1,000 dollars. The generic alternative costs the
Part D plan $100 dollars. When the beneficiary selects brand drug X,
instead of the generic, it costs the Part D plan $900 dollars more.
So when Medicare beneficiaries buy expensive brand drugs with coupons,
instead of less-expensive alternative drugs, it costs the Part D plan
Right. Part D plans design copayments to encourage beneficiaries to
select less expensive, equally effective drugs, such as generics. When
more beneficiaries select the expensive brand drug, it costs more for
the Part D plans and, ultimately, the Federal government, and the
Is that why you did this evaluation?
That's one reason, but we also wanted to know if manufacturers have
safeguards in place to prevent coupons from being used for drugs paid
for by Medicare Part D.
Why would they have safeguards to prevent that?
Under the Federal Anti-kickback Statute, it is illegal to knowingly and
willfully offer or receive anything of value as a reward for referrals
of Federal health care program business.
Ok - how does that tie into copay coupons?
Manufacturers may be liable under the anti kickback statute if they
offer coupons to encourage beneficiaries to buy certain drugs covered by
Medicare or other Federal health care programs. For this study, we
looked at the safeguards that manufacturers have in place to prevent
coupons from being used for Medicare covered drugs.
So, what did you find, Melissa?
Manufacturers' primary safeguard is notices to beneficiaries. Notices
are usually found on coupons or on coupon materials and state that
coupons may not be used in Federal health care programs. In addition,
most of the manufacturers use prepay edits within the pharmacy computer
system that stop a coupon from being processed.
And what are prepay edits?
In this case, prepay edits are pre-programmed checks in the pharmacy
computer system that detect when a coupon should not be used. These
manufacturer edits try to determine if the person using the coupon is a
Medicare beneficiary. If they're on Medicare, they can't use the coupon.
So are manufacturers taking appropriate steps?
Well, although manufacturers have some safeguards in place, they may not
stop all coupons from being used for drugs covered by Medicare's
prescription drug program. Manufacturer notices can't necessarily stop
coupons from being processed. And manufacturers that use prepay edits
cannot tell for sure if a patient is on Medicare because they can't see
the patient's Medicare insurance status.
So the safeguards manufacturers currently have in place can't stop all
coupons from being used for Medicare covered drugs?
Right. The manufacturers that use prepay edits rely on other
information, like a patient's age, to conclude that a patient is on
What else did you find?
We also found that Medicare currently cannot identify coupons because
pharmacy claims for drugs are typically processed before coupons claims
are processed. This means that Medicare does not know if a coupon is
about to be used with a Medicare covered drug. So it's almost impossible
for Medicare or insurance companies to ensure the proper use of coupons.
So, what can be done to solve this problem?
We think the manufacturers will need to find a technical solution. OIG
is also issuing a Special Advisory Bulletin to manufacturers that offer
copay coupons. The bulletin states that manufacturers must take
appropriate steps to ensure that patients are NOT using their coupons
for drugs paid for by Medicare - or those manufacturers could face
Is it only up to the manufacturers to solve this problem?
In our report, we recommended that the Centers for Medicare and Medicaid
Services, or CMS, cooperate with industry efforts to create reliable
And how did CMS respond to your recommendation?
CMS agreed, and said it will work with the industry to improve the
reliability of safeguards. CMS specifically agreed to work with the
industry to facilitate confirmation of Medicare insurance status and
explore how to make coupons identifiable in pharmacy claims.
Thank you, Melissa, for sharing this important work
You may be eligible for money damages if you owned or leased one of these VW, Porsche or Audi vehicles.
In the major scandal of 2015, Volkswagen cheated you and the world. They rigged diesel emission controls so you, nor regulators, would know how much pollution their cars were adding to our environment.
They were caught and have reserved $7.3 billion to help "make it right" with victims.
If you owned or leased one of these vehicles, contact us now.
Janicek Law attorneys are actively pursuing these cases against VW. Do Not Wait...