Copay Adjustment Programs: What Are They and What Do They Mean for Consumers?

Americans spend on average more than $1,000 per person per year on prescription drugs, far surpassing prescription drug spending in other peer nations. According to a 2023 KFF poll, 3 in 10 adults taking prescription drugs report that they have not taken their medication as prescribed due to costs. In a 2023 KFF consumer survey, nearly one-quarter (23%) of insured adults reported that their health insurance did not cover a prescription drug or required a very high copay for a drug that a doctor prescribed, increasing to more than one-third (35%) of insured adults in fair or poor physical health. People who need specialty or brand-name medications to treat chronic health conditions such as diabetes, cancer, arthritis, and HIV are especially vulnerable to high costs, particularly considering rising deductibles over the years. In addition, plans are more likely to apply coinsurance (a percentage of the cost paid by the enrollee after meeting their deductible) than copayments (a flat dollar amount) for specialty or higher cost prescription drugs than they are for lower cost drugs, which could result in enrollees having to pay more out of pocket for these drugs.

As biologics and other specialty drugs have become increasingly available, many people who take these high-cost medications receive financial assistance from drug manufacturers to offset these high out-of-pocket costs. For people with private insurance, when applied to patient deductibles and out-of-pocket costs, this assistance can provide considerable help, but increasingly plans have applied “copay adjustment programs” that do not count these amounts toward enrollees’ out-of-pocket obligations. This issue brief provides an overview of copay adjustment programs, arguments made for and against their use, their prevalence, and federal and state efforts to address them.

Key Takeaways

• Many drug manufacturers provide copay coupons for their high-cost (often specialty) medications to encourage the use of their drugs and help offset out-of-pocket costs for consumers who use their medications. Concerned about the potential for these coupons to undermine their benefit designs and increase costs, some health plans have changed the way coupons apply to enrollee out-of-pocket obligations. The separate incentives of these two industry players can wind up putting the patient in the middle.
• With copay accumulators, the value of the manufacturer copay coupon is applied each time the prescription is filled but that value does not count toward the enrollee’s deductible or out-of-pocket maximum. Once the coupon is exhausted the enrollee is suddenly subject to their deductible and then a copayment and/or coinsurance, which can be substantial for these medications.
• The 2024 KFF Employer Health Benefits Survey found that nearly one in five (17%) large employer-sponsored health plans have a copay accumulator program in their largest plan, increasing to one-third (34%) of firms with 5,000 or more workers. Another analysis found that two-thirds (66%) of individual Marketplace plans sold in states that do not prohibit copay accumulator programs have such a program in 2024.
• With copay maximizers, insurers seek to capture the savings from coupons provided by drug manufacturers. Plans re-classify certain high-cost specialty medications such that they are no longer subject to the Affordable Care Act’s patient cost sharing limitations. Copay coupons do not count toward the enrollee’s deductible or out-of-pocket maximum. Enrollee cost sharing requirements are set to match the maximum coupon value, which is applied evenly throughout the year. Enrollees who choose to participate in the program do not typically face immediate out-of-pocket costs for that medication, but if they choose not to participate, they face substantial out-of-pocket obligations that do not count toward their out-of-pocket obligations.
• Definitive data on the prevalence of copay maximizers is limited, but one study found that their use has increased dramatically in recent years, with roughly half of commercially-insured individuals exposed to one.
• Federal regulations have not yet fully addressed the use of copay adjustment programs, but federal legislation has been introduced and 21 states and Washington, DC, have taken action to fill these gaps for state-regulated health plans.

Overview of Manufacturer Copay Coupons

Many prescription drug manufacturers have established copay assistance programs in the form of copay cards and coupons to help offset immediate out-of-pocket costs (deductibles, copays, and coinsurance) for brand name, often specialty, prescription drugs for people with health insurance. Some branded drugs with coupons have a generic equivalent. The structure of copay coupons varies by manufacturer and by drug. Some coupons are valid for a certain number of prescription fills or for the duration that the patient is prescribed the medication. Some have a maximum annual dollar value while others have a monthly maximum, or a combination of both. Some manufacturer copay coupon programs require a relatively nominal monthly contribution (e.g., $10) from the patient toward the cost of the drug. Copay coupons can also be applied toward patient deductibles and coinsurance payments.

Eligibility may vary depending on whether the insured patient’s health insurance plan has a copay adjustment program (discussed in the next section). Copay assistance programs are different from patient assistance programs (PAPs), which typically provide financial assistance to those without insurance (or who are underinsured) who meet certain maximum income thresholds. Co-pay assistance programs are also different from drug discount cards that are available to any consumer that may provide them with a discount on a medication at a pharmacy.

Copay assistance is available for the vast majority of brand name drugs and that share has increased over time. In 2023, copay assistance was used for an estimated 19% of prescriptions for patients with private insurance (though much higher for some therapy areas), with a total value of $23 billion. Nearly one-third of brand commercial prescriptions used manufacturer copay assistance in the top 10 therapy areas that year.

The federal anti-kickback statute prohibits manufacturers from offering copay coupons for beneficiaries of federal health care programs, including Medicare and Medicaid, because coupons can act as a financial incentive for beneficiaries to choose more expensive drugs over lower-cost equivalents, which can also lead to higher federal spending. Manufacturers typically have safeguards in place to help ensure compliance with the law, such as notices printed on coupons and sent to pharmacies or verification during the claims transaction system. However, a 2014 study by the Office of the Inspector General of the Department of Health and Human Services found that these safeguards may not prevent all copay coupons from being used to pay for Medicare Part D drugs, in part because coupons are not always transparent in the pharmacy claims transaction system to entities other than manufacturers and manufacturers could be relying on unreliable patient information.

By contrast, federal laws that apply to private insurance, such as the Affordable Care Act (ACA), do not specifically address copay coupons. The ACA does, however, place annual limits on out-of-pocket cost sharing for covered essential health benefits (EHBs), including prescription drugs, for consumers with private insurance (see callout box). At least two states (MA (until 2026) and CA) prohibit the use of copay coupons in their state-regulated private insurance markets if the drug has a generic equivalent, with some specific exceptions.

How do manufacturer copay coupons work?

To explain how manufacturer copay coupons work in practice, consider the following hypothetical scenarios in which a patient, who takes a brand-name, specialty medication to treat her cystic fibrosis that costs $2,000/month, does and does not receive a copay coupon (Table 1). Assume the patient, whose plan year begins in January, has a:

• $2,000 deductible which she has not yet met,
• 25% coinsurance (which equates to $500),
• $5,000 out-of-pocket (OOP) maximum, and
• A $6,000/year manufacturer coupon, when applied.

Without a copay coupon: The patient pays the full cost of the medication in January after which point her deductible has been met. The insurance plan begins to cover the drug in February and the patient pays her required coinsurance. In July, she reaches her OOP maximum ($5,000) and the plan covers in full her cystic fibrosis medication (and all other covered health care services and medications received in-network) for the remainder of the plan year.

With a copay coupon: The patient’s copay coupon is applied to her deductible and coinsurance each month. In this scenario, her $5,000 OOP maximum is met in July, meaning that even though the coupon was for $6,000, the manufacturer ends up paying $1,000 less. Her health plan will now cover the drug in full for the remainder of the year. The patient pays $0 for this medication over the course of the plan year. The health plan receives no benefit from the copay coupon.

In both scenarios, the patient reaches her deductible and OOP maximum in the same month. The total cost sharing amounts paid are the same in both scenarios; however, in the scenario without a coupon, that amount is shifted from the patient to the drug manufacturer.