A WINNING HAND?

June 3, 2002

Pharmacists are facing a myriad of prescription discount cards in a high-stakes game

 

COVER STORY

A WINNING HAND?

Pharmacists are facing a myriad of prescription discount cards in a high-stakes game

Pharmacists didn't like discount prescription drug cards when they sprang up about 10 years ago. And they like them even less now that politicians, drug companies, and pharmacy benefit managers have latched onto the scheme as a way to offer senior citizens lower prices in the absence of an actual Medicare drug benefit.

Everybody and his cousin is now hyping discount prescription cards: the Bush Administration, Congress, state governments, PBMs, and pharmaceutical companies. One reason Rx discount cards are so attractive is that they are a way to respond to the growing clamor over rapidly escalating drug prices that have put medications beyond the reach of many of the millions of seniors without drug coverage. At the same time, Congress seems to lack the political will to pass meaningful Medicare reform legislation, including an Rx drug benefit.

Discount cards grew out of the private sector, where they are still flogged by ads and infomercials. The companies typically charge an individual or family a monthly or annual fee in exchange for promises of discounts at their pharmacy. Of course, they don't tell their customers that their pharmacy may never have agreed to give the discount and may not honor the card.

Overly optimistic promises and underperforming discounts have caused consumer complaints. As a result, several states have begun to regulate the sale and marketing of Rx discount card plans, which often promise huge savings—50%, 70%, even 90%. More than a dozen states have mandated that Rx cards must include an actual contract with participating pharmacies, and they must clearly state that the card is not an insurance program. Other states, including California and Washington, have prohibited discount drug card companies from operating inside their borders unless they are licensed as insurance companies.

"Consumers see late-night TV ads and sign up for $7.99 a month and agree to give up the privacy of their records," said John Rector, general counsel, National Community Pharmacists Association. "They go to the drugstore only to be told, 'You've been had. We don't know anything about it.' There are a lot more of those cards than any other kind. Pharmacies don't have to honor the cards, but the Merck-Medco/Reader's Digest plan tried to argue that because the pharmacy had signed an insurance contract as part of a network, they had to honor the [discount] cards. That is a crock, and we helped defeat that."

Private-sector discount cards are still a thorn in the side of commu-nity pharmacy, according to Susan Winckler, v.p. of policy and communications, American Pharmaceutical Association. Promising consumers savings that aren't delivered at the pharmacy "gets pharmacists back into defending a pricing structure over which they have very little control. Consumers largely do not understand that 78 cents out of every dollar is going out of the pharmacy," she added.

Supersize that Rx card

Turning down cards promoted by private companies is one thing; going to war with the President of the United States is quite another. And yet, that's what happened last July when the Bush Administration decided to supersize the typical Rx discount card. Working in secret with executives from about five large PBMs, the Bush team devised a plan that would let designated PBMs sell seniors a Medicare-endorsed card for a one-time fee of no more than $25. The card would entitle them to discounts of 10% to 25% off brands and 40% to 60% off generics in their local pharmacy and even more if they used mail service.

The beauty of the plan from the Administration's viewpoint was that it didn't cost Medicare a dime. The fact that community pharmacies would have to eat the cost of the discounts didn't seem to figure into the Administration's equation. To put the Rx card on a fast track, the Administration contended it could implement the card plan without a detour through Congress or the usual regulation-making process.

The Bush Administration worked out the Medicare-endorsed card plan without consulting community pharmacy. The first clue about the Rx card plan came when a White House volunteer phoned the National Association of Chain Drug Stores and NCPA to invite representatives to attend a Rose Garden press conference unveiling the program.

It just so happened that NCPA had worked with Rep. Henry Waxman's (D, Calif.) staffers on a critique that took apart Rx discount cards, said NCPA's Rector. After the White House invitation, a preliminary report was whipped into final shape and given to the media. So when President Bush picked up the newspaper on the morning of his big announcement, he was greeted by stories in the Washington Post and New York Times saying that the Democrats and pharmacists opposed the Rx card before it had even been formally announced.

"In April [2001], before the Bush card announcement, all the pharmacy groups got together with [secretary of Health & Human Services] Tommy Thompson and laid out what they wanted for Medicare," said Rector. "We clearly didn't want cards. We submitted draft language for legislation on June 12. We never even got an acknowledgment that it was received. The next thing was the invitation to a Rose Garden party. Bush's comments that day were extraordinary. He said that if the media had questions about his proposal, rather than referring them to his press staff, he referred them to the five PBM executives. I was astounded."

Even beyond the White House snub, the idea of the detested PBMs being allowed to promote, administer, and profit from an Rx discount card for Medicare beneficiaries did not sit well with community pharmacies. Being required to squeeze the cost of those discounts out of their already slim margins was more than they could take. The bloom was barely off the Rose Garden love fest with PBM honchos before community pharmacy struck back. NACDS and NCPA filed suit in U.S. District Court against the Bush plan.

The 30-page suit alleged that "the PBMs will profit by: charging Medicare beneficiaries enrollment fees; extracting price discounts from pharmacies and rebates from manufacturers that need not be shared with beneficiaries; and steering beneficiaries to mail-order pharmacies owned by PBMs." A few days later, NACDS and NCPA were back in court, seeking a preliminary injunction against the Administration until the court could rule on the merits of the original suit. Eventually the American Pharmaceutical Association joined the suit.

To bolster community pharmacy's position, one of the nation's pre- mier pharmacoeconomists, Stephen Schondelmeyer, predicted that the Bush card would eliminate all the net profits and nearly all the gross margins of community pharmacies. Director of the University of Minnesota's PRIME Institute, Schondelmeyer conservatively estimated that community pharmacies would lose nearly $2 billion annually and that 2,500 to 10,000 pharmacies would be forced out of business.

The court answered community pharmacy's prayers on Sept. 6 when U.S. District Court Judge Paul Friedman granted the NACDS-NCPA request for a preliminary injunction to halt the Bush program. He noted that the plan would cause irreparable harm to community pharmacies if it were not enjoined. However, he also issued a stay of the order to allow the Administration time to submit a new plan.

The Bush Administration went back to the drawing board. On March 6 of this year, a notice published in the Federal Register laid out the new blueprint for the Centers for Medicare & Medicaid Services (CMS) to resurrect Bush's PBM-administered Rx discount card. The plan promises "substantial" discounts. The cards are now part of a proposal to educate seniors about prescription drug programs and generic savings as a prelude to a real Medicare Rx benefit in the future. CMS officials figure that emphasizing the educational component skirts the argument that the agency lacks legal authority for the program.

The second coming of the Bush card was received with as much enthusiasm by the PBM industry as it was the first time around. The new proposal was hailed as an "important step toward providing seniors with comprehensive prescription drug coverage" by LaVarne Burton, president of the Pharmaceutical Care Management Association, which represents PBMs and mail-service pharmacies. She added that "today's drug cards, especially those sponsored by PBMs, have created the infrastructure for Medicare to provide immediate relief to seniors."

The new Bush Rx card was dismissed as the same "bad, recalled medicine in a new container" by NCPA's Rector. "There are some catchy words in there about rebates from the drug companies, but there's no requirement for rebates," he said. "It makes it sound like a discount might even be passed through the pharmacy, but they don't require it, and if there's no rebate, there are no sanctions. They tried to dress it up, but it's still the same proposal. They are absolutely relying on the PBMs, which have total discretion but aren't regulated at all. The PBMs have died and gone to heaven. They love it, and their fingerprints are all over it."

Rx cards not only confuse consumers, they move the pharmacist away from talking about medications and how to use them. Instead they talk about which cards offer the best prices, said Winckler. "I don't think anyone would propose going to the physician's office with a rainbow of cards and saying, 'You figure out which one saves me money.' We don't even do that at the grocery store, but somehow it's OK to approach a healthcare professional, the pharmacist, and say, 'Here's my three scripts and my seven cards. What's going to work best?' "

The ink was barely dry on the Federal Register notice when NACDS and NCPA were back in federal court asking that the revised Bush card plan be rejected as a tired retread. Asking that Judge Friedman's original injunction be enforced, the motion charged that HHS still lacks the authority to set up the Rx card program.

Reshuffle the deck

After the original court injunction to stop the Bush plan, the big pharmaceutical companies were left reading the tea leaves inside the beltway and being pounded by unrelenting media assaults for high drug prices. In response, several drug companies jumped on the Rx discount card bandwagon as a quick solution to the problem of senior access to medications and the problem of bad publicity. For example, GlaxoSmithKline announced its Orange Card program last October, offering low-income seniors and the disabled without Rx coverage an average of 30% off the price of GSK drugs.

Not to be outdone in the discount department, several drug companies came up with a new twist, a flat fee per Rx. Eli Lilly's LillyAnswers charges a monthly fee of $12 for any Lilly drug used by eligible seniors and the disabled without Rx coverage. The Pfizer for Living Share Card charges low-income Medicare enrollees without Rx coverage $15 for a 30-day supply of any Pfizer drug. And the Novartis Care program was recently changed to add a flat fee of $12 per month per script for low-income seniors.

As the number of discount programs grew, community pharmacies were facing the prospect of staffers spending time trying to make sense out of the jumble of cards slapped on the counter by senior citizens. It was not a happy situation for seniors who just want their discounts but are confused by the fine print or for pharmacists who want to help their elderly patients but don't have time to unravel even more red tape.

The solution proposed in March by NACDS was the PharmacyCareOneCard to be licensed through the Pharmacy Care Alliance. The idea is to give seniors one card to gain access to all the drug company discount and subsidy programs. Seniors enrolled in the program will be able to use the card at a participating pharmacy of their choice. Drug manufacturers and participating community pharmacies will supply the discounts and subsidies.

The PharmacyCareOneCard is designed to eliminate consumer confusion and inconvenience as more discount cards enter the market. It also relieves some strain on the pharmacist because it's not an insurance card. There are no co-pays, deductibles, or formularies and no phone calls to a PBM help desk.

No sooner had NACDS unveiled its one-card concept than seven pharmaceutical companies came out with yet another offering, the Together Rx card. Up to 11 million Medicare enrollees will be eligible for the card, which offers discounts of 20% to 40% on more than 150 medications. Abbott Laboratories, AstraZeneca, Aventis Pharmaceuticals, Bristol-Myers Squibb, GlaxoSmithKline, Johnson & Johnson, and Novartis Pharmaceuticals are backing the program, which was announced at a New York City press conference in March.

The Together Rx plan coming on the heels of the Pharmacy Care Alliance has created some confusion, admitted Crystal Wright, NACDS spokeswoman. "This is not a competition about who's going to get the most names; it's not a horse race," she said. "We're just making savings available through a simpler process of one umbrella group for the various manufacturers. Multiple cards don't simplify the situation. The last thing seniors need is more complexity."

With the advent of the Together Rx card, NACDS began courting the program administrator, McKesson Corp. There have also been talks with Argus Health Systems, which represents the Lilly and Pfizer programs. The idea is to bring the various plans under the Pharmacy Care Alliance umbrella, said director Bill Sittmann. "Our position is to make the public aware of the programs, how to get the cards, and how they work," he said. "The processors would then work directly with the manufacturers on the day-to-day processing of the cards. And the discounts will be passed directly to consumers."

False promises

With all the political posturing, legal maneuvering, and public relations hype about how Rx discount cards are going to drive down drug costs, some are questioning whether it's really just a shell game. And a whole lot of politicians, bureaucrats, and business executives are trying to sell Medicare enrollees on a concept that won't make much difference in their medication bills, according to studies. A drug that costs $150 a month is not likely to be any more affordable after a discount to $125, especially when the average senior takes between four and 12 medications.

"The Bush card is a false promise," said APhA's Winckler. "When you announce something as a discount off AWP, there are very few folks in the pharmacy community—let alone consumers—who could translate that. Also the plan talks about a substantial discount but does not define substantial. I'm sure most seniors would not consider a 10% discount substantial. APhA's threshold issue is coverage, not discounts. Discounts rarely get consumers to the point where they can afford the drugs."

A comparison of five private discount card programs showed an average savings of less than 2% compared with an Internet pharmacy on five of the highest-selling drugs for seniors. With input from NCPA, the study was prepared for Rep. Waxman by the minority staff of the special investigations division of the House Committee on Government Reform. When the cost of annual fees was factored in, the price difference disappeared. For example, when Merck-Medco's $25 annual fee was subtracted from the price of the five drugs, the card generated annual savings of just $2.69.

Similar results were reported in a study conducted last winter by the Congressional General Accounting Office. Most Rx discount cards offered by drug companies and PBMs provided discounts of less than 10% on brand-name drugs. The discount cards were issued by the PBMs AdvancePCS, Express Scripts, Merck-Medco Managed Care, and Wellpoint Health Networks. The study did not include the fixed-price-per-month cards now offered by Lilly, Novartis, and Pfizer.

"With a lot of the discounts, you have to ask whether it's off retail or wholesale," said NACDS' Wright. "A discount off wholesale won't even make a dent in drug prices. We think that all the discount cards will eventually coalesce around the Lilly and Pfizer model of a flat fee. We think that the marketplace will push for that."

Jokers are wild

While pharmaceutical companies, the Bush Administration, and community pharmacy all maneuver to gain advantage in a high-stakes game, the joker in the deck is whether Medicare reform legislation will be passed this year. House Republicans and Senate Democrats unveiled competing Medicare fix-up bills with a prescription drug benefit. But some House Republicans facing reelection in the fall reportedly put pressure on their leadership to revise the Rx benefit because it would take money away from hospitals and physicians.

The inside-the-beltway betting among pharmacy groups is that Congress will once again fumble the Medicare reform ball, at least this year. "We expect the House to debate and pass something," said Winckler. "We may see the Senate move something, but it's less likely, and I doubt they will pass a simi- lar benefit. I'm not sure there's time to work out any differences. I wouldn't bet on getting something through and in place by 2003 or 2004. It's ridiculous that Medicare will pay to diagnose you but won't pay for the medication to treat you. It will pay for the train wreck but not to fix the track. We do need a Medicare benefit."

Community pharmacy is also going to have to wait for Judge Friedman's ruling on the motion to enforce his injunction to stop the second incarnation of the Bush Rx discount card. His Honor was recently dealt his own joker that put him out of legal action for some time. When a mugger tried to snatch his wife's purse, he was stabbed.

Carol Ukens

Key questions about Medicare-endorsed Rx cards

• Will the Medicare endorsement increase savings for consumers?

• Will prohibiting seniors from enrolling in more than one Medicare-endorsed program diminish their overall savings?

• Will adequate quality standards be imposed on sponsors to guard against marketing abuses?

• Will the requirement that sponsors obtain and pass along manufacturer rebates be enforceable?

• Will the Medicare label result in seniors confusing the discount card with an actual Medicare benefit?

Source: Patricia Neuman, v.p./director, Medicare Policy Project, Henry J. Kaiser Family Foundation

APhA criteria for Medicare Rx benefit

• Does the program actually provide coverage for the cost of the drug product, not just discounts?

• Is there coverage for the pharmacist's medication therapy management services?

• Do consumers have a choice of pharmacy and pharmacist?

• Does it include administrative simplification requirements such as a uniform benefit ID card to ensure consumer access?

 

Carol Ukens. A WINNING HAND?. Drug Topics 2002;11:32.