Government

Medicare Part D less of a bargain than the VA for prescription drugs, study finds

The AMA and Families USA say the solution is to allow Medicare to negotiate directly with pharmaceutical companies.

By David Glendinning — Posted Jan. 23, 2006

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Washington -- The seniors who started receiving prescription medications under Medicare's new drug benefit earlier this month -- and the taxpayers supporting them -- are already paying entirely too much money, a consumer advocacy group contends.

A recent study by Families USA concluded that the prices available for drugs under Medicare Part D, which launched Jan. 1, are significantly higher than what the Dept. of Veterans Affairs has negotiated for its own beneficiaries. The median price difference between the two programs for the 20 drugs most commonly prescribed by physicians to seniors is nearly 50%.

For some patients, this means that the affordability of the drugs their physicians say they need will remain out of reach, the group said.

In some cases, the differences in the potential yearly bills are significant. For Medicare beneficiaries living in Delaware, Maryland, Ohio or Washington, D.C., for instance, the lowest available price from any Part D plan for a year's worth of the cholesterol drug Zocor is $1,323.72. Those eligible to receive medications through the VA system can find the same drug for only $167.80 per year.

Only one drug in the top 20 list, the acid reflux medication Nexium, can be found for a lower yearly price from Medicare than from the VA, the study said.

Such cost differences mean big bucks out of the pockets of Medicare beneficiaries, who on average will foot about one-quarter of the bill, with taxpayers picking up the rest, said Ron Pollack, executive director of Families USA.

"The huge prices paid by seniors and taxpayers could have been avoided if Congress and the president had not caved in to the pressure of the drug lobby," he said.

The solution proposed by Pollack's group, as well as the American Medical Association and a bipartisan group of lawmakers, is to follow the VA's example by allowing the federal government to negotiate lower prices directly from drug manufacturers. The legislation necessary to make such a change would take that responsibility from pharmacy benefit managers, the private firms that are administering the drug benefit.

The Pharmaceutical Care Management Assn., which represents pharmacy benefit managers, argues that such a move would lead to anticompetitive government price controls that would limit Medicare beneficiaries' choices and shift costs to health care consumers in the private sector.

The type of direct purchasing model that the VA employs simply would prompt drugmakers to minimize government discounts by raising their base prices across the board and would force drug plans to limit the number of pharmacies allowed to accept their coverage, said Mark Merritt, PCMA's president.

"Families USA is presenting a false choice. Medicare beneficiaries would never accept a drug benefit with sharply reduced drug choices and very limited access to pharmacies," he said. "Policy-makers recognized this political reality and devised a program providing seniors with choice and competition."

Benefit managers are already getting great deals on medications for Medicare's seniors and people with disabilities when compared to the prices they would pay with no coverage at all, Merritt said.

A Pharmaceutical Care Management Assn. analysis of Medicare drug prices available in New York State found that beneficiaries and the government will pay an average of about 30% less than the undiscounted price on the top 25 medications prescribed to seniors. When beneficiaries use mail-order pharmacies, this average savings figure increases to 45%.

A mixed debut for Medicare drugs

In the final two weeks of 2005, the Dept. of Health and Human Services announced that more than 21 million seniors and disabled people would be getting Medicare's help in paying for their medications when the drug benefit launched Jan. 1.

"The new prescription drug benefit is off to a strong start," said HHS Secretary Michael Leavitt. "With more than 21 million participating in coverage as of Jan. 1, we are well on the way of meeting our goal of 28 million to 30 million enrolled in the first year of the program. While there is still much work to do, we are encouraged by the early results."

But the initial Bush administration figure includes only about 1 million seniors who actually signed up for a new, stand-alone plan under Medicare Part D.

The remainder are automatically transitioning from their existing Medicaid drug coverage to Medicare or getting their drugs from former employers who are accepting a Medicare subsidy, managed care plans already offering drug benefits, or federal employee or military benefit programs.

The successful rollout of the drug benefit will depend in large part on convincing millions more seniors who don't fit into these categories to sign up for stand-alone plans on their own.

Leavitt estimated that an additional 500,000 would enroll by the end of January, but critics such as Families USA's Pollack said the initial figures amounted to a poor debut for Medicare Part D.

"The real progress toward expanding drug coverage, as opposed to the administration's misleading hype, is very disappointing," he said. "We hope program enrollment improves significantly, but it seems likely that the confusing and bewildering structure of the new Medicare drug program will continue to hinder that progress."

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ADDITIONAL INFORMATION

Comparing prices

Medicare beneficiaries are being quoted significantly higher medication prices under the new drug benefit than those negotiated by the Dept. of Veterans Affairs for its own program, according to a recent report. Here's how the lowest total annual prices in three states and the District of Columbia compare for the top seven drugs prescribed by physicians to seniors:

VA Medicare
Plavix 75 mg $887.16 $1,229.64
Lipitor 10 mg $497.16 $717.84
Fosamax 70 mg $493.32 $709.68
Norvasc 5 mg $301.68 $458.88
Protonix 40 mg $253.32 $1,080.00
Celebrex 200 mg $619.80 $865.08
Zocor 20 mg $167.80 $1,323.72

Source: Families USA, "Falling Short: Medicare Prescription Drug Plans Offer Meager Savings," December 2005

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External links

"Falling Short: Medicare Prescription Drug Plans Offer Meager Savings," Families USA, December 2005, in pdf (link)

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