Skip to content
  • About
  • Contact
  • Contribute
  • Book
  • Careers
  • Podcast
  • Recommended
  • Speaking
  • All
  • Physician
  • Practice
  • Policy
  • Finance
  • Conditions
  • .edu
  • Patient
  • Meds
  • Tech
  • Social
  • Video
    • All
    • Physician
    • Practice
    • Policy
    • Finance
    • Conditions
    • .edu
    • Patient
    • Meds
    • Tech
    • Social
    • Video
    • About
    • Contact
    • Contribute
    • Book
    • Careers
    • Podcast
    • Recommended
    • Speaking

Drug discount cards: Tips and tricks to watch out for

Richard J. Sagall, MD
Meds
September 17, 2013
Share
Tweet
Share

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.

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.

ADVERTISEMENT

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.

Richard J. Sagall, is president and co-founder, NeedyMeds.

costs_of_care_logo_small

This post originally appeared on the Costs of Care Blog. Costs of Care is a 501c3 nonprofit that is transforming American healthcare delivery by empowering patients and their caregivers to deflate medical bills. Follow us on Twitter @costsofcare.

Prev

I'm grateful that I've been given a second chance

September 16, 2013 Kevin 8
…
Next

The Sunshine Act: A chilling effect on medical education?

September 17, 2013 Kevin 3
…

Tagged as: Medications

Post navigation

< Previous Post
I'm grateful that I've been given a second chance
Next Post >
The Sunshine Act: A chilling effect on medical education?

ADVERTISEMENT

More by Richard J. Sagall, MD

  • Why this physician is running out of sympathy

    Richard J. Sagall, MD

More in Meds

  • From stigma to science: Rethinking the U.S. drug scheduling system

    Artin Asadipooya
  • How drugmakers manipulate your health from diagnosis to prescription

    Martha Rosenberg
  • The food-drug interaction risks your doctor may be missing

    Frank Jumbe
  • Why retail pharmacies are the future of diverse clinical trials

    Shelli Pavone
  • Why does rifaximin cost 95 percent more in the U.S. than in Asia?

    Jai Kumar, MD, Brian Nohomovich, DO, PhD and Leonid Shamban, DO
  • A world without antidepressants: What could possibly go wrong?

    Tomi Mitchell, MD
  • Most Popular

  • Past Week

    • How President Biden’s cognitive health shapes political and legal trust

      Muhamad Aly Rifai, MD | Conditions
    • The hidden health risks in the One Big Beautiful Bill Act

      Trevor Lyford, MPH | Policy
    • How New Mexico became a malpractice lawsuit hotspot

      Patrick Hudson, MD | Physician
    • Why doctors are reclaiming control from burnout culture

      Maureen Gibbons, MD | Physician
    • Why health care leaders fail at execution—and how to fix it

      Dave Cummings, RN | Policy
    • How digital tools are reshaping the doctor-patient relationship

      Vineet Vishwanath | Tech
  • Past 6 Months

    • Why are medical students turning away from primary care? [PODCAST]

      The Podcast by KevinMD | Podcast
    • What the world must learn from the life and death of Hind Rajab

      Saba Qaiser, RN | Conditions
    • Why “do no harm” might be harming modern medicine

      Sabooh S. Mubbashar, MD | Physician
    • How President Biden’s cognitive health shapes political and legal trust

      Muhamad Aly Rifai, MD | Conditions
    • Here’s what providers really need in a modern EHR

      Laura Kohlhagen, MD, MBA | Tech
    • The hidden health risks in the One Big Beautiful Bill Act

      Trevor Lyford, MPH | Policy
  • Recent Posts

    • The unseen cost of detachment in radiology

      Dr. Yesu Raju | Physician
    • I thought success was a destination. Then I became a doctor.

      Ryan Nadelson, MD | Physician
    • Why psychotherapy works and why psychotherapy fails

      Peggy A. Rothbaum, PhD | Conditions
    • The One Big Beautiful Bill and the fragile heart of rural health care

      Holland Haynie, MD | Policy
    • How oral health silently affects your heart, brain, and body

      Charles Reinertsen, DMD | Conditions
    • How President Biden’s cognitive health shapes political and legal trust

      Muhamad Aly Rifai, MD | Conditions

Subscribe to KevinMD and never miss a story!

Get free updates delivered free to your inbox.


Find jobs at
Careers by KevinMD.com

Search thousands of physician, PA, NP, and CRNA jobs now.

Learn more

Leave a Comment

Founded in 2004 by Kevin Pho, MD, KevinMD.com is the web’s leading platform where physicians, advanced practitioners, nurses, medical students, and patients share their insight and tell their stories.

Social

  • Like on Facebook
  • Follow on Twitter
  • Connect on Linkedin
  • Subscribe on Youtube
  • Instagram

ADVERTISEMENT

  • Most Popular

  • Past Week

    • How President Biden’s cognitive health shapes political and legal trust

      Muhamad Aly Rifai, MD | Conditions
    • The hidden health risks in the One Big Beautiful Bill Act

      Trevor Lyford, MPH | Policy
    • How New Mexico became a malpractice lawsuit hotspot

      Patrick Hudson, MD | Physician
    • Why doctors are reclaiming control from burnout culture

      Maureen Gibbons, MD | Physician
    • Why health care leaders fail at execution—and how to fix it

      Dave Cummings, RN | Policy
    • How digital tools are reshaping the doctor-patient relationship

      Vineet Vishwanath | Tech
  • Past 6 Months

    • Why are medical students turning away from primary care? [PODCAST]

      The Podcast by KevinMD | Podcast
    • What the world must learn from the life and death of Hind Rajab

      Saba Qaiser, RN | Conditions
    • Why “do no harm” might be harming modern medicine

      Sabooh S. Mubbashar, MD | Physician
    • How President Biden’s cognitive health shapes political and legal trust

      Muhamad Aly Rifai, MD | Conditions
    • Here’s what providers really need in a modern EHR

      Laura Kohlhagen, MD, MBA | Tech
    • The hidden health risks in the One Big Beautiful Bill Act

      Trevor Lyford, MPH | Policy
  • Recent Posts

    • The unseen cost of detachment in radiology

      Dr. Yesu Raju | Physician
    • I thought success was a destination. Then I became a doctor.

      Ryan Nadelson, MD | Physician
    • Why psychotherapy works and why psychotherapy fails

      Peggy A. Rothbaum, PhD | Conditions
    • The One Big Beautiful Bill and the fragile heart of rural health care

      Holland Haynie, MD | Policy
    • How oral health silently affects your heart, brain, and body

      Charles Reinertsen, DMD | Conditions
    • How President Biden’s cognitive health shapes political and legal trust

      Muhamad Aly Rifai, MD | Conditions

MedPage Today Professional

An Everyday Health Property Medpage Today
  • Terms of Use | Disclaimer
  • Privacy Policy
  • DMCA Policy
All Content © KevinMD, LLC
Site by Outthink Group

Leave a Comment

Comments are moderated before they are published. Please read the comment policy.

Loading Comments...