Discount cards spur higher healthcare spending in Canada

by Leo Almazora12 Nov 2019

A new study from the University of British Columbia has revealed that the use of brand-name discount cards is leading to higher health care spending for both public plans and private insurers.

“Although the cards are generally thought to cover enough to make the patient’s copayment similar to that of an equivalent generic, costs to insurers for the remaining portion of the drug can be higher,” said authors Michael Law, Fiona Chan, Mark Harrison, and Heather Worthington.

As they explained in the report published by the Canadian Medical Association Journal (CMAJ), the increase in cost for insurers arise because the difference in cost between a branded product and the equivalent generic drug is covered only for the patient and not the insurance plan.

The increased cost, they said, is more likely for claims that are sent to the plan for adjudication before the card is applied, thus making it appear to the insurer that the patient is filling a standard brand prescription.

Based on discount-card usage data covering the period from September 2014 to September 2017 — which included 2.82 million instances of brand discount cards being used for 89 different medications — they found that monthly use of the cards swelled by 67% over the three-year period.

The researchers looked at a sample of over 930,000 claims involving a private insurer and no government payment, and compared it with a dataset of more than 995,000 equivalent generic claims. They found that third-party insurers paid $69.8 million toward the claims they received, compared to an estimated $47.7 million for the same mix of equivalent generic prescriptions.

“This equates to an increase of $21.7 million, or 46%,” they said. “On a per-prescription basis, this represented a cost increase of $23.09 (95% CI $22.97 to $23.21) for private insurers.”

The researchers then focused on claims submitted to public drug plans with no private insurer involvement, which yielded a sample of over 901,000 claims; they compared that data with 1.45 million equivalent generic drug claims. While government plans paid a total of $26 million toward brand-name drugs when a discount card was used, it was estimated that they would have paid only $25.7 million for equivalent generics, for a difference of $334,000.

“This represents an increase of 1.3%, or $0.37 per prescription (95% CI $0.33 to $0.41),” the study’s authors said.

The difference in impact between private insurers and public plans, they said, could be attributed to the fact that nearly every public drug plan in Canada will cover only the generic equivalent price when one is available, whereas many private plans do not have this rule.

“Our study provides empiric evidence that drug discount cards represent a way for pharmaceutical companies to leverage this discrepancy while making patients’ copayments nearly equivalent, so as not to deter them from filling their prescriptions with branded medicines,” the authors wrote.

They concluded that given the large increases in private-plan costs demonstrated by the analysis, employers might want to consider more stringent generic substitution policies to ensure value for money in drug spending.