Medicare Discount Drug Plan Seen as Little More Than ‘a Start’

The Bush administration unveiled a Medicare drug discount proposal Thursday that even its creators said would not do enough to make prescription drugs more affordable for seniors.

The average 10% to 13% the plan could save participating senior citizens in drug costs is “not a lot,” said Tom Scully, administrator of the Centers for Medicare and Medicaid Services. “But it is a start,” designed to tide the elderly over until Congress can add a prescription drug benefit to Medicare.

Drugstore owners and some consumer advocates called the proposal “a charade” and “much ado about very little.”

Under the administration’s proposal, Medicare would endorse private pharmacy-benefit plans that had negotiated discounts on the types of drugs most often used by the elderly. To receive what Ron Pollack, executive director of the consumer advocacy group Families USA, derisively called the “Medicare good housekeeping seal of approval,” the private plans also would have to demonstrate that they had the capacity to handle the prescription claims of large numbers of Medicare beneficiaries.

In turn, approved private and state-run plans could advertise their discount cards as “Medicare-endorsed,” and Medicare would aim to educate beneficiaries about the advantages of the overall discount program and how to participate in it.

Beneficiaries would pay a maximum enrollment fee of $25 to get a discount card, which they would then present to their pharmacy or mail-order supplier, along with their prescription. The plan does not require a minimum discount level or that all drugs be discounted.

Medicare does not cover the cost of prescription drugs administered outside a hospital. And while many of Medicare’s 40 million beneficiaries have supplemental insurance that covers medications, roughly 38% have no prescription coverage, according to a study by researchers of KPMG Consulting Inc. and the Kaiser Family Foundation.

“The only people who walk into a drugstore and pay full price for prescriptions are seniors and the uninsured,” Scully said.

And prescription drug costs, which jumped more than 17% in 2000, hit senior citizens especially hard because their incomes are relatively fixed and they take, on average, many more medications than younger people. Though they make up 13% of the U.S. population, 34% of all prescriptions dispensed go to senior citizens; and they account for 42% of all prescription drug spending, according to a Families USA study.

So the question now facing senior groups, consumers, lawmakers, drug manufacturers and pharmacies--who all have 60 days to give public feedback--is whether this limited, intermediary step is better for seniors than nothing.

“First and foremost, we want a comprehensive benefit,” said an official with AARP, which represents 35 million Americans age 50 and older. In the meantime, the administration’s proposal would provide a modest discount and, perhaps most important, serve as “a platform or pilot project for how [the government] could run a comprehensive drug benefit,” said the official, who declined to be identified because AARP officials had not thoroughly evaluated the administration’s proposal.

Scully said the discount card plan “lays out the infrastructure” for a Medicare drug benefit by “organizing the purchasing power” until Congress appropriates money for a comprehensive Medicare benefit. He predicted that 10 million seniors would sign up for a Medicare-endorsed discount card.

The administration introduced a similar discount card proposal in July. But drugstore owners and pharmacists, concerned that much of the promised discounts would come out of their slim profit margins, filed suit in federal court to block the plan. They argued that the Bush administration did not have the authority to implement such a program without congressional approval and that it had violated federal rules by failing to allow public comment on the proposal.

U.S. District Judge Paul Friedman blocked implementation of the program in September, saying President Bush had “acted without legal authority.”

Administration officials later said they would go back to the drawing board, revise their proposal, publish it in the Federal Register and submit it for public comment. In November, Friedman gave them permission to proceed.

Drugstore owners made much the same argument Thursday that they did last year.

“Ultimately, the judge will have to decide,” said Larry Kocot, senior vice president and general counsel of the National Assn. of Chain Drug Stores. “But no one gave Medicare the authority to move forward with any prescription discount plan.” Such a plan should be openly debated in Congress, he said.

Although the drugstore owners, like everyone else, “believe any senior with a valid prescription ought to be able to get it filled, someone has to pay for it,” Kocot said.

Because the Medicare proposal does not specify the size of discounts or rebates that drug manufacturers would have to offer to win endorsement, drugstore owners and pharmacists are concerned that the discounts would eat away at their profit margins, which Kocot said are “2% or lower.”

The Pharmaceutical Research and Manufacturers of America, the trade association for drug companies, declined to comment substantively about the proposal, noting that its members had not had sufficient time to evaluate it.

For consumer advocate Pollack, the proposal falls far short of offering significant savings to senior citizens.

“It’s unclear whether a senior purchasing a specific drug would get any savings at all,” he said. In addition, he said, the program does little to promote the use of cheaper, generic drugs and does not directly address the “bulk of drug costs, the three-quarters charged by drug manufacturers.”

As a result, Pollack said, even if the administration’s plan is implemented, continued increases in drug costs will leave more senior citizens unable to afford the drugs they need.

“President Bush’s proposal will provide very little relief.”