The Rise of Integrated Discount Card Programs

Discount card programs require thoughtfulness when implemented within a pharmacy benefit

Drug discount cards have been around for several years, but their recent usage has significantly increased. This trend can be attributed to several factors, including a rise in member consumerism, the adoption of digital tools, greater member liability due to high deductible health plan (HDHP) or plan designs, industry and regulatory focus on drug affordability, and increased attention to disparities in member level drug pricing, particularly for generics (e.g. Mark Cuban Cost Plus Drugs, J&J lawsuit). In this blog you will learn how discount cards work, how pharmacy benefit managers (PBMs) have responded with integrated discount card programs, and what considerations key stakeholders need to take when implementing discount card programs.

How discount cards work

There has been much discussion about the drug product and financial flows that enable the discount card market. In comparison to a true member cash pay transaction (i.e., U&C claim), a discount card transaction is adjudicated as a claim by a PBM at a negotiated rate. The PBM receives a fee from the pharmacy and pays a fee to the discount card originator. There are various discount card options available from different sources

The price of a drug is determined at the point of sale through claims adjudication. It is calculated based on the “lesser of” logic, which means that the cost of the drug ingredient will be the lowest of the following: 1) the pharmacy’s established usual and customary price (U&C); 2) the average wholesale price (AWP) discount calculated by the PBM or 3) the maximum allowable cost (MAC) calculated by the PBM. However, consumerist members, enabled by discount cards, have found savings by introducing a fourth criterion for the “lesser of” pricing logic: the discount card price.

PBM Discount Card Integration Programs

In response, many PBMs have developed the capability to integrate the discount card experience into a member’s prescription benefit and adjudicate the claim leveraging those rates. PBM programs are briefly named and summarized below:

Overview of Programs:

• ESI: Price Assure (previously RightPrice)
  • GoodRx based discount card engine
• Optum: Price Edge
  • OptumRx proprietary discount card technology
  • Applicable to generic, non-specialty drugs only
• CVS Caremark: Cost Saver
  •  GoodRx based discount card engine
• CarelonRx: EnsureRx
  • Waltz Health based discount card engine
  • Applicable to 50 generic drugs only

Stakeholder Considerations

Members:

Integrated discount card programs aim to offer a seamless experience for members by automatically incorporating discount card prices during claim adjudication, eliminating the need for members to actively seek out a discount card or pharmacy. This approach ensures that members receive the lowest available prices under their current plan and member ID card, fostering trust in the ability of their benefit to secure the best pricing without relying on third-party solutions.

While PBM programs can provide discounts, they are typically more limited in scope compared to direct discount card programs. PBM programs may not apply to all drug categories that stand-alone discount cards cover, such as specialty generics, brand-name copay cards, or patient assistance programs. Additionally, PBM programs may not offer ongoing alerts or notifications regarding potential savings available through platforms like GoodRx.

One advantage of PBM integrated discount card programs is that the claim can be added towards member accumulators, such as deductibles and out-of-pocket maximums. This feature is not typically available with U&C transactions.  This may not apply for discounts achieved through these programs for excluded drugs.

Furthermore, integrated discount card programs may provide savings over U&C prices for products that are not covered benefits or are excluded from formularies or other means, offering an additional layer of cost savings for members.

Health plans:

Integrated discount card programs deliver a unified benefit and begin to address member-level disparities on generics, such as cross-subsidization of brand drugs by generics. By automatically incorporating discount card prices, these programs improve member trust and satisfaction, as members can be confident that their plan is able to procure the lowest possible prices for them.

Additionally, integrated discount card programs facilitate claim capture for quality measures, adherence reporting, clinical programs, and other reporting purposes, providing a more comprehensive view of member utilization and enabling more effective population health management.

It’s important to note that while PBM programs can offer discounts, they may not apply to all drug categories that stand-alone discount cards cover, potentially limiting their scope and effectiveness.

Integrated discount card programs should be considered a member satisfaction strategy rather than a financial strategy. While claims may be paid at a reduced price, these programs are not typically accompanied by improved financial guarantees and may either help PBMs in achieving discount guarantees or cause potential cost increases to non-discount card claims. In other words, the overall guarantee remains the same, even if a subset of discount card claims is paid at a higher discount off the AWP.  These programs may also pass a higher adjudication fee to a network pharmacy than what the pharmacy would pay for true “on benefit” claim and may or may not be included in dispensing fee guarantee reconciliation.

Furthermore, it’s essential to ensure that the definitions of rebates and discounts in current contracts account for all claims-based revenue, as PBMs may be making spread-based revenue that is not explicitly contemplated in current PBM agreements

PBMs:

Integrated discount card programs acknowledge the existence of member-level disparities and take steps to partially correct the issue. While these programs highlight and address the problem, other PBMs are working on more direct solutions, such as reducing cross-subsidization of brand drugs by generics or introducing new acquisition-based reimbursement models.

Beyond addressing the financial disparities, integrated discount card programs facilitate claim capture for clinical edits (retrospective drug utilization review and concurrent drug utilization review), forecasting, and clinical programs.

It’s worth noting that integrated discount card programs also represent an additional spread-based revenue stream for PBMs. In these arrangements, pharmacies pay a fee to the PBM, who then shares a portion of that fee with the discount card provider.

A Step in the Right Direction

Several factors affect the cost of drugs for members at the pharmacy, including the drug’s list price, health plan benefit designs, cost-sharing requirements, negotiated discounts between PBMs and pharmacies, pharmacy acquisition costs, and pricing differences among manufacturers of the same drug. Current PBM pricing strategies maintain a macro focus on ensuring the lowest net cost across populations, but this approach leads to disparities at the member level. It means that a specific member receiving a specific drug at a specific pharmacy may not get the lowest available cost. While it does not fully address this issue, an integrated discount card can improve this situation by allowing members to benefit from a lower cost without taking any action but may adversely impact other members.

PSG has extensive experience navigating the nuances of these programs, what they mean for members, and how they impact PBM contracts. Reach out to PSG experts to deep-dive into pharmacy cost mitigation strategies and the role of discount card programs in your pharmacy benefits.