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Medicare Prescription Card Plan Runs Into Opposition

Kate Traynor

The Bush administration is moving quickly to establish a Medicare-endorsed prescription-drug discount card program for seniors, but community pharmacy organizations are rising in opposition.

The discount plan, which would enable Medicare beneficiaries to enroll in special discount card programs run mainly by pharmacy benefit managers (PBMs), was unveiled by the president a week ago. A notice (PDF) describing eligibility requirements for participating PBMs was published yesterday in the Federal Register. And the public has until the end of today to submit written comments and recommendations about yesterday’s notice.

The Department of Health and Human Services (HHS) has requested that the Office of Management and Budget finish an "emergency review" of the Federal Register notice by tomorrow so that the program can begin in January 2002. If all goes as planned, the PBMs can begin enrolling seniors this November, and the discount cards will be active in January.

According to the National Association of Chain Drug Stores (NACDS) and the National Community Pharmacists Association (NCPA), which have filed a lawsuit to stop the discount card program, the recent public disclosure follows months of closed-door negotiations between the Bush administration and five leading PBMs. Representatives for these PBMs—Express Scripts Inc., Caremark Rx Inc., Merck-Medco Managed Care LLC, AdvancePCS, and WellPoint Health Networks Inc.—were present when Bush announced the plan last week at The White House.

"It truly angers us that a federal agency would barter away the 35 years of goodwill associated with the Medicare name, and all the trust embodied in it, through a tawdry backroom scheme that didn’t receive the public scrutiny that the law requires," said S. Lawrence Kocot, senior vice president and general counsel for NACDS. Kocot made the remark during a press conference held yesterday in Washington, D.C., to describe the lawsuit and the reasons behind it.

In addition to protesting the lack of public notice and input on the discount card program, the lawsuit alleges that HHS and its Centers for Medicare & Medicaid Services (CMS) lack the authority to create the card program.

The lawsuit, which was filed in the U.S. District Court for the District of Columbia, also claims that the eligibility requirements outlined in yesterday’s Federal Register notice are "arbitrary and capricious." Among the reasons for this allegation are the requirements for participating organizations to have been in business for at least five years and to provide prescription-drug services to at least 1 million "covered lives," 2 million if not a regional operation.

All five of the PBMs involved in crafting the discount card program would have card plans that qualify for Medicare endorsement, Kocot said.

Prescription-drug discount cards are not a new idea, although federal endorsement of card programs is unprecedented. Today, consumers can sign up for discount cards offered by PBMs, nonprofit organizations such as AARP, and some community pharmacies. Such cards may charge an annual fee and give consumers discounts on prescription drugs purchased at participating community or mail-order pharmacies.

According to HHS, the Medicare discount card program will save seniors about 10–25% on prescription-drug costs. The savings are expected to come from drug manufacturers’ rebates as well as enrollment fees of up to $25 that the PBMs can charge seniors for the cards. PBMs are encouraged—but not required—to share their rebates with seniors and pharmacies. But, PBMs are not expected to disclose to CMS any information about money the groups obtain through rebates.

"The way the administration thinks this is going to work," Kocot said, "is that the manufacturer’s rebate is going to flow all the way down to the seniors somehow."

This, Kocot said, is different from the way rebates work today. "In the current market, the manufacturer pays a rebate to the PBM on an expensive…brand-name drug. The PBM then keeps the rebate....They don’t pass it along to the consumer...[or] the pharmacy."

In reality, said NCPA Executive Vice President Calvin J. Anthony, the savings will be extracted from the already slim profit margins of community pharmacies.

"We just can’t absorb the humongous discounts that are being promised," he said during yesterday’s press conference.

ASHP last week joined NCPA, NACDS, and five other pharmacy-related professional organizations belonging to the Pharmacy Benefits All Coalition in drafting a letter to Bush urging him to abandon his Medicare prescription-drug card plan. A copy of the letter, which was also sent to HHS Secretary Tommy G. Thompson and CMS Administrator Thomas A. Scully, is available at the ASHP Web site.

ASHP is not a participant in the lawsuit filed by NACDS and NCPA.