Rising drug prices are a problem. You know it. Your patients know it. And drug discount card companies know it.
We all know there’s a problem with rising drug prices. We just don’t all agree on how to solve this problem.
The Rise of Discount Card Use
Discount card companies developed an incredibly lucrative business model by giving patients instant access to PBM-contracted rates. But pharmacies are getting the short end of the stick.
In the early days, discount cards were mainly used by cash-paying patients looking for a way to find the lowest cash price. Now, discount cards are used by a significant percentage of insured patients looking to save money. With the rise of high-deductible health plans, most patients don’t bat an eye at using a discount card to save a few dollars on a prescription vs. going through their health plan to get credit towards their deductible.
Just how many patients are using discount cards? The numbers may surprise you. When reviewing pricing data at over 500 retail pharmacies, we found that prescriptions were filled using discount cards more than any other single payer. Take a minute to let that sink in – discount cards accounted for more transactions than any other health plan or PBM. The volume of discount card transactions has quietly reached a critical mass.
PBMs and Discount Cards – Birds of a Feather?
It’s certainly no secret that PBMs are driving down reimbursement for pharmacies on medications through DIR fees. But have you considered the full impact of discount card fees on your reimbursement?
Let’s start with some striking similarities between the operating model for PBMs and discount cards. Just like PBMs, discount cards are largely unregulated. This means they can charge whatever fees they want, and increase those fees any time without notice.
Discount card fees are just as big of a threat to your bottom line as DIR fees, possibly even bigger. If PBMs went away today, you would still be paying high and unpredictable fees on prescription transactions. The only difference would be where you are sending the money – a discount card company vs. a PBM. Discount cards pay big fees back to the PBM’s, however, further driving PBM profits.
Discount Cards are Not Just the Cost of Doing Business
Now for the good news. Discount cards are often considered just a cost of doing business; a necessary evil to keep patients coming into your store. But unlike the regulatory mountain we would have to climb to eliminate DIR fees, the ability to eliminate discount card fees is in your control.
Enter effective cash pricing.
From a patient’s perspective, using a discount card is paying cash. By offering your patients a competitive cash price, the patient still gets to pay cash and save money on their medication, but you are no longer losing revenue to a discount card company.
We know that cash pricing is a tricky business. You don’t want to set your cash price so low that you’re losing out on PBM reimbursement. But if you set your cash prices too high, this model doesn’t work.
So, what’s the secret to setting the right cash price? Stay tuned for part II of this series, where we will explore the nuances of cash pricing, and outline how to effectively set cash prices both to maximize PBM reimbursement and to mitigate discount card fees.
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