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9/7/2001

Judge Puts Brakes on Medicare Prescription Drug Card Program

Kate Traynor

In a victory for community pharmacy groups, federal Judge Paul L. Friedman said yesterday that he will sign an order temporarily blocking the creation of the Medicare prescription-drug discount card program proposed two months ago by President Bush.

The injunction responds to a lawsuit filed in July by the National Association of Chain Drug Stores (NACDS) and the National Community Pharmacists Association (NCPA). The lawsuit, a complaint against Health and Human Services (HHS) Secretary Tommy G. Thompson and Centers for Medicare & Medicaid Services (CMS) Administrator Thomas A. Scully, alleges that the discount card program is illegal.

The program, which was to begin enrolling patients in November and be active in January, would allow Medicare beneficiaries to receive special discount cards issued mainly by pharmacy benefit managers. The cards would cost seniors up to $25 and would entitle cardholders to receive prescription drugs for a price negotiated between card administrators and drug manufacturers. HHS estimated that the cards would save Medicare beneficiaries 10–25% on the price of prescriptions—a claim that NACDS and NCPA said is unrealistic.

Friedman, ruling for the U.S. District Court for the District of Columbia, found merit in two of the pharmacy organizations’ arguments against the plan—that HHS lacked authority to create the program, and that the program was created without following federal rule-making requirements.

In addressing the issue of HHS’ authority to create the program, a Justice Department lawyer had likened the discount card plan to a patient education program. Congress, said the attorney, allows HHS broad authority to create patient education programs.

Friedman disagreed. "I don’t see that that’s what Congress envisioned," he said, noting that the discount card program does not fit in with the current role of Medicare.

A July announcement by HHS had claimed that the plan "can be implemented without Congressional action." The Justice Department argued yesterday that regulatory rules did not apply to the discount card program, which was designed to be a voluntary program for patients, pharmacies, and pharmacy benefit managers.

But Friedman agreed with the pharmacy organizations’ claim that the discount card program is a "substantive rule." In creating the program, he said, HHS had circumvented the legal requirement to post a public notice and allow for comments on the regulation.

Friedman also discussed whether the discount card program would cause "irreparable harm" to community pharmacies—a legal concept the judge said does not normally apply to economic issues. But, he said, the government’s involvement in the program complicates the picture because of the worth of the Medicare name.

"What’s at stake here is a valuable commodity," Friedman said of the Medicare endorsement created by the discount card program.

In granting the temporary injunction, Friedman put the brakes on CMS' plan to begin announcing on Sept. 21 the names of organizations endorsed by Medicare to offer prescription discount cards.

Friedman said the lawsuit’s merits were strong enough to justify an immediate slowdown of CMS' plans.

"In a case like this...preserving the status quo is important," he said.