A couple of weeks ago, I got an email from a reader. (In keeping with the tradition of using Buffy the Vampire Slayer character names we’ll call him Xander). Xander found my website because I have written about MLM scams in the past (such as MonaVie and One24). I get quite a few of these mails since there are literally thousands of these scams, but I can only write about a few of them. This email was about ProvisionRX, a discount pharmacy card.

I was particularly interested in ProvisionRX for a couple of reasons. One, my wife is a pharmacist, I used to be a pharmacy technician, and well, if it is a scam, perhaps I’m in a unique position to spread it at the annual APhA meeting. Some pharmacists might be interested in this kind of thing, but usually they are more concerned with the actual medications. The other reason I was interested in ProvisionRX is that when I looked into it, it appears Xander handed me a gun and gave me a proverbial barrel of fish. Now I just have to shoot them. When you are as Lazy as I am, this is gold. Gold!

So here’s what Xander sent me (some slight cleaning for typos and such):

“Could you look into ProvisionRx? It’s a free prescription discount card. They say that all you have to do to retire in 2 years, is to hand 10 cards a month. Of course you must get others to do the same – more priority on recruiting – by far. I got out of it, having lost $400 plus $39.95 for 4 months – $560 total. You can go into your back-office website and see the usages (prescription fills) handed out after that month. In January I had 3 usages. I honestly tried hard and handed out over 1000 in 3 months! Many are now saying the pharmacy won’t take the card!”

If I were new to MLM, I’d probably miss the large number of red flags here. However, I can spot these a mile away now. Here we go:

• Big Charges to Participate in the Business – It’s $199 to get started, but Xander got pinched for another $189 on top of that. That’s the fee for becoming a trainer, which pays out better.
• Monthly Subscription – The $199 to start includes a $39.95 monthly subscription (we’ll round it $40). That’s for the back-office website and processing of the cards.
• Not a Matter of Effort – Most of the people in MLM say that those who don’t make money simply don’t try hard enough. They pin the blame of the business failure on distributor’s personal performance rather than the circumstances surrounding the business. As we can see, Xander tried extremely hard. This was the inspiration behind a guest post I got for JuiceScam.com: It’s Not a Matter of Effort, it’s a Mathematical Certainty.
• No Retail Sales – The FTC has a guide about MLMs vs. Pyramid Schemes and the key focus point is that there are sales made to people not involved in the business. In this case, the product is a free discount pharmacy card, so there is no sale of product possible to people not involved in the business.
• Focus on Recruiting – I get to this below…

I know what you are thinking… how does one actually make money from the business of handing out free pharmacy discount cards? That’s what I was thinking too. Xander pointed me to a handy video on YouTube explaining how it works (the money earning starts 6 minutes in, so you can just fast-forward there):

The company will pay you $10 to print out ten cards when you join. So far so good.

Next, up… the recruitment

If you thought, “Oh crap. This is where it all goes to hell” you were right.

At around the 7:30 mark, you get to the demonstration of the recruitment. This one is by their own admission, “5 who get 5.” You recruit 5 people to join at the first level, earning $80 each – total of a $400 bonus. When those 5 people sponsor another 5 people they get $10 each or a total of $250. On level 3, there are now $125 giving you $1250. On level 4 we have 625 giving you $6250. The fifth level pays $20 each so at 3125 people, you would be getting $62,500. Total all those bonuses up and it is $70,650. So what’s not to like about that, right?

For that one person to make $70K a total of 3,905 people have been brought in each paying a minimum of $200, paying a total of $781,000 into the scheme for the business of handing out these cards. Keep in mind that it could be double if they opt for the better bonus structure like Xander did. Also, each of the 3,905 people are paying $40 for the back-office software, an earnings of $156,200 a month. Anyone with any experience in pyramid schemes knows that bringing in 3,905 is completely impractical even on a chain. If everyone in the United States was interested in this opportunity… a total of 300 million people, only an average town of 76,824 could mathematically make this money. Clearly, the whole of the United States wouldn’t be interested due to the Reality of MLM and Saturation (some recognize the same, some don’t want to recruit others, some people live in small towns, where recruiting is difficult, most have some form of insurance already and aren’t interested in the product, etc.)

In fairness to the company, the video does say it is perfect example, but they back track from that saying that some will sponsor more and some will sponsor less making it appear to be an average scenario. At the 10:10 mark in the video they pull out the kicker (paraphrased), “Let’s say that you fail by half? Would an extra $35,000 in income next year make a difference to you and your family.” See what they did there? They took an exponential growth example and then divided it by a linear number. Sorry to get all “mathy” with you, but that’s just a ridiculous abuse of mathematics.

Also keep in mind what the FTC says about pyramid schemes:

“One sign of a pyramid scheme is if distributors sell more product to other distributors than they do to the public.”
“Another sign of a pyramid scheme is if the money you make depends more on recruiting — getting new distributors to pay for the right to participate in the plan — than on sales to the public.”

So far all the money, with the exception of the $10 they give you for printing out your card is from recruiting with zero sales made to the public.

However, that just covers the Quick Start Bonus. There’s more payment to be made! Let’s see if its legit or if we are looking at more pyramid scheme shenanigans. The next up is the “Residual Income Infinity Bonus”. The only thing I like better than infinity pool is an infinity bonus. The next time your boss asks you what kind of bonus you think you deserve, you should, with a straight face, argue for an infinite one.

The “Residual Income Infinity Bonus” works like this. If each person in your recruited “team” hands out 10 cards (I presume they could just be printed and tossed in the trash because the company isn’t policing the handing out of cards), you’ll make $1.80. The infinity comes in because it doesn’t stop at level 5 like the Quick Start Bonus, it can go on for infinite levels. Of course if you look at a “6 who recruit 6” scheme the world’s population is exceeded in 13 levels. In a 5×5 scheme, 15 levels is 30 billion, more than 4 times the world’s population. But hey, 15 is pretty close to infinity, right?

The residual income cap is $60,000 a month, but in reality you won’t need that because even in the “perfect scenario” described with the Quick Start Bonus that has 3,905, you’d make $7,029 a month. That’s good money no doubt, but remember the number of 5 who recruit 5 is limited and really only happens for the first couple of people in the company if ever.

That brings us to the third phase of compensation, the income that is generated from the cards. You earn a cut of the discount each time a card is used. When you hand out a card, you get between 25 and 70 cents for each prescription. As Xander explained, in handing out more than 1,000 cards, he got 3 usages (prescription fills), so that’s somewhere between 75 cents and $2.10. Keep in mind, this income doesn’t come from those in your recruited team, but just yourself. This is actually the closest thing to retail sales in the compensation plan as this payment is unrelated to recruiting of any kind. However, without recruiting, you’ll need to see a minimum of 265 usages on those cards in the first month to break even. That’s presuming that they are all of the maximum 70 cent nature. The next month when you have to pay another $40 for your back-office you need to get 55 more. The number nearly triples if you get the prescriptions that pay only 25 cents. The retail business is clearly terrible and nearly impossible to make back your money.

It seems clear that ProvisionRX is a pyramid scheme based on the FTC’s determination of the “money you make depends more on recruiting — getting new distributors to pay for the right to participate in the plan — than on sales to the public.”

I could go on with more about ProvisionRX. He mentions that there is a toll-free number that tells you which pharmacies take it, but when people actually went to use it, the pharmacies didn’t take it. The excuse from the company was that the information in the system is outdated. I can’t speak to that, but if I was that person who paid $199 to get as a distributor and found out that it didn’t work for me, I’d be very unhappy. On the other hand, if I had been given a free card, I might have just figured there was no harm in trying.

In the end, this looks like most basic of pyramid schemes. It reminds me of iJango, which is no longer business. The scam is the same: “Give us money up front and sign on to this subscription. We’ll keep a vast majority of that, but if you recruit enough others to do the same you can eventually break even or perhaps make money. We are happy if you do that, because you just push another bunch of people into the hole. They’ll have to recruit more people to get out of it and we’ll make money each time.”