Considerations for Launching and Operating Prescription Discount Card Programs

America spends more on prescription drugs than any other country in the world.[1] Although most patients have some form of insurance to help offset the costs of their prescriptions, 28% of Americans currently take a prescription medication that is not covered by their insurance.[2] 13% have no form of insurance at all.[3] Without insurance coverage, patients are forced to bear the entire cost of their medication—a price that can be hundreds, if not thousands, of dollars per month. In recent years, however, prescription discount card companies, like GoodRx, have increased their presence in the prescription drug supply chain to help patients afford their medications. State lawmakers noticed this increasing presence and, as a result, began regulating prescription discount card programs via state regulations and/or statutes. Accordingly, before operating your own prescription discount card company, operators must be aware of several common laws that regulate prescription discount card programs.

What is a Prescription Discount Card?

To understand how a prescription discount card program is regulated, it is critical to understand when and how these cards are used. Prescription discount cards offer cash patients a way to lower the price of their medications. Generally, prescription discount card companies create BIN and Group numbers, produce print or digital “cards,” and distribute them to patients to be used to process cash claims. Essentially, when a cash-paying patient comes into a pharmacy with a prescription discount card, the pharmacist processes the card through the pharmacy’s software system, and the discount card reduces the cash price. Some prescription discount card companies require a patient to register beforehand and will issue a personalized card, while others are simply printable, mailed, or available online and are identical from patient to patient.

Importantly, prescription discount cards are not synonymous with copayment coupon cards. Unlike copay coupon cards, prescription discount cards apply only to cash payments and cannot be used in combination with private insurance. Copay coupon cards are designed to offset the copay that the patient must pay to make it easier for the patient to afford the branded medication covered by the coupon program. Conversely, prescription discount cards are designed to provide a discount on the total cash price for any cash-paying patient.

Licensure Requirements to Operate a Prescription Discount Card Company

A foundational element of operating a prescription discount card company is understanding where, when, and under what conditions a prescription discount card company is required to register/obtain a license from the state in which it is operating. Currently, just under half of all states require prescription discount card companies to obtain a license or otherwise register with the state before  operating in that state. However, certain states maintain licensure laws that may not apply to every prescription discount card company. For instance, some states specifically exclude companies from the licensure requirement if the company only offers discounts on prescription drugs. Other states only require prescription discount card companies to obtain a license when the prescription discount cards are only accessible by patients in exchange for payment (i.e., fees or dues that must be paid to the prescription discount card operator to utilize the prescription discount card) or other considerations.

Although licensure requirements may seem rather simple in the abstract, even a seemingly straightforward form of regulating prescription discount card programs can be complex when examined closely. For example, in states where licensure is only required for prescription discount cards that receive payment or other consideration directly from the patient-user in exchange for the discount card, what constitutes “other consideration”? Has a patient provided consideration simply by utilizing the prescription discount card company’s BIN and Group numbers, thus giving the prescription discount card program access to patient data that it may sell for a profit? As illustrated by the previous example, licensure requirements can be complex depending on a particular discount card program’s business model and operations. Ultimately, prescription discount card operators must be aware of which states have licensure requirements and understand that although its particular business model may not require a license in one state, the same may not be true in other states in which it operates.

Regulation of Prescription Discount Card Marketing and Mandated Disclosures

Prescription discount card operators must be cognizant of how they market their company as nearly all states regulate how prescription discount card companies can be marketed. Although state laws may differ slightly, the following requirements are prominent in nearly every state:

  • All advertisements, marketing materials, and the prescription discount card itself (“Marketing Materials”) must be truthful and not misleading;
  • Marketing materials cannot use the terms “insurance,” “health plan,” “coverage,” “copay,” “deductible,” or any other terms in a way that may mislead an individual into thinking a prescription discount card is a form of health insurance;
  • Marketing Materials must not include any fraudulent representations concerning the available discounts;
  • Required disclosures (i.e., that the prescription discount card is not a form of insurance) must be clearly legible and conspicuous on all Marketing Materials; and
  • Marketing Materials must inform individuals that by using the prescription discount card, the patient-user is responsible for the entire remaining cost of the prescription after the discount is applied.

While the requirements noted above are the most common, prescription discount card companies should note that each state’s laws are different, and as such, additional regulations may apply when marketing prescription discount card programs.

How Frier Levitt Can Help

Navigating the often-complex regulatory scheme surrounding prescription discount card programs can be onerous. Critically, failure to comply with applicable state laws and regulations may result in potentially significant penalties, including, but not limited to, substantial monetary fines. Thus, before operating a prescription discount card program, operators must be sure their company is compliant with the requirements of each state in which it operates. For help understanding the legal requirements applicable to your prescription discount card company, contact Frier Levitt. Our attorneys have the experience and knowledge to help prescription discount card companies operate in compliance, including 50-state surveys analyzing which laws may impact your business in each state.

 

[1] See Langreth, Robert; Why Prescription Drug Prices in the US Are so High, Bloomberg, available at https://www.bloomberg.com/news/articles/2022-07-19/why-prescription-drug-prices-in-the-us-are-so-high-quicktake?leadSource=uverify%20wall.

[2] See Guttentag, Sasha; Survey: More Americans are Uninsured Compared to Last Year, and Prescription Medication Hasn’t Improved, GoodRx; available at https://www.goodrx.com/insurance/health-insurance/survey-more-americans-uninsured-compared-to-last-year.

[3] Id.

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