How Do Prescription Discount Cards Make Money?

When you think about a ‘Prescription Discount card’ -you immediately think about, how it helps you save up on your medical bills! But, what many cannot fathom, is how a company providing a ‘prescription discount card’ is able to sustain itself profitably.  Still wondering how? Well, the saying-‘If it seems too good to be true then it probably is’ “also applies to drug discount cards,” states Richard J. Sagall on kevinmd.com. “Drug discount cards have the potential of helping patients save a lot of money, but you have to understand how they work,” he states.

Players Involved in the ‘Prescription Discount Card’ Market

‘So then, how does a ‘prescription discount card’ really work?’ “To better understand discount drug cards, it helps to first identify all the players and learn some terminology,” advises Eldercare Resource Centre. “There are five or sometimes six entities involved in each prescription purchase that involves a discount card,” the website informs. It  categorizes them as- the “Cardholder – the consumer;  Pharmacy – the retail outlet in which the purchase is made; Pharmaceutical Company – the manufacturer of the medication; Adjudicator – the organization that negotiates the discounts with the drug makers; Card Marketer – the organization whose brand is on the card and Card Marketer Affiliate – an organization that assists the Card Marketer in distribution.”

Role of Different Players in Creating a ‘Prescription Discount Card’

Having understood, who the main players are, it is now time to understand- what role each one of them plays, in making a ‘prescription discount card’ transaction possible! This is explained by Sagall in the following words: “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.” The next stage involves –PBMs marketing the card to companies or organizations, for which-they may employ professional marketers, he informs.

How Does a ‘Prescription Discount Card’ Generate Money?

The fact is that every player in the ‘prescription discount card’ game is gaining from it! According to Sagall, “There are five reasons pharmacies accept the cards.” Pharmacies are businesses and cannot be expected to work on charity. So it is more than obvious that –even after selling medicines at discounted prices-they are still making considerable profits! May be lower profits, but profits none the less!

Under no circumstance, would they “offer such a large discount that they lose money on the transaction,” observes Sagall. Moreover, he believes that ‘being able to increase the sale of drugs, which customers may not have otherwise bought because of their high prices;’ ‘building customer loyalty;’ ‘increasing non-pharmaceutical purchases;’ and ‘being in tune with other pharmaceuticals;’ are other factors that motivate pharmacies-to honor the ‘prescription discount card.’

Ways in Which a ‘Prescription Discount Card’ Generates Money

So how does a ‘prescription discount card’ mysteriously manage to generate money? When you get into the nitty-gritties of it all- you realize that “generating money,” is exactly what a ‘prescription discount card’ was designed to do! “Each time a card is used there is a transaction fee applied to the purchase price.  That fee is split 3 or 4 ways (though perhaps not evenly) between the Pharmacy, the Adjudicator, the Card Marketer and their Affiliate.  This transaction fee comes at the Cardholder’s expense,” informs ‘Eldercare Resource Centre.’  Besides transaction fees, many ‘prescription discount card’ companies, also sell personal information of card holders, to make money! “However, usually the negotiated discount cost of the medication far exceeds the transaction fee so the Cardholder still wins,”  ‘Eldercare Resource Centre’ concludes.

This article was written by James Sosa, a healthcare writer, who believes that a Prescription Discount Card offers a win-win situation for both customers and pharmacies.

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