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Drug Discount Cards Confuse and Disappoint

In June, seniors will be able to start using Medicare-approved discount cards for prescription drug purchases — a feature of the new Medicare law that Congress passed last November. For those who lack drug coverage, the cards could potentially save some money. Unfortunately, the program has so many pitfalls that it may be hard for most seniors to see any significant savings at all.

More than 70 cards are being offered by a variety of vendors, mostly pharmaceutical benefit managers (PBMs) and insurance companies. The cards are available for a maximum fee of $30 a year. According to the Centers for Medicare and Medicaid Services (CMS) — the federal agency that administers those health programs — seniors who buy the cards will be able to get prescription discounts ranging from 10 to 25 percent. The biggest savings appear to be on generic drugs.

TEMPORARY HELP. The card program is designed to provide some measure of temporary assistance until 2006, when prescription drug coverage — as enacted by Congress late last year — goes into effect. Buying one of the cards is strictly voluntary. Retirees who enjoy employer-sponsored drug plans or have other types of coverage won't need them.

Retirees who could really use meaningful drug discounts, however, may face an uphill battle in trying to select the right card. Each one will have a different list of available drugs and seniors will be restricted to just one card per year. So, if you take multiple medicines, you may not be able to get discounts for all them on your one card.

SWITCH DRUGS. Also, the card vendors have the right to switch the drugs (and change the prices) on their lists every seven days. That doesn't mean they will. But it's certainly possible that you could sign up for a card because it offers discounts on Lipitor, only to find out down the road that the vendor has discontinued that drug in favor of another cholesterol-reducing brand.

Furthermore, not all local pharmacies will honor every available card. You might have to change pharmacies in order to use the card you choose.

The Medicare Web site and toll-free number are supposed to help seniors figure out which cards are best for them (1-800-MEDICARE or 1-800-633-4227). CMS maintains price lists for all the cards as a way to help seniors compare the prices they currently pay with the prices being offered by the discount cards. But seniors who've attempted to get information from CMS report lots of problems.

First, many of the prices cited are not the same ones that the vendors themselves are quoting. CMS may say a drug costs $34.99. Call the vendor directly and it may be quoted at $47. In addition to prices, CMS also lists participating pharmacies for each card. But these, too, are often incorrect.

REAL DISCOUNTS? There's also a question about the validity of the discounts. CMS has said that it will monitor the card vendors to make sure that they're not basing their discounts on artificially inflated prices. Unfortunately, standards for doing this have not been put in place.

As yet, CMS has failed to examine why drug prices significantly increased in the months immediately before and after the card law was passed by Congress, even though deliberate price manipulation by manufacturers is suspected by many consumer advocates. Recent price hikes by drug companies essentially cancel out the new discounts in many instances.

PHONY CARDS. According to Consumers Union (CU), the publisher of Consumer Reports magazine, the cards have unleashed a "blizzard of mail, radio and TV ads" by vendors trying to market their cards. CU is warning seniors to be on the lookout for unscrupulous salespeople who may try to sell you phony cards. Some level of fraud will be hard to avoid, considering the complexity of the program and the large number of cards that will be available.

"For most seniors, the discounts from these cards will be negligible — not much better than the regular senior citizen discounts at local pharmacies and not as good as prices they can get from Canadian mail-order pharmacies," says AFSCME Pres. Gerald W. McEntee. He cited the success of the Department of Veterans Affairs in negotiating lower drug prices for veterans and said Medicare should be allowed to do the same for its beneficiaries. Unfortunately, the 2003 Medicare law specifically prohibits it.

MONEY POLITICS. "Private plans can't come close to Medicare's buying power," McEntee says, "so there can only be one reason for putting price negotiations in their hands — political influence." The insurance and drug industries have spent millions on lobbying and campaign contributions, he says. Their influence ensured that the new drug benefits would be provided by private plans rather than Medicare and that Medicare would be barred from negotiating directly with drug companies.

The result will be huge new profits for these industries. The prescription cards are only the beginning. According to the Bureau of National Affairs in Washington, D.C., card sales will "allow approved sponsors to gain significant experience and name recognition prior to the beginning of the Medicare Part D drug benefit," putting them in a position to gain even greater financial rewards after 2006.

So does anyone other than the vendors actually benefit from these cards? One group of seniors will unquestionably receive a good deal from the drug card program — seniors with relatively low incomes. For individuals with incomes below $12,569 in 2004 and couples with incomes below $16,862, the discount cards will be free of charge and include a built-in value of $600 toward the annual cost of prescription drugs.

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