Myth: Drug discount cards do not save money.
In a January 2002 report, the General Accounting Office (GAO) showed that discount cards on average save consumers 32 to 55 percent on generic medications and 6 to 32 percent on brand medications compared to average retail pharmacy prices without a discount card.

For the entire basket of drugs surveyed, consumers
save an average of 11 percent on drugs purchased through a discount
card compared to walk-in retail pharmacy prices.
Savings achieved by individual consumers will vary depending on
what drugs they need, and where they live, and how much their local
pharmacy marks up drugs for walk-in customers without insurance.
Discount cards were shown to have the greatest benefit for rural
seniors. Consumers purchasing their medications in a rural retail
setting are paying considerably more, sometimes up to three times
more, than consumers using discount cards and are paying up to twice
the amount as those consumers purchasing their drugs in urban retail
settings, according to the January GAO study (which used prices in
rural Georgia retail setting). The savings achieved on generics are
larger because retail pharmacies mark them up more aggressively.
Data from one discount card program showed that individuals in the
top 1.5 percent of spending saved over $1,000 annually by consistently
using the discount card.
GAO's report also understates the savings achieved through discount
cards. In some cases retail pharmacies charge cash paying customers
less for a specific drug than the rate negotiated by the discount card
program with the pharmacy. The discount card programs generally
capture these savings for persons enrolled in the discount card
program. Since contractually the pharmacy must charge the patient
the "lower of" its cash price or the negotiated price, the patient always
benefits where the pharmacy has a lower cash price. GAO did not
account for this in its calculation of savings.
Myth: Retail pharmacies are forced to participate in these programs
and cannot make a reasonable profit when complying with discount
card terms.
Participation in discount card programs is entirely voluntary.
Pharmacies choose to participate in these programs because they still
profit, even when they pass lower prices on to consumers. Discount
card programs require participating pharmacies to charge consumers
rates that are equivalent to prices they must charge for patients with
drug coverage through their health plans. Pharmacies do feel
competitive pressure to participate in discount card programs. If a
pharmacy makes a business decision not to participate in discount card
program, it must determine whether it will benefit financially by its
decision. Pharmacies that accept discount programs also benefit from
increased customer loyalty and foot traffic that results in increased
sales of other items.
Some pharmacies even offer their own discount card programs. For
example, in September 2001, CVS launched the CVS Health Savings
Pass, which provides people age 50 and over with discounts on
prescriptions and other health care services. Cardholders also have
access to vision, dental and hearing services, a 24-hour nurse line, and
a fax medication alert service in addition to the discounted
prescriptions. CVS also accepts many other commercially available
discount cards.
Myth: PBMs have a higher than average per prescription cost than
cash-paying customers.
Retail pharmacies charge their highest prices to consumers without
drug coverage. In funded prescription drug programs either the health
plan or its PBM negotiates discounted reimbursement rates from
pharmacies. Cash paying customers don't have a PBM to help reduce
their drug costs - unless they enroll in a discount card program. The
Rite Aid drugstore chain recently settled a lawsuit with the state of
New Jersey, which alleged that the store and its pharmacists had raised
prices for consumers not covered by insurance or discount cards.
Further, New Jersey state officials found that among the top nine drugs
used by the elderly for a variety of ailments, the uninsured paid 81 to
183 percent than consumers with coverage.
Retail pharmacy pricing is one of the reasons cash paying consumers
pay high prices for prescription drugs. However, the major reason for
high prescription drug costs is the prices charged by drug
manufacturers. Drug discount cards also attempt to address this
problem by negotiating pricing concessions from drug manufacturers
and passing on savings to the consumers enrolled in their plans.
Myth: Discount cards will hinder patient choice and pharmacist/patient
relationships, and reduce quality of care.
Discount cards do nothing to prevent consumers from seeing any
pharmacist they want. They simply enable the consumer to access
lower prices. Seniors who have trouble paying for drugs often try to
skip doses or simply fail to refill their medications. Pharmacists who
are concerned with their patients' overall well-being should want to
ensure that they are able to access the lowest possible prices.
Discount cards improve the quality of care received by consumers who
enroll in those plans. Unlike consumers with a funded drug benefit,
there is no systematic screening for drug interactions or other
avoidable problems (e.g. incorrect dosing or drug/allergy interactions).
Consumers enrolled in discount card programs have all of their
prescriptions recorded in a central database, which not only tells the
pharmacist what to charge for the prescription, but also alerts the
pharmacist to potential medical issues. Individual pharmacies often
perform this service, but only for prescriptions filled by that pharmacy
or pharmacy chain. Discount card programs expand that protection
regardless of where the consumer fills a prescription.
Discount cards programs usually provide consumers with a large array
of pharmacies to choose from. A patient can always choose to forgo
the benefit of a discount cards and patronize a pharmacy that does not
participate in the program. The argument that discount cards interfere
with pharmacist/patient relationship is disingenuous at best since it is
the pharmacy has elected not to participate. If a pharmacy participates
in a card programs, there is no interference or interruption in the
relationship between the patient and pharmacy or pharmacies used.
Myth: The issuers of these discount cards are under no statutory
provision -- either state or federal -- to protect the confidential nature
of a patient's drug regimen.
In fact, the groups issuing these cards ARE subject to all state and
federal statutes governing the privacy of medical information. They
are directly regulated in their capacity as state licensed, certified or
registered entities, e.g., a pharmacy, a non-resident pharmacy, a third
party administrator, a utilization review organization and/or a
preferred provider organization. They are also directly regulated when
they engage in certain activities falling under the jurisdiction of state
or Federal agencies (e.g., the Federal Trade Commission requirements
concerning fair business practices apply to mail order services).
Under the administrative simplification provisions of Health Insurance
Portability and Accountability Act (HIPAA), which address standard
electronic transactions, privacy of health care information and security
of health care information, pharmacies that transmit information in
electronic form are "covered entities." Covered entities must comply
with a broad range of complex regulations concerning their use and
disclosure of health care information and conduct of electronic
transactions. HHS has authority to audit pharmacies' compliance with
the administrative simplification provisions and to impose sanctions on
pharmacies that fail to comply. Under HIPAA, consumer information
cannot be used for marketing purposes unless the individual explicitly
states a desire.
Myth: PBMs, the entities that often provide drug discount cards, shift
seniors to high-cost brand name products rather than a less expensive
generic.
Generic substitution is widely embraced and enthusiastically promoted
by PBMs. In fact, substitution of lower cost products is a cornerstone
of how PBMs save their customers money. PBMs provide financial
and contractual incentives to pharmacists to encourage generic drug
use. These requirements typically are written into PBM contracts with
employers, state governments, and other PBM clients.
Generic substitution rates for mail order pharmacies are actually
higher than retail pharmacy. One PBM recently calculated the generic
dispensing rate for the top 50 drugs dispensed through its mail order
facility for third-party plans using co-payments for both mail service
and retail prescriptions. About 100,000 prescriptions were dispensed
through mail order with a generic dispensing rate of 31.3 percent. For
the same drugs filled through retail pharmacies, 340,000 prescriptions,
the dispensing rate was 27.7 percent.
Another PBM recently succeeded in implementing one of the most
aggressive generic substitution programs. In August of 2001, Prozac,
the blockbuster anti-depressant, lost its patent. Within one week of
generic availability, Merck-Medco, a PBM that supplies prescription
drugs to more than 65 million beneficiaries, switched 80 percent of
home-delivery subscribers from Prozac to the generic. On the day the
generic version of Prozac was available, Merck-Medco informed topprescribing
physicians as well as patients of the availability and
potential savings.
The GAO similarly concluded that PBMs frequently use generic
substitution. The Federal Employees Health Benefit Plans (FEHBP)
began to contract with PBMs to lower drug costs in the early 1990s.
By 1995, over 58 percent of FEHBP recipients were enrolled with a
PBM. According to the GAO, generic substitution accounted for
about $4 million in estimated savings. By 1995, where applicable,
generic equivalents were substituted over three quarters (77 percent) of
the time.1
Myth: Discount card programs force patients to use mail order
services, reducing access to pharmacy counseling.
The use of mail order services is optional in almost all drug discount
card programs. Many seniors - particularly those who have trouble
getting to the drug store or those who live in remote rural areas -
greatly value the ability to get their drugs through the mail. Mail order
pharmaceuticals often are less expensive because of packaging
efficiencies and lower dispensing fees. All mail service pharmacies
must comply with the counseling requirements of OBRA '90. The
reality is that many, probably most retail pharmacies provide little if
any counseling to patients. Often, the only interaction between a
patient and pharmacy personnel is with a clerk at the counter. Mail
service provides patients the opportunity to talk with a pharmacist, at
the time chosen by the patient, and in a private, secure setting i.e., the
privacy of their own homes. Many patients simply are not comfortable
talking to a pharmacist in a busy retail pharmacy with other customers
nearby.
While retail pharmacists have expressed concerns that mail order
pharmacies steer beneficiaries away, there is evidence to suggest
otherwise. In its 1997 study, the GAO found that over two-thirds of
all prescriptions by FEHBP beneficiaries were filled by retail
pharmacies despite beneficiaries' access to mail order services.
Additionally, the study concluded that enrollee access to retail
pharmacy services has not been substantially limited. In 1995,
enrollees could purchase discounted prescriptions at between 44,000
and 55,000 retail pharmacies or between 80 and 97 percent of
pharmacies nationwide.
Myth: Discount cards eliminate the need for a Medicare drug benefit.
Discount cards are no substitute for a prescription drug benefit. The
Medicare benefit was crafted in 1965, prior to the introduction of most
pharmaceutical therapies. Pharmaceuticals are an integral part of
modern medicine, and should be included to ensure best outcomes for
Medicare beneficiaries.
A drug benefit also would improve quality of care. Senior citizens
face a fragmented health care delivery system. The elderly often have
multiple, and sometimes chronic, conditions which require that they
see several physicians on a regular basis (i.e., specialists, primary care
physician). Streamlining prescriptions and coordinating the overall
care is increasingly difficult, but especially important, for elderly
patients.
PBMs also are better able to contain costs with their insurance
products. It is not uncommon for PBMs to save 20 to 30 percent of
total pharmacy costs for employers and health plans that hire them to
manage drug spending. For example, the GAO found that in the
FEHBP, PBMs saved their plans over $600 million in 1995 compared
previous years without PBM management. These savings reduced the
pharmacy benefit costs each plan believes it would have paid without
using a PBM by between 20-27 percent. Examples from the private
sector frequently are cited in industry analyst reports.
PBMs achieve these savings because they deploy a range of techniques
to control costs while also improving quality. They contact physicians
to ensure that they are aware of what drugs are preferred by the plan.
They employ tiered cost sharing and formularies to give beneficiaries
direct financial incentives to use less expensive equivalent drugs.
They also offer disease management programs to ensure that chronic
diseases such as asthma and heart failure are addressed properly and
that patients get the best care.
Myth: The cost savings resulting from discount cards will hurt patient
quality.
PBMs have a strong history of controlling costs while improving the
quality of care provided to patients. In 2000, PBMs coordinated the
pharmacy benefits of over 200 million people in the U.S. PBMs have
evolved over the last three decades from claims administrators to
complex organizations offering a wide range of prescription drug
management tools.
PBMs provide essential clinical programs and services to help
beneficiaries avoid medication errors, improve drug safety and
increase patient compliance, education and awareness. These services
are required by many employers, state governments, and other PBM
clients because they improve overall clinical outcomes for
beneficiaries and result in a healthier population and better quality of
life. Through their knowledge, clinical information and expertise, and
in accordance with strict confidentiality standards, PBMs provide
critical clinical information and support to patients, physicians and
pharmacists.
PBMs have succeeded in addressing the two fundamental goals:
holding down prescription drug costs and improving the quality of care
provided to beneficiaries. They have done this by developing a broad
spectrum of tools (e.g., formularies, generic and therapeutic
substitution, disease management programs), which are increasingly
being adopted by other entities (e.g., state Medicaid programs).
1 The General Accounting Office. GAO/HEHS-97-47, February 1997.