Prescription Drug Discount Coupons and Patient Assistance Programs (PAPs)

November 5, 2015 – September 12, 2022 R44264

Prescription Drug Discount Coupons and
September 12, 2022
Patient Assistance Programs (PAPs)
Suzanne M. Kirchhoff
U.S. pharmaceutical manufacturers fund a variety of programs to help consumers defray
Analyst in Health Care
the cost of prescription drugs. Industry assistance includes drug discount coupons as
Financing
well as free drugs or insurance cost-sharing payments for individuals with lower

incomes or high drug expenses. According to one analysis, 95% of brand-name drugs
offer manufacturer assistance and 75% of cost sharing in commercial insurance plans is

offset by manufacturers. In addition, nonprofit patient assistance programs (PAPs) offered by drug manufacturers
and independent charities dispense billions of dollars in assistance annually, placing some among the nation’s
largest charitable organizations.
Drug manufacturers say the generous aid is evidence of their commitment to patients who cannot afford a
prescribed course of medication. Many manufacturer programs are designed to reduce consumer cost sharing for
high-cost specialty drugs used to treat cancer, hepatitis C, Crohn’s disease, and other serious and chronic
conditions. Industry analysts and the Department of Health and Human Services’ Office of Inspector General say
that the programs also are used to bolster manufacturer prescription drug sales and prices and can increase costs
for government and commercial health payers. For example, an insured consumer may use a manufacturer coupon
to buy a more expensive brand-name drug even if a lower-cost generic is available. Although the coupon reduces
the consumer’s cost-sharing obligation for the drug, it may not cut the price paid by the consumer’s health care
plan.
Federal statutes, including the federal anti-kickback statute, limit the use of coupons and manufacturer donations
in conjunction with federal health care programs, such as the Medicare Part D prescription drug benefit. The anti-
kickback statute in Section 1128B(b) of the Social Security Act generally prohibits the knowing and willful offer
or payment of remuneration to induce a person to buy an item or service that will be reimbursed by a federal
health care program. In the private sector, health plans have made major changes in drug plan benefit design
during the past several years specifically to blunt the impact of manufacturer assistance offers. Some health
payers have barred enrollees from redeeming coupons for certain drugs or do not count the value of the
manufacturer assistance toward an enrollee’s annual plan out-of-pocket spending requirements. Another approach
for health plans is to require enrollees to apply for manufacturer assistance for expensive drugs and then to
increase the plan’s enrollee out-of-pocket cost-sharing requirement to maximize the amount of manufacturer
assistance collected by the payer.
During the past several years, the U.S. Department of Justice has stepped up enforcement of relevant laws
governing manufacturer cost-sharing assistance and has collected billions of dollars in settlements with
pharmaceutical companies and patient assistance organizations for allegedly steering Medicare Part D
beneficiaries to specific drugs.
This paper provides an overview of coupons and patient assistance programs, federal regulation, the commercial
marketplace, and federal enforcement efforts.
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Introduction
U.S. pharmaceutical manufacturers spend billions of dollars annually on special assistance
programs to defray the consumer cost of prescription drugs for both insured and uninsured
individuals. Many manufacturers offer prescription drug discount coupons that reduce or
eliminate required out-of-pocket payments for consumers, including insurance deductibles, co-
payments, and coinsurance.1 Likewise, pharmaceutical manufacturers, along with some state
governments and independent charities, operate patient assistance programs (PAPs) that provide
free drugs or financial aid to help eligible individuals pay for prescription drugs based on factors
including income, medical necessity, and health insurance status. Many PAPs are set up as
501(c)(3) nonprofit foundations or charities.2 Pharmaceutical companies may qualify for federal
tax deductions for the donation of inventory through their own manufacturer PAPs or for donating
to independent charity PAPs.
There are restrictions on the use of pharmaceutical assistance. Drug coupons may not be used in
conjunction with federal programs such as the Medicare Part D prescription drug benefit, because
the coupons may implicate, among other things, the federal anti-kickback statute.3 Manufacturer-
sponsored PAPs may not offer cost-sharing assistance to enrollees in Medicare Part D and other
federal programs. However, PAPs operated by independent charities (which are allowed to
receive cash donations from drug companies) may assist beneficiaries in federal programs, if the
PAPs comply with certain conditions.4
Pharmaceutical assistance programs, including PAPs and coupons, have increased in value and
scope in recent years. According to one analysis, 95% of brand-name drugs offer manufacturer
assistance and 75% of cost sharing in commercial insurance plans is offset by manufacturers.5 A
study of retail pharmacy data found that manufacturer coupons offset $12 billion in consumer
prescription drug spending in 2019, an increase from $8 billion in 2013.6 More recent data show
$14 billion in coupon use for commercially insured patients in 2020, which also includes the use
of prepaid debit cards.7 An analysis of proprietary Internal Revenue Service (IRS) data found that
giving by selected large drug manufacturer PAPs has risen substantially since the early 2000s,
with 10 drug manufacturers providing $1.6 billion in aid in 2014,8 accounting for 85% of all

1 See text box entitled “Common Insurance Terms.”
2 See “What Is a 501(c)(3) Organization?”
3 See, generally, CRS Report RS22743, Health Care Fraud and Abuse Laws Affecting Medicare and Medicaid: An
Overview. Anti-kickback statute (Section 1128B(b) of the Social Security Act) prohibits the knowing and willful offer
or payment of remuneration to induce a person to buy an item or service that will be reimbursed by a federal health care
program.
4 HHS OIG, “Special Advisory Bulletin: Pharmaceutical Manufacturer Copayment Coupons,” September 2014, at
http://oig.hhs.gov/fraud/docs/alertsandbulletins/2014/SAB_Copayment_Coupons.pdf.
5 IQVIA, “Trends to Watch through 2023: Copay Accumulator Adjuster Programs,” March 21, 2022, at
https://www.iqvia.com/locations/united-states/blogs/2022/03/trends-copay-accumulator-adjuster-programs.
6 IQVIA, “Medicine Spending and Affordability in the United States,” August 2020, pp. 6, 9, at https://www.iqvia.com/
insights/the-iqvia-institute/reports. The figures do not include prepaid debit cards, also offered by manufacturers.
IQVIA provides a range of services including health care data analytics, management consulting, and product launch
services. The company has compiled extensive pharmaceutical data sets from physician prescription and pharmacy
claims information. Although most of the data are proprietary, IQVIA releases some reports to the public. The
Department of Health and Human Services (HHS) uses IQVIA data in estimating national prescription drug spending.
7 IQVIA, “The Use of Medicines in the U.S.: Spending and Usage Trends and Outlook to 2025,” 2021, p. 46, at
https://www.iqvia.com/insights/the-iqvia-institute/reports.
8 Austin Frerick, “The Cloak of Social Responsibility: Pharmaceutical Corporate Charity,” Tax Notes, November 28,
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pharmaceutical charity deductions and one-sixth of all U.S. corporate charity deductions that
year.9 The largest drug manufacturer PAP in that study contributed more than $853 million in
2014, but a Congressional Research Service (CRS) review of more up-to-date IRS financial
filings by selected manufacturer PAPs shows that, in 2019 and 2020, a number provided well over
$1 billion each in annual assistance.10 An outside analysis of charitable giving included five
charitable PAPs in the 2021 list of top 100 U.S. nonprofits (ranked by revenue).11
Pharmaceutical manufacturers say the assistance programs are evidence of their commitment to
ensure that prescription drugs remain affordable. They note that although more people have
gained insurance since the 2010 Patient Protection and Affordable Care Act (ACA; P.L. 111-148,
as amended) took effect, a number of insured consumers have difficulty meeting required
prescription co-payments, deductibles, and other out-of-pocket costs. That appears to be
especially the case for people in high deductible health plans (HDHP) and those prescribed high-
cost specialty drugs.12 However, recent studies indicate that coupons are also widely redeemed
for relatively less expensive therapies, such as diabetes treatments, for which there is market
competition.13
There is evidence that coupons may be a useful tool for improving enrollee adherence to
prescriptions and improving health outcomes—possibly at the expense of higher health plan
premiums.14 Industry internal documents and public statements have indicated that manufacturers
and drug marketers also view PAPs as a crucial tool for creating brand loyalty, supporting higher
list prices, and developing markets for new drugs.15

2016, at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2874391.
9 See “How Are PAP Donations Valued?”
10 CRS research based on IRS Form 990s for tax years 2018-2020. See “Pharmaceutical Assistance Programs”.
11 The NonProfit Times, “The 2021 NPT 100: Donors Stood Tall, Led With BIG Gifts,” November 3, 2021,
https://www.thenonprofittimes.com/report/the-2021-npt-100-donors-stood-tall-led-with-big-gifts/. The NPT 100 is a
report by The NonProfit Times—a business publication on nonprofit management—on the largest nonprofits in the
United States that derive at least 10% of revenue from public support. The organizations were ranked by total revenue.
12 High deductible health plans (HDHP) refer to health plans with large out-of-pocket (OOP) spending requirements
that must be met before coverage commences. Certain HDHPs help provide eligibility to establish and contribute to a
health savings account (HSA). To be considered an HSA-qualified HDHP, a health plan must meet several tests: it
must have a deductible above a certain minimum level, it must limit total annual out-of-pocket expenditures for
covered benefits to no more than a certain maximum level, and it can provide only preventive care services and (for
plan years beginning on or before December 31, 2021) telehealth services before the deductible is met. See CRS Report
R45277, Health Savings Accounts (HSAs).
13 Massachusetts Health Policy Commission, “Prescription Drug Coupon Study: Report to the Massachusetts
Legislature,” July 2020, p. 11, at https://archives.lib.state.ma.us/handle/2452/829870.
14 Massachusetts Health Policy Commission, “Prescription Drug Coupon Study: Report to the Massachusetts
Legislature,” July 2020, p. 14, at https://archives.lib.state.ma.us/handle/2452/829870. According to the study, drug
coupons increased utilization and spending for a number of drugs that have lower-cost generic alternatives that would
be clinically appropriate for many patients, with implications for higher premiums. However, in cases where patients
with commercial insurance could not afford clinically necessary medication, coupons provide financial relief and likely
improve adherence, leading to better clinical outcomes. See also Catherine Starner et al., “Specialty Drug Coupons
Lower Out-Of-Pocket Costs and May Improve Adherence At The Risk Of Increasing Premiums,” Health Affairs, vol.
33, no. 10 (October 2014), pp. 1761-1769.
15 HealthWell Foundation, “When Health Insurance Is Not Enough: How Charitable Copayment Assistance
Organizations Enhance Patient Access to Care,” 2012, at https://www.healthwellfoundation.org/wp-content/uploads/
legacy/files/HWF-white%20paper%20for%20printing.pdf. Senate Committee on Finance, “The Price of Sovaldi and its
Impact on the U.S. Health Care System,” December 1, 2015, link at https://www.finance.senate.gov/ranking-members-
news/wyden-grassley-sovaldi-investigation-finds-revenue-driven-pricing-strategy-behind-84-000-hepatitis-drug.
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Although a drug discount coupon may reduce the amount an insured consumer must pay out of
pocket for a drug, it generally does not reduce the price charged to an insurer or government
program for the drug. The same is true with cost-sharing assistance offered through certain
PAPs.16 More broadly, when consumers are relieved of cost-sharing obligations, there may be less
market constraint on drug prices.
However, it is increasingly difficult to describe the impact of coupon and PAP support on drug
sales, health payer spending, and enrollee prescription adherence because health care payers and
insurers have begun to redesign their health plan benefits to maximize the amount of
manufacturer prescription assistance dollars that the payers can collect—while sometimes
reducing the enrollee benefit of the programs. For example, some private health insurance plans
now employ so-called accumulator programs that allow enrollees to use manufacturer assistance
to reduce the dollar amount of their cost-sharing for a given drug, but do not allow the
manufacturer assistance to count against the enrollee’s deductible and/or annual out-of-pocket
maximum requirements. (“Insurance Market Response to Coupons/PAPs”) Recent federal
regulations have bolstered these market changes by allowing insurers to use coupon accumulators
in certain ACA-regulated health plans. (“2020 HHS Rules on Co-payment Assistance”)
Evidence of fraud on the part of manufacturers and PAP operators has been an additional
development. During the past several years the Department of Justice has stepped up enforcement
of relevant laws governing manufacturer cost-sharing assistance and has collected billions of
dollars in settlements from pharmaceutical companies and patient assistance programs charged
with steering Medicare Part D beneficiaries to specific drugs. (“
Justice Department Action on Prescription Drug Aid Programs”)
This report will provide an overview of spending and coverage for prescription drugs, coupon and
PAP offers and legal considerations, insurers’ responses to coupon programs, federal regulation
and enforcement and information on real world impact of the pharmaceutical assistance.

16 HHS Office of Inspector General (OIG), “Special Advisory Bulletin: Pharmaceutical Manufacturer Copayment
Coupons,” September 2014, at http://oig.hhs.gov/fraud/docs/alertsandbulletins/2014/SAB_Copayment_Coupons.pdf.
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Common Insurance Terms
Brand-Name Drug: The Food and Drug Administration defines a brand-name drug as a drug marketed under a
proprietary, trademark-protected name.
Coinsurance: The percentage share that an enrol ee in a health insurance plan pays for a product or service
covered by the plan. An insurer could charge 10% coinsurance for a $100 prescription drug, meaning the
consumer’s out-of-pocket cost would be $10.
Co-payment: A fixed dol ar amount that an enrol ee in a health insurance plan pays for a product or service
covered by the plan. For example, an insurer could charge a $20 co-payment for a physician visit or a $5 co-
payment for a prescription drug.
Deductible: The amount an enrol ee is required to pay for health care services or products before his or her
insurance plan begins to provide coverage. An enrol ee in an insurance plan with a $500 deductible would be
responsible for paying for the first $500 in health care services. In some insurance plans, the deductible does not
apply to certain services, such as preventive care. Insurance plans vary regarding whether beneficiaries must meet
a deductible for prescription drug coverage.
Formulary: A list of prescription drugs covered by an insurance plan. In an effort to control costs, insurers are
imposing closed or partially closed formularies, which include a more limited number of drugs than traditional
formularies.
Generic: A generic drug is identical to a brand-name drug in dosage form, safety, strength, route of
administration, quality, performance characteristics, and intended use. Although generic drugs are chemically
identical to their branded counterparts, they are typically sold at substantial discounts from the branded price.
High Deductible Health Plan (HDHP): High deductible health plans are health plans that require enrol ees to
meet large out-of-pocket spending requirements before coverage commences. Certain HDHPs are eligible for
special health savings accounts (HSA). To be considered an HSA-qualified HDHP, a health plan must: have a
deductible above a certain minimum level, limit total annual out-of-pocket expenditures for covered benefits to no
more than a certain maximum level, and provide only preventive care services and (for plan years beginning on or
before December 31, 2021) telehealth services before the deductible is met.
Out-of-Pocket Costs: The total amount an insured consumer pays each year for covered health care services
that are not reimbursed by an insurance plan. Out-of-pocket costs can include deductibles, co-payments, and
coinsurance.
Out-of-Pocket Maximum: The maximum amount an enrol ee must pay before his or her health insurance plan
covers 100% of health benefits. Certain costs, such as premiums, generally do not count toward an out-of-pocket
maximum, or cap.
Pharmacy Benefit Managers (PBMs): Intermediaries between health plans and pharmacies, drug wholesalers,
and manufacturers. PBMs perform functions such as designing drug formularies, negotiating prices, and
administering prescription drug payment systems on behalf of health plans.
Pharmacy Network: A group of retail, mail-order, and specialty pharmacies that contract with PBMs and health
insurers to dispense covered drugs at set prices. Network pharmacies also may provide other services under
contract, such as monitoring patient adherence to drugs.
Premium: The amount an enrol ee pays for health insurance coverage. Many plans charge monthly premiums,
but premiums also can be assessed on a quarterly or annual basis.
Specialty Drug: There is no one set definition of specialty drugs, although insurers and other health care payers
often characterize them as prescription products requiring extra handling or administration that are used to treat
complex diseases, such as cancer. High cost can trigger a specialty drug designation. Biologics, or drugs derived
from living cells, often are deemed to be specialty drugs.
Tiered Pricing: Insurers use tiered cost sharing for formulary drugs, meaning that patients face lower co-
payments or coinsurance for less expensive generic drugs and certain brand-name drugs designated by the plan as
preferred drugs, based on the price the plan has negotiated with the manufacturer and the effectiveness of the
product. At the same time, patients are charged higher co-payments or coinsurance for more expensive drugs
(including specialty drugs) or drugs that the plan deems to be less effective.
Underinsured: Refers to people who have insurance but stil have financial difficulty paying for prescription drugs
or medical treatments.
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Consumer Out-of-Pocket Prescription Drug Costs
During the 1990s, manufacturers expanded their pharmaceutical assistance programs, including
direct aid to consumers and discount coupons, in response to public concern about rising drug
prices and lack of coverage.17 The programs have continued to grow despite a broad expansion of
health insurance drug coverage and the widespread adoption of low-cost generic drugs.18 Millions
of consumers gained prescription drug coverage through Medicare Part D (Medicare Prescription
Drug, Improvement, and Modernization Act of 2003; P.L. 108-173) and the 2010 ACA.19 The
ACA, among other things, capped total annual out-of-pocket spending in many commercial
health plans, including drug spending; expanded coverage through the health insurance exchanges
and state-federal Medicaid program; eliminated cost sharing for contraceptives in many health
plans; and reduced annual cost sharing for Part D enrollees by closing the coverage gap or
“doughnut hole.”20
In 1990, consumer out-of-pocket spending—cash payments, health plan deductibles, coinsurance,
and co-payments—for filled prescriptions made up 57% of U.S. retail drug spending, whereas
commercial payers and taxpayer-financed health programs accounted for about 43%, according to
federal data. However, in the ensuing years, commercial payers and taxpayer-financed health
programs have covered a growing share of the nation’s retail prescription drug bill. According to
the National Health Expenditure (NHE) data, out-of-pocket spending declined to 13.3% of retail
drug spending in 2020, versus about 86.7% for these other payers.21 Going forward, out-of-pocket
(OOP) spending is projected to decline to 10.4% of outpatient drug spending by 2030. (Figure 1)
Looked at on a per capita basis, the NHE data show that average per person, out-of-pocket
spending for retail prescription drugs fluctuated from $153 in 2014 to $141 in 2020. Out-of-
pocket spending is forecast to increase gradually to $169 by 2030.22 However, because cost
sharing is not projected to increase as fast as total drug spending, OOP expenditures are forecast
to drop as a share of per capita drug spending.

17 Tom Norton, “The Vanishing Rx Patient Assistance Programs?” Pharmaceutical Executive, November 6, 2013, at
http://www.pharmexec.com/vanishing-rx-patient-assistance-programs; Government Accountability Office (GAO),
“Drug Company Programs Help Some People Who Lack Coverage,” November 2000, at https://www.gao.gov/
products/gao-01-137; Saul Weiner, Jill Dischler, and Cheryl Horvitz, “Beyond Pharmaceutical Manufacturer
Assistance: Broadening the Scope of an Indigent Drug Program, American Journal of Health System Pharmacists, vol.
58, no. 2 (2001), at https://academic.oup.com/ajhp/article-abstract/58/2/146/5149905.
18 Austin Frerick, “The Cloak of Social Responsibility: Pharmaceutical Corporate Charity,” Tax Notes, November 28,
2016, at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2874391.
19 See CRS In Focus IF10287, The Essential Health Benefits (EHB). The ACA requires insurers to provide drug
benefits as part of qualified individual and fully-insured small-group health plans and provides incentives for states to
expand enrollment in Medicaid. Although prescription drug coverage is an optional Medicaid benefit, all states include
drug coverage. Medicare Part D was implemented in 2006. The ACA exchanges and incentives for Medicaid expansion
took effect in 2014.
20 CRS Report R40611, Medicare Part D Prescription Drug Benefit.
21 “National Health Expenditure Data: Historical,” Table 16, at https://www.cms.gov/Research-Statistics-Data-and-
Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsHistorical. The NHE
accounts estimate how much consumers pay each year to fill retail prescriptions including cash purchases and insurance
deductibles, co-payments, and coinsurance. Insurance premiums are not included in out-of-pocket spending.
22 National Health Expenditure Data: Historical,” Table 16, at https://www.cms.gov/Research-Statistics-Data-and-
Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsHistorical. CMS, “National
Health Expenditure Projections 2021-2030,” Table 11, at https://www.cms.gov/Research-Statistics-Data-and-Systems/
Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsProjected.html.
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Prescription Drug Discount Coupons and Patient Assistance Programs (PAPs)

Figure 1. Total Out-Of-Pocket Spending as a Share of Retail Drug Spending

Source: Centers for Medicare & Medicaid Services (CMS), National Health Expenditure (NHE) Data: Historical
and Projected.
Notes: Out-of-pocket spending includes cash payments, deductibles, co-payments, and coinsurance but does not
include insurance premiums. Consumer out-of-pocket spending rose from $22.9 bil ion in 1990 to $46.5 bil ion
in 2020 and is projected to reach $59 bil ion in 2030.
It may seem paradoxical that manufacturer assistance has increased while average out-of-pocket
spending has moderated. There appear to be several reasons for continued growth of
manufacturer aid.
 Individual consumers can face significant out-of-pocket drug costs depending on
whether they have insurance coverage, the design of their health plan, and their
specific diagnosis and prescribed medications. (See “Distribution of Prescription
Drug Cost Sharing.”)
 The growth of independent charity PAPs in the early 2000s created a way for
manufacturers to aid consumers enrolled in Medicare Part D without violating
federal anti-kickback statutes. (See “Restrictions on Coupon Use.”)
 Manufacturers and drug marketers view PAPs and discount coupons as important
tools for creating brand loyalty, supporting drug prices, and developing markets
for new drugs. (See “Financial Impact of Coupons and PAPs.”)
Coupon and PAP Assistance in Pharmaceutical Spending Data
Manufacturer coupons and patient assistance program (PAP) assistance generally are not broken out in data sets
on prescription drug spending, making it difficult to determine how the aid affects out-of-pocket costs and other
measures of drug spending. For example, the NHE data compiled by the Centers for Medicare & Medicaid Services
(CMS) are adjusted to account for pharmaceutical manufacturer rebates to private payers and government
programs including Medicaid, the State Children’s Health Insurance Program, Medicare, and Department of
Defense health programs. However, the NHE data only include manufacturer coupons and PAP payments when
the source data reporting to CMS includes that information.
In the commercial market, analysis and consulting firm IQVIA has extensive prescription drug spending data sets of
physician, hospital and pharmacy transactions as well as information on coupon programs. IQVIA is also a
consultant to manufacturers and health plans, and operates subsidiaries that help manufacturers operate their
prescription drug discount programs. (IQVIA, Global Compliance, at https://www.iqvia.com/solutions/integrated-
global-compliance.)
Sources: CRS, CMS, and IQVIA.
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Distribution of Prescription Drug Cost Sharing
Lower-cost generic drugs accounted for about 90% of filled prescriptions in 2020, but only 18%
of total drug spending, according to the Association for Accessible Medications.23 The majority of
drug spending is concentrated in prescriptions for brand-name drugs, particularly high-cost
specialty drugs for cancer, rheumatoid arthritis, and other serious ailments.24 For example, a
Congressional Budget Office (CBO) study found that net spending on specialty drugs in
Medicare Part D rose from $8.7 billion in 2010 to $32.8 billion in 2015. Net spending on
specialty drugs in Medicaid roughly doubled from 2010 to 2015, rising from $4.8 billion to $9.9
billion. In 2015, brand-name specialty drugs accounted for about 30% of net spending on
prescription drugs under Medicare Part D and Medicaid, but were only about 1% of all
prescriptions dispensed in each program. A number of drugs now in the development pipeline are
specialty biologics, which often have a high introductory price and initially may not have many
lower-cost alternatives.25
Given the trends in drug development and spending, health payers have worked to closely
manage drug utilization through use of formulary tiered pricing, prior authorization, and other
practices. In tiered plans, enrollees may be charged coinsurance, as opposed to flat co-payments,
for more expensive or less preferred drugs. For example, a consumer may pay a $10 co-payment
for a generic drug on a formulary low-cost price tier; the same consumer may be charged 30%
coinsurance for an expensive specialty drug on a high-priced tier.
The use of health plan price tiers specifically for high-priced drugs has been increasing, imposing
a greater financial burden on consumers who use higher-priced drugs.26According to the Kaiser
Family Foundation, in 2021, 49% of covered workers at large firms were in a health plan with at
least one cost-sharing tier just for specialty drugs. The average specialty drug co-payment was
$101 and the average coinsurance was 27%.27 Part D enrollees prescribed expensive drugs may
face an annual deductible and cost sharing of up to 50% for certain non-preferred drugs.28
Many health plans, including Medicare Part D plans, base coinsurance on the list price of a drug,
rather than the plan’s net price (the price after rebates and other discounts). Basing cost-sharing,
such as coinsurance, on the higher list price also serves to increase enrollee costs.29 Also,
enrollees in certain health care plans with deductible requirements for prescription drugs can face
out-of-pocket costs for a therapy before coverage begins.30 More generally, enrollment in HDHP

23 See Association for Accessible Medications, 2021 Generic Drug & Biosimilars Access & Savings in the U.S., at
https://accessiblemeds.org/resources/blog/2021-savings-report.
24 Stacie Dusetzina, “Share of Specialty Drugs in Commercial Plans Nearly Quadrupled, 2003–14,” Health Affairs, vol.
35 no. 7 (July 2016), pp. 1241-1246. Congressional Budget Office (CBO), “Prices for and Spending on Specialty Drugs
in Medicare Part D and Medicaid,” March 19, 2019, at https://www.cbo.gov/publication/54964.
25 Food and Drug Administration (FDA), “Novel Drug Approvals for 2021,” p. 12, at https://www.fda.gov/drugs/new-
drugs-fda-cders-new-molecular-entities-and-new-therapeutic-biological-products/novel-drug-approvals-2021. The
FDA approved 50 novel new drugs in 2021. From 2012 through 2021, the FDA’s Center for Drug Evaluation and
Research has averaged 43 novel drug approvals per year.
26 Kaiser Family Foundation, “2021 Employer Health Benefits Survey,” Section 9, at https://www.kff.org/health-costs/
report/2021-employer-health-benefits-survey/. The Kaiser data indicate that more plans are imposing separate price
tiers for specialty drugs or other high-cost drugs.
27 Ibid.
28 CRS Report R40611, Medicare Part D Prescription Drug Benefit.
29 HHS OIG, “High-Price Drugs Are Increasing Federal Payments for Medicare Part D Catastrophic Coverage,”
January 2017, OEI-02-16-00270, at https://oig.hhs.gov/oei/reports/oei-02-16-00270.asp.
30 Deductible requirements vary among plans. For example, most Medicare Part D plans impose an annual deductible
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plans has been rising, with 31% of individuals covered by large employer-offered insurance
enrolled in HDHP plans in 2021.31
The result of these parallel trends—expanded insurance coverage coupled with higher cost
sharing for more expensive drugs—appears to have been a decline in average out-of-pocket
spending but potentially high spending for enrollees who have chronic conditions or may be
prescribed high-cost drugs. Manufacturer coupon offers and PAP assistance grants are designed to
blunt health plan cost-sharing requirements by covering a portion of enrollee out-of-pocket costs.
The following sections examine different forms of manufacturer assistance—discount coupons,
manufacturer PAPs, and independent charity PAPs.
Manufacturer Co-payment Coupons
Pharmaceutical firms offer co-payment coupons or cards to help consumers reduce out-of-pocket
costs, such as co-payments and coinsurance. While individual coupon offers may be for a limited
period, such as six months or one year, manufacturers may allow patients to re-enroll.32
For a sense of how a coupon works, consider a pharmaceutical manufacturer that sells a brand-
name drug to a commercial payer for $1,000 for a 30-day supply.33 The payer places the drug on a
price tier that imposes 25% enrollee coinsurance up to the plan’s annual out-of-pocket maximum.
To support sales of the drug, the manufacturer offers a coupon that limits out-of-pocket costs to
$100 per 30-day refill for a 12-month period. In the absence of the manufacturer coupon, an
enrollee would pay $250 out of pocket each time he or she went to a pharmacy to buy a 30-day
supply of the drug (25% of the $1,000 price), until the annual out-of-pocket maximum was
reached. With a coupon, the consumer would pay $100 per fill and the manufacturer would cover
the remaining $150 of the required coinsurance up to the maximum subsidy amount.
Many co-payment coupons include disclaimers stating that they cannot be used by enrollees in
federal health programs, including Medicare, Medicaid, and the Veterans Health Administration.
(See “Restrictions on Coupon Use.”) Some coupons are expressly for use outside of insurance
coverage, meaning without submitting an insurance claim.

(capped at $480 in 2022). Most workers covered by insurance offered by large employers that includes general
deductibles do not have to meet the deductible before drug coverage begins. Kaiser Family Foundation, “2021
Employer Health Benefits Survey,” Section 7, Figure 7.27, at https://www.kff.org/report-section/ehbs-2021-section-7-
employee-cost-sharing/. Workers covered by HDHPs may have higher costs. An IQVIA analysis of U.S. sample
prescription drug claims data found that in 2019, brand-name drug claims in health plans’ deductible phase made up
less than 1% of all claims, but nearly 15% of out-of-pocket spending. IQVIA defined deductible claims as those where
the patient would pay more than 50% of the claim, and the primary patient payment was greater than $250. IQVIA,
“Medicine Spending and Affordability in the United States,” August 2020, medicine-spending-and-affordability-in-the-
united-states.pdf (iqvia.com).
31 Kaiser Family Foundation, “2021 Employer Health Benefits Survey,” Section 5, at https://www.kff.org/report-
section/ehbs-2021-section-5-market-shares-of-health-plans/.
32 For example, see “Aimovig® Copay Card Terms and Conditions,” at https://www.aimovigcopaycard.com/tcs.
Aimovig, manufactured by Amgen Inc., is a treatment for migraine headaches.
33 Insurers and PBMs negotiate rebates and discounts from manufacturers on the drugs that they purchase for health
plans or distribute through their own mail-order and specialty pharmacies. These rebates and discounts are separate
from those that manufacturers offer consumers through coupons and other assistance programs. Overall drug pricing
also includes payments to pharmacies that dispense the drugs and other costs and markups along the supply chain, but
those costs have not been included to simplify the transaction.
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Coupon Processing
When an insured consumer’s prescription is presented at a pharmacy (either in person or through
an electronic e-prescribing transaction), the pharmacist uses an electronic routing system to
submit a claim to the pharmacy benefit manager (PBM) or health plan that manages the
consumer’s specific pharmacy benefit.34 The PBM or plan processes the initial drug claim and
determines the patient’s cost-sharing obligation. The electronic processing system then submits
secondary claims to other payers. Secondary payments can include another insurance policy held
by the individual or a manufacturer coupon. If a coupon is presented for coverage, the PBM or
plan system, using special codes, will route a coupon to a manufacturer for payment.35 After all
payments are processed, the consumer covers the remaining co-payment, if any.
In certain instances, manufacturer discounts are not processed through the electronic system, such
as offers that take the form of a rebate or discount after the point of sale. In this case, a consumer
may make the required co-payment imposed by his or her primary insurance plan when filling a
prescription, then send the pharmacy receipt and rebate offer to the manufacturer to secure the
promised discount.36
Consumers may use a coupon and pay cash for a drug that is not covered by their insurance plan,
that is less expensive outside their insurance coverage, or if they do not have insurance.
Prescription Drug Discount Coupon Distribution
Coupons can be printed in a magazine or advertising supplement, offered electronically—such as
a discount offer on a website—or presented as a debit-type card. Manufacturers can directly offer
coupons and/or work through vendors.37 Coupons loaded on smartphones can provide automatic
reminders to a consumer to refill a prescription. Manufacturer coupons and other discount offers
may be offered via special programs on physician electronic prescribing systems.38 Manufacturers
may offer starter cards that patients can use to receive an initial fill of a prescription at no cost
while they wait for a coverage decision from their health plan.
A portion of pharmaceutical assistance consists of special coupons and discount cards that reduce
a drug’s retail price, but are not designed to be applied to health plan co-payments. The rise of
digital platforms has made these services easier to use.39

34 National Council for Prescription Drug Programs, “Background and Guidance for Using g the NCPDP Standards for
Digital Therapeutics,” August 2021, at https://www.ncpdp.org/NCPDP/media/pdf/Background-and-Guidance-for-
Using-the-NCPDP-Standards-for-Digital-Therapeutics.pdf?ext=.pdf
35 HHS OIG, “Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs,” September 2014,
at http://oig.hhs.gov/oei/reports/oei-05-12-00540.pdf.
36 Ibid.
37 For example, see Abbvie, “Join the Before Breakfast Club,” offer for Synthroid assistance, at
https://www.synthroid.com/support/before-breakfast-club. Abbvie offers discounts to both insured and uninsured
consumers for the drug, used to treat hyperthyroidism.
38 GoodRx Announces Agreement with Surescripts to Provide Real-Time Drug Discount Pricing in Electronic Health
Records, August 5, 2021, at https://investors.goodrx.com/news-releases/news-release-details/goodrx-announces-
agreement-surescripts-provide-real-time-drug.
39 One example is digital health company Goodrx, which allows consumers to access discount offers for drugs,
including both generic and brand drugs, without insurance. In addition, GoodRx has a telehealth service to help
consumers obtain prescriptions and has agreements with certain companies to provide GoodRx discounts as an
employee benefit. GoodRx revenues come from prescription transaction fees, subscriber fees, and payments from drug
manufacturers and telehealth providers. According to the GoodRx quarterly letter to shareholders from May 2022, the
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Some pharmacies, nonprofit organizations, and PBMs also offer their own prescription drug cards
or programs, which generally may not be used with government benefits or private insurance.40
Scope of Coupons and Discounts
There are no comprehensive public data on co-payment coupon distribution and use.
Manufacturers, consulting firms, PBMs, and various websites that serve as online clearinghouses
for coupon offers release some information, but it is difficult to gauge the overall market.
According to IQVIA, retail pharmacy data show that manufacturer coupons (excluding prepaid
debit cards) offset $12 billion in consumer prescription drug spending in 2019, an increase from
$8 billion in 2013.41 A more recent IQVIA analysis found that coupons for commercially insured
patients reached $14 billion in 2020 – including the use of prepaid debit cards.42 Coupon usage
for branded drugs used by commercially covered patients in some therapy areas was high: 47%
for drugs in the mental health category and 80% for immunology drugs. In another example, the
Pharmaceutical Research and Manufacturers of America (PhRMA) cite research that 70% percent
of patients taking innovative medicines to treat multiple sclerosis in 2019 used cost-sharing
assistance.43
Other studies indicate that coupons are not just important for specialty or single-source drugs, but
for widely used products where there is market competition. A 2020 Massachusetts study of drug
coupon use in the state found the top category of coupon use was drugs for treating diabetes,
which represented 20% of all coupon volume. Antivirals, largely for HIV treatment and
prevention but also for conditions such as Hepatitis C, were the second largest category with 11%
of all coupons. The study suggested that coupon availability was “associated with moderately
higher utilization of branded drugs relative to use of generic close therapeutic substitutes, and that
coupon availability is associated with higher total spending.”44

company acquired vitaCare in April 2022, a pharmacy services platform that helps facilitate access to drugs, including
manufacturer savings programs.
40 For example, see the CVS Caremark description of National League of Cities Prescription Discount Program, at
http://nlc.org./nlc-prescription-discount-program; and OptumRx, at http://www.myprescriptiondrugsavings.com/
welcome.aspx.
41 IQVIA, “Medicine Spending and Affordability in the United States,” August 2020, p. 6 and p. 9. The figures do not
include prepaid debit cards, also offered by manufacturers. Available for download at https://www.iqvia.com/insights/
the-iqvia-institute/reports.
42 IQVIA, “The Use of Medicines in the U.S.: Spending and Usage Trends and Outlook to 2025,” May 2021, p. 46.
Available for download at https://www.iqvia.com/insights/the-iqvia-institute/reports. Savings programs include
coupons, e-coupons, prepaid debit cards, and average 50% of brand prescriptions in some of the highest overall
spending specialty therapy areas, compared to 33% of leading traditional medicine therapy areas.
43 PhRMA vs. Becerra, et al., Civil Action No. 1:21-cv-1395, May 2021. The legal filing includes information on
multiple sclerosis drugs from an IQVIA Analysis for PhRMA, U.S. Market Access Strategy Consulting Analysis
(2020). According to the filing, the study also said that patients taking diabetes medicines would have paid more than
twice as much out of pocket if they were prevented from using cost-sharing assistance. PhRMA is the main trade
association for the pharmaceutical industry.
44 Massachusetts Health Policy Commission, “Prescription Drug Coupon Study: Report to the Massachusetts
Legislature,” July 2020, p. 3, at https://archives.lib.state.ma.us/handle/2452/829870.
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Restrictions on Coupon Use
Federal Programs
There are limitations on use of co-payment coupons in conjunction with federal health care
programs, including Medicare, Medicaid, TRICARE military insurance, and Veterans Health
Administration programs. One limitation is based on the federal anti-kickback statutes,45 which
cover various types of remuneration—including kickbacks, bribes, and rebates—whether made
directly or indirectly, overtly or covertly, in cash or in kind.46 Pharmaceutical companies may be
liable under the anti-kickback statute if they offer coupons to induce the purchase of drugs paid
for by federal health care programs.
Retailers and other entities that submit claims to federal agencies for items or services resulting
from a violation of anti-kickback statutes may also face civil monetary penalties and damages
under the False Claims Act.47
Federal Employees Health Benefit Program and Qualified Health Plans
Private health plans sold to federal workers through the Federal Employees Health Benefit
(FEHB) Program are not considered federal health care programs for purposes of the anti-
kickback statute. Enrollees in these plans may use drug discount coupons or pharmacy incentive
programs in concert with their insurance benefits.48
Regarding qualified health plans,49 former HHS Secretary Kathleen Sebelius in an October 2013
letter to Representative James McDermott said the HHS did not consider qualified health plans,
as well as tax subsidies and cost-sharing assistance, to be federal programs.50
Purchases and Donations ”Outside” a Government Benefit
There may be cases in which an individual covered by a federal health plan goes “outside” his or
her benefit to purchase prescription drugs. For example, a Medicare Part D beneficiary may

45 Section 1128B(b) of the Social Security Act.
46 The HHS OIG in December 2016 issued final regulations to create safe harbors from the anti-kickback statute for
certain Part D program activities. The rules provide protection for pharmacy waivers of cost sharing for financially
needy Medicare Part D beneficiaries and for mandatory manufacturer discounts in the Part D coverage gap. The final
rules are at 81 Federal Register 88368, December 7, 2016, at https://www.gpo.gov/fdsys/pkg/FR-2016-12-07/pdf/
2016-28297.pdf. For the proposed rules, see HHS OIG, 42 C.F.R. Parts 1001 and 1003, “Medicare and State Health
Care Programs: Fraud and Abuse; Revisions to Safe Harbors Under the Anti-Kickback Statute, and Civil Monetary
Penalty Rules Regarding Beneficiary Inducements and Gainsharing,” 79 Federal Register 59717, October 3, 2014, at
https://www.federalregister.gov/articles/2014/10/03/2014-23182/medicare-and-state-health-care-programs-fraud-and-
abuse-revisions-to-safe-harbors-under-the#h-4.
47 31 U.S.C. §§3729-3733. See also 42 U.S.C. §1320a-7b(g).
48 See 42 U.S.C. §1320a-7b(f)(1). See also Office of Personnel Management, “Frequently Asked Questions:
Insurance,” at https://www.opm.gov/faqs/QA.aspx?fid=fd635746-de0a-4dd7-997d-b5706a0fd8d2&pid=c8263db8-
cf0e-4144-9e8a-13a1ef38c084.
49 A qualified health plan is an insurance plan that is certified by an exchange, provides essential health benefits,
follows established limits on cost sharing (such as deductibles, co-payments, and out-of-pocket maximum amounts),
and meets other requirements. See https://www.healthcare.gov/glossary/qualified-health-plan/. Qualified health plans
are sold in the non-group (individual) and small-group markets inside and outside exchanges.
50 Letter from Kathleen Sebelius, HHS Secretary, to Rep. McDermott, October 2013, at https://www.health-law.com/
media/news/85_The-Honorable-Jim-McDermott.pdf.
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choose to pay cash for a drug at a retail pharmacy if doing so is cheaper than buying the drug
through his or her Part D plan.
Although a Part D enrollee may use a coupon to purchase a drug outside the program, only the
actual price paid for the drug—minus all discounts—counts toward Part D annual out-of-pocket
spending limits.51
2014 HHS Office of Inspector General Report
A 2014 report from the HHS OIG said that pharmaceutical manufacturers did not have consistent,
effective safeguards to prevent Medicare Part D beneficiaries from using co-payment coupons
along with program benefits.52
Some beneficiaries might not be aware of the ban on coupons. According to the report, not all
manufacturer offers carried a disclaimer stating that the coupons, rebates, or other incentives may
not be used by individuals enrolled in federal health care programs or in conjunction with federal
benefits. The report noted that manufacturers that redeem coupons through PBM electronic
claims systems have set up edits at the point of sale designed to identify individuals who may be
enrolled in federal programs such as Medicare. For example, when an enrollee submits a coupon
with a prescription, and when it is submitted to a manufacturer as a secondary payer, the
manufacturer may check for a patient’s primary insurance, Part D benefit stage,53 and date of
birth. (Actual Part D enrollment data is not available from CMS because it may contain sensitive
personal information.)
However, the HHS OIG report found that the staged system for processing prescription drug
claims can make it difficult for entities other than manufacturers to identify coupons as they move
through the pharmacy transaction system. The report also noted that manufacturer discounts that
are processed after the point of sale, such as mail-in rebates, may not be detected by electronic
safeguard systems.
HHS issued a special advisory bulletin warning manufacturers that they faced potential penalties
if they failed to take appropriate steps to ensure that such coupons do not induce the purchase of
federal health care program items or services.54
In response to the 2014 HHS OIG guidance the NCPDP, which sets standards for electronic
claims processing, in 2017 issued recommendations for better identifying coupons in Medicare
Part D claims administration.55

51 Out-of-pocket spending amounts are adjusted annually. For more information, see CRS Report R40611, Medicare
Part D Prescription Drug Benefit. In July 2014, the HHS OIG issued an advisory opinion regarding a direct-to-patient
sales program sponsored by a specific pharmaceutical manufacturer under which an individual may buy a prescription
drug at a fixed cash price through an online pharmacy. HHS OIG, “OIG Advisory Opinion 14-05,” July 28, 2014, at
https://oig.hhs.gov/compliance/advisory-opinions/14-05/. CMS has also issued separate guidance for Part D cash
purchases at out-of-network pharmacies where coupon use is not involved. CMS, Medicare Part D Prescription Drug
Manual, Chapter 14, Section 50.4.2, at https://www.cms.gov/Medicare/Prescription-Drug-Coverage/
PrescriptionDrugCovContra/Downloads/Chapter14.pdf.
52 HHS, OIG, Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs, September 2014,
at http://oig.hhs.gov/oei/reports/oei-05-12-00540.pdf.
53 For example, an individual enrolled in Part D might not have met the annual deductible.
54 HHS OIG, “Special Advisory Bulletin: Pharmaceutical Manufacturer Copayment Coupons,” September 2014, at
http://oig.hhs.gov/fraud/docs/alertsandbulletins/2014/SAB_Copayment_Coupons.pdf.
55 NCPDP, “Recommendations for Use of the NCPDP Telecommunication Standard to Prevent Use of Copayment
Coupons by Medicare Part D Beneficiaries and Applicability to other Federal Programs,” Version 1.1, May 1, 2017,
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2020 HHS Rules on Co-payment Assistance
In 2020, HHS issued two final regulations affecting manufacturer coupon programs: one
governing commercial plans sold on health insurance exchanges, and another affecting the
calculation of prices for drugs sold through the state-federal Medicaid program. The rules were
issued in response to increased use of accumulator programs, under which a health plan or issuer
allows an enrollee to use a coupon or other manufacturer program to defray the out-of-pocket
costs for filling a prescription but does not count the value of the manufacturer assistance against
the enrollee’s deductible and/or annual out-of-pocket maximum. (See “Insurance Market
Response to Coupons/PAPs”)
2020 HHS Coupon Accumulator Final Rule for Qualified Health Plans
In a final rule published in 2020,56 HHS gave issuers of certain health plans authority to decide
whether to count any form of direct pharmaceutical manufacturer support, such as coupons, as
part of enrollee cost sharing for purposes of meeting annual OOP spending caps. The regulation
applies to health plans sold on the health insurance exchanges, and non-grandfathered individual
and group health plans sold off the exchanges.57
Under the rule, to “the extent consistent with state law, amounts of direct support offered by drug
manufacturers to enrollees for specific prescription drugs towards reducing the cost sharing
incurred by an enrollee using any form are not required to be counted toward the annual
limitation on cost sharing.”58
The 2020 final rule was a modification of a 2019 HHS final rule that held that issuers were not
required to count enrollee manufacturer assistance toward annual OOP caps in cases where the
manufacturer assistance was applied to brand-name drugs that had an “available and medically
appropriate generic equivalent.” HHS said it issued that rule due to concern about possible market
distortions if consumers chose higher-cost brand-name drugs when less expensive generics were
available.59
In response to comments from issuers and insurers, HHS subsequently announced it would not
enforce the 2019 rule and would modify the requirement as part of rulemaking for the 2021 plan
year. Insurers had been concerned that, among other things, the 2019 rule was in conflict with
federal requirements for the operation of HSA-eligible HDHPs, which mandate that HDHP

available at https://www.ncpdp.org/White-Papers.aspx. It is up to individual entities to decide whether to adopt the
NCPDP recommendations.
56 CMS, “Patient Protection and Affordable Care Act; HHS Notice of Benefit and Payment Parameters for 2021; Notice
Requirement for Non-Federal Governmental Plans,” 85 Federal Register 29230, May 14, 2020, at
https://www.federalregister.gov/documents/2020/05/14/2020-10045/patient-protection-and-affordable-care-act-hhs-
notice-of-benefit-and-payment-parameters-for-2021.
57 Health insurance plans that were in existence (in the non-group, small-group, or large-group market) and in which at
least one person was enrolled on the date of the ACA’s enactment (March 23, 2010) are considered grandfathered and
have a unique status under the ACA. As long as a plan maintains its grandfathered status, the plan has to comply with
some but not all ACA provisions. CRS Report R44163, The Patient Protection and Affordable Care Act’s Essential
Health Benefits (EHB).
58 Ibid., p. 29253.
59 CMS, “Patient Protection and Affordable Care Act; HHS Notice of Benefit and Payment Parameters for 2020,” 84
Federal Register 17544, April 24, 2019, at https://www.federalregister.gov/d/2019-08017/p-885.
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issuers disregard any provider discounts in determining whether enrollees meet plan deductible
requirements.60
The final 2020 rule for the 2021 plan year states that issuers and group health plans have
flexibility (subject to state law and other applicable requirements (if any)), to determine if and
how to count manufacturer assistance, such as coupons, toward annual OOP limits. Plans that
choose to impose limitations on manufacturer assistance must implement the limitations in a
uniform, non-discriminatory manner. CMS encouraged issuers and health plans that limit
manufacturer assistance to be transparent to enrollees by prominently providing information
about their coupons/cost-sharing policies on websites and in brochures, plan summary
documents, and other plan materials. According to CMS, “If we find that such transparency is not
provided, HHS may consider future rulemaking to require that issuers provide this information in
plan documents and collateral material.”61
2020 Medicaid Best Price Final Rule
In a final rule issued in December 202062 (which was later struck down in court, see below) CMS
said that, beginning in 2023, it would count the value of patient assistance when calculating a
manufacturer’s “best price” for the drug under the state-federal Medicaid program unless a
manufacturer was able to demonstrate that the full value of a coupon or other assistance accrued
to an individual, rather than to a payer, such as a private insurer.63
In general, pharmaceutical manufacturers that sell covered outpatient drugs through Medicaid are
required to pay state Medicaid programs a basic rebate and, if they raise a drug’s price faster than
inflation, an additional rebate.64 The basic rebate is determined by comparing each drug’s per unit
average manufacturer price (AMP)65 to that drug’s per unit best price. The best price is the drug
manufacturer’s lowest U.S. price any purchaser paid during a quarterly reporting period. The

60 CMS, “Patient Protection and Affordable Care Act; HHS Notice of Benefit and Payment Parameters for 2021; Notice
Requirement for Non-Federal Governmental Plans,” 85 Federal Register 23921, May 14, 2020. According to CMS,
Q&A–9 of IRS Notice 2004–50 states that the provision of drug discounts will not disqualify an individual from being
an HSA-eligible individual if the individual is responsible for paying the costs of any drugs (taking into account the
discount) until the deductible under the HDHP is satisfied. Thus, Q&A–9 of IRS Notice 2004–50 requires an HDHP to
disregard drug discounts and other manufacturer and provider discounts when determining if the deductible for an
HDHP has been satisfied, and only allows amounts actually paid by the individual to be taken into account for that
purpose. CMS stated, therefore, that under this IRS policy, an issuer or sponsor of an HSA-qualified HDHP could be
put in the position of complying with either the requirement under the 2019 final rule for limits on cost sharing in the
case of direct support provided by drug manufacturers for a brand-name drug with no available or medically
appropriate generic equivalent or the IRS rules for minimum deductibles for HDHPs, but potentially being unable to
comply with both rules simultaneously. According to CMS, the 2019 final rule implied that in situations where a
medically appropriate generic equivalent is not available, “group health plans and issuers are required to count such
coupon amounts toward the annual limitation on cost sharing.”
61 Ibid, p. 29233.
62 CMS, “Medicaid Program; Establishing Minimum Standards in Medicaid State Drug Utilization Review (DUR) and
Supporting Value-Based Purchasing (VBP) for Drugs Covered in Medicaid, Revising Medicaid Drug Rebate and Third
Party Liability (TPL) Requirements,” 85 Federal Register 87048, December 31, 2020, at https://www.govinfo.gov/
content/pkg/FR-2020-12-31/pdf/2020-28567.pdf.
63 Ibid, p. 87000.
64 Social Security Act Section 1927(k)(3), Covered Outpatient Drug.
65 Social Security Act Section 1927(k)(1) defines the AMP as the average U.S. price manufacturers received for their
product excluding specified price concessions when sold to retail community pharmacies.
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basic rebate is either the greater of a specified percentage of AMP or the difference between the
AMP and the best price.66
In its 2020 Federal Register notice outlining the final rule, CMS said that it had learned that some
health plans, which are defined as providers for determining Medicaid best price, were using
accumulator programs to apply patient assistance programs in a way that provided a financial
benefit to the plan, rather than solely to the enrollee.67 For example, by imposing accumulator
programs that (1) allow an enrollee to use a coupon but (2) do not count the value of the coupon
toward annual OOP requirements, health plans effectively delay the point at which they must
provide certain benefits to enrollees, which allows them to realize cost savings. According to
CMS, such savings amount to a reduction in the price of a drug, which should be included in
determining the Medicaid best price.
CMS set a January 1, 2023, implementation date for the final rule so that manufacturers would
have time to develop technical systems to track payment assistance offers to determine whether
coupons and other benefits were delivered exclusively to consumers. PhRMA sued HHS and
CMS, contending that the rule was inconsistent with the Medicaid statute. PhRMA asserted that
manufacturers did not have control over the development or implementation of accumulator
programs, and that there was not a reliable method for drug manufacturers to determine whether a
cost-sharing offer was provided exclusively to a consumer.68 In May 2022, the U.S. District Court
for the District of Columbia struck down the final rule on the grounds that HHS had exceeded its
authority.69
Pharmaceutical Assistance Programs
Pharmaceutical manufacturers, state governments, and independent charities operate PAPs to help
uninsured or underinsured individuals pay for prescription drugs. Many nongovernmental PAPs
are set up as 501(c)(3) nonprofit organizations to provide prescription drugs or financial subsidies
to qualified patients.70 501(c)(3) entities are exempt from federal income taxes and qualify to

66 Social Security Act Section 1927(c)(1)(C)(ii) defines best price to include cash discounts, free goods contingent on
any purchase requirement, volume discounts, and rebates (other than the specified Medicaid rebates). Best price
includes the lowest price available from the manufacturer to any U.S. purchaser, which includes with some exceptions
a wholesaler, retailer, hospital, provider, HMO, nonprofit entity, or governmental entity.
67 CMS, “Medicaid Program; Establishing Minimum Standards in Medicaid State Drug Utilization Review (DUR) and
Supporting Value-Based Purchasing (VBP) for Drugs Covered in Medicaid, Revising Medicaid Drug Rebate and Third
Party Liability (TPL) Requirements,” 85 Federal Register 87000, December 31, 2020, p. 87408, at
https://www.federalregister.gov/documents/2020/12/31/2020-28567/medicaid-program-establishing-minimum-
standards-in-medicaid-state-drug-utilization-review-dur-and. Medicaid patients are not eligible for manufacturer-
sponsored programs, but according to CMS the administration of these programs by commercial health plans and
PBMs can affect the rebates that the Medicaid program receives from the manufacturer-sponsor of these programs.
According to the Federal Register notice, when manufacturer-sponsored assistance does not accrue towards a patient’s
deductible or OOP limits, a health plan is able to delay the application of its plan benefit to the patient to the detriment
of the patient or consumer, thus generating savings for the plan.
68 Pharmaceutical Research and Manufacturers Of America (PhRMA) v. Xavier Becerra, Secretary of Health and
Human Services, Civil Action No. 1:21-cv-1395, May 21, 2021, at https://www.courthousenews.com/wp-content/
uploads/2021/05/pharma-HHS.pdf.
69 Bloomberg Law, “Drugmakers Win Challenge to Medicaid Drug Price Rebate Rule,” May 17, 2022, at
https://news.bloomberglaw.com/health-law-and-business/drugmakers-win-challenge-to-medicaid-drug-price-rebate-
rule. Pharmaceutical Research and Manufacturers Of America (PhRMA) v. Xavier Becerra, Secretary of Health and
Human Services, Civil Action No. 1:21-cv-1395, May 17, 2022, at https://casetext.com/case/pharm-research-
manufacturers-of-am-v-becerra-1.
70 See “What Is a 501(c)(3) Organization?”
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receive tax-deductible contributions.71 As such, pharmaceutical companies and other donors can
deduct donations of inventory or cash to PAPs.72
Different types of PAPs include the following:73
 Pharmaceutical Manufacturer PAPs. Many pharmaceutical makers distribute
prescription drugs to individuals through their own 501(c)(3) organizations,
which often are set up as private foundations. Manufacturer PAPs provide drugs
to people enrolled in private insurance and public health programs, and the
uninsured. Drug manufacturers may contract with outside companies in
administering their PAPs.74
 Independent Charity PAPs. Independent charities operate PAPs that offer aid
such as financial assistance to uninsured consumers or underinsured consumers
who cannot meet their health plans’ premiums or cost sharing, such as co-
payments, coinsurance, and deductibles.
 State PAPs (SPAPs). As of 2021, CMS listed 20 state governments with 43
SPAPs that met certain criteria.75 The SPAPs generally serve uninsured residents
or fill in the gaps in Medicare, Medicaid, and private insurance coverage.76
SPAPs are targeted at lower-income individuals and usually are the payer of last
resort, meaning the SPAP will pay for drugs only after federal programs or any
private insurance already has been billed. SPAP rules and coverage vary by
state—some focus on seniors and some on specific disease groups, such as
people with HIV/AIDs. This report concentrates on the other two types of PAPs,
and refers to the state programs as SPAPs rather than PAPs for clarity.
What Is a 501(c)(3) Organization?
501(c)(3) organizations qualify for federal tax-exempt status.77 To qualify, a 501(c)(3)
organization must be “organized and operated exclusively” for at least one of the exempt
purposes listed in statute, which include charitable and educational purposes. Although the statute
uses the term “exclusively,” this actually means the organization’s activities must primarily be for

71 26 U.S.C. §§170, 501.
72 See also “How are PAP Donations Valued?” In addition, see HHS OIG, “New Special Advisory Bulletin Provides
Additional Guidance on Independent Charity Patient Assistance Programs for Federal Health Care Program
Beneficiaries,” May 21, 2014, at http://oig.hhs.gov/newsroom/news-releases/2014/charity.asp.
73 Definitions come from HHS OIG publications.
74 Outside administrators include Eversana, “Alleviate Patients’ Financial Burdens and Increase Speed to Therapy,” at
https://www.eversana.com/solutions/integrated-commercial-services/affordability-programs/patient-assistance-
programs/; and McKesson,“ Program Pharmacy Solutions for Biopharma From RxCrossroads,” at
http://www.mckesson.com/manufacturers/pharmaceuticals/oncology-and-specialty-pharmaceutical-services/patient-
assistance-programs-paps/.
75 CMS, “State Pharmaceutical Assistance Programs Excluded from Medicaid Best Price,” May 2021, link to list at
https://www.medicaid.gov/medicaid/prescription-drugs/state-prescription-drug-resources/index.html. The Medicaid
statute allows manufacturers participating in the Medicaid Drug Rebate Program to exclude prices to SPAPs from their
Medicaid best price calculations.
76 National Conference of State Legislatures, “State Pharmaceutical Assistance Programs,” updated 2014 and material
added January 2016, at http://www.ncsl.org/research/health/state-pharmaceutical-assistance-programs.aspx. See also
Medicare.gov, “State Pharmaceutical Assistance Programs,” at https://www.medicare.gov/pharmaceutical-assistance-
program/state-programs.aspx.
77 26 U.S.C. §501(a).
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an exempt purpose.78 Furthermore, as part of the “organized and operated exclusively”
requirement, the organization must serve a public, as opposed to private, interest.79 When an
organization engages in activities that benefit private industry, the question may arise as to
whether it provides the public benefit necessary for 501(c)(3) status. If such activities are a
substantial part of the organization’s activities, then the organization would appear to no longer
qualify for 501(c)(3) status.80
Another requirement for 501(c)(3) status is that the organization’s earnings may not be used to
benefit any private shareholder or individual.81 Any level of private inurement may jeopardize the
organization’s tax-exempt status or, depending on the circumstances, may trigger a penalty tax.82
Charity vs. Foundation
A 501(c)(3) organization is either a public charity or a private foundation.83 Public charities have
broad public support and tend to provide charitable services directly to the intended beneficiaries.
Private foundations often are tightly controlled, receive significant portions of their funds from a
small number of donors, and make grants to other organizations rather than directly carry out
charitable activities. Because these factors create the potential for self-dealing or abuse of
position by the small group controlling the entity, private foundations are more closely regulated
than public charities. As such, private foundations are subject to penalty taxes for doing things
such as failing to distribute a certain amount of their income each year; having excess business
holdings; and failing to maintain expenditure responsibility over certain grants. 501(c)(3)
organizations are presumed to be private foundations and, if they want to be treated as a public
charity, must tell the IRS how they qualify for public charity status based on the support and
control tests found in Internal Revenue Code (IRC) Section 509.
How Are PAP Donations Valued?
Companies that donate cash or pharmaceuticals may be able to deduct the donation as a charitable
contribution under IRC Section 170. Companies that donate cash or non-inventory property
generally may deduct the amount of the cash donation or fair market value of the property,
subject to various restrictions.84
If the company donates inventory, then a special valuation rule applies.85 The general rule for
donations of inventory is that the taxpayer may only claim a charitable deduction that equals its
basis in the inventory (which is typically its cost). However, there is a special valuation rule that
applies for C corporations.86 Under it, C corporations donating inventory may deduct the lesser of

78 26 C.F.R. §1.501(c)(3)-1(c)(1). See also Better Business Bureau of Washington D.C., Inc. v. United States, 326 U.S.
279 (1945) (indicating that an organization will not qualify for Section 501(c)(3) status if it has a substantial purpose
that is not an exempt purpose).
79 See Treas. Reg. §1.501(c)(3)-1(d)(1)(ii).
80 See Rev. Rul. 71-505, 1971-2 C.B. 232; Rev. Rul. 71-504, 1971-2 C.B. 231.
81 26 U.S.C. §501(c)(3) (“no part of the net earnings of which inures to the benefit of any private shareholder or
individual”).
82 26 U.S.C. §4958.
83 26 U.S.C. §509.
84 For information on the general rules regarding the deduction of charitable contributions, see CRS Report RL34608,
Tax Issues Relating to Charitable Contributions and Organizations, by Jane G. Gravelle and Molly F. Sherlock.
85 26 U.S.C. §170(e)(1).
86 C corporations are large incorporated entities that are treated for federal tax purposes as a separate taxable entity
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(1) the taxpayer’s basis in the property plus 50% of the property’s appreciated value or (2) two
times the basis.87 This is commonly referred to as an enhanced deduction.
To benefit from the enhanced deduction, the donation must be made to a qualified 501(c)(3)
organization.88 The donee’s use of the donation must be related to its tax-exempt purpose and be
“solely for the care of the ill, the needy, or infants.”89 Further, the donee may not exchange the
donation for money, property, or services.90 The taxpayer must obtain a written statement from
the donee stating it will comply with these restrictions.91 Finally, donated inventory such as food
or drugs must comply with any applicable safety standards in the Federal Food, Drug, and
Cosmetic Act on the date of the donation and for 180 days thereafter.92
Consumer Eligibility for PAP Assistance
Although specific criteria vary among PAPs, consumer eligibility for assistance generally appears
to be based on (1) annual income, (2) insurance status, (3) physician endorsement, (4)
prescription information, and (5) proof of U.S. citizenship or legal residence.
Income limits may vary for different drugs supported by a single PAP. A PAP could set a higher
income for very expensive drugs, while imposing a lower limit for less expensive products. For
example, the Lilly Cares Foundation patient assistance program has three drug assistance
groupings with separate income cutoffs ranging from up to 300% of the federal poverty level
(FPL) to up to 500% of FPL.93 Separately, a 2019 study of the six largest charitable organizations
offering pharmaceutical patient assistance, which included 274 patient assistance programs, found
that 97% of the programs excluded uninsured patients, and the most common income eligibility
limit was 500% of FPL.94
Most PAP support is provided for a limited time period, such as several months or a year.
Individuals in many cases may reapply for assistance. PAPs may provide drugs or other aid
directly to a patient or through a doctor, pharmacy, or other health care provider.

apart from their owners. See 26 U.S.C. §§11, 1361. For more information, see CRS Report R43104, A Brief Overview
of Business Types and Their Tax Treatment, by Mark P. Keightley.
87 26 U.S.C. §170(e)(3), (e)(3)(B); Treas. Reg. §1.170A-4A(c)(2).
88 26 U.S.C. §170(e)(3)(A).
89 Ibid., §170(e)(3)(A)(i).
90 Ibid., §170(e)(3)(A)(ii).
91 Ibid., §170(e)(3)(A)(iii).
92 Ibid., §170(e)(3)(A)(iv).
93 Lilly Cares Foundation, “Check Your Eligibility,” at https://www.lillycares.com/how-to-apply#check-eligibility.
94 So-Yeon Kang et al., “Financial Eligibility Criteria and Medication Coverage for Independent Charity Patient
Assistance Programs,” Journal of the American Medical Association, JAMA. 2019 Aug 6; 322(5): 422–429, at
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6686767/. There were 168 patient assistance programs (61%) that
provided only co-payment assistance, 9 programs (3%) offered only assistance to subsidize the cost of health insurance
premiums, and 90 programs (33%) allowed patients to choose between co-pay and insurance premium assistance. None
of the patient assistance programs offered free drugs. The most common therapeutic areas covered were cancer or
cancer treatment–related symptoms (113 programs; 41%) and genetic or rare diseases (93 programs; 34%). The study
also found that the median 2016 Medicare Part D spending per beneficiary was $1,157 for medications covered by
these programs compared with $367 for the medications not covered.
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HHS Guidance Addressing PAP Giving
As is the case with manufacturer coupons, there are legal constraints on the use of PAP funding in
conjunction with federal health care programs.
2005 HHS OIG Bulletin
In November 2005, just before Medicare Part D took effect, the HHS OIG issued a special
advisory bulletin on PAPs.95 The OIG said that although manufacturer-based PAPs that offered
subsidized Part D cost sharing presented heightened risks under the anti-kickback statute,96 cost-
sharing assistance offered by truly independent charities should not raise anti-kickback concerns,
even if the charities received cash donations from drugmakers.97 The bulletin affirmed that
manufacturer-based PAPs could operate “outside” the Part D benefit, meaning that they could
provide drugs to Part D enrollees but that no manufacturer donation could be filed with a Part D
plan and the assistance would not count against Part D out-of-pocket spending requirements.98
Manufacturers that were operating PAPs before enactment of Part D had concerns about the legal
implications of providing aid to Part D enrollees, and some companies took steps to limit
programs. After release of the HHS OIG guidance and entreaties from members of Congress,
manufacturers generally continued assistance through manufacturer PAPs.99 A number of
independent charity PAPs also were created in the early 2000s to aid Medicare enrollees and other
consumers.100
The HHS OIG guidance also limits the dissemination of data from PAPs. Specifically, PAPs may
not provide detailed data that would enable pharmaceutical firms to determine how much of any
donated funds were being used to support prescriptions for the specific drugs they manufacture.101
The pharmaceutical manufacturer cannot solicit or receive data from the charity that would
facilitate the manufacturer in correlating the amount or frequency of its donations with the
number of subsidized prescriptions for its products.

95 HHS OIG, “Publication of OIG Special Advisory Bulletin on Patient Assistance Programs for Medicare Part D
Enrollees,” 70 Federal Register 70623, November 22, 2005, p. 70626, at https://oig.hhs.gov/documents/special-
advisory-bulletins/880/2005PAPSpecialAdvisoryBulletin.pdf.
96 Ibid. The HHS OIG noted that subsidies by manufacturer PAPs had the practical effect of “locking beneficiaries into
the manufacturer’s product, even if there were other equally effective, less costly alternatives (and even if the patient’s
physician would otherwise prescribe one of these alternatives).”
97 Ibid. The HHS OIG said that in-kind donations of drugs to independent charity PAPs posed additional risks not yet
directly addressed in prior OIG guidance, and that the HHS OIG had insufficient experience to offer detailed guidance.
“While in-kind donations have the potential benefit of increasing the value of donations (because marginal costs of
drugs are generally low), they also have the effect of creating a direct correlation between the donation and use of a
particular donor’s product, thereby weakening important safeguards of an independent charity PAP arrangement.” HHS
also noted potential accounting and valuation issues regarding in-kind donations. See footnote 14 of the HHS Bulletin.
98 The HHS OIG also issues separate advisory opinions to specific manufacturer and charitable PAPs that seek
clarification as to whether their programs are in compliance.
99 Senate Finance Committee, “Senators Invite Drug Company Execs to Discuss Prescription Drug Assistance
Programs,” May 8, 2006, at http://www.finance.senate.gov/newsroom/chairman/release/?id=8e7de26d-bcd6-4e87-
aa02-f53fe7797aa0. See also http://www.oig.hhs.gov/fraud/docs/alertsandbulletins/2006/TauzinPAP.pdf.
100 Alex Berenson, “In Drug-Aid Foundations a Web of Corporate Interests,” New York Times, April 8, 2006, at
http://www.nytimes.com/2006/04/08/business/08foundation.html.
101 HHS OIG, “Publication of OIG Special Advisory Bulletin on Patient Assistance Programs for Medicare Part D
Enrollees,” 70 Federal Register 70623, November 22, 2005, p. 70626, at http://www.oig.hhs.gov/fraud/docs/
alertsandbulletins/2005/PAPAdvisoryBlletinFinal-Final.pdf.
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2014 Update to HHS OIG Bulletin
In May 2014, the HHS OIG updated its 2005 bulletin. In its update,102 the HHS OIG said it would
increase scrutiny of independent charity PAPs that established or operated funds that narrowly
defined specific diseases or limited assistance to a subset of available products, such as covering
co-payments only for expensive or specialty drugs. In an accompanying press release, the HHS
OIG said it had seen a general tendency away from broad disease funds and toward narrower
funds, such as a fund for a specific stage or complication of a disease. It also said charities had
sought advisory opinions that would allow them to narrow the scope of the drugs that they
covered to specialty or expensive pharmaceuticals. The HHS OIG said such restrictions could be
harmful to patients, taxpayers, and federal programs. “If assistance is available only for the
highest-cost drugs, patients may be steered to those pharmaceuticals rather than to equally
effective, lower-cost alternatives. If, instead, assistance is available for a broader range of equally
effective treatments, patients, and their prescribers, have greater freedom of choice.”103
According to the update, the cost of a drug was not an appropriate stand-alone factor for
determining need. Generous financial support, particularly for a PAP with a limited number of
drugs or limited to the drugs of a major donor manufacturer, could be evidence of intent to induce
use of particular drugs rather than to support financially needy patients.104 A number of charitable
PAPs agreed to make operational changes in response to the HHS OIG’s 2014 guidance. More
recently, the HHS OIG has issued supplemental advisory opinions regarding new operations of
individual charitable PAPs.105
Another recent development appears to be an increased willingness by manufacturers to offer
direct assistance to enrollees in federal programs such as Medicare Part D through their own
manufacturer PAPs (as opposed to or in addition to donating to an independent charity PAP). For
example, Novo Nordisk, a main insulin producer, offers Medicare Part D enrollees up to a 120-
day supply of a medication or device through its PAP through the end of a calendar year.106 Eli
Lilly, another major insulin producer, offers aid to Part D enrollees through its Lilly Cares
Foundation.107

102 HHS OIG, “Supplemental Special Advisory Bulletin: Independent Charity Patient Assistance Programs,” 79
Federal Register 31120, May 30, 2014, p. 31120-31123, at http://oig.hhs.gov/fraud/docs/alertsandbulletins/2014/
independent-charity-bulletin.pdf.
103 HHS OIG, “New Special Advisory Bulletin Provides Additional Guidance on Independent Charity Patient
Assistance Programs for Federal Health Care Program Beneficiaries,” May 21, 2014, at http://oig.hhs.gov/newsroom/
news-releases/2014/charity.asp.
104 Andrew Pollack, “Drug Maker’s Donations to Co-Pay Charity Face Scrutiny,” New York Times, December 19,
2013, at http://www.nytimes.com/2013/12/19/business/shake-up-at-big-co-pay-fund-raises-scrutiny-on-similar-
charities.html; and Bill Alpert, “Too Close for Comfort,” Barron’s, October 19, 2013, at http://www.barrons.com/
articles/SB50001424053111904462504579137163650125276.
105 See HHS OIG at http://oig.hhs.gov/compliance/advisory-opinions/#advisory.
106 Novo Nordisk, “Novo Nordisk Patient Assistance Program Application,” PAP-Application-EN.pdf (novocare.com).
107 Lilly Cares, at https://www.lillycares.com/. As part of the application for aid, Part D enrollees must agree not to
submit any claim for reimbursement to any third party or government insurer for any product provided to them through
the Lilly Cares Program; if enrolled in Part D, not to seek to have the cost/value associated with the medication they
receive through the Program counted as out-of-pocket costs for prescription drugs and to inform the covering Part D
plan about their enrollment in Lilly Cares.
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Data Sources for Annual PAP Revenue and Giving
As previously noted, manufacturer and independent charity PAPs are now among the larger U.S.
nonprofit organizations. However, it is difficult to assess the total dollar value of PAP giving or
the total number of consumers aided each year. There is no central PAP database and no uniform
national patient eligibility criteria.
A primary source of PAP data is the annual information return (Form 990 series) that 501(c)(3)
organizations generally are required to file with the IRS.108 On the form, the organizations must
disclose information related to income, expenses, assets, and officers and employees, among
other things.109 The form has several schedules that ask for information in such areas as the
organization’s substantial donors (Schedule B) and related organizations (Schedule R).
Furthermore, an organization that conducts business activities unrelated to its exempt purpose
must file a tax return (Form 990-T) and pay tax on the earnings.110
The organization and the IRS must make the organization’s Form 990, accompanying schedules,
and Form 990-T publicly available.111 Identifying information about the donors reported on the
Schedule B is not subject to public disclosure unless the 501(c)(3) entity is a private
foundation.112
There is variation in the type and amount of information that the PAPs include in their Form 990s.
Some Form 990s examined by CRS provided aggregate information about the value of donated
drugs or cash, whereas others provided detailed data about the specific drugs or the type of
patients supported.
PAPs Appear to Have Increased in Size and Scope
Based on rankings of nonprofit organizations, IRS annual reports filed by manufacturer and
independent charity PAPs, and outside studies, PAP contributions and revenues for some of the
largest organizations appear to have increased in recent years.
A 2016 study of IRS information found that charitable expenditures by 10 leading manufacturers
increased from $3.1 billion in 2008 to $6.1 billion in 2014, and contributions by five independent
charity PAPs increased from $50 million in 2005 to $868 million in 2014.113 A study of charitable
PAPs found that, in 2017, the six largest independent charity PAPs had total revenue ranging from
$24 million to $532 million, and spending on patient assistance ranging from $24 million to $353
million, representing on average, 86% of their revenue.114
Based on recent, available Form 990 filings, some of the largest manufacturer PAPs include

108 26 U.S.C. §6033.
109 Ibid., §6033(a).
110 Ibid., §§511, 6011.
111 Ibid., §6104(b), (d).
112 Ibid.
113 Austin Frerick, “The Cloak of Social Responsibility: Pharmaceutical Corporate Charity,” Tax Notes, November 28,
2016. The study of pharmaceutical giving includes data on the manufacturer and charitable PAPs going back to 2005.
However, not all organizations were included in the data in the earlier years. The figures in the text represent the
change in giving over the time periods for which there is information from all the PAPs.
114 So-Yeon Kang et al., “Financial Eligibility Criteria and Medication Coverage for Independent Charity Patient
Assistance Programs,” Journal of the American Medical Association, JAMA, vol. 322, no. 5, (August 6, 2019), pp.
422–429, at https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6686767/.
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 the Johnson & Johnson Patient Assistance Foundation, with about $1.8 billion in
contributions and grants in 2019;
 the Bristol-Myers Squibb Patient Assistance Foundation with $1.3 billion in
contributions and grants in 2019;
 the Lilly Cares Foundation with $1.7 billion in contributions and grants in 2020;
 the Merck Patient Assistance Program, with $1.4 billion in contributions and
grants in 2019;
 the Pfizer Patient Assistance Foundation with $1.1 billion in contributions and
grants in 2018; and
 the Sanofi Cares North America (formerly Sanofi-Aventis Patient Assistance
Foundation) with $779 million in contributions and grants in 2019.115
Five charitable PAPs were included in a 2021 list of top 100 U.S. nonprofits (ranked by revenue),
including
 the Heathwell Foundation, ranked 37st with $559 million in revenue;
 the Patient Access Network Foundation (PAN Foundation), ranked 44th with $451
million in revenue;
 the Assistance Fund, ranked 53rd with $383 million in revenue;
 Good Days, ranked 66th with $323 million in revenues; and
 the Patient Advocate Foundation, ranked 74th with $301 million in revenue.116
According to the PAN Foundation’s annual report, in 2020 the Foundation provided $454 million
in financial assistance to more than 170,000 patients. The average grant was about $6,000, and
98% of assisted patients had Medicare coverage.117
Insurance Market Response to Coupons/PAPs
In response to the growth in manufacturer coupons and PAPs, health care issuers and payers have
made changes to their prescription drug benefits to directly address these programs. The changes
have made it more difficult to assess the financial impact of manufacturer offers on health payers
and enrollees.
For example, a number of health payers, often working with PBMs, have redesigned their
prescription drug benefits to maximize the amount of pharmaceutical coupon and PAP payments
that the health plans can receive directly from manufacturers, sometimes while limiting the

115 Form 990s for the PAPs are available at ProPublica Nonprofit Explorer, at https://projects.propublica.org/nonprofits/
organizations/562591004.
116 The NonProfit Times, “The 2021 NPT 100: Donors Stood Tall, Led With BIG Gifts,” November 3, 2021, at
https://www.thenonprofittimes.com/report/the-2021-npt-100-donors-stood-tall-led-with-big-gifts/. The NPT 100 is a
report on the largest nonprofits in the United States that derive at least 10% of revenue from public support. The
organizations were ranked by total revenue.
117 PAN Foundation, Annual Report 2020, available at https://www.panfoundation.org/about-pan/annual-reports/.
According to the PAN Foundation 2021 Form 990, the organization provided $380 million in grants and other
assistance during the year, aiding 160,554 patients. The Form 990 is also available at https://www.panfoundation.org/
about-pan/annual-reports/.
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overall financial benefit of the assistance to enrollees. Among the new systems are accumulator
and maximizer programs (see below).
Due to market consolidation, many health insurers now own PBMs and specialty pharmacies that
earn large fees for dispensing expensive specialty drugs to plan enrollees, and thus have an
interest in ensuring patients sign up for manufacturer assistance.118 In another example of the
increasingly complex relationships between payers and manufacturers, managed health care
insurer Centene owns a subsidiary that helps health payers maximize collection of manufacturer
assistance program dollars, while limiting the payers’ own costs for the drugs. 119
Following is a description of emerging health plan approaches.
Cost-Sharing Accumulators
Under an accumulator program, a health plan allows an enrollee to use a coupon or other
manufacturer assistance such as a co-payment card or voucher to reduce the enrollee’s out-of-
pocket (OOP) cost-sharing for filling a prescription, for example, while in the deductible or when
a co-payment or coinsurance is owed. However, the plan does not count the value of the
assistance toward meeting the enrollee’s deductible or annual OOP limit. (See example in
“Accumulator Programs” below.) By not counting the value of the manufacturer assistance, the
plan delays the point at which the enrollee would otherwise meet the annual deductible and/or
OOP cap by using the coupon, thereby limiting the plan’s additional financial exposure. (For
example, delaying the point at which a plan might have to pay 100% of the cost of the drug
because the enrollee met the annual OOP cap.)
Accumulator Programs
For an example of an accumulator program, assume a consumer is enrol ed in a health insurance plan with a
$1,000 annual deductible and has a manufacturer co-payment coupon worth $250.
In a plan without a co-pay accumulator policy, the $250 manufacturer coupon would reduce the enrol ee’s OOP
cost for the drug and also would be applied toward the plan deductible, reducing the beneficiary’s deductible
obligation to $750.
In a plan with a co-pay accumulator, the $250 coupon would be used to reduce the enrol ee’s OOP cost for the
prescription drug, but would not count toward the deductible, leaving the enrol ee to meet the ful $1,000
deductible from the enrol ee’s own OOP spending before plan benefits commenced. The coupon value would also
not apply to meeting enrol ee annual caps on OOP spending.
Patient advocates say that the programs can reduce the financial value of the assistance for
patients which, in turn, may affect their ability to afford a particular medication and undo some of
the medical benefits related to medication adherence. For example, an enrollee could reach the
maximum value of a coupon offer prior to the end of a plan year, without having satisfied out of
pocket spending requirements. In such a case, the enrollee may not be able to afford the cost-
sharing necessary to continue a course of treatment. That could be a problem for individuals with

118 Insurers that own specialty pharmacies reap large fees for administering and dispensing specialty products, and thus
may have a financial incentive to ensure patients can access the products. See for example, Humana, Patient
Assistance, at https://www.humana.com/pharmacy/specialty-rx/patient-assistance. According to the website: “Humana
Specialty Pharmacy® offers patient assistance programs to help with the financial costs of specialty medications. In
2019, Humana Specialty Pharmacy® helped patients find over $108.9 million in patient assistance funds and has
relationships with over 175 funding sources.”
119 Centene in 2019 acquired Health Smart Rx Solutions, which designs patient assistance accumulator and maximizer
programs. See Health Smart, at https://www.healthsmart.com/SmartRxAssist.
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chronic diseases such as AIDS, who are highly dependent on manufacturer assistance.120 In
addition, advocates say insurance plan documents may not be clear as to whether an accumulator
program is in effect, leaving consumers who have been relying on coupons to discover only after
annual enrollment that expected coverage is less extensive than expected.
Accumulator programs appear to be growing in use, although there is no single source measuring
national prevalence.121 According to one pharmaceutical industry analysis, 80% of people in
commercially insured managed care plans in 2021 appear to have been enrolled in plans with co-
pay accumulator or maximizer features (discussed in the next section) as part of the plan
design.122 Among employers with 500 or more employees that offered prescription drug benefits
in 2021, 18% had programs that excluded subsidies from prescription drug manufacturers, such
as coupons, from counting towards an enrollee’s deductible or out-of-pocket limit.123
The 2020 CMS rules allow accumulator programs (when not prohibited by state law) in health
plans sold on the exchanges and in non-grandfathered individual and group health plans sold off
the exchanges. (See “2020 HHS Coupon Accumulator Final Rule for Qualified Health Plans”) As
of fall 2021, a dozen states and Puerto Rico had policies to limit the use of the accumulator
programs in the health plans they regulated.124
Coupon Maximizers
Under a coupon maximizer program, a health plan enrolls eligible beneficiaries in manufacturer
cost-sharing programs for certain prescribed drugs. Once a beneficiary is enrolled in a
manufacturer assistance program, the payer increases the health plan’s required cost-sharing
amount for the drug to the maximum dollar amount of the manufacturer coupon or PAP offer.125
Most or all of the cost sharing would be covered by the manufacturer program; the enrollee’s

120 The AIDS Institute, “Copay Accumulators and Insurance Issues,” February 1, 2022, available at
https://aidsinstitute.net/protecting-patients-and-removing-barriers-to-care/copay-accumulators-and-insurance-issues.
121 Ibid. The study looked at 2022 health insurance exchange plans in states that did not restrict the practice, and found
that in 35 states, there was at least one plan with a co-pay accumulator adjustment policy. In eight states, every plan
included a co-pay accumulator policy: Alabama, Alaska, Delaware, Idaho, Indiana, Iowa, Montana and South Carolina.
According to the study, 12 states had restrictions on accumulator policies in such plans.
122 Drug Channels, “Copay Accumulator and Maximizer Update: Adoption Accelerating as Pushback Grows,”
November 17, 2020, at https://www.drugchannels.net/2020/11/copay-accumulator-and-maximizer-update.html. Figures
are based on data from U.S. commercial managed care plans that cover nearly 130 million people. The accumulator
programs were part of the plan designs, but might not be applied by all plans.
123 Kaiser Family Foundation, “2021 Employer Health Benefits Survey,” Section 13, p. 19, at https://www.kff.org/
health-costs/report/2021-employer-health-benefits-survey/. Larger firms were more likely to institute such programs –
24% of companies with 5,000 or more workers had such programs. In addition, 14% of firms with more than 500
workers said they did not know if their plan included accumulator and similar programs.
124 National Conference of State Legislatures, “Copayment Adjustment Programs,” October 7, 2021, at
https://www.ncsl.org/research/health/copayment-adjustment-programs.aspx.
125 According to Drug Channels, “The value of the manufacturer’s copayment program is applied evenly throughout
the benefit year. The patient’s out-of-pocket obligations aren’t based on the list or net price of the drug—but are instead
set to equal the maximum value of a manufacturer’s copayment program. To avoid these extraordinary costs, the
beneficiaries must enroll in a separate copay maximizer program.” See “Copay Accumulator and Maximizer Update:
Adoption Accelerating as Pushback Grows,” November 17, 2020, at https://www.drugchannels.net/2020/11/copay-
accumulator-and-maximizer-update.html. According to a recent IQVIA analysis, the proliferation of
accumulator/maximizer programs in tandem with changes in federal Medicaid policy (separate from the accumulator
rule that was struck down), could have a big financial effect on manufacturers. IQVIA, “Trends to Watch through
2023: Copay Accumulator Adjuster Programs,” March 21, 2022, at https://www.iqvia.com/locations/united-states/
blogs/2022/03/trends-copay-accumulator-adjuster-programs.
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actual OOP obligation for that specific drug could be reduced or eliminated.126 (See example in
“Co-pay Maximizer Program” box.)
Co-pay Maximizer Program
For an example of a maximizer program, assume a consumer is in a plan with 25% coinsurance and is prescribed a
drug with an estimated monthly cost of $2,000. The enrol ee is eligible for a manufacturer coupon that provides
up to $1,500 a month in coverage and requires an enrol ee contribution of $20.
Without the coupon, the enrol ee would pay $500 a month in cost sharing, and the plan would cover $1,500.
Under a manufacturer’s regular coupon offer, the coupon would cover $480 of the cost sharing and the enrol ee
would pay $20.
Under a health plan maximizer program, the monthly cost sharing for the drug would be increased to $1,520, of
which the coupon would cover $1,500, the enrol ee would pay $20, and the plan would cover $480. Depending
how the program is set up, the value of the coupon may not count toward the enrol ee’s deductible or annual
OOP cap.
The programs provide the issuer/payer the maximum manufacturer assistance for the drug, in
addition to other rebates/discounts that the plan may have negotiated separately with the
manufacturer for placing the drug on the plan formulary. A health plan may directly administer a
coupon maximizer program or contract with a third party firm to administer such a program. The
program administrator tracks all pharmaceutical assistance offers, and manages the paperwork to
enroll a plan beneficiary in a manufacturer program including addressing income and/or any prior
authorization requirements.
In a related move, some payers have designed programs that remove certain drugs from their
formularies and help enrollees sign up for manufacturer assistance programs for the drugs, which
would become the enrollees’ de facto coverage.127
Justice Department Action on Prescription Drug Aid
Programs
As patient assistance programs have grown in importance, the Justice Department and HHS have
stepped up scrutiny. During the past several years, the Justice Department has announced
financial settlements with manufacturers, PAP operators, and pharmacies regarding alleged
violation of the anti-kickback and other federal statutes. Below is a list of selected settlements.
Manufacturers
Following are selected settlements with manufacturers announced by the Justice Department:
 Incyte Corporation in 2021 agreed to pay $12.6 million to resolve allegations that
it used an independent foundation as a conduit to pay the co-pays of certain

126 According to Truveris, a drug benefit analytics and consulting firm, “Maximizers, sometimes called variable copay
programs, reclassify a subset of specialty medications as ‘non-essential,’ removing the ACA requirements related to
maximum out-of-pocket spending. These medications are assigned a percentage of coinsurance within the benefit, but
patients are always charged $0 for these drugs. PBMs identify the available copay assistance and spread that across a
patient’s benefit year to maximize the use of those available funds.” See https://truveris.com/pharma-accumulators-
maximizers/.
127 Smart RxAssist, HealthSmart, at https://healthsmart.com/Copay-Maximizer. Site contains a link to a webinar on
accumulator/maximizer programs.
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federal beneficiaries taking Incyte’s drug Jakafi. According to the Department of
Justice, Incyte was the sole donor to a fund that assisted only myleofibrosis
patients.128
 Biogen in 2020 agreed to pay $22 million to resolve claims that it illegally used
foundations to pay the co-pays of Medicare patients taking Biogen’s multiple
sclerosis drugs, Avonex and Tysabri.129
 Gilead Sciences, Inc. in 2020 agreed to pay $97 million to resolve claims that it
illegally used a foundation to pay the Medicare co-pays for its drug Letairis.130
 Novartis in 2020 agreed to pay $51.25 million to resolve allegations that it
illegally paid the co-pay obligations for Medicare patients taking its drugs. The
payment was part of an overall $642 million settlement with Novartis that
included allegations of improper payments to physicians.131
 Sanofi-Aventis U.S., LLC in 2020 agreed to pay $11.85 million to resolve
allegations that it paid kickbacks to Medicare patients through a purportedly
independent charitable foundation, The Assistance Fund (“TAF”).132
 US WorldMeds LLC in 2019 agreed to pay $17.5 million to resolve allegations
that it paid kickbacks to patients and physicians to improperly induce
prescriptions of its drugs, Apokyn® and Myobloc®. 133
 Astellas Pharma US Inc. and Amgen Inc. in 2019 agreed to pay a total of $124.75
million to resolve allegations that they each illegally paid the Medicare co-pays
for their own products, through purportedly independent foundations.134
 Jazz Pharmaceuticals plc, Lundbeck LLC and Alexion Pharmaceuticals Inc. in
2018 agreed to pay a total of $122.6 million to resolve allegations that they

128 Department of Justice, “Incyte Corporation to Pay $12.6 Million to Resolve False Claims Act Allegations for
Paying Kickbacks,” May 4, 2021, at https://www.justice.gov/opa/pr/incyte-corporation-pay-126-million-resolve-false-
claims-act-allegations-paying-kickbacks.
129 Department of Justice, “Biogen Agrees To Pay $22 Million To Resolve Alleged False Claims Act Liability For
Paying Kickbacks,” December 17, 2020, at https://www.justice.gov/opa/pr/biogen-agrees-pay-22-million-resolve-
alleged-false-claims-act-liability-paying-kickbacks.
130 Department of Justice, “Gilead Agrees to Pay $97 Million to Resolve Allegations that it Paid Kickbacks through a
Co-Pay Foundation,” September 23, 2020, at https://www.justice.gov/usao-ma/pr/gilead-agrees-pay-97-million-
resolve-allegations-it-paid-kickbacks-through-co-pay.
131 Department of Justice, “Novartis Pays Over $642 Million to Settle Allegations of Improper Payments to Patients
and Physicians,” July 1, 2020, at https://www.justice.gov/opa/pr/novartis-pays-over-642-million-settle-allegations-
improper-payments-patients-and-physicians. See also: “Novartis Agrees to Pay Over $51 Million to Resolve
Allegations that It Paid Kickbacks Through Co-Pay Foundations,” at https://www.justice.gov/usao-ma/pr/novartis-
agrees-pay-over-51-million-resolve-allegations-it-paid-kickbacks-through-co-pay.
132 Department of Justice, “Sanofi Agrees to Pay $11.85 Million to Resolve Allegations That it Paid Kickbacks
Through a Co-Pay Assistance Foundation,” February 28, 2020, at https://www.justice.gov/usao-ma/pr/sanofi-agrees-
pay-1185-million-resolve-allegations-it-paid-kickbacks-through-co-pay.
133 Department of Justice, “Pharmaceutical Company Agrees to Pay $17.5 Million to Resolve Allegations of Kickbacks
to Medicare Patients and Physicians,” April 30, 2019, at https://www.justice.gov/opa/pr/pharmaceutical-company-
agrees-pay-175-million-resolve-allegations-kickbacks-medicare-patients.
134 Department of Justice, “Two Pharmaceutical Companies Agree to Pay a Total of Nearly $125 Million to Resolve
Allegations That They Paid Kickbacks Through Copay Assistance Foundations,” April 25, 2019, at
https://www.justice.gov/opa/pr/two-pharmaceutical-companies-agree-pay-total-nearly-125-million-resolve-allegations-
they-paid#:~:text=
The%20Department%20of%20Justice%20announced%20today%20that%20two,foundations%20that%20the%20comp
anies%20used%20as%20mere%20conduits.
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illegally paid the Medicare or Civilian Health and Medical Program (ChampVA)
co-pays for their own products, through purportedly independent foundations.135
 Pfizer Inc. in 2018 agreed to pay $23.85 million to resolve allegations that it paid
kickbacks to Medicare patients through a purportedly independent charitable
foundation.136
 United Therapeutics in 2017 agreed to pay $210 million to resolve claims that it
used a patient assistance foundation as a conduit to pay the co-pays of Medicare
patients taking the firm’s pulmonary arterial hypertension drugs.137
Patient Assistance Programs
Following are selected Justice Department settlements with PAPs:
 Patient Services, Inc. agreed to pay $3 million in 2020 to resolve allegations that
it enabled certain pharmaceutical companies to pay kickbacks to Medicare
patients taking the companies’ drugs.138
 The Assistance Fund (“TAF”), in 2019 agreed to pay $4 million to resolve
allegations that it enabled certain pharmaceutical companies to pay kickbacks to
Medicare patients taking the companies’ drugs.139
 The Chronic Disease Fund, Inc. d/b/a Good Days from CDF (“CDF”), and
Patient Access Network Foundation in 2019 agreed to pay $2 million and $4
million, respectively, to resolve allegations that they enabled pharmaceutical
companies to pay kickbacks to Medicare patients taking the companies’ drugs.140

135 Department of Justice, “Three Pharmaceutical Companies Agree to Pay a Total of Over $122 Million to Resolve
Allegations That They Paid Kickbacks Through Co-Pay Assistance Foundations,” April 4, 2019, at
https://www.justice.gov/opa/pr/three-pharmaceutical-companies-agree-pay-total-over-122-million-resolve-allegations-
they-paid.
136 Department of Justice, “Pfizer Agrees to Pay $23.85 Million to Resolve Allegations that it Paid Kickbacks Through
a Co-Pay Assistance Foundation,” May 24, 2018, at https://www.justice.gov/usao-ma/pr/pfizer-agrees-pay-2385-
million-resolve-allegations-it-paid-kickbacks-through-co-pay.
137 Department of Justice, “Drug Maker United Therapeutics Agrees to Pay $210 Million to Resolve False Claims Act
Liability for Paying Kickbacks,” December 20, 2017, at https://www.justice.gov/opa/pr/drug-maker-united-
therapeutics-agrees-pay-210-million-resolve-false-claims-act-liability.
138 U.S. Department of Justice, “Patient Services Inc. Agrees to Pay $3 Million for Allegedly Serving as a Conduit for
Pharmaceutical Companies to Illegally Pay Patient Copayments,” January 21, 2020, at https://www.justice.gov/opa/pr/
patient-services-inc-agrees-pay-3-million-allegedly-serving-conduit-pharmaceutical-companies. The Justice
Department “alleged that PSI coordinated with three pharmaceutical manufacturers – Insys, Aegerion, and Alexion – to
enable them to pay kickbacks to Medicare patients taking their drugs. PSI allegedly worked with these companies to
design and operate certain funds that funneled money from the companies to patients taking the specific drugs the
companies sold. These schemes allegedly minimized the possibility that the companies’ contributions to the funds
would go to patients taking competing drugs made by other companies and undermined the nature of these
contributions as bona fide donations. The United States previously entered into settlement agreements with Insys,
Aegerion, and Alexion covering their use of PSI as a conduit to pay their patients’ copays.”
139 Department of Justice, “Third Foundation Resolves Allegations that it Conspired with Pharmaceutical Companies to
Pay Kickbacks to Medicare Patients,” November 20, 2019, at https://www.justice.gov/usao-ma/pr/third-foundation-
resolves-allegations-it-conspired-pharmaceutical-companies-pay-kickbacks.
140 Department of Justice, “Foundations Resolve Allegations of Enabling Pharmaceutical Companies to Pay Kickbacks
to Medicare Patients,” October 25, 2019, at https://www.justice.gov/usao-ma/pr/foundations-resolve-allegations-
enabling-pharmaceutical-companies-pay-kickbacks-medicare.
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Pharmacy Settlements
The Justice Department has also announced this settlement with a pharmacy: Specialty pharmacy
Advanced Care Scripts Inc. in 2020 agreed to pay $3.5 million to resolve allegations that it
conspired with pharmaceutical manufacturer Teva Neuroscience, Inc. (Teva), to enable Teva to
pay kickbacks to Medicare patients taking Copaxone for multiple sclerosis.141 According to the
announcement, ACS acknowledged, among other things, that it relayed data from two
foundations, Chronic Disease Fund and The Assistance Fund, to Teva to correlate its payments to
the foundations with the amounts of money the foundations spent on Copaxone patients.
Financial Impact of Coupons and PAPs
Analyses by marketing firms and academics indicate that coupons and patient assistance
programs can benefit manufacturers by helping to create demand for newly introduced drugs,
maintaining market share in therapeutic areas with competing drugs available, supporting higher
list prices, and increasing consumer adherence to existing prescriptions.142
Manufacturers build the cost of the programs into their budget and pricing strategies and use
analytics to target the offers.143 There is no comprehensive information on how much PAPs and
coupons may contribute to higher drug list prices, or stimulate sales of more expensive drugs
when cheaper generics or other therapeutic substitutes are available, although there have been
some targeted academic studies on the impact of manufacturer assistance, some of which are
summarized in the remainder of this section.
A 2022 study of brand-name drugs without generic equivalents found that coupons increased the
quantity of the drugs sold in the commercial market by 21-23% relative to Medicare Advantage in
the year after introduction. The study also suggested that co-payment coupons increased spending
on multiple sclerosis drugs by up to 8% and nearly $1 billion in annual spending.144 “Combined,
the results suggest co-payment coupons increase spending on couponed drugs without
bioequivalent generics by up to 30 percent,” according to the study.
A 2016 study of coupons for brand-name drugs for which generics were available found the
coupons reduced the rate of generic substitution. The brand-name drugs with coupon offers had

141 Department of Justice, “Specialty Pharmacy Advanced Care Scripts Agrees to Pay $3.5 Million to Resolve
Allegations that it Served as a Kickback Conduit,” August 13, 2020, at https://www.justice.gov/usao-ma/pr/specialty-
pharmacy-advanced-care-scripts-agrees-pay-35-million-resolve-allegations-it.
142 Marketing firm analyses include Mason Tenaglia, “Copay Cards and Coupons: Letting Facts Get in the Way,”
Pharmaceutical Executive, January 1, 2012, at https://www.pharmexec.com/view/copay-cards-and-coupons-letting-
facts-get-way; Merkle, “Beyond Price Wars: Using Copay Programs to Drive Adoption,” May 29, 2018, at
https://www.merkleinc.com/blog/beyond-price-wars-using-copay-programs-drive-adoption; McKesson, “Optimizing
Co-Pay Assistance Programs to Improve Medication Adherence,” September 3, 2019, at https://www.mckesson.com/
Blog/Copay-Assistance-Medication-Adherence/; Truveris, “Is Your Copay Program Costing You More Than It’s
Earning? Keep These Top 5 Metrics in Mind,” January 11, 2021, Truveris, at https://truveris.com/is-your-copay-
program-costing-you-more-than-its-earning-keep-these-top-5-metrics-in-mind/.
143 Trialcard, “Leveraging Data and Analytics to Enhance Copay Program Performance,” Pharmaceutical Executive,
Special Advertising Section.
144 Leemore Dafny, Kate Ho, and Edward Kong, “How Do Copayment Coupons Affect Branded Drug Prices and
Quantities Purchased,” NBER Working Paper No. 29735, February 2022, at http://www.nber.org/papers/w29735. The
paper used data from a PBM and from Medicare to evaluate the impact of co-pay coupons on prices and quantities of
branded drugs without generics. The authors: (1) created a model that compared pre vs. post-coupon prices and
quantities for the commercially insured vs. the Medicare Advantage population, which is ineligible to use coupons and
(2) built a second model of medications for multiple sclerosis to predict the effect of coupons on list prices.
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12%-13% annual price growth, compared to 7%-8% annual price growth for those without
coupons.145 According to the study, the co-payment coupons increased retail spending from 1.2%
to 4.6% in the five years following the introduction of a generic, which corresponded to increased
spending of $30-$120 million for the average drug studied. In addition, an earlier, targeted study
of consumers using statins to control cholesterol levels found that the use of manufacturer
coupons increased enrollee prescription adherence, but at the cost of higher out-of-pocket
spending for consumers and higher costs to their insurance plans than for those using generic
drugs or brand-name drugs that did not offer coupons.146
Other studies have examined whether manufacturers target coupons at drugs for which lower-cost
substitutes are available, thus inducing beneficiaries to use higher-priced drugs. A 2013 study
examined whether widely advertised coupons were being offered for drugs with available generic
substitutes or therapeutically equivalent products.147 According to that study, based on 374
coupons for brand-name prescription drugs advertised on the website
http://www.internetdrugcoupons.com, about 60% of the offers were for products with generic
alternatives in the same drug class.148
A 2018 study of the top 200 top-selling drugs in 2014, found no coupons offered for the 68
generics in the group. Of the remaining 132 brand drugs, 90 had coupons of which: 21% had a
generic equivalent, 28% had a generic drug among close therapeutic substitutes, 12% had no
substitute and 39% had only single-source branded competitors. According to the study:
While we cannot determine whether coupons raise drug costs directly, our classification
suggests which coupons may be more or less likely to raise costs, and if they raise costs,
whether they are providing a clear benefit in exchange. The 21% of coupons on drugs with
generic equivalents seem very likely to raise costs without any obvious benefit. At the other
end of the spectrum, the 12% of coupons on drugs with no therapeutic substitute of any
kind may or may not raise costs, but improve access for more price.149
A 2020 study found that drugs that were later entrants to the market, were more expensive than
in-class competitors, or faced competitors offering coupons were more likely to have greater

145 Leemore Daffny, Christopher Ody, and Matt Schmitt, “When Discounts Raise Costs: The Effect of Copay Coupons
on Generic Utilization,” NBER Working Paper No. 22745, October 2016, at http://www.nber.org/papers/w22745. The
study found that coupons supported prices of brand-name drugs by reducing sales of generic substitutes. The study did
not find an association between coupons and quantity levels or growth rates for the drugs.
146 Jonas Daugherty, Matthew Maciejewski, and Joel Farley, “The Impact of Manufacturer Coupon Use in the Statin
Market,” Journal of Managed Care Pharmacy, vol. 19, no. 9 (October 2013). The study used commercially available
claims data spanning three years and representing 340,350 patients to compare demographics, statin use, and
expenditures of patients initiating generic statins, brand-name statins without manufacturer coupons, and brand-name
statins with manufacturer coupons.
147 According to the FDA, drug products classified as therapeutically equivalent can be substituted with the full
expectation that the substituted product will produce the same clinical effect and safety profile as the prescribed
product. Drugs must meet specific guidelines to be deemed therapeutically equivalent. See http://www.fda.gov/Drugs/
InformationOnDrugs/ucm079436.htm#T.
148 Joseph Ross and Aaron Kesselheim, “Prescription-Drug Coupons—No Such Thing as a Free Lunch,” New England
Journal of Medicine, vol. 369, no. 13 (September 26, 2013), at http://www.nejm.org/doi/full/10.1056/NEJMp1301993.
The authors used the FDA website and the Tarascon Pharmacopoeia to determine that a lower-cost FDA-approved
therapeutic equivalent was available for 8% of the drugs in their sample. For more than half the remaining products
there was a lower-cost generic alternative within the same drug class.
149 Karen Van Nuys et al., “Prescription Drug Copayment Coupon Landscape,” USC Schaffer, February 7, 2018, at
https://healthpolicy.usc.edu/research/prescription-drug-copayment-coupon-landscape/. The study was based on data
from PBM Optum’s Clinformatics® and looked at the top 200 drugs by spending in 2014 that had been in the market
since at least 2012.
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coupon use. Drugs with higher mean patient co-pay were no more likely to be offered coupons
than those with lower co-pay.150
A 2014 study using data from Prime Therapeutics, a PBM owned by a group of Blue Cross and
Blue Shield plans, found that coupons helped consumers save $6 of every $10 in out-of-pocket
costs for specialty drugs.151
There is less information available on the impact of PAPs. While in the past, some charitable
PAPs and marketers made forecasts regarding return on investment from their programs, PAP
operating procedures have changed in response to the more stringent oversight from HHS OIG
and the Department of Justice.

Author Information

Suzanne M. Kirchhoff

Analyst in Health Care Financing

150 So-Yeon Kang et al., “Factors Associated With Manufacturer Drug Coupon Use at US Pharmacies,” JAMA Health
Forum, August 13, 2021, at https://jamanetwork.com/journals/jama-health-forum/fullarticle/2783127. The study used a
nationally representative database sample of 2,501 unique brand-name prescription drugs accounting for 8,995,141
claims. “From a 5% nationally random sample of 26 774 102 unique individuals using any copay offset between
October 2017 and September 2019, we excluded claims for which a federal health plan was the payer and identified
brand-name prescription drugs with at least one transaction where a manufacturer’s product-specific coupon was used.
We examined the method of payment and payer names to identify claims using manufacturer drug coupons as either the
primary or secondary payer for the transaction.”
151 Catherine Starner et al., “Specialty Drug Coupons Lower Out-Of-Pocket Costs And May Improve Adherence At
The Risk Of Increasing Premiums,” Health Affairs, vol. 33, no. 10 (October 2014), pp. 1761-1769. The study examined
264,801 specialty drug prescriptions in 2013 covered by the insurance plans the PBM, Prime Therapeutics, served.
Spending for the specialty claims totaled $911.8 million, of which $35.3 million (3.9%) was paid OOP by enrollees.
Beneficiaries used coupons for 44.3% of the prescriptions, which offset $21.2 million (60.2%) of the $35.3 million in
charges. In most cases, the coupons reduced monthly out-of-pocket costs to less than $250, a price at which Prime
Therapeutics said separate data indicated that patients using high-cost drugs were less likely to abandon therapy.
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