Stage Set for Drug Benefit Battle

Everyone--make that everyone--in Washington wants to make prescription drugs more affordable for the elderly, especially the poorest among them.

“Now’s the time” for Congress to pass a drug benefit, the Pharmaceutical Research and Manufacturers of America, the voice of the big drug manufacturers, says in television and newspaper advertisements.

But agreement ends where philosophy gives way to practicality. So deep are the divisions that meaningful congressional action is a longshot this year.

The contentious debate over how to ensure access to prescription drugs will probably force politicians to reconsider government’s role in health care and raise new concerns about influence of the powerful health-care industry.

Nearly a decade ago, President Clinton’s national health insurance proposal served this purpose, preoccupying Congress before being rejected as too cumbersome and expensive. Now prescription drug coverage for the elderly, though much narrower in scope, could have the same effect.

Prescription drugs taken outside the hospital are not covered by Medicare. And thanks to the financially lethal combination of the drugs’ higher prices and their broader use, they are becoming an ever-greater burden on the budgets of the elderly.

Seniors’ groups and consumer advocates are demanding that somebody fill the gap between what the elderly need and what they can afford.

“So many people now agree that this should be done, I don’t think Congress can afford to drag their feet on this,” said John Rother, director of policy and strategy for AARP, which has 35 million members age 50 and older.

Many political leaders have responded--but not with one voice.

President Bush has proposed letting the elderly buy into existing private drug-discount cards. Cardholders would receive substantial discounts from drug companies, which would benefit by gaining access to huge sources of potential customers.

The discount cards, which would cost the government little, are intended as a stopgap on the way to broader Medicare reform, which the administration has proposed funding at $190 billion over 10 years.

But community pharmacists and retail drugstores fear that the government-endorsed discounts would come out of their profit margins. They have sued in federal court to block Bush’s proposal.

The big companies that make the familiar brand-name drugs also oppose other efforts to make prescription drugs more affordable. They have revved up their formidable lobbying machine to oppose state cost-control measures and federal legislation that would favor lower-cost generic drugs.

A spokesman for PhRMA said a Medicare prescription drug benefit would lead to government regulation of drug prices just as surely as Medicare’s basic coverage led the government to regulate the delivery of medical care to the elderly.

AARP has been concerned primarily with the size of a prescription drug benefit. Like PhRMA, it believes any benefit should be voluntary: The elderly should be able to use an annual Medicare grant to buy insurance on the private market. If the government premium for drug coverage is too high, AARP says, the elderly simply won’t buy that type of coverage. It estimates the 10-year cost of an adequate drug-benefit program at as much as $750 billion over 10 years.

The need for prescription drug coverage has grown urgent because three forces have converged to create “almost the equivalent of a perfect storm,” says Ron Pollack, executive director of the consumer group Families USA.

Although many elderly Americans purchase private insurance coverage for their prescription drugs, at least half of the nation’s 40 million Medicare recipients go without coverage for at least part of each year.

And even for those who are insured, premiums and co-payments are increasing as employers, faced with rising health insurance costs for their employees, are cutting back on benefits for their retirees.

What makes these two trends acutely important is a third: the soaring cost of prescription drugs.

National spending on prescription medications grew by 19.2% in 1999, 17.3% in 2000 and 18.2% in 2001, according to the government’s Centers for Medicare and Medicaid Services and the private National Institute for Health Care Management. While prescription drugs account for barely more than 10% of the nation’s health-care spending, the government agency said, they represent the single fastest-growing health cost, and they are most responsible for the return to double-digit health-care inflation.

About half of the spending increase is because of the growth in the number of prescriptions used by the rapidly increasing 65-and-older population, according to Stanley S. Wallack, executive director of the Schneider Institute for Health Policy at Brandeis University. The other half, Wallack says, stems from the rising cost of individual prescriptions--even though some prescription drugs are only slightly better than over-the-counter remedies and generics.

Families USA found that the average number of prescriptions (including refills) filled by seniors annually increased by 45% from 1992 to 2000 (from 19.6 to 28.5) while the average prescription price increased by 49%, from $28.50 to $42.50.

Taken together, those two factors meant that the average elderly person spent more than twice as much on drugs in 2000 as in 1992.

Spiraling prescription drug costs are forcing state governments, insurers and businesses to implement controversial cost-control measures. Sixteen states have cut or are considering cutting payments they make to pharmacies for filling Medicaid prescriptions. In turn, many drugstores in those states are threatening to reduce their hours, close stores in poor neighborhoods or stop participating in the Medicaid programs, which also serve the nation’s poorest seniors. In Charlotte, N.C., several Kerr Drug Stores will close next month.

In California, state law requires pharmacies that participate in Medi-Cal, the state’s Medicaid program, to offer Medicare beneficiaries the same 20% drug discount received by Medi-Cal patients. However, a Rand Corp. health study released this month by the California HealthCare Foundation found that only 75% of enrolled pharmacies gave seniors the required discount. And in more than half the pharmacies, seniors had to ask for the discount to get it.

Other states are restricting the number of prescriptions Medicaid patients can fill each month before physicians must convince program officials that their patients really need additional medications.

And some states are seeking greater discounts from drug manufacturers. PhRMA sued the governments of Florida, Michigan and Maine to stop what assistant general counsel Jan Faikes called their “hijacking of [Medicaid] patients to force us to pay higher rebates.” PhRMA is appealing first-round court rulings that upheld the legality of the state programs.

Many older Americans experience sticker shock when they retire and switch from their employer’s health plan to Medicare and have to pay full freight for their drugs. A recent public opinion poll commissioned by AARP found that 80% of Americans 45 and older want a Medicare drug benefit.

Among AARP members, the sentiment is even stronger. Such a benefit is the No. 1 priority for congressional action not only for members 65 and older but also for those ages 45 to 64, Rother said.

And no politician wants to tell AARP’s 35 million members that their No. 1 priority is out of reach.