Walmart is known as the retailer that began the $4 generic prescription program. It became the go-to store for cheap generics if you didn’t have prescription drug coverage. Other major retailers soon followed. It was a game changer in the pharmacy business. Generic drugs that were once a lucrative business for pharmacies were suddenly low-margin products. Of course, not every generic is $4, but the $4 list is pretty robust. For those prescriptions that are not on the $4 list, patrons often turn to a discount pharmacy card program, such as PS Card or GoodRx. A pharmacy discount card is a service where uninsured individuals (and anyone who wants one) join a network that has partnered with a pharmacy benefit manager (PBM). PBMs administer drug plans for insurers, health plans and government programs such as Medicare and Medicaid. Because PBMs are volume purchasers of drugs, they’ve negotiated a better price than is typical for walk-in customers. For example, let’s assume you join a discount drug plan whose PBM partner also administers the drug plan for General Motors. GM pays lower prices for drugs than one consumer paying cash. Yet, card-holding cash-paying customers benefit from the volume discounts that huge purchasers receive.
Discount drug cards contain information on the specific PBM allowing the pharmacist to look up the negotiated price, the payer and the account of the card provider. Once entered into the computer with their customer records, this information can be stored in the pharmacy computer system for years allowing the pharmacist on duty to always apply the correct discount. The process works similar to the way it works when you have health coverage and your pharmacist enters information on your drug plan into the pharmacy computer system.
In mid-August 2015, Walmart took the unusual step of identifying its pharmacy business as a drag on profits. Apparently, more Walmart pharmacy shoppers were enrolled in drug plans, which it claimed reimbursed prescriptions at lower rates than prices paid by cash-paying shoppers. The volume of high-margin cash transactions was also down as fewer shoppers paid with cash. Customers with health coverage obviously expect the negotiated discounts their plans offer – especially if they have not met their deductibles. But what about discount card holders? What if the records of their cards were accidentally lost? The other day I got a call from the owner of a discount pharmacy card service saying Walmart had apparently done just that — purged its pharmacy files of all discount cards. Customers are still welcome to use a discount pharmacy card as long as they present a new one to the Walmart pharmacist.
Because the information is stored electronically, most people probably don’t remember where their cards are. They may not even remember that they’re using one. I could not find an official disclosure but I did find independent confirmation from other discount card firms that customers need to present the Walmart or Sams Club pharmacist with a new card upon their next visit. The discount pharmacy card executive I spoke to was worried that periodically purging discount card records may become standard practice at all chain pharmacies as a way to boost margins. Who knows? Maybe drugstores will begin to require their customers to present a discount card at every encounter.
Discount card providers don’t generally charge consumers for their services. Most cards are free, while purveyors make a small commission off each prescription filled. In theory, the pharmacy earns less on discount card program members, but has more customers. A new venture called Blink Health is a departure from the standard way of doing business. Blink’s business model may give it a competitive advantage over the other discount cards if more pharmacies demand a card during each encounter. Blink is a service where patrons have to sign up in advance. Once registered, customers look up their prescriptions and pay for them online. The customer then prints out a paid-in-full voucher (containing discount card information) and presents it to the pharmacist. Some discount cards run afoul of Medicare’s anti-kickback regulations but this method is apparently legal for Medicare as well. Although the specific price varies from one pharmacy to the next with some card programs, Blink has uniform pricing across all pharmacies. Whichever card program shoppers use, one significant benefit of programs such as PS Card, GoodRx and Blink Health is the ability to look up the drug’s price ahead of time.