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How retail pharmacies can play a role in the discount card market

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Prescription drug discount cards are a fast-growing market. The growing complexity of insurance plans and a system of pharmaceutical discounts and rebates that is not visible to the patient have widened the discrepancy

Rodey Wing

between the cost of drugs and what patients actually pay. Additionally, the price a patient pays can vary widely across insurance plans, pharmacy chains and even across locations within a chain. Discount cards take advantage of these discrepancies and offer an alternative — and often a lower price than the cost with insurance. A growing segment of customers are experimenting with discount cards to lower their out-of-pocket costs. As a result, retail pharmacies have an opportunity to play a role in the discount card market. In this article, we explore the market and examine the potential steps pharmacies could take.

The state of the discount card market

The U.S. discount card market has been growing substantially. Over the past five years, discount card use has grown by 60%. As of 2021, discount cards represent 5.4% of U.S. pharmacy adjudications, a 3.3% increase from 2017. That trend is expected to continue, with the market projected to nearly triple by 2027 to become a $355 million industry.

Laura Bowen

What’s causing the boom? A combination of factors, including the increased prevalence of health conditions requiring medications, including anxiety, stress and attention disorders; the higher price of drugs for patients and discrepancies versus the actual cost of the drug; the aging U.S. population requiring more medications (the percentage of Americans over age 65 will grow from 15% in 2020 to 25% in 2060); and the proliferation of discount card programs.

Who uses discount cards?

Who are the patients using discount cards to save money on prescription drugs? ­Kearney’s consumer pharmacy study conducted in December 2022 found that discount card users are prevalent and represent a significant opportunity to capture value.

Most discount card users are insured and use discount cards regularly to supplement their insurance coverage. Our study reveals that at least two-thirds of pharmacy patients in the U.S. use discount cards, even though 90% also have either private or government insurance. The takeaway is that having insurance alone is not enough to exclude customers from the discount card market. Most discount card users pay for prescriptions using their discount cards at least 50% of the time.

Most customers (50% to 75%) at all the major pharmacies (CVS, Walgreens, Walmart, Kroger, Rite Aid) use discount cards. And the discount cards are influencing their decisions about which pharmacies to use. In fact, 20% to 60% of major pharmacy customers say they have switched pharmacies in the past because their card was not accepted.

Mohamed Sulub

This willingness to switch should be concerning to pharmacies that don’t have a compelling proprietary discount card offer or partnerships with discount card companies. Many discount card users are either current or future high-value customers with prescriptions that they pay for with insurance as well as prescriptions that they pay for using a discount card. If the pharmacy doesn’t accept their discount card or provide the discount solutions they need to supplement their coverage, customers will move all of their prescriptions elsewhere.

First, consider the potential of future high-value customers: 44% of discount card users are young adults (age 25 to 44), and 75% of them fill two or more prescriptions regularly. This customer segment represents an opportunity to capture and retain patients who can become even more high-value as they get older, start or grow families, take care of aging parents, and require more prescriptions.

Another group to consider is current high-value patients. For discount card users over the age of 45, more than 80% fill two or more prescriptions regularly and have a chronic or specialty condition. Discount cards that meet the needs of these customers can lock in a source of consistent value for the pharmacy now.

Understanding the discount card business model

Discount card companies make money by collecting referral payments from pharmacies and patient membership fees. To understand the dynamics of that business model, consider the four roles and the value that each role captures:

  • Discount card provider — The discount card provider negotiates drug discounts with participating pharmacies. What are the most popular discount cards? GoodRx is arguably the most well known and holds the largest share of the U.S. discount card market (46% in 2021). The company is driving the overall market growth. Several smaller players are following the trail blazed by GoodRx, including Benecard, United Networks of America, Single­care, Inside Rx and Paramount.

Many pharmacies and pharmacy benefit managers also operate their own discount cards, such as Kroger Rx Savings Club, Walgreens Prescription Savings Club and Optum Perks. Although GoodRx was launched as being independent of any pharmacy or PBM affiliation, as of 2023 it has an exclusive partnership with the major PBM Express Scripts.

Consumers are happy to have discount cards in their pharmacy tool belt. All of the top discount cards have high satisfaction scores. All of the top 12 discount cards in our study scored higher than four out of five, with GoodRx getting the top score.

Discount card providers can negotiate rates between the pharmacy’s net acquisition drug cost and the usual and customer (U&C) price, the typical charge when patients are paying with cash. This way, discount card companies can unlock savings for patients. For each sale, the card provider collects a portion of the drug revenue as compensation for driving the patient to the pharmacy. Some providers also collect membership fees from patients.

  • Marketer — The marketer promotes discount cards to prospective patients through media channels and sometimes ships physical discount cards to patients. As a result, they collect a portion of the drug revenue in exchange for promotional and marketing efforts.
  • Pharmacy — The pharmacy dispenses the drugs to patients with a discount card and charges the discounted price. Pharmacies keep a portion of the drug revenue based on negotiated terms with the discount card provider — and benefit from incremental foot traffic and in-store sales from loyal discount card users.
  • Patients — Patients simply presents their discount card at the pharmacy. Patients save money while accessing the drugs they need. Sometimes, these savings are more attractive than what they would have been with insurance, given high co-pay or deductibles.

The next step for retail pharmacies

Discount cards are not going away anytime soon. The opportunity and demand for pharmacies? Figuring out how to define their role in the market with a compelling offer. With a recession looming, this segment gaining importance with patients.

Forward-thinking pharmacies will consider building a compelling discount card offering and a partner strategy that focuses on what customers care about most and define a strategy to attract and retain them. When considering a discount card offering, pharmacies should weigh the options, including whether to allow discount card companies or create in-house programs. For example, Kroger doesn’t accept GoodRx but offers its own discount card. Others partner with discount card providers, which limits the infrastructure investment needed but, without exclusive agreements, may be less lucrative and offer less robust customer insights.

Regardless, the path forward is clear: A well-constructed discount card strategy is not only important but also vital. Without this, pharmacies stand to lose much more than just discount card prescriptions as more of their highest-value patients look at this as a crucial factor when choosing a pharmacy.

Rodey Wing is a partner in the health practice at Kearney, a global strategy and management consulting firm. He can be reached at rodey.wing@kearney. Laura Bowen is a principal in the health practice at Kearney. She can be reached at [email protected]. Mohamed Sulub is an associate at Kearney. He can be reached at [email protected].


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