Drug Discount Cards – Lifting the Veil of Secrecy
By Richard J. Sagall, MD
Everywhere I look today, I see ads claiming huge savings from drug discount cards. These cards promise huge savings to consumers, yet they are unable to deliver on these outrageous statements. Now, when I see these ads, I’m skeptical – and you should be too because not all the claims are real.
Too Good to Be True
The old saying “If it seems too good to be true then it probably is” also applies to drug discount cards. Drug discount cards have the potential of helping patients save a lot of money, but you have to understand how they work. It’s important to remember that they all work basically the same way. Here are the basics-
First, a company called a “pharmacy benefits manager” (PBM) or an adjudicator sets up a network of participating pharmacies that agree to accept the cards. Then, the PBM negotiates with each pharmacy chain and all the participating local pharmacies to offer a discount on the drugs they dispense. The discount offered is usually a percentage of the cash price of the drug and the percentage may vary from drug to drug.
Next, the PBM finds companies or organizations in which to market their card. These groups, called marketers, may be for-profit companies or non-profit organizations. They may be multilevel marketing organizations and some marketers work with multiple groups.
The Finances Behind Drug Discount Cards
The amount you pay when using a drug discount card is the sum of four components. This is true for all drug discount cards.
1. The Negotiated Discounted Price – The PBM does its best to negotiate the best discount from the pharmacies. Some PBMs do a better job of this than others. The size of the PBM, its market share, and how much business it will direct to the pharmacy are all important factors in the overall final discount.
2. Pharmacy Transaction Fee – Each time a card is used the pharmacy earns a small amount to help cover their costs.
3. PBM Transaction Fee – The amount the PBM earns to cover their costs of setting and running the pharmacy network, processing claims, etc.
4. Marketer Fee – This is how much the marketer earns for promoting and distributing the card.
Who pays all these fees? You do!
Why Pharmacies Accept Drug Discount Cards
You may wonder why pharmacies accept drug discount cards. After all, wouldn’t they make more by not accepting the cards and charging customers the non-discount price? There are five reasons pharmacies accept the cards:
1. Earning a profit even at the discounted price – They wouldn’t offer such a large discount that they lose money on the transaction.
2. Selling prescriptions they wouldn’t sell otherwise – For example, a customer may not be able to afford a prescription with a non-discounted price of $100 but may be able to afford it at the discounted price. The pharmacy gets the sale, but earns a lower profit.
3. Building customer loyalty – The drugstore business is very competitive. If a pharmacy gives you a good discount with a drug discount card you are more likely to continue to patronize that store than others.
4. Increased non-pharmaceutical purchases – There’s a reason why most pharmacies are at the back of the drugstore. This arrangement forces you to walk down aisles, increasing the chances you will make additional purchases.
5. Peer pressure – If all the pharmacies in town but one accept drug discount cards, that one will lose business.
How Marketers Make Money
There are two main ways card marketers make money from drug discount cards and items you should watch out for:
1. Transaction Fees – Each time a marketer’s card is used the marketer earns a transaction fee designed to cover expenses and make a profit. The size of the fee varies quite a bit. Generally speaking, non-profit companies and marketers that don’t have expensive marketing programs have lower transaction fees. Lower fees mean more savings for card users. Remember, card users pay the fees.
2. Selling of Information – Some card marketers gather personal information on people who use their card. They can do this if you have to register to obtain a card. They can also receive personal information each time you use the card. For example, a company selling diabetic supplies would pay for a list of names and addresses of people who buy insulin.
Buyer Beware
Here are some tips when selecting a drug discount card:
1. Never pay for a card – There are many good cards that are free. There is no reason to pay for a card since it’s unlikely it would offer a discount any better than a free one.
2. Never register for a card – This is one way marketers get info that they sell. The only reason to give your name and address is if the card is being mailed to you.
3. Read the privacy policy – Make sure the marketer has a privacy policy that you agree with. Even then, there’ no guarantee they will follow it.
4. Helpline – All reputable marketers have a toll-free helpline. Give the line a call and see how responsive they are. Do they have real people answering your questions or just a recording? If you leave a message do they call you back?
5. Shop around – Try different cards to see which offers you the best discount. Ask your pharmacist which has the best prices.
6. Consider who is making money – All things being equal, using a card offered by a non-profit is best. Any money they make is going to further their cause while the money earned by a for-profit is just going into someone’s pocket.
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Richard J. Sagall, MD, is the president and co-founder of NeedyMeds. He spent 25 years practicing family and occupational medicine. He now devotes his time to NeedyMeds (www.needymeds.org) and Pediatrics for Parents (www.pedsforparents.com), a children’s health newsletter.
Rosanne Karp, RN, ACM
August 26, 2013 at 4:49 pmThis system is useful only to those who do not have a pharmacy benefit with their health insurance plan, as copays for covered meds are signifcantly cheaper under the insurance plan than with the discount card. For those without a pharmacy benefit, the discount plan can offer some help, but consumers should also be aware of low cost drugs that local retail pharmacies offer on their own.
Younker
January 15, 2022 at 4:44 amNot necessarily. Plus lots of people have high deductible plans, meaning they need to pay full cost for things out of pocket until the deductible is satisfied. If you have to satisfy a $1500 deductible, you won’t get any break on the cost of your drugs such as a copay. I’ve had drugs that were $300 when I was working on meeting the deductible, and got it for $45 with the card.
Rich Sagall, MD
August 26, 2013 at 5:06 pmCopays are generally, but not always, cheaper than the drug discount card price. I have heard of cases where the card gave a better price – but not many.
Many pharmacies do have their own discounts that may beat the card price.
The take home lession is that you have to shop around and try all the discounts you can. Unfortunately. there is no one best approach nor is there always one best pharamacy.
Brad
July 23, 2020 at 9:12 pmthis just happened to me, with another bonus i still can’t wrap my head around. i got a job and had to take their insurance, which prompted the need for another prior authorization, which of course wasn’t submitted by the time i needed the refill. the pharmacist that told me no auth existed offered to use a discount card instead (no idea which), and not only did i get my med, it was 33$, not the 40$ copay through insurance! she said i can do this every month…(this is why i’m looking up how these cards work because i can’t process why this is a thing)
Sean Parnell
September 26, 2013 at 4:50 pmGenerics can also be a pretty low-cost option, especially at the ‘big box’ retailers like Target or Walmart where they have $4 generics programs. Costco is pretty good too.
His Most Sacred Caesarian Majesty, Sid Fein
March 5, 2020 at 12:03 amThanks for breaking it down, Doc! Sounds like it’s pretty on the level, reduced price for the consumer, everybody wins!
Chris Pederson
October 22, 2020 at 3:32 pmI agree that if one drugstore gave me a good discount for being a loyal customer then I’ll keep going there. I like to save money no matter what. I’ll go to the same drugstore multiple times if it means I can save money.
Patricia Lewis
October 28, 2020 at 1:12 pmMy prescription is a generic prednisone eye drop Blue Cross Blue Shield won’t cover. Over 36.00 every 8 days
I use discount cards to get it for just less than 20.00
I pay for insurance out of my check, and it doesn’t cover my meds. I have had 2 corneal transplants dont have a choice, shame on insurance.
Scott Ewing
November 2, 2020 at 1:20 pmThat is not true. I have an AARP Medicare Advantage program and often the price offered by GoodRX or other discount cards is significantly cheaper than using my insurance. They also offer medications that are not offo
Braden Bills
November 3, 2020 at 2:08 pmI need to get medication, but I want to ensure that I can afford it. It makes sense that I would want to get discounts where I can. That seems like a good way to ensure that the medicine will be affordable for me.
Ron ijen
January 18, 2021 at 4:32 pmIt looks like a discount card is far better for those of us on a high deductible health insurance plan.
Also, what are the charges to the customer/patient for each transaction?
Fuerster Hinkley
September 15, 2021 at 4:34 amFor some pharmacies it’s the old bait and switch. Many pharmacies will not tell you the price until you present the prescription. At that point, the pharmacy says they don’t accept the discount or they raise the price. Or corporate never told them to accept them.
M. Tremoglie
January 6, 2022 at 3:21 pmThe author seems to think the PBMs etc should not be charging fees. If they do not earn a living why should they provide this service? Does he think the government does not make profits? The government pays its employees and has all the other expenses businessss do. The difference is the politicians in government take money from people not using the product or service and give it to those who do and get their votes or patronage.