Prescription Discount Cards - What They Are, Why They Work

A prescription discount program is designed to help people save money on prescription medications by offering its members a prescription discount card used when paying for prescriptions. Pharmacies are willing to accept these discount cards from customers for a variety of reasons.The first of these is a matter of competition between pharmacies. Pharmaceuticals is a $500 billion industry, so competition is fierce. If one pharmacy does not accept the discount card, the pharmacy down the street can, thereby gaining the business of the cardholder. Remember when you started that lemonade stand when you were a kid, and then that pesky neighborhood boy copied your idea, but sold his lemonade for 5 cents less? Unless you could prove that your lemonade was worth 5 cents more than his, you had to lower your price as well. (And let's be honest--your moms were making the lemonade anyway.)Since medication from one pharmacy is identical to medicine from another, pharmacies are obliged to honor the discount card. Second, even in the absence of competition, pharmacies understand that some medication is helpful, but not essential (think antacids), so if the price is too high, some may choose not to fill their prescriptions at all. In other words, there is a whole market segment to be gained by accepting the discount card--the segment that, based on price, would have to decline to purchase their medication unless the price was lowered. Third, pharmacies understand that by accepting the discount card, they get a new customer through the door who may end up buying much more than just their medication. Ever wondered why Walgreens places their pharmacy (the main reason you're in the store) all the way in the back? As you walk back to the pharmacy, you pass thousands of products from groceries to batteries to stuffed animals to greeting cards to--the list goes on an on. So the more people they get through the door, the more money they make on items other than medication.


Prescription discount programs are created by pharmacy benefits managers (PBMs) who work with pharmacies in a variety of ways. In the case of prescription discount programs, PBMs negotiate discounted prices for their cardholders, which pharmacies are willing to accept for the reasons mentioned above. But what's in it for the PBMs? When a prescription is filled using one of the PBMs discount cards, the PBM gets a small percentage of the revenue from that sale.In essence, everyone wins. Pharmacies get more business. Cardholders get their prescriptions filled at a lower price. And PBMs get a share of the profits. It's a classic win, win, win situation.