PAAS National Articles

Cash Card Controversy

H. Edward Heckman, R.Ph.

When you signed your first third-party contract, you intended to service prescription patients with a particular insurance program. Little did you know that the contract you signed would apply to non-insurance patients. And the most remote thought was that it could force you to waive your right to bargain directly with your own cash patrons. Indeed, this is the turn of events initiated by many pharmacy benefits managers (PBMs) who are administering cash card programs for non-insurance based customers.

What I am referring to are your patients with prescription cards that require a 100% copay. The most common term for this progeny of prescription plastic is cash card. They are also referred to as consumer cards, discount cards, point of sale cards and 100% copay cards. Call them what you want, PBMs are interfering with your cash prescription business by offering these programs to your patients.

The typical scenario goes something like this. A customer responds to a solicitation to obtain a cash card to be "honored in pharmacies across the country for discounts up to 60% on prescription drugs." These cards are either sold to consumers or offered as incentives for other activities. The customer who paid your usual and customary price yesterday comes today loaded with their new consumer weapon, ready to cash in on huge discounts on prescriptions.

These solicitations and advertisements are hitting our population from all sides. Cash cards are being sold through banks, gas stations, trade associations, clubs, television, direct mail, and the internet.

The local bank down the street from your pharmacy, without your knowledge or permission, may offer customers who open new accounts a discount cash card on prescriptions at your pharmacy. What are the ethical considerations for such activity? What right does the bank have, legal or ethical, to discount your prices? What would happen if you reciprocated by offering new prescription customers higher earnings on their savings accounts at the neighboring bank?

A recent Wall Street Journal article revealed the planned move by 7-Eleven to begin selling prescription discount cards for $10.00 in their convenience stores. Similar in concept to prepaid long distance phone cards, it will entitle purchasers to discounts on prescriptions and eyeglasses. This program is being offered to 7-Eleven by PAID Prescriptions. It is called the Rx Benefit Card and is touted to save consumers from 10% to 50% on prescriptions. The Rx Benefit Card will have a limited life of 90 days once purchased. This new offer and the 7-Eleven announcement created so much controversy from community pharmacies, that the project was placed on hold.

Jerry Sveum, co-owner of Grand Avenue Pharmacy in Beloit, wrote a letter to the editor of the local Beloit newspaper regarding the cash card offers made by Providian. Sveum states he wrote the letter because "They've (Providian) been advertising like crazy at $7.95 a month. At $7.95 a month, that's about $100.00 per year. $100.00 per year to pay someone else to negotiate a discount is unacceptable. You (the patient) can do better."

For pharmacists, cash cards are a thorn in their sides. With third party and managed care demands of lower reimbursements and more services, the last thing pharmacists need is interference with their last vestiges of cash paying patients.

All of us have been at the wrong end of an irritated customer when their newly acquired cash card didn't deliver discounts that measured up to their expectations. In fact, boastful advertising by Blue Cross in Georgia resulted in a lawsuit for false advertising. Many consumers falsely believe that their cash card will save them big money on maintenance medications. The reality is that competition drives cash pricing in the marketplace. Price discounts from a cash card may be nonexistent.
One of the fairest offers to consumers comes from Mutual of Omaha and their Prescription Program administered by Diversified Pharmaceutical Services, Inc. Their solicitation states, "not an insurance product and does not provide insurance coverage." The Mutual of Omaha offer goes on to inform consumers that "some pharmacies routinely offer discounts to all customers on certain high-volume medications. For these medications, your preferred price may not be less than the discounted price."
There are a host of legal and ethical issues focused around the cash card controversy. At the forefront is the debate over serving non-insurance based customers through third-party contracts. Not at issue are instances of insurance companies using 100% copay programs to streamline and administer the major medical insurance component of their programs. The insurance companies using cash cards for their major medical components feel they can reduce paper claims, improve efficiencies and control drug costs.

It is the non-insurance based cards (see table) that raise ethical concerns. It isn't fair and is seemingly an interference of trade for third parties to offer discounts at pharmacies without the express permission and consent of store management. When I owned my store in Chicago, I felt cheated and violated when a cash card would take me by surprise. I was not willing to relinquish my right to be able to deal directly with my own cash paying patrons. I refused to honor any cash cards. Jerry Sveum comments, "They're certainly getting passed off as insurance cards and they're not, of course."

Apparently, many area drug chains agree and are unwilling to honor most of the cash cards. Snyder Drugs, based in Minneapolis, made a corporate decision a couple of years ago to refuse cash cards. While declining to officially comment, it is a strong belief that Walgreen is honoring only a very few cash cards. If the program doesn't measure up to their profit criteria, they do not accept it.

Some interesting legal issues are also focused around cash cards. PBMs do not fall under any special state or federal laws or regulations. While insurance companies are licensed and closely regulated and controlled; pharmacy benefits managers slip between the cracks. Without regulation, PBMs can enter into many ventures off the beaten path without repercussions or accountability.

The second legal issue with cash cards focuses upon antitrust laws. These laws prevent collusion by pharmacy owners to establish third-party terms on insurance-based programs. Do anti-trust laws apply to the same degree and manner to cash cards? Perhaps they do not. After all, pharmacies that ban together to decline these programs aren't trying to negotiate or set uniform pricing from store to store. They are only fighting to maintain their direct relationships with cash patrons. Money might be well invested for pharmacies to explore and challenge this issue.

With cash cards come the added risks and burdens associated with doing business with third parties. There are switching and electronic transaction fees. The inherent latent liability associated with audits and possible charge-backs looms on the horizon. Of course, you must deal with plan guidelines, limitations, DUR messages and formularies.

PBMs take advantage of their provider contracts to force pharmacies to agree to provide these cash card services to non-insurance based clients or threaten you with possible termination. One example is the language contained in PAIDís newly issued Pharmacy Services Manual. Section 4.1 states "Pharmacy is required to participate in a variety of plan designs including those which permit access to a negotiated discount when producing an identification card and paying for the prescription at the point-of-sale." If you refuse a PAID cash card, you may be in breach of contract.

You do have a chance, in some cases to control your destiny. As an example, PCS has allowed providers to selectively opt out of their cash card networks (CCP01 and CCP02). I am not aware of any widespread retaliation or retribution from other third parties when pharmacies elect to decline servicing cash cards.

Every community pharmacy operator must make a decision on what is best for his or her business operation. Keep in mind that chain stores know where their bottom line is and stick to it. It is believed that Walgreen won't participate in cash card programs reimbursing less than their usual and customary charges. One strategy you might employ is to opt out of these programs. Another strategy may be to create your own discount card for your pharmacy to be used to replace the cash card.

I urge each pharmacist to encourage third parties to unbundle cash card programs from their basic provider agreements and make them a separate option for provider participation. Many of the ethical questions would be mitigated if pharmacists were allowed to control their destinies.