Could Big Pharma’s Coupon Scheme Get You in Trouble with the IRS?

Sometimes good legislation passes and has unintended consequences.

That is what has happened with the North Carolina General Assembly’s Senate Bill 257 from last year’s legislative session.

Senate Bill 257, which passed and was signed into law, increased prescription drug pricing transparency, established important consumer protections, and is helping patients save some money at the pharmacy counter.

The bill also included an Rx “coupon accumulator” mandate.

The mandate requires insurance companies to count “coupons” offered to patients by pharmaceutical companies towards a patient’s deductible.

For example, if you have a medicine that costs $1,000, the pharmaceutical company who makes the medicine might offer you a $400 coupon to help pay for the drug. So now, the patient pays $600 out of pocket for the $1,000 drug.

The mandate in Senate Bill 257 requires that both the $600 paid by the patient, and the $400 paid by the pharmaceutical company count towards the patient’s deductible.

While this might sound great if you’re the patient, there is a big catch.

According to the IRS, individuals who have High Deductible Health Plans (HDHPs) with Health Savings Accounts (HSAs) cannot count the $400 coupon towards their deductible.  

“If a covered individual is prescribed a drug that costs $1,000, but a discount from the drug manufacturer reduces the cost to the individual to $600, the amount that may be credited towards satisfying the deductible is $600, not $1,000,” the IRS has said.

If the IRS regulation is not followed, individuals could lose the ability to contribute to their HSAs, be audited, or face fines and penalties.

So, why not just fix the law by exempting individuals who have high deductible insurance plans with HSAs from the mandate?

That is the best and most simple solution, and the General Assembly should do it.

The problem is that the powerful pharmaceutical lobby doesn’t want anyone to be exempt since these coupon programs are a huge money-maker for them.

Here is how their coupon scheme works.

The drug company sets the price of their medicine at an extremely high, unaffordable level.

They offer a “coupon” that equals a patient’s deductible, or they offer multiple coupons until the deductible is met.

Then, “once the patient hits their deductible, drugmakers stop providing their coupons.”

Your insurance and your premium dollars then go towards the extremely high, unaffordable cost of the drug.

“Coupon” programs have become such a racket that the federal government does not allow them for Medicare and Medicaid, and considers them to be in violation of anti-kickback laws.

In North Carolina, Pharma is so committed to the scheme that they are willing to let consumers face the wrath of the IRS.

Thankfully the fix to all this is quick and easy.

The General Assembly just needs to do it.