West Virginia Rx Card Savings Are 10%, Pharmacist Tells House Cmte.

West Virginia's "Golden Mountaineer Card" discount program saves seniors about 10% at retail, but at a high cost to pharmacy profits, Drug Emporium of West Virginia owner Gary Sims told the House Small Business Committee Oct. 25.

Sims reviewed 296 prescriptions filled at his four West Virginia Drug Emporium outlets and found an average retail price savings of 10.4%, or $4.07 per script. "It is quite clear that this is not what the politicians told everyone" to expect. "On numerous occasions, the customer has become upset and questioned why they did not receive a 'bigger' discount."

The program, however, did have a significant impact on operating profits: "the cost to the pharmacy was 37% of the gross profit on those prescriptions," Sims maintained.

"Because my cost to buy the drug is still the same, I am receiving no reduction in the cost," Sims said. "Because I now must submit an electronic claim to the PBM...I must pay a fee for every prescription that is filled."

The hearing focused on the potential impact of the Bush Administration Medicare drug discount card proposal on pharmacies.

AdvancePCS was awarded the contract for the West Virginia program in September (¹ (Also see "AdvancePCS Rx Discount Card In W. Va. To Share Drug Rebates With Seniors" - Pink Sheet, 24 Sep, 2001.), p. 10). The program uses the AdvancePCS national open formulary, which has minimal rebates. As the program evolves, AdvancePCS said it expects rebates to increase, and that the savings will be passed on to cardholders.

Committee Chairman Donald Manzullo (R-Ill.) suggested that an Express Scripts-managed program in his home state is a better model for expanding senior drug coverage.

Illinois Department of Revenue Director Glen Bower said the state's Pharmaceutical Assistance Program is able to satisfy pharmacies' needs while still working through a PBM. The program uses a reimbursement formula of AWP-10% plus a dispensing fee, compared to the AWP-13% rate used in West Virginia.

Sims said the extra 3% reimbursement Illinois pharmacies receive over those in West Virginia is significant. If a prescription costs $100, "that's taking an additional three dollars straight off of our gross profit margin," he said.

"The success of programs like those in Illinois strongly suggests that the federal government, rather than create a whole new bureaucracy to manage a prescription drug benefit for seniors, simply fund state operation of a prescription drug benefit," Manzullo said.

Ranking Minority Member Lydia Velazquez (D-N.Y.) also declared her opposition to the Administration discount card proposal, and urged a follow-up hearing to gather testimony from the Center for Medicare & Medicaid Services.

A federal judge ruled in favor of the pharmacy trade associations in litigation to block the Bush program. The Administration has asked to stay the proceedings pending a formal rulemaking process (² (Also see "HHS Medicare Rx Card Rulemaking Planned: Fall-Back For '02 Drug Debate?" - Pink Sheet, 15 Oct, 2001.), p. 3).

Advocates of the discount card plan suggest that it would be a good interim step towards a full Medicare drug benefit (³ (Also see "Medicare Card Plan Would Help In Drafting Drug Benefit - Rep. Johnson" - Pink Sheet, 22 Oct, 2001.), p. 23).

Witnesses during the hearing expressed skepticism about the ability of PBMs to pass rebates on. Pharmaceutical Care Management Association President LaVarne Burton stressed that "the PBM company itself does not retain the rebate. The rebate is owned by the owner of the plan, the plan sponsor."

National Community Pharmacists Association Senior VP-Government Affairs John Rector disagreed. "We'd be happy to provide for the record contracts from AdvancePCS, for example, that show that in...certain contracts, PBMs keep 100% of the rebates."

Rep. Mike Ross (D-Ark.), owner of an independent pharmacy, declared that rebates amount to "kickbacks" to PBMs. "Except we all know its illegal to call them kickbacks anymore, so we rename them rebates," he maintained.

"There ought to be rebates, alright," he added. "There ought to be big rebates. But they should not stop at the prescription card company, they should not stop at your hometown family pharmacy, they ought to be passed through to the senior."

Burton said she would provide the committee with written evidence that "the savings come at both ends."