Bush Administration Unveils New Drug Card program

The Bush administration on Friday announced a new, private prescription discount program that it says will save seniors an average of $170 per person on medications they purchase.

But questions remain about whether the administration has congressional authority to implement such a program.

"Clearly we've had some legal challenges, but we're still committed to doing this," said Tom Scully, administrator of the Centers for Medicare and Medicaid Services (CMS) in Washington, DC.

Under the initiative, sponsors of private drug cards that meet defined criteria will be allowed to market and label their cards using the "Medicare" imprimatur. The program will save roughly 10 million Medicare beneficiaries 10% to 13% off total drug spending, CMS said. It projects total savings of $1.2 billion to $1.6 billion in the first year.

The final regulation will appear in the September 4th issue of the Federal Register, and CMS hopes to begin soliciting proposals from private card sponsors in the fall.

The agency said the final rule differs in many respects from a proposed regulation issued in March, which was blocked by a federal judge in Washington, DC. Pharmacy groups sued, asserting that CMS lacked authority to create the program, but the government secured a stay allowing it to replace that earlier version of the plan.

Under the final rule, card sponsors must secure manufacturer rebates or discounts on brand name and generic drugs to earn Medicare's seal of approval. The rule also "enhances" the information provided seniors on card sponsors' drug prices. Sponsors will have to publish their prices on Medicare's Web site and must maintain those prices for at least 60 days before updating them.

"That kind of true transparency doesn't exist anywhere in the country right now," Scully said in a press briefing this morning. He told Reuters Health that the information would be presented in a way that would help beneficiaries decide which card is best for them. "We think that's going to drive a lot more competitive pricing throughout the market."

Critics, though, said the program differs very little from the earlier version blocked by the federal court.

"Just because they go through a public rulemaking period...doesn't mean that they have the authority to do this card," said Crystal Wright, a spokeswoman for the National Association of Chain Drug Stores, one of the plaintiffs in the lawsuit challenging the card program.

Scully argued that CMS is "not creating a new federal program" and is authorized to grant drug card sponsors the Medicare "seal of approval" as part of its "educational authority." Yet Scully couldn't cite an exact date for the start of the program, conceding that CMS may need to receive clearance from the US District Court or reassurance from Congress. He said CMS would appeal any decision rendered against the agency and would ask Congress for legislative clarification.

"That's like riding a horse in both directions. You can't claim you have authority and then go to the Congress and seek it," said John Rector, general counsel of the National Community Pharmacists Association, another plaintiff in the case against CMS.

"Our view it's even more apparent than it was a year ago that they do not have the authority," he said.

Rector said pharmacies would likely go to court next week to ask for an injunction, unless they unearth something in the test of the rule that validates CMS's position.

Meanwhile, CMS intends to press forward, issuing a request for proposals as early as this fall.

Jeffrey Simek, a spokesman for Medco Health Solutions Inc., one of the nation's largest pharmacy benefit managers, said the company would have to review final terms of the program before deciding whether to submit a proposal to sponsor a Medicare drug card. "We've expressed interest consistently in the past," he added.

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