As I mentioned in my previous post about the new KnoxRX drug discount card, I e-mailed the local company, Advantage Wellness of America, with several questions about how the program works.

Debbie Cole, President of AWA, who said they had been bombarded with phone calls and e-mails, was kind enough to take time out to reply. Here's what she said:

Read more after the jump...

Q (KnoxViews): How does the card work when purchasing prescriptions? For example, would someone without any other prescription drug insurance coverage purchase their prescriptions the same as before, except at a discounted price? Do they get billed for a co-pay or something by AWA?

A (AWA): Discount is given at the point of sale. The consumer pays 100% of the discounted amount at the pharmacy. Since it's not insurance, there is no provision for copays, deductibles.

Q: How does the pharmacy know what discounted price to charge? How are they compensated for the difference in price? Does AWA pay them, or are they not compensated, or how does that work?

A: AWA/UNA has contracted with a PBA HealthTrans to bring this program to consumers. The dollars generated thru the program are pharmacy processing fees, something pharmacies pay any time an insurance card is used. Our fees are actually less than most at $1.80. The adjudicator receives $1, AWA receives $0.80.

Q: What is the relationship with Knox County? Are they a client of AWA? I
read in the WBIR report that the county gets 40 cents every time the card is used to fill a prescription. Who pays for that? Does the county pay AWA for administering the program?

A: Our CEO Tim Helton noticed in the paper that the County intended to enter into an agreement with CareMark (another PBA/PBM)through NACO. We approached the commission and told them we could handle it locally and we could do it via an online card creator program at no expense to them. They liked the idea of helping the citizens and it not costing them anything.

Q: What services does AWA provide the county for this program?

A: The access to our PBA contract. We also provide the toll-free number, websites, personnel.

Q: How does AWA earn revenue from the program? Does someone pay a
per-transaction fee, and if so, how is it collected?

A: Pharmacies pay a processing fee of $1.80. See above.

Q: What is the relationship between AWA and UNA and HealthTrans (the website that provides pharmacy locations and pricing)? Does HealthTrans administer the program?

A: HealthTrans is the PBA for our programs.

Q: How are the discounts made possible? Do UNA, AWA, HealthTrans, Knox
County, or all of the above get rebates from pharmaceutical manufacturers?

A: HealthTrans negotiates with the drug companies. AWA and UNA have contracts with HealthTrans. No rebates. See the HealthTrans site for additional info on how PBAs work.

Q: How is the KnoxRX card different from the UNA card available to anyone at unarxcard.com?

A: No difference. You could download one from there. The cards downloaded from the KnoxRXCard site will help put money back into non-profits in the Knox County area.

Q: Why hasn't TennCare partnered with AWA/UNA to reduce prescription drug
costs?

A: I believe TennCare does partner with a PBM or PBA.

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So this actually sounds like a pretty good deal all around. I didn't know pharmacies paid a fee when insurance cards are used, but I guess that makes sense if they want to get paid. This is an interesting way to tap into that revenue.

Ms. Cole says AWA, UNA, and Knox County do not receive rebates, but PBM provider HealthTrans says on their website that rebates factor in to the pricing they negotiate with drug companies and that the savings are passed on to their clients. So using these programs is a way for consumers to tap into that. Wish I had known about it before.

It's also good to know that using the KnoxRx card puts money back into the community, so I guess I'll get one of those cards and try it out. Now maybe AWA should talk to Blount County so we can get the program over here, too.

(I still say that this is all crazy complicated, and prescription drug companies should just lower their prices for everybody. But like I also said, I'm happy to save $30 or so per month however it works.)

UPDATE: One thing I'm still not clear on is how the pharmacy gets compensated. It seems to me like they are paying a fee to charge you a lower price. There must be some something in it for them? I sent a follow-up e-mail, hopefully Ms. Cole can explain that part.

UPDATE: Ms. Cole has again graciously taken time to respond to that last question. Here is her response:

"Let me explain it this way... when a person has health insurance with an RX benefit, the insurance company has contracted with a Pharmacy Benefit Manager (PBM) or Pharmacy Benefit Administrator (PBA) to process the claims and to negotiate pricing and rebates with the drug companies. The pharmacies contract with the PBM or PBA network and are required to fill the drug at the negotiated rate. When insurance is involved, there is another step... the adjudicator (PBM/PBA) of the claim must determine copays, deductibles, etc. The pharmacy then typically collects the amount from the customer and is paid the remaining amount due by the insurer.

Our RX cards merely offer the consumer the discounts that everyone with health insurance is already getting. When pharmacies fill prescription drugs through a PBM or PBA network, they pay a processing fee. This is true for all prescriptions filled through a network. Those processing fees can be as high as $4 to $5. Our processing fee is $1.80. So, the pharmacies are paying this fee already. I hope this makes it clearer.

Years in the insurance industry have led me to this conclusion: The most important aspect about health insurance is the negotiated discounts that an insurer or network has negotiated with providers. Take a look at an Explanation of Benefits (EOB). The discounts offered thru a BCBS or Cariten are sometimes as high as 75%.

Let me give you an example: If I have a $10,000 bill for a hospital stay, but the insurance company has negotiated a 45% discount, the claim is processed at $5500 and the hospital is required to write-off $4500. They do this because the insurer routes patients their way. Without insurance, you pay what are called billed rates (the $10,000 I referred to in the example above), unless the hospital has a sliding scale or will negotiate a discount with you individually.

However, look at all the citizens in our community who don't have access to health insurance because they just can't afford it or because they're uninsurable. What we're trying to do is to deliver the network discounts to people who can't get the insurance part."

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(Hey, I'm starting to like these guys more and more. This is a pretty good approach in lieu of a national single-payer health care plan.)

So essentially, what's in it for the pharmacy is that if they don't participate their customers will go somewhere else to a pharmacy that does. And they are already giving some customers the negotiated discounts. Which I guess uninsured (pharmacy-wise) guys like me have been subsidizing. So it only makes sense for anyone who doesn't have a pharmacy insurance benefit to get in this program. I don't see a down side.