The rising cost of prescription drugs impacts all members of the pharmacy supply chain. For patients, it likely means higher copay or co-insurance responsibilities under their prescription benefit plan. Excessive patient pay amounts deter adherence, as patients may struggle to afford the high out of pocket amounts associated with their prescriptions. To address increased patient costs, manufacturers developed copay assistance programs, often in the form of copay coupons, to cover portions of the patient’s copay. These manufacturer copay coupons effectively reduce costs for patients and, as such, pharmacies are eager to apply these coupons for their patients. However, many pharmacies underestimate the potential risks associated with manufacturer coupons, potentially exposing themselves to liability. Specifically, increasing focus on copay coupons from pharmacy benefit managers (“PBMs”) during pharmacy audits can lead to adverse audit findings, financial recoupment, and even the termination of the pharmacy’s contract with the PBM.. Therefore, it is imperative for pharmacies to have a comprehensive understanding of what a copay coupon is and is not, when they can be applied, and the applicable regulatory consideration is critical for pharmacies to avoid PBM sanctions.
Manufacturer Copay Coupons vs. Prescription Discount Cards
Manufacturer copay coupons are often confused with prescription discount cards, but the two purchasing mechanisms are distinct and carry different PBM and regulatory requirements. As mentioned above, a manufacturer copay coupon is a form of manufacturer assistance that is applied at the point of sale to reduce a patient’s out of pocket costs under their insurance plan. Prescription discount cards, on the other hand, are typically used without any insurance. For example, if a patient visits the pharmacy to pick up their prescription and under their insurance plan, the patient owes a $100 copay at the point of sale, a manufacturer coupon may be applied to reduce the copay to $10. Conversely, if the patient goes to the pharmacy and learns that the prescribed medication is not covered under their insurance plan, the patient is then responsible for the entire cost of the medication, let’s say $50. By using a prescription discount card, the patient receives a discount on the total cost of the medication, reducing it to $20.
Another distinction between manufacturer coupons and prescription discount cards is who sponsors or funds the discounted costs. Manufacturer coupons are sponsored by the drug manufacturer and, as such, the manufacturer covers the difference between what the patient paid and the total patient pay amount. Prescription discount cards are normally operated by independent companies who contract with pharmacies willing to dispense certain products at the discounted rate, leaving pharmacies on the hook for the difference between the discounted price and the true cost of the medication. Thus, if a prescription discount card lowers the patient’s out of pocket cost for a medication below the pharmacy’s acquisition cost, the pharmacy may take a loss on the dispensed product – especially when administrative fees charged by the prescription discount card operator to the pharmacy are considered.
The regulation of prescription discount card programs is increasing as well. For instance, some states, like Kansas, require prescription discount card operators to obtain a license before operating. Many others, like Texas and Illinois, only require licensure/registration if the prescription discount card operator charges users a fee to utilize the prescription discount card. However, since prescription discount cards are typically not used in conjunction with insurance, there are generally less risks involved for the pharmacy from a regulatory/PBM manual perspective than when a manufacturer coupon is applied.
Applying Manufacturer Coupons, PBM Audits and Regulatory Considerations
PBMs are closely scrutinizing the use of copay coupons and manufacturer-sponsored assistance programs in both desktop and on-site audits. When copay coupons are applied improperly, these audits can lead to PBM recoupment of funds or termination from the PBM’s network. When auditing copay coupon claims, there are typically three major discrepancies alleged to challenge the coupon’s application; one being primarily a regulatory consideration and the others primarily concerned with the PBM’s contract.
PBMs allege discrepancies when a manufacturer coupon is used in conjuncture with insurance plans paid by federal or state healthcare programs. Federal laws and regulations like the Anti-Kickback statute generally prohibit pharmacies from applying a manufacturer coupon to prescription claims paid for, in whole or in part, by federal healthcare programs such as Medicare, Medicaid, and TriCare. In addition, many states have enacted laws that mirror the federal Anti-Kickback statute further restricting the application of manufacturer coupons in certain situations. Thus, when a pharmacy applies a copay coupon to a claim paid for under Medicare Part D, for example, PBMs assert discrepant audit findings and seek to recoup funds from the pharmacy. Moreover, PBMs regularly refer adverse audit findings to state and federal governing bodies which, in turn, could expose the pharmacy to further liability under the federal Anti-Kickback statute (which carries both civil and criminal penalties) or a similar state law.
Another common PBM audit discrepancy that involves manufacturer coupons is an allegation that a copay coupon cannot be applied to the specific product dispensed. Specifically, PBMs contend that manufacturer coupons cannot be applied to non-FDA approved products. Unlike limitations placed based on the patient’s insurance, there are no federal or state laws specifically restricting the use of copay coupons for non-FDA approved drugs, so long as such usage complies with other applicable laws and regulations. Instead, PBMs often include provisions in their Provider Manuals or Participation Agreements that prohibit pharmacies from applying manufacturer coupons to non-FDA approved drugs. When PBM contracts contain such provisions, application of a manufacturer coupon exposes pharmacies to adverse audit findings.
However, it is important to understand that the extent of coupon usage limitations based on FDA approval status depends on the specific PBM contract, and these restrictions can vary significantly between PBM contracts. Accordingly, in addition to complying with state and federal laws, pharmacies must also be well-versed in their contractual obligations with PBMs, especially those related to copay collection. A robust understanding of these contractual obligations is critical to reduce the risk of PBMs alleging improper copayment collection discrepancies during audits, which, in turn, could lead to substantial financial recoupment and even network termination.
Finally, PBM contracts often prohibit pharmacies from “outsourcing” copay collection to entities like a Hub Pharmacy, for example. PBMs view this activity as an extension of efforts to facilitate higher-cost products being billed to patients and have mandated that all collection of copays must occur at the pharmacy’s location and cannot be performed by another entity (e.g., a Hub). Relevant to manufacturer coupons, many Hub Pharmacies have affiliations or relationships with manufacturers pursuant to which manufacturer copay coupons are applied to claims for the manufacturer’s products. PBMs will not only assert copay or “Other” discrepancies if it discovers the Hub relationship during an audit, but a PBM’s discovery that a particular manufacturer has structured a Hub to facilitate copay collection on a pharmacies’ behalf will lead to the PBM auditing pharmacies with significant claims volume for the manufacturer’s products. Thus, it is critical that pharmacies adhere to their contractual requirements with manufacturers and carefully scrutinize any relationships it may have with Hub pharmacies.
How Frier Levitt Can Help
Regardless of the size of your pharmacy or the amount at stake, Frier Levitt is ready and able to assist you in successfully challenging PBM abuse of your pharmacy. Our life sciences attorneys are prepared to provide guidance as your pharmacy prepares for audits or network enrollments. Moreover, we adopt an assertive approach to advocating for your rights following adverse PBM actions or audit findings. If you have questions or need help fighting adverse PBM actions, contact us to speak to an attorney.
