Medicare Rx Discount Card Sponsors Expect To Beat CMS’ Savings Estimate

Medicare drug discount card sponsors appear confident that they will be able to provide savings in excess of CMS' projection of 10% to 15%.

The National Association of Chain Drug Stores expects seniors will save up to 40% off of retail drug prices through its drug discount card program, CEO Craig Fuller said April 18 at the association's annual meeting in Phoenix, Ariz.

NACDS is partnering with the pharmacy benefit manager Express Scripts to roll out a card through the Pharmacy Care Alliance (¹ (Also see "NACDS/Express Scripts To Offer Medicare Card, 90-Day Supply Through Retail" - Pink Sheet, 19 Jan, 2004.), p. 9). The association attributed the expected card savings to deep discounts obtained by Express Scripts.

"We have been pleased with the response that Express Scripts has been able to get from the manufacturers in the sense that the real price concessions are going to, I think, beat the projections," Fuller said.

The Center for Medicare & Medicaid Services' estimate of 10% to 15% savings is "certainly within reach," he added. The Pharmacy Care Alliance is "seeing savings of up to 40%."

When the new Medicare law was enacted, CMS estimated that the temporary program could yield savings of 10% to 15%, and up to 25% on certain drugs.

Pharmacy Care Alliance card enrollees will save an average of 20% on brand drugs and up to 40% on generic drugs, according to marketing materials for the card (see ² (Also see "Pharmacy Care Alliance Plans Print, Radio Ads For Medicare Rx Card" - Pink Sheet, 26 Apr, 2004.) ).

The Pharmacy Care Alliance is offering two drug discount card programs: for $30, seniors can enroll in PCA's deepest discounted program; seniors also have the option of paying a $19 enrollment fee and receiving smaller discounts.

The Pharmaceutical Care Management Association said April 20 that it estimates that PBM-administered discount cards will provide similar savings, in the range of 16% to 39%.

PCMA contracted a third party to survey its members on the average discounts seniors would receive under their Medicare-endorsed cards. The association estimates that 85%-90% of Medicare-endorsed cards will be administered by PBMs.

The survey data reflect responses of five PCMA members who expect to enroll approximately 1.3 mil. seniors, roughly half the total number of seniors the Centers for Medicare & Medicaid Services estimates will sign up for a card.

According to the survey, PBM-administered discount cards will save seniors an average of 17% off the retail price of brand name drugs. The savings on generic drugs are projected to be about 35%, on average.

The card savings are expected to be higher for mail order versus retail: 23% versus 16%, respectively, for brands and 39% versus 34% for generics.

PCMA acknowledged that manufacturers are "cooperating" in terms of providing discounted prices, but stopped short of describing the discounts as deeper than more traditional, market-driven pricing.

"We certainly get the sense that they're cooperating," PCMA CEO Mark Merritt said. "But we don't have any information to say they're giving better or worse discounts than in other programs."

Neither association expects manufacturers to change the prices they offer under the Medicare drug discount card program once it is launched.

After the discount card program kicks off June 1, "I don't think you're going to see a lot of pricing movement," Fuller said. "The manufacturers, for the most part, did make price concessions and," as a result, "I don't think we're going to see a lot of that."

Fuller noted that, for the Pharmacy Care Alliance card, the price "negotiations, from our standpoint, are pretty much set up on the path for the balance of this year." Even in the absence of contractual terms, "I frankly don't believe other card sponsors are going to be moving pricing around inside the card drug plans."

Under the new Medicare law, card plan sponsors are allowed to change prices after 30 days. However, the logistics associated with drug price re-negotiation will deter sponsors from exercising that option, Fuller predicted.

"As a practical matter," adjusting drug prices for the discount card "requires a whole new negotiating process and I just don't think you're going to see it," the NACDS exec said.

Increased scrutiny of pharmaceutical pricing practices as a result of the new Medicare law will also discourage frequent price changes, Fuller said.

"There's enough visibility and transparency that if that's going on, it's going to be reported. We've got so many people watching what we're doing," Fuller said. "I'm sure the watch dogs will be watching, which is fine."

PBMs also have little incentive to engage in bait-and-switch discount card drug pricing practices, Merritt maintained. "You have to remember where PBMs are coming from. This discount program is an opportunity for PBMs, really for the first time, to have direct-to-consumer marketing and interaction."

"These PBMs are trying to build a good brand with seniors so that they can then go into the funded benefit and do even more. So I think any PBM who bait-and-switched wouldn't be very smart."

Furthermore, PBMs are required to "report weekly on price and formulary changes," Merritt said. CMS "has a lot of access to our information, and if there's any fluctuation...that is different than fluctuations on normal drug prices, PBMs are really going to have to have a good reason as to why the price changed."

AARP has asked drug companies to exercise price restraint (³ (Also see "AARP Will Continue Pricing Dialogue With Manufacturers; Website Planned" - Pink Sheet, 5 Apr, 2004.), p. 15).

If the discount card program is successful, policymakers may extend the program beyond its allotted 18 months as mandated by the Medicare law, Fuller said. "Some in Washington with whom we have been speaking are beginning to say, 'Well, maybe this is something that deserves a longer run,'" Fuller said.

The Medicare drug discount card program could serve as a model for designing a program aimed at providing a drug benefit for the uninsured, Fuller suggested. "If we could find a way to expand this card program over time to help reduce the burden on some of those people, I think that might be a step, and it's one that I think we're certainly willing to look at."