By Patricia Barry
September 2001

	Comparison Chart of Drug Discounts

Announcing his new plan for a Medicare prescription drug discount card, President Bush said: "Present the card at a participating pharmacy and you receive a substantial discount. It's as simple as that."

Thomas Scully, head of the federal agency that runs Medicare, agrees. He calls it a good "no-brainer" idea that—until a Medicare drug benefit works its way through Congress—will provide immediate relief with no need for new legislation and at little cost to the government.

But the prescription drug issue is seldom simple and this idea has sparked controversy, too.

Richard Gephardt, Democratic leader in the House of Representatives, calls it a "meaningless gesture" that might delay passage of a real drug benefit in Medicare. Several national associations of pharmacists have filed a lawsuit against the plan, saying it was hatched "in secret" and is "unlawful" and "unworkable."

For Medicare beneficiaries without year-round insurance, though, the key question is how far the card will actually reduce their drug costs.

Scully concedes that at least initially the discounts—estimated as 10 to 25 percent off brand name retail prices (maybe more for generics)—may be no greater than those in existing discount plans. These range from discounts at neighborhood pharmacies to nationwide plans on the Internet.

But long term he expects "volume"—"the purchasing clout of millions of seniors," in Bush's words—to produce deeper discounts for older and disabled Americans.

Some analysts question whether volume alone will allow the companies running the program to wrest significantly lower prices from the drugmakers—a complex process—and how much of those savings will be passed on to customers.

Under the Bush plan, any Medicare beneficiary can enroll in one of several competing discount programs run by pharmacy benefit management companies (PBMs), which already negotiate prices for health plans and other groups.

At press time it was not known how many PBMs Medicare will license to take part. AARP, which has run its own drug discount program for members since 1959, intends to apply.

Some programs will offer mail order as well as pharmacy-based services. Not all will offer every drug, nor operate in every locality.

Joining will cost a one-time fee of up to $25 (though some cards may cost less). You can sign up with only one program at a time but can switch to another after six months.

Enrollment is scheduled to begin Nov. 1, 2001, with discounts available from Jan. 1, 2002. Medicare will advertise the program nationally and answer beneficiaries' questions on its hotline, (800) 633-4227.

Starting Jan. 1, 2003, the PBMs will be required to post their comparative prices on a joint website. That will be the first time consumers have ever been able to see a range of drug prices at a single glance.

To illustrate the value of such comparisons, the AARP Bulletin compiled some prices for three brand name drugs often used by older Americans. [See chart.]

Retail prices in one urban area, for instance, varied widely at randomly selected pharmacies during one week in July—from $71 to $121 for 30 pills in the case of Lipitor, which lowers cholesterol. Among existing nationwide discount plans, prices were only a few dollars apart.

The deepest discounts came from Canada, where drug prices are limited by law. Billy Shawn, president of one Internet pharmacy, TheCanadianDrugstore.com, declines to say how many U.S. prescriptions he fills. "But there are lots, and it's growing every day," he says. More than 80 percent of his American customers, he adds, are over age 60.

Importing drugs from Canada for personal use remains open to challenge. Recently the House passed enabling legislation by a huge majority.

If the bill passes the Senate and is sent to Bush, the president may face a dilemma: whether to sign into law a measure that could substantially undercut the prices in his own drug discount plan.