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How Do Prescription Discount Cards Make Money

By David Krug David Krug is the CEO & President of Bankovia. He's a lifelong expat who has lived in the Philippines, Mexico, Thailand, and Colombia. When he's not reading about cryptocurrencies, he's researching the latest personal finance software. 13 minute read

The envelope stands out when you browse through your daily mail, which often consists of bills and advertisements. It boldly proclaims, saves UP TO 75% on the price of all your prescription drugs when you use the card included. You may be wondering, That much? Should we believe that?

The solution is more involved than that. It’s true that prescription medicine discount cards can help you save money, however, the typical reduction is much smaller than 75%. Not all pharmacies offer these discounts, and even the ones that do are limited to specific medications.

Of all, any discount, no matter how modest, is better than none at all when money is tight. A 10% savings might mean the difference between taking your prescription as prescribed and not taking it at all if you are one of the millions of Americans who can’t afford their medications. So, let’s take a deeper look at these discount cards to see if they actually deliver on their promise of saving you money.

How Drug Coupon Cards Operate

The United States has some of the highest prices in the world for prescription medications. The average American spends $858 per year on prescriptions, as reported in the Journal of the American Medical Association in 2016. That’s far higher than the median of the other 19 developed nations.

There are no real controls on what firms may charge, which is the fundamental reason why medicine prices are so high. When a corporation develops a new medication, it is granted a patent on the drug and the exclusive right to manufacture and sell it for a considerable period of time. 

During that time, the company can set the price of the drug at whichever level is sustainable for sales. Furthermore, individual patients have little leverage to negotiate cheaper rates.

Drug assistance programs serve this purpose. They avoid dealing with pharmaceutical manufacturers and go straight to retailers instead. If pharmacies participate in these schemes and cut the price of their prescriptions, they will attract more customers. If implemented properly, everyone involved (pharmacies, customers, and the program administrator) stands to benefit.

The Pricing Method

Pharmacy benefit managers (PBMs) are businesses that provide discount cards for prescription drugs. PBMs negotiate lower pricing for patients at pharmacies in the following ways:

  1. Initially, the PBM establishes a group of pharmacies that are willing to take its cards. The pharmacies under this system may be part of a larger network or they may be independently owned. Thus, a pharmacy discount card can only be used at participating pharmacies.
  2. The PBM negotiates with individual network pharmacies to secure price reductions for cardholders on the medications the PBM distributes. Medication discounts are typically offered as a percentage of the full retail price. The quantity of the discount, however, may change from one medicine to another. Every time a consumer uses the card, the business will pay a little transaction charge to the PBM.
  3. After that, the PBM goes out and finds distributors to help get the word out about its cards. Business enterprises and charitable groups alike qualify. Doctors’ offices, government agencies, and paid marketers all distribute discount drug cards.
  4. Drug stores may hand out discount cards directly to customers on occasion. The PBM will pay these promoters a commission to help spread the word about the card.
  5. Patients who use the cards pay the reduced price plus any costs the PBM has negotiated with the retailer. Paying for advertising and the PBM’s own operating expenses fall under these categories. The total cost is still less than the price would have been without the discount card.

Why Drug Discount Cards Are Accepted in Pharmacies

Strangely, some pharmacies have agreed to accept cheap medicine cards. After all, the pharmacy loses money when a patient uses one of these cards since it must reduce the price it charges the PBM for the medication the patient fills. 

A store may benefit from accepting these cards despite the drawbacks. While the business loses money on each transaction processed with the card, it gains customers and thus revenue.

Let’s say your doctor prescribes a $100 medication for you. The pharmacy generally makes a $40 profit off of this medicine, given that they purchase $60 for it. But since $100 is out of your price range, you don’t buy the medication.

Let’s say, though, that you have a discount card that your pharmacy accepts, bringing the price of the prescription down to $80. To put it another way, if you buy it for that price, the shop will make a $20 profit. That’s less than $40, but that’s better than it would have gotten otherwise, which is nothing.

A loyalty card program is a great way for a pharmacy to attract and retain customers. When you find a pharmacy that accepts your discount card, you’re more likely to shop there for all of your prescription needs, regardless of price.

And while you’re there, chances are you’ll pick up some of the store’s other wares, such as greeting cards or OTC medications. Instead of risking losing you to a competitor, the pharmacy would rather take the discount card and make a smaller profit.

What You Can Save

Consumer World conducted a study in 2012 to determine the average amount an uninsured person could save on a prescription by using a medication discount card. It compared the pricing of four commonly used medications among three pharmacies (CVS, Costco, and an independent pharmacy) and five different credit cards. An average of 16% was reported to be saved by using these cards in the trial.

But that doesn’t mean you’ll save 16% on every drug, at every store, just because you have one of these cards. The precise figure is highly context and medication-specific. According to research by Consumer World, in some circumstances using a discount card reduced the price of a medicine by as much as 71%. While in other instances, no cost reductions were observed.

The cash price of many medications varies from one pharmacy to the next, which is a contributing factor. Simvastatin, a substitute for the brand-name medicine Zocor used to treat high cholesterol, was included in the research. 

This medication’s original cash price at CVS was $40; with a discount card, the price dropped to between $19 and $39. However, the cash price at Costco was $6.50, and most discount cards couldn’t get any cheaper than that.

Health insurance vs. discount cards

A prescription discount card may not be worth it if you have health insurance. This is due to the fact that these cards only reduce the retail cost of the drug and not the copayments required by your health plan.

Take, for instance, a medicine that normally costs $100 but you’ll just have to pay $20 out of pocket. That implies the remaining $80 will be covered by your health insurance. Your insurance is effectively offering you a discount of 80%.

In contrast, most pharmacy discount cards would only save you between 10 and 30 percent. If only the 20% off could be used for the $20 co-pay and make it only $16, but alas, that’s not how it works.

A prescription savings card may be more cost-effective than insurance for some low-cost drugs. Let’s say, for the sake of argument, that the drug you want to buy costs $20. 

Although your insurance will cover some of the cost, your $20 co-pay will still leave you responsible for the entire cost of the medication. A medicine savings card that reduces the total price to $16 would be more cost-effective here.

Discount Cards vs. Generic Drug Programs

There are other ways to save money on medications besides using a drug discount card if you don’t have health insurance. The generic equivalents of commonly prescribed medications are available at a set, low price through a discount program offered at nearly all chain pharmacies.

Generic versions of medications are just as effective as their name-brand counterparts since they contain the same active components. The FDA reports that about eight out of every ten prescriptions filed in the United States are for generic pharmaceuticals, thus a scheme like this can help you save money on most of your prescription meds.

A common name for discount programs for generic drugs is $4 generic drug programs. The real cost of medications through these programs, however, varies from $4 for a 30-day prescription to $16 for a 90-day supply, as reported by Consumer Reports. 

However, even the most expensive option under these plans is still cheaper than what you’d pay without insurance. Sometimes the cost is even lower than what you’d pay if you had health insurance.

The conditions for participating in a generic discount program vary from store to store. If you want to shop at certain establishments, you may need to sign up as a member and pay an annual fee, which can range from $10 for an individual to $35 for a family.

When this is the case, anyone with a valid prescription is welcome to stroll in and use the service. It’s best to plan ahead if enrollment is necessary because of the time it can take.

Asking if your local pharmacy, whether it’s a chain or a mom-and-pop, offers the same price cut on generics is always worth it. When asked, some independent pharmacies will match the prices of national chains. There are even a few that have their own generic medicine discount programs.

The Difficulty of Comparing Prices

It’s difficult to anticipate how much you’ll save when using a pharmacy discount card. As Consumer World’s Edgar Dworsky found, it was almost impossible to determine which card offered the greatest discounts.

Dworsky sought to get price information by visiting various pharmacies with his test cards, but most of them refused to help him without a prescription. That’s because they had to go through the motions of placing an order in order to see what the pricing would be. 

Making a call to the pharmacy chains’ headquarters was also fruitless. Dworsky only received pricing from Costco for all the medications used in his experiment.

According to The New York Times, Dworsky was able to pass the test after all after visiting a doctor and receiving legitimate prescriptions. However, he does point out that the drug costs he negotiated aren’t necessarily the best that other patients might negotiate for the same drugs. 

The cost of prescription medications might differ from one pharmacy to another and even over time. It’s possible, then, that two customers using the same card to buy the same drug at the same pharmacy could end up paying different costs.

The Consumer Reports secret shoppers did slightly better when they used discount cards to compare prices. No pharmacy would give them a pricing quote over the phone, and even going in person wasn’t always successful. 

Only one drugstore was willing to provide a price without a prescription, while the other three could each only quote a price for one of the five test cards. Buyers were able to obtain the majority of the required pricing information from the cards’ own websites and customer care lines. 

They were forewarned, however, that the costs listed online were just approximations and could be different in-store. Consumer Reports is “not crazy about” prescription discount cards because of these issues.

How to Pick a Discount Drug Card

The greatest pharmacy discount card is the one that helps you save the most money on your medications. Nonetheless, as the aforementioned research shows, checking drug prices is next to impossible without a card, and ideally a legitimate prescription. 

As a result, consumers are caught in a Catch-22; Price comparisons are essential to choosing the finest card, and you cannot perform price comparisons without the card.

Dworsky recommends getting multiple cards and comparing pricing on their respective websites in order to find the greatest deal on prescription medications.

Consumer Reports discovered that these sites typically only provide broad pricing estimates rather than actual prices for specific medications. However, they will still be able to guide you toward the credit card that will serve you best.

Dworsky recommends physically visiting stores to compare costs in a second interview with the Detroit Free Press. To avoid the crowds, he suggests going on a weekday. When there is no one waiting in line behind you, the pharmacist is more likely to assist you. Shopping around at several stores to find the greatest price is something he suggests.

Where to Find Discount Drug Cards

Get your hands on actual discount cards to compare their benefits. If you’re looking for a decent place to start, try your doctor’s office. These cards are commonly offered by doctors to individuals as a means of covering the costs of their prescribed medications.

Discount cards can also be found online. Just type in discount cards for prescription drugs into Google and you’ll see how many results show up. In order to acquire your card at some places, you have to register for a few seconds. Some establishments allow you to immediately print the card, while others only offer digital versions via download.

Consider where you do the majority of your drugstore shopping before deciding which cards to apply for. The Simple Savings card offers the most average savings at CVS shops, according to the analysis by Consumer World. 

Costco members get the best deals with their AARP cards, while customers of independent drugstores might save the most with their Una Rx cards. The article has been updated to reflect the fact that a NeedyMeds card typically provides the best pricing.

What to Look Out For

You shouldn’t pick a prescription discount card based just on the amount you’ll save. Keep an eye out for hidden charges and other fine print. In order to assist you to distinguish between good and terrible cards, here are some guidelines to follow:

  • Don’t Ever Buy a Card. Some pharmacy discount cards carry an annual fee, but this is uncommon. According to experts, there is little use in paying for a card since the savings are comparable. Some cards, like those from AAA and AARP, only cost a nominal fee to members. If you are already a member, there is no reason not to give them a try, but you should not join solely to obtain the card.
  • Take Care Of Your Personal Information. Companies that sell discount medicine cards may sell your personal data for financial gain. Your name and any information provided may be used for promotional purposes. They may even be able to sell information about the drugs you purchase. You might end up on a mailing list for a company that makes diabetic supplies if you buy insulin, for example. Be sure to research the company’s privacy practices before applying for a card to learn how they intend to use your personal data. Don’t get any kind of card that requires you to register if that’s a major worry of yours.
  • Examine the Organization’s Score. Check the company’s Better Business Bureau (BBB) rating before using the card. The BBB assigns an A+ to F grade to businesses based on factors like the number and type of complaints they receive and the likelihood that the business will be sued. Credible customers are more likely to deal with A-rated businesses. Those ranked poorly are probably not legitimate or worth your time.
  • Attempt calling the Support Hotline. A toll-free assistance line is a must-have for any legitimate drug discount program. Just dial the number and discover how useful it is for you. Is it a recording, or are there actual humans on the other end? Do you get a return call if you leave a message? If you ever have card issues, it will be much simpler to deal with the organization if they have a good customer service hotline.

How to Make the Most of Your Card

Consider how you’ll put this card to use carefully if you decide to apply for one. 

Some considerations are as follows:

  • Learn the Regulations. Find out ahead of time which establishments will accept your card. You wouldn’t want to get to the pharmacy to pick up your prescription and find out you have to pay full price. What if you don’t have any cash on you? That might be really embarrassing.
  • Examine Your Insurance Coverage First. Although it can help you save money on prescriptions, a discount card is not the same as insurance and will not cover all of your costs. Prioritize using your insurance coverage if you have it. Using a discount card is the best option if your health insurance doesn’t pay for medication or doesn’t reduce the out-of-pocket cost much.
  • Verify the Cash Discounts. All pharmacy discount cards operate in the same way, reducing the out-of-pocket cost of medication by a fixed percentage. As a result, the smaller the cash price, the lower your total cost will be. Get the full retail price of the medication you need by calling various pharmacies. It’s possible that without a discount card, you’d pay less at one retailer than at another.
  • Go with the Generics. In addition, wherever possible, go for generic medications to save money on the out-of-pocket total. These are always far less expensive than major brand names.
  • Keep with One Pharmacy Only. One common strategy for saving money on medication is to visit multiple pharmacies before making a purchase. Still, there is some danger in doing so. A pharmacist can better monitor your medication regimen if you purchase all of your medications from the same location. That person has the ability to recognize the presence of potentially harmful medication interactions. It’s more cost-effective to go with a single pharmacy that offers reasonable prices on your regular medications.

Bottom Line

Discount cards for medications might be very helpful. Although they can be helpful, they are not the only or even the best strategy to cut costs on medications. Buying generic medications is the best way to save money for most individuals. 

You can save costs even further if the pharmacy you frequent participates in a generic medicine program. Using a mail-order pharmacy or a prescription assistance program is another option for reducing medical costs.

Feel free to experiment with these cards, but don’t put too much stock in their effectiveness. Keep in mind that they are just one method among many for lowering healthcare costs.

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