The Pharma Savings Card: Is There A Better Way?

The proliferation of pharmaceutical savings card programs currently blanketing magazines, TV advertisements, and internet sites are ubiquitous for prescription drugs. While these offers seem like a great deal to patients and pharmaceutical companies, health plans and other payers warn that there are long-term implications. Perhaps the issue isn’t as clear cut as one might think.1 There are actions that can be taken by both parties to improve the situation and ultimately continue to benefit the patient.

A total of 561 savings card programs appeared in the market during 2014, representing a 34% increase from the previous year in the number of savings cards introduced by pharmaceutical manufacturers. With brand-name pharmaceutical companies spending $4 billion annually on savings card programs, and an expected increase in usage of 15% per year, this trend shows no signs of slowing down in the near future.2

As savings cards become more prevalent, payers are concerned that these offers discourage patients from using less expensive generic drugs.3 The lack of agreement between payers and pharmaceutical manufacturers about the benefits and drawbacks of these programs represents the latest battle in an escalating war over savings cards. Deeper strategic considerations and analysis of savings card dynamics may offer a better way of benefitting payers, pharmaceutical manufacturers, and patients.4

To illustrate why stakeholders have such divergent perspectives on the topic, one must understand the concept of the formulary – a critical tool used by health plans to manage drug costs. The formulary is a menu of drugs that is set up to show the prices of different categories of pharmaceuticals for health plans, hospitals, and pharmacy benefits management (PBMs). Formularies commonly consist of tiers indicating which drugs are preferred based on the safety and efficacy of the drug, whether it is branded or generic, and other considerations such as rebates and pricing. Health plans often set a high co-pay tier for branded drugs in order to steer consumers to less expensive generics or “preferred brands.” Health plans commonly assert that savings cards circumvent the co-pay tier structure, reducing the ability of the payer to control drug spend.

Pharmaceutical manufacturers assert that savings cards wouldn’t be so attractive to consumers if the co-pays that health plans set weren’t so high. Conversely, health plans argue that co-pays wouldn’t be so high if drug prices were lower.

In order to understand the issue, the example below demonstrates how a savings card effectively insulates the patient from the cost issues and the resulting impact that choosing a tier-3 over a tier-2 drug may have on the payer.

Payers might suggest that the long-term impact of savings cards result in high insurance premiums, while a pharmaceutical industry representative might maintain that prescriptions account for less than 10% of healthcare costs in the U.S.5 The visceral and myopic positions of both the payer and pharmaceutical representative ignore the complexity of the broader pricing and contracting environment, as well as the affordability concerns facing patients.


In addition to savings cards, pharma uses contracts with health plans to create co-pay parity with competitors. During contract negotiations with a pharmaceutical manufacturer, inclusion and position on formulary can include various financial concessions, such as rebates from a pharmaceutical manufacturer.6 The pharmaceutical company may agree to pay a per-script rebate for preferential status on a formulary or a positioning without restrictions, such as a step-therapy. Generally, the higher the percentage of the rebate, the better the formulary position, which generally results in a lower co-pay amount.

As out-of-pocket costs on formularies are increasing – they have doubled over the past 10 years7 – and tier differential is blurring, a savings card offers a method for addressing the primary reason for unfilled prescriptions: cost and affordability. Savings card programs are aimed at assisting consumers with the out-of-pocket (OOP) expenses associated with prescriptions.

Adherence or non-adherence is closely linked to the cost of a drug for a patient. Pharmaceutical companies contend that savings card programs are a proven tool in helping patients stay adherent to therapy for a longer period of time by lowering cost to both the consumer and the health system. Additionally, savings cards offer more choice to patients and providers, allowing them to focus on choosing the best medicine rather than making cost a significant factor in decision making.

While that may be the case, pharmaceutical companies also benefit from a savings card offer as a mechanism for competing in highly competitive therapeutic classes. With more than 600 offers in the market, brand teams are under pressure to equalize or improve their offer to drive trial of their drug and grow (or at least maintain) current market share. Additionally, pharma manufacturers must recoup the development costs associated with innovative drug products. This has put added focus on contracting and savings card strategy to optimize a product’s market access and ability to land an upper-tier spot on formularies.


Health plans understand that savings cards are used to encourage trial, maintain adherence to a medication regimen, and bolster profits (or prevent share-loss). They contend that circumventing the formulary through the use of savings cards results in the need to raise prices to support the pharmaceutical benefits for their members. Health Plans are concerned that savings cards drive patients towards more expensive, brand-name drugs, leaving payers to cover the full cost. A recent study conducted by Visante on behalf of the Pharmaceutical Care Management Association suggests that savings card programs could increase spend on drugs by as much as $32 billion over the next decade.8 

Although many savings cards focus on reducing a patient’s co-pay, others have the effect of changing the way that drugs are purchased altogether. Some cards that are valid for a whole year effectively may “buy down” from a tier-3 to a tier-2 status by negating any cost sharing responsibility with the consumer.

From the payer’s perspective, it’s a great deal for the patient but not the health plan. Health Plans’ argument is based on the premise that savings cards undermine formulary designation and impact the bottom line. The cost to payers can dramatically increase if a consumer chooses a nonpreferred, branded drug when a less expensive preferred product is available on the formulary. Not only do savings cards undermine formulary designation and the ability of a payer to control prescription costs, which ultimately results in higher consumer premiums, but savings cards may also allow the pharmaceutical company to evade contracted rebates.

Savings cards allow Providers to prescribe outside of a tiered formulary because of the way that the offers are processed in the pharmacy claims system. Health plans and PBMs believe they have no visibility into the claim to know whether there is a savings card offer. This forces health plans and payers to reimburse for more costly drugs when cheaper drugs or preferred-tier drugs are available. When a consumer uses the savings card to offset their cost share, the payer is then responsible for the remaining cost of the entire drug, resulting in higher than expected costs for the health plan.


Although the uptake of savings card programs is a positive for pharmaceutical companies and consumers in the shortterm, the resulting long-term impact on prices may not be favorable. Moving forward, pharmaceutical manufacturers and payers will have to pursue ways to reconcile and align their approaches. At some point, payers may take drastic measures to eradicate the benefit that savings cards represent. We already witnessed the lengths that payers will go to when CVS Caremark recommended dropping 34 drugs off of their formulary where more than half of them had active savings cards in the market.9 While there is no easy answer to the dilemma that savings cards present, the question in the industry remains: “Is there a better way”?

Debates about the legality of savings cards and whether these tools represent an inducement have been raised through regulatory channels. While regulation prohibiting savings cards may not be in the near-future, pharmaceutical manufacturers could get ahead of the issue by applying a more strategic focus on how the cards address issues of high need in the healthcare industry by:

• Using analytics to create a targeted savings card approach and not a one-size-fits-all philosophy. By determining cost variances by regions and creating variable savings cards for high-cost areas, the use of the card is truly helping consumers in need of off-setting the first dollar-out-of-pocket spend. For instance, if a health plan is dominant in a given region, and a pharmaceutical company has paid significant rebates to lower patients’ drug cost through formulary, it doesn’t make sense to blanket that market with savings cards at the same time.

• Targeting high-need populations or regions where the prevalence of high-deductible health plans are present.

• Addressing the increasing growth of high-priced, Tier-4 specialty and biologic products by utilizing the savings card to enable access to medicines that would otherwise be unattainable due to cost.

• Designing programs that make sense and mitigate abandonment rates.

• Increasing the affordability of products. Affordability is the number one reason attributed to non-adherence, and pharmaceutical manufacturers could use the savings card on adherence focused programs only. This would utilize rich data analytics to target those at risk for nonadherence as a result of affordability.

• Analyzing the accessibility of its products. If a pharmaceutical company has already paid a health plan significant rebates for their formulary position, there is no need for the manufacturer to load up on savings cards in that region. If this consideration isn’t included in the savings card strategy, then the savings card program could cost more than the rebates given to the health plans to retain preferred status.

Rather than universally opposing savings cards, Health Plans should focus their strategic efforts on:

• Determining which programs are actually hurting the ability to enforce the formulary versus helping.

• Using historical utilization data to determine when, who, and the extent of savings card usage in specific therapeutic classes.

• Analyzing the average co-pay prior to use of the savings card to assess whether savings card offers are circumventing or reinforcing the formulary position and utilizing that information during contracting.

• Using analytics to identify and segment the types of patients who are using savings card offers.

• Establishing a structured system for tracking savings card programs, and work with pharmaceutical manufacturers on targeting member populations most in need of a savings card.

• Identifying which physicians are writing prescriptions associated with savings cards, understand why they utilize the savings card and evaluate the benefit to the patient.

• Alignment of efforts to ensure that patients don’t end up with the losing hand in the savings card game is important to the success of the entire health system. Whether pharmaceutical manufacturers and payers can find common ground or continue to be misaligned remains to be seen.

End Notes
  1. Schultz, David “Drug Coupons a Good Deal For the Patient, But Not the Insurer”, Kaiser Health, October 1, 2012. View in Article
  2. Co-Pay Offset Monitor” Zitter Health Insghts October 1, 2014. View in Article
  3. Blanford, Larry “Co-Pay Cards: House of Cards”, Medical Marketing and Media, March 1, 2012. View in Article
  4. Zirkelbach, Robert “The Reality of Prescription Medicine Costs in Three Charts” PhRMA, May 27, 2014. View in Article
  5. O’Keefe, Kevin, Sirois, Stu, Hasan, Shiraz “Making Dollars And Sense Out of Copay Assistance”, In Vivo: The Business & Medicine Report, July/ August, 2012. View in Article
  6. Shelley, Suzanne “Copay programs’ increased value to manufacturers is matched by rising criticism”, Pharmaceutical Commerce, January 1, 2014. View in Article
  7. Milliman Research Report“Will the typical family of four be driving a Cadillac Plan by 2018?” 2015 Milliman Medical Index May 2015. View in Article
  8. Pharmaceutical Care Management Association (PCMA). “How Copay Coupons Could Raise Prescription Drug Costs By $32 Billion Over the Next Decade.” November 2011. View in Article
  9. Staton Tracy “CVS Takes Aim at Copay Cards by Blocking Coverage”, Fierce Pharma, May 1, 2012. View in Article
See All Notes