What Are Drug Coupons, Why Do They Exist and How Do They Work?

For anyone who has read the ScriptSave WellRx Facebook comment-threads, you’ll know the topic of manufacturer drug coupons (and the Q&A that relates to them) is a popular one. So popular, in fact, we felt it deserved its own article on what drug coupons are and how they work.

What are Manufacturer Drug Coupons?

These coupons often go by a number of different names. Sometimes referred to as copay cards or copay coupons, also commonly called Copay Assistance Programs or just pharma coupons, the end result is often the same. A program, funded by the pharmaceutical manufacturer of a prescription drug, which helps to lower the out-of-pocket cost that the patient pays at the pharmacy.

Because these programs are funded directly by the pharmaceutical company that manufactured the drug, they are usually able to provide the patient with an extremely low cost. Some programs can even drop a patient’s out-of-pocket expense to zero dollars (i.e., FREE prescription medication to the patient).

How do Copay Assistance Programs work (and are the really FREE)?

So what’s the catch behind the copay card? And, yes, there is a catch. To answer this question, let’s look at why these programs were created by pharma manufacturers in the first place.

Just because the patient might end up paying zero dollars, it certainly doesn’t mean the drug manufacturer gave their product away and didn’t make any money. In fact, nothing could be further from the truth.

The clue is really in the name, “Copay Assistance” or “Copay Coupon” – i.e. these programs are designed to help lower a patient’s insurance copay. More about that to follow, a little further down the page.

It’s important to keep in mind that the pharmaceutical manufacturer collects payment for their drug not just from the patient, but also from the patient’s insurance plan. Furthermore, with traditional health plans, the lion’s share of the payment for the drug would generally be coming from the insurance company rather than from the patient. For example, consider a brand drug that might sell for $1,000 and its generic equivalent that’s available for $100. If the patient’s health plan has a flat copay of $20, then the patient would likely opt for the brand. After all, their personal expense would be the same twenty dollars out-of-pocket cost, regardless of which version of the drug they choose … so why not go for the brand-version. In such an example, the patient would pay $20 in the form of their copay, while the brand drug company would collect the remaining $980 from the insurance company.

With this in mind, let’s consider what might happen if patient’s health insurance plan changes its copay structure for the next plan year. If the patient finds themselves having to pay 20 percent of the cost of their medications (a practice commonly referred to as co-insurance), rather than the flat copay of $20, they would then face an out-of-pocket cost of $200 for the same brand drug (i.e. 20% of $1,000) or only $20 for the generic – same as their previous year’s copay (i.e. 20% of $100).

Under these circumstances, the patient’s choice between brand vs. generic has a direct and significant impact on their own out-of-pocket cost, and the potential impact to the brand manufacturer is most certainly a cause for concern. Not only do they lose the patient’s share of the payment for the medication, they also lose the majority share that would have been paid by the insurance provider. And so comes the case for the copay card, copay assistance program or manufacturer drug coupon.

What if the manufacturer pays, reimburses, or assists with the patient’s cost?

Keeping the math the same as the example above, what if the manufacturer creates a program that offers to kick-in $200 against the patient’s copay? The answer is simple. If the patient faces 20% of the cost of a $1000 brand drug vs. 20% of a $100 generic … but then the manufacturer of the brand offers to subsidize $200 back to the patient if the patient picks their drug, then the patient is left facing a choice between a zero-dollar burden for choosing the brand or a $20 burden for the generic.

Obviously, the patient will now tend to choose the brand. However, although the patient is able to use the coupon to escape paying anything whatsoever for the drug, the drug company is now able to collect $800 from the insurance plan, because the pharmacist dispensed the brand as opposed to the generic (thereby triggering a bill to the patient’s insurance for the brand). In other words, by giving a $200 discount or subsidy to the patient, the pharma manufacturer manages to collect $800 from the insurer, rather than collecting nothing if the patient had opted for the generic.

Pharma coupons – only for the insured

At this point, anyone still reading has probably already had their ‘a-ha moment’ in realizing why these programs (that can be so wonderfully generous to patients across the U.S.) are often only available to patients with insurance. Long story short, without the insurance company in the equation to continue footing their full share of the bill, these programs wouldn’t make any money at all for the pharma manufacturer.

To many folks this seems unfair. However, it doesn’t change the fact that, every single day, manufacturer coupons make a HUGE difference to many patients who can’t afford their medications.

For those without access to these programs, the ScriptSave WellRx prescription discount card might be able to help (although, clearly, we’re never going to be able to help as much as the manufacturers’ own programs – for those who qualify).

If you’re struggling to afford your prescription medications, check out the ScriptSave WellRx website or app to see how much you could be saving on the cost of your medications! Furthermore, if you’re still unsure why the WellRx card from ScriptSave is different to the copay assistance cards from the manufacturers, and how our discount program works, there’s a brief write-up to explain that here. You may also want to read our related article, “What Are Patient Assistance Programs?“