Prescription discount cards: Who do they benefit? Who do they hurt?

By Michael Murphy, PharmD, MBA and Jennifer Rodis, PharmD, FAPhA for the PolicyRx newsletter

Americans use large numbers of medications, and many struggle to afford them. Beyond public and private insurance, or paying cash for prescription medications, discount cards have risen in popularity as a means to reduce the costs of certain medications.

Discount cards for prescription medications emerged in the 1990s, mainly aimed at helping seniors access medicines before the Medicare Modernization Act (MMA) that established Medicare Part D in 2004. The use of discount cards has risen steadily, and the market has diversified to include all ages and patient sectors, as well as various types of discount cards. Recent estimates by Chain Drug Review show that discount card use has increased by more than 60% and is trending upward, with market projections of a $355 million industry.

How do these cards work?

There are three major types of discount cards:

1. Manufacturer discount programs, often operationalized as coupons, can be used with private insurance to reduce the copayment on brand medication. Public insurance programs disallow them due to the Social Security Amendments of 1972, which established the Anti-Kickback Statute.

• These discounts can often be found directly via the manufacturer’s website.
• Coupons typically have an expiration date or a limited number of uses of the coupon or discount, leaving patients to determine other strategies to pay for the medication upon termination.
• When a medication is dispensed, the patient pays the discounted price and then the manufacturer reimburses the pharmacy the discounted amount.
  • For example, if a medication's out-of-pocket cost is typically $20, the patient may pay $5 when using the coupon. After submission, the manufacturer will reimburse the pharmacy the difference of $15.

2. Pharmacy-specific discount cards are provided by individual pharmacy chains.

• An example of this would be Walmart’s Easy Drug Card. These predominantly provide generic medications at a lower cash price to patients and do not allow billing insurance in combination with the card.
• After patients sign up for the card, the benefits can be applied only at the sponsoring pharmacy.
• These are most beneficial for uninsured patients, as the discounted generic price with the card may not be superior to an insurance copay.
• It is essential to note that the money paid to the pharmacy does not contribute to an insurance Out-of-Pocket Maximum (OPM) or deductible.
• Procedurally, these cards involve contracting between the pharmacy business and a pharmacy benefit manager (PBM).
• When the medication is dispensed, the pharmacy pays a transaction fee to the PBM and the pharmacy receives a discounted payment from the patient as their total reimbursement.
• This out-of-pocket discounted payment is lower than the cash amount the pharmacy would typically receive.
  • For example, if a medication cost is typically $20 without insurance, the patient may pay $15 when using the pharmacy-specific discount card. After dispensing, the pharmacy will pay the PBM a transaction fee, resulting in a net cost to the pharmacy for the transaction.
• The rationale of a pharmacy-specific discount card is to incentivize patient visit frequency and loyalty to the pharmacy, but it sacrifices individual prescription dispensing revenue for the pharmacy.

3. Prescription discount cards provide savings for brand and generic medications.

• These cards—the most popular brands being GoodRx, America’s Pharmacy and SingleCare—are for-profit companies that contract with PBMs to offer discounts to patients on individual medications.
• With the use of these cards, the price can alter and shift between fills for each medication.
• The way they work is that the discount card company scans pricing across PBM networks and pharmacy contracts to find the best price, then offers that price to patients as their amount due for the dispensed medication at the pharmacy.
• At the point of sale, the pharmacy pays a transaction fee to the PBM, part of which goes to the discount card company. The pharmacy receives the patient’s discounted payment amount as their total reimbursement.

This seems like a great way to increase access for patients. What’s the problem?

While at face value—and in the short term—these programs appear to improve patient access to medications, a deeper look unveils problems that threaten this viewpoint. Because of the wide range of use and significant impact of prescription discount cards on community pharmacies, the focus for this issue is on prescription drug discount cards, not manufacturer coupons or pharmacy-specific cards. However, some policy considerations may be applicable across programs.

The primary problems include a lack of transparency and regulation, as well as negative revenue implications for pharmacies that process these discount cards. You may note a commonality across our other PolicyRx issues related to NADAC and pharmacy deserts.

Here are the major concerns:

Discount card companies are not federally regulated as health care entities.

• They are not governed by the Health Insurance Portability and Accountability Act of 1996 (HIPAA).
• When patients sign up for these cards and sign the terms of use, they may be signing away their personal information, opening up the risk of leaking individual and potentially sensitive health status data.
• Consumer Reports published that the Federal Trade Commission fined GoodRx for disclosing personal health information to third-party advertisers without proper authorization. GoodRx has since announced that it has changed its policies and does not sell patient data to third parties.

Pharmacies lose money with every prescription dispensed using a prescription drug discount card.

• The pharmacy, which purchased the drug at a much higher cost, will not only pay the PBM and the discount card company a transaction fee, but also end up with a discounted payment for the drug and no additional administrative fee for dispensing.
  • Consider this example: A drug purchased at $15 with a discount card could result in a total payment to the pharmacy by the patient of $5. Not only is this below acquisition cost, but it also does not include payment for coverage of the dispensing service or account for the processing transaction fee paid by the pharmacy.
  • In this example, the pharmacy experiences a loss of more than $10 on this single prescription without factoring in the cost to process the discount card and ensure safe dispensing of the medication.
• These programs leave pharmacies nowhere near being able to sustain their businesses.
  • In a recent study by Gernant et al, it was estimated that pharmacies processed an average of 15 coupons per day and required about five extra minutes for each discount card claim.

Patients predominantly interact solely with pharmacy personnel as the gatekeepers for these discounts when, in fact, pharmacies are not affiliated with these companies and suffer a loss when processing discount cards.

• When pharmacists refuse to accept discount cards, patients are understandably angry, not recognizing that using these cards threatens the pharmacy’s financial viability, further risking the closure of the pharmacy.

For patients, the primary risks associated with discount cards beyond privacy of personal data involve the variability in price and coverage, which can shift month to month and fill to fill.

• This variability can influence consistency and adherence to chronic medications.
• Limitations in the number of pharmacies that accept the cards may impact continuity of care for patients and decrease access to pharmacy services.

Despite reported widespread use, the evaluation of how these programs are being used by patients and their influence on health outcomes is lacking.

• The few published studies, such as the assessment of Needy Meds data by Munigala et al, share concerns that demonstrated the most commonly prescribed medication classes for which discount cards were used between 2009 and 2016 included highly addictive, controlled substances: opiates and benzodiazepines.

Policy options related to prescription drug discount cards

Overall, prescription discount cards are band aids on a broken system. The core of the issue is that medications in the U.S. are too expensive, and sometimes it is cheaper not to use insurance and pay out of pocket than to use your insurance. Many medications are priced so high by pharmaceutical manufacturers and/or wholesalers in the U.S. that it is unreasonable for any citizen to afford them, even at the cost they are sold to the pharmacy.

Big picture: We need comprehensive prescription drug reform across the supply chain to ensure fair and reasonable access to medications.

In lieu of complete reform, we provide some specific, smaller scale policy considerations for advocates:

We encourage advocates to educate patients, lawmakers, advocacy organizations and providers on the risks and benefits of prescription drug discount programs is needed. The unregulated and nontransparent drug discount programs illustrate another cog in the dysfunctional machine that is the United States drug use system. Speak up and out about how these programs negatively impact pharmacies and, ultimately, patients.