Retirement Insights — O Canada! (Land of Cheaper Rx Drugs)
By Karen Gilgoff
The prescription drug program for seniors that President Bush supported and Congress enacted has a long list of shortcomings.
"It does more to erode Medicare and employer-paid coverage than it helps seniors pay for medicines," says President McEntee. "The big winners are drug and insurance companies."
One of the law's greatest flaws is its failure to contain drug prices. It bars Medicare from negotiating with drug manufacturers, even though bargaining for 40 million beneficiaries could be a potent weapon in lowering costs. As a result:
Seniors will pay more. Cost-sharing under the new private drug plans will be indexed to the annual growth in prescription costs, so failure to check price increases could soon make the coverage unaffordable. Democrats on Congress' Joint Economic Committee project that soaring drug prices will drive up the amount of calendar-year deductibles from $250 in 2006 (when the drug program takes effect) to $445 in 2013, a 78 percent increase.
Rising prices will also greatly enlarge the "doughnut hole" — the drug benefit's big gap in coverage. In 2006, the hole will mean no coverage at all between $2,250 and $5,100 in annual drug spending (seniors keep paying premiums, but get no benefits). By 2013, it's even bigger: no coverage between $4,000 and $9,066.
Drug companies reap rewards. The drug industry — the most profitable in the world — worked hard to eliminate cost-containment from the drug benefit, spending millions to lobby Congress last year. According to Edward F. Coyle, director of the Alliance for Retired Americans, the new law is a "shameless corporate giveaway" amounting to a $139 billion bonanza for the drug companies.
The drug lobby also stopped Congress from legalizing re-importation from Canada, where drugs cost 30 to 50 percent less than in the United States, due to strict cost-containment rules. Under the new Medicare law, Congress outlawed re-importation unless the Department of Health and Human Services certifies that Canadian drugs are safe. HHS has refused to do that.
"Safety" becomes a bogus issue. Because re-importation could lower profits, drug manufacturers emphasize the safety issue. As President McEntee points out, however, "the drugs are the same brands sold in the United States and used every day by Canadians. The Canadian government has even agreed to guarantee their quality for American use."
Canadian pharmacies are eager to sell their lower-price drugs on American soil. Some U.S. cities and states would like to partner with these firms. A study recently completed for Illinois claims that taxpayers, state employees and retirees could save nearly $91 million a year if Illinois dealt with Canada.
The first locality to actually start a re-importation program is Springfield, Mass. Beginning last year, its employees and retirees under the city's health plan were encouraged to purchase maintenance drugs through a Canadian pharmacy-benefit manager. The voluntary program waives all co-payments and covers shipping charges for all drugs mail-ordered from CanaRx Services. Because the city never touches the shipments, merely reimburses for the cost — just as it would for prescriptions filled by local pharmacies — the city believes it is not in violation of federal law.
According to Donna Bowler, staff representative in Springfield for AFSCME Council 93, "our members love the CanaRx option." She estimates that 70 percent of city employees and retirees use the program. The city is saving, too. Since the tie-in with CanaRx, savings have averaged 41 percent of Springfield's total drug bill, and health plan premiums have decreased by 8 percent.
