Many California pharmacies have questions regarding the newly enacted California’s prohibition on drug manufacturers’ coupons, co-pay cards, and other discounts. The prohibition became effective on January 1, 2018, and created confusion within the industry about when manufacturer’s assistance can be applied to medications dispensed.

To start, California’s AB265 attempts to curb the ever-rising drug costs by prohibiting any manufacturers’ co-pay assistance if a generic version is covered under the plan or a lower cost over-the-counter (OTC) version is available without a prescription. Hence, a pharmacy still may apply a coupon/discount if a generic version is not available under the plan (or a generic has been on the market for less than three months), or if a prescriber indicates “Do not Substitute.” Other less-common scenarios when a pharmacy may apply discounts on patients’ out-of-pocket expenses are:

  •  if the patient has completed applicable step therapy or a prior authorization was obtained;

  • discounts are required under the FDA’s Risk Evaluation and Mitigation Strategy (REMS);

  • the discount is for a single-tablet drug regimen for the treatment of HIV/AIDS that is as effective as a multi-tablet regimen, unless the multi-tablet regimen is clinically equally effective or more effective and is more likely to result in adherence to the drug regimen;

  • the discount is a rebate received by a state agency;

  • a discount is used by a cash-paying patient.

AB265 still allows manufacturers to provide free drugs (if there is no cost to the plan or the patient). It also allows co-pay assistance coming through independent charities.

In addition, keep in mind the federal perspective on manufacturers’ drug assistance. Here is some guidance from the OIG and CMS when manufacturers’ financial assistance may be used. In a nutshell, manufacturer’s assistance with copays is acceptable as long as the assistance is provided outside of the Part D (meaning that the enrollees obtain their drugs without using their Part D insurance benefit). Another safeguard described by the OIG and CMS is that the assistance for Part D enrollees must be determined based solely on patients’ financial need, using a methodology.

AB265 presents operational burdens for California pharmacies and manufacturers: they need to screen the patients, analyze available alternatives, and apply financial assistance very carefully. Because of the additional risks involved, some manufacturers made decision to exclude all California patients from receiving any discounts on drugs with available generic versions.

As to California pharmacies, they often cannot determine if an alternative product is available at a lower cost (especially with OTC medications), it is hard to determine if the lower-cost calculation should be based on dosage or wholesale cost of the drug. While we are waiting for clarification from the state, pharmacies should choose a benchmark to compare drug-cost, prepare policies and procedures describing how the compliance with AB265 should be performed, and train pharmacy staff on the new requirements.