Medicare Compliance & Reimbursement

Experts debate whether seniors will flock to the temporary cards. 

On Dec. 10, only two days after President Bush signed sweeping Medicare legislation, the Centers for Medicare & Medicaid Services issued an interim final rule providing for the prescription drug discount card program authorized by the new law.

The discount cards, which will cost beneficiaries a maximum of $30 annually, are designed to provide an immediate transitional benefit for beneficiaries until full drug coverage is up and running in 2006. CMS estimates that, starting in June, the Medicare-endorsed cards will save beneficiaries an average of 10 to 15 percent on their pharmaceutical purchases, and up to 25 percent on certain drugs, although there is no set level of required discounts.

About 15.4 million of Medicare's 41 million beneficiaries lack other substantial drug coverage and would be candidates to purchase the cards, CMS officials said in a briefing. The agency expects 7.4 million beneficiaries, a little less than half of this pool, to actually purchase the cards.

For beneficiaries with incomes below 135 percent of the federal poverty level - which amounts to $12,123 for single individuals and $16,362 for married couples - CMS will pay the annual enrollment fee and load each card with $600. Of the 7.2 million Medicare beneficiaries who would qualify for this assistance - "dual eligibles" who qualify for both Medicaid and Medicare are excluded - CMS predicts that 4.7 million will sign up.

Beneficiaries will be able to change cards only once, at the beginning of 2004. CMS policy advisor Timothy Trysla said this "lock-in" feature will boost savings for seniors, since card sponsors will have a guaranteed number of consumers to offer drug manufacturers in negotiating for discounts.

If card sponsors try to take advantage of locked-in beneficiaries by raising prices beyond increases in wholesale costs and other legitimate factors, Trysla said, CMS could freeze their enrollment or withdraw its endorsement. He added that such "bait and switch" tactics are unlikely in the first place since pharmacy benefit managers and other card sponsors will be trying to establish good relationships with CMS and beneficiaries to build market share for 2006.

The pharmacy industry has opposed earlier Bush administration efforts to introduce discount cards, arguing that too much of any discounts that card holders get would come out of pharmacies' hides. John Rector, senior vice president and general counsel of the National Community Pharmacists Association, told M&H Dec. 11 that the new discount-card program presents the same concern. He noted that the regulation requires potential card sponsors to have arrangements for manufacturer discounts for some - as opposed to all, or even most - of the drugs they will carry.

Rector said that NCPA had not decided whether to go to court to try to block the discount card program from taking effect, as the pharmacy industry successfully did twice before. Back then, pharmacists won by pointing out that CMS lacked any statutory authority to establish a discount-card program. That route is obviously a nonstarter this time around, but Rector said there might be other legal grounds available. For instance, he questioned CMS' assertion that it did not need to perform a "regulatory flexibility analysis," through which agencies are normally required to examine regulatory alternatives that might lessen adverse effects on small businesses.