A study by the Kaiser Family Foundation shows that the Medicare prescription drug plan for seniors and the disabled is providing substantial discounts on drugs. In its report, the organization finds that prices have not been fluctuating as much as had been feared.
The Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA) adds outpatient prescription drug benefits to the Medicare program, effective January 1, 2006. To assist Medicare beneficiaries with their outpatient prescription drug costs in 2004 and 2005, the MMA authorizes the establishment of the Medicare Discount Card Program as well as a Transitional Assistance (TA) Program for low-income beneficiaries.
According to the Centers for Medicare & Medicaid Services (CMS), about 3.9 million beneficiaries have signed up for a Medicare-approved discount card, including almost 1 million qualifying for TA. Nearly 2.3 million of those enrolling are members of Medicare Advantage (MA) plans who were auto-enrolled in a card offered by their plan. In addition, seven of the 31 states with state pharmacy assistance programs (SPAPs) have arranged to auto-enroll their recipients in a discount card. If the number of beneficiaries who were “autoenrolled” by SPAPs is taken into account, the number of beneficiaries enrolling to date on their own initiative would likely be less than 1 million.
This new report examines the early experience with the Medicare-Approved Drug Discount Card Program, prices offered by card sponsors, and potential savings for enrollees. The pricing analysis shows that discount cards can deliver savings off of full retail drug prices, but also that savings for individual beneficiaries can vary significantly across card programs.
Pricing analysis shows that some cards do offer good value when compared to full retail prices paid by cash customers. It also indicates that, after an initial period of price instability and unreliability, the drug prices quoted for these cards have remained relatively stable.
Most of the entities that have been approved for card sponsorship are companies that describe themselves as pharmacy benefit managers (PBMs) or firms that perform some or all of the functions of PBMs. Of the 72 originally approved general national and regional card sponsors, 53% can be classified as PBMs. Other sponsors include a variety of businesses that have partnered with entities that have the capacity to manage pharmacy benefits. In addition, 84 MA organizations sponsor discount cards that are available solely to their enrollees (“exclusive cards”).
Number and choice of discount cards. In all, 39 general card programs were originally approved by CMS to accept enrollment throughout the U.S. (“general national” cards); an additional 33 general cards were approved that serve one or more states (“general regional” cards). Little variation exists across the nation in the number of general card programs actually available to beneficiaries, ranging from the originally approved 39 to 43 where multiple regional options are available.
The range of real choices, however, is less than meets the eye. Five of the national card programs that were approved never became operational, reducing the number of general card options to 34. Moreover, many of the card programs are either offered by the same sponsor or utilize the same PBM or similar type of entity. When examined for actual variations in programs, drug prices, enrollment fees, and pharmacy networks, some cards appear to be different in name only.
Beneficiaries may be charged an annual enrollment fee of up to $30 per year. While most do charge a fee, just over half of the general national card programs (21 of the 39) charge the maximum $30 enrollment fee for 2004, compared to only three of the 33 regional discount card programs.
Formularies are important because they define the list of discounted drugs offered by a given card program. Card sponsors are required to offer a discounted price on at least one drug in each of 209 categories developed by CMS. In addition, sponsors must provide at least one generic drug in 95% of the categories for which a generic is available.