In early 2024, Change Healthcare announced that it would be winding down its prescription discount card lines of business and would cease acting as an administrator for companies using Change Healthcare to process cash discount claims. Change Healthcare began providing notice to prescription discount card companies and marketing firms that it would be terminating their marketing and service agreements, with the terminations being set to take effect in late-May 2024. What’s worse, Change Healthcare also indicated that it would be discontinuing altogether the BIN, PCN and Group Numbers associated with their cash discount card programs, throwing the ability of prescription discount card companies and marketing firms to continue their businesses into serious jeopardy.
Background on Prescription Discount Cards
By way of background, prescription discount cards operate by allowing pharmacies to process claims for cash-paying patients to third party plans, who adjudicate the claims and provide a lower negotiated price that patients can pay, often representing a reduction off of normal usual and customary/list prices for the drugs. Pharmacies submit the claims to a BIN, PCN and Group Number associated with the prescription discount card plan, and in exchange, pharmacies remit a portion of the amounts collected from the cash-paying patients to the prescription discount card plan.
While some companies develop and manage the programs entirely by themselves, many prescription discount card companies operate more generally as marketing companies, developing branding, content and copy for the cards and other materials, and engaging in direct pharmacy outreach to increase adoption and utilization of the cards. These companies, in turn, rely on processors like Change Healthcare to establish and register the BIN, PCN and Group Numbers associated with the prescription discount programs. As part of operating the programs, the processors to not only negotiate with pharmacies to establish the negotiated prices for otherwise cash-paying patients, but also directly process claims at the pharmacies, collecting the administrative fees and passing on the fees to the marketing companies.
Change Healthcare Terminating Contracts and Discontinuing Prescription Discount Card BINs
Change Healthcare’s announcement was particularly concerning to prescription discount card companies and marketers, as the BIN, PCN and Group Numbers assigned by Change Healthcare are critical assets and intellectual property of such companies. Pharmacies often “pre-load” the BIN, PCN and Group Numbers associated with preferred prescription discount cards into their pharmacy management software so that they can be easily utilized by pharmacy staff looking for savings for patients. In other instances, pharmacies will post the BIN/PCN/Group Numbers next to the pharmacy counter for quick easy of reference. Prescription discount card marketers get residuals over the continued use these BIN/PCN/Group Numbers over time. By discontinuing the BIN/PCN/Group Numbers, pharmacies will no longer be able to process claims to those programs, and will surely find alternative prescription discount cards. All the past marketing efforts and business development by these companies would effectively be lost forever.
Cyber Attack on Change Healthcare Making Matters Worse
The harm from this recent decision by Change Healthcare is further compounded by the fact that Change Healthcare is undergoing a massive outage due to an ongoing cyber attack. The cyber attack has disrupted virtually all functions of Change Healthcare’s switching services. This has resulted in not only prescription discount card companies not getting paid for past claims processed by pharmacies before the cyber attack, but also in pharmacies being unable to process any claims to prescription discount card programs administered by Change Healthcare. This is resulting in pharmacies moving such cash-paying patients to other prescription discount cards that process on other switches unaffected by the outage. This outage runs the risk of not only impacting prescription discount card companies’ short term cash flow, but long term success as well.
Strategies May Exist
Fortunately, options do exist for prescription discount companies facing termination by Change Healthcare. First, the service agreements between prescription discount card companies and Change Healthcare set forth certain rights and obligations that might not have been met by Change Healthcare. For example, the agreement sets forth certain notice requirements on issues such as contract termination. Moreover, companies may have auditing and accounting rights, whereupon they can review past claims and ensure that they have been paid appropriately. Finally, with the interruption caused by the cyber attack, companies may also have breach of contract claims relating to Change Healthcare’s failure to maintain the network in good condition allowing pharmacies to process claims to prescription discount programs.
In addition, prescription discount card companies are encouraged to explore rights in migrating their associated BIN/PCN/Group Numbers to another switch or prescription discount processor. If a prescription discount card company owns its own BIN, PCN and Group Numbers, the migration may be more straightforward. If the BIN/PCN/Group Numbers are owned by Change Healthcare directly, the migration may be more difficult, but not impossible, given options to re-route claims to new BIN/PCN/Group Numbers through the switching process.
How Frier Levitt Can Help
Frier Levitt represents many prescription discount card providers and marketing companies, and has experience in dealing with Change Healthcare’s recent actions and interruptions. Frier Levitt has also represented prescription discount card companies in seeking accountings of unpaid or improperly paid claims from prescription discount card processors, as well as negotiating agreements with new processors. If your prescription discount card company is facing interruption with Change Healthcare, contact Frier Levitt to speak with an attorney.
