There's nothing simple about the new Medicare prescription discount card program, which gets started in two weeks.
There are a lot of cards that have been approved by the Centers for Medicare and Medicaid Services, Washington: 49 from 28 "general card" sponsors -- 30 are national -- and then there are 43 Medicare managed care drug sponsors of cards representing 84 Medicare Advantage health plans.
There is uncertainty over who is going to pay how much for the 10% to 25% discounts promised to card holders.
There's a $600 credit for low-income Medicare recipients and the need to track usage of that credit.
There are preexisting cards from other programs and other senior discounts.
There are fraudulent cards.
There are over 40 million Medicare recipients, and 7.3 million are expected to enroll in a drug card program.
This adds up to a recipe for confusion. Most of the expert sources contacted by SN agreed that there is one place perplexed consumers will turn for help in deciphering the puzzle: their local pharmacy.
"I think that it's an opportunity to help seniors obtain the best price on their medication, but at first it is going to be very, very confusing both for our stores and for the seniors," said Michele Snider, director of pharmacy, Save Mart Supermarkets, Modesto, Calif.
The discount card program is the first phase of the Medicare Prescription Drug, Improvement and Modernization Act of 2003, which was passed by Congress last fall and signed into law by President Bush. If all goes according to plan, the full program will be implemented in January 2006 (see Part 1 of this series in SN's April 12 issue) and the discount cards will be discontinued at that point.
Sign-ups for the cards begin May 3 and consumers can start using them in June. There's no limit on the number of programs retailers can enroll in, but consumers can sign up for one card per year, which can cost no more than $30. The cards will vary in the medications they cover.
Despite concerns about profitability and prescription benefit management companies pushing their mail-order services, supermarket pharmacy executives are primarily concerned with answering their customers' questions.
"The challenge is, with so many different programs out there, we have to be prepared to participate, be prepared to provide information, and be prepared to make recommendations," said John Fegan, vice president, pharmacy, Ahold USA, Quincy, Mass.
The need, in short, is for education -- "big-time communication," he said.
With the many card options available to them, consumers are likely to come into stores with their various prescriptions asking the pharmacy staff to check prices any number of ways, much like one might ask a hotel to compare the room rates with an AARP card vs. an AAA card, said Bill Vaughan, director of government relations, Families USA, Washington.
"People will need to figure out the best deal because, if you are taking five or six medicines, the chances of getting the best deal on any one card is pretty remote," Vaughan said. Families USA is a advocacy group for health care consumers.
The kind of aggressive shopping required by the program may well be beyond the capabilities of many Medicare recipients, he said. "We are asking people at the most vulnerable time of their lives to be bright-eyed, bushy-tailed shoppers and that's a little naive."
That is where the pharmacist comes in. "I think in June, they should look for some overtime. People will be lined up asking for their help." Rather than going on the Internet or calling a toll-free number, "they are going to look for a warm friendly face, somebody they trust, and from what I read, that is frequently the pharmacists," Vaughan said.
The confusion on the part of seniors is going to get worse as they are bombarded with marketing starting May 1, said a pharmacy executive with a supermarket in the Washington market. "When they realize that no one card is going to give them the best discount on everything they take, there's going to be some backlash," he said.
"We think that seniors are going to come to our counter looking for information," he added.
"We are going to have to make our pharmacists very aware of the various card programs that exist and why we might be potentially recommending one program over another," Fegan said. Consumers will be inundated with information about the card programs "and we have to have our ducks in a row to explain the programs succinctly and intelligently to the consumer so they can make the best decision. So, we really need to do our homework behind the scenes," he said.
"At Giant Eagle pharmacies, we serve as a consolidating resource for information on the broad topic of upcoming changes to the Medicare bill," said spokesman Brian Frey. "To educate our customers on the benefits and monthly drug charges associated with each individual card, we are administering Q&A events throughout May at all Giant Eagle supermarkets that offer in-store pharmacies."
These events are designed to provide the senior customers with the opportunity to interact with Medicare-trained pharmacists to estimate the monthly payments for each card program based on their medication needs. "The events will also provide card enrollment information, consultation and other opportunities to learn about staying healthy and up-to-date on Medicare changes," Frey said.
"In general, there is a lot of confusion and a startling lack of awareness both of the availability, features and benefits of the cards," said Jon Hauptman, vice president, Willard Bishop Consulting, Barrington, Ill. "So, supermarkets have a great opportunity to drive competitive advantage by taking the time and making the effort to clearly educate consumers about the need and use and benefits of the cards, particularly in the new Medicare reform environment."
Schnuck Markets, St. Louis, will have an ambitious educational program for its pharmacy staff and customers, said Curtis Hartin, director of pharmacy. With the variety of card issuers, "it is going to make a difference how aggressively those folks get into mailing pieces sent home to consumers. Then, I fully expect our seniors to be bringing in two or three different applications, needing help sorting out what the benefit really is," he said.
Discount cards are a business builder, said Roy White, vice president, education, General Merchandise Distributors Council Educational Foundation, New York. "They are directed at the very group of people who are the greatest consumers of prescription drugs," he said.
The confusion caused by the numerous cards can be turned into a positive for supermarkets, he said. It's an opportunity for the pharmacists to talk directly to patients and fulfill their role in consulting with patients, "and there's no reason why that shouldn't be on the issues of payment as well as clinical issues," White said.
The in-store education about the drug discount cards needs to go beyond the pharmacy and to other store employees because they also will get questions, said Peter Ashkenaz, spokesman, Centers for Medicare and Medicaid Services, Washington. "If they are going to promote it, others in the supermarket may need to have some information to answer questions about how this is going to work," he said.
The program "has the potential of bringing new customers into the pharmacy itself, people who hadn't been purchasing drugs as often," Ashkenaz said. "At the same time, it means that people within the pharmacy and the supermarket are going to have to learn the basics of the program."
The discount card represents a "dry run" for the full Medicare prescription benefit that will be implemented in 2006, said Ty Kelley, director of government relations, Food Marketing Institute, Washington. "The first step is to provide something immediately to seniors."
"In general, it is going to provide a needed benefit for seniors in this country," said Cathy Polley, vice president, state and government affairs, National Association of Chain Drug Stores, Alexandria, Va. "As the regulations are written [for the full benefit], we will be giving input and feedback to CMS and to the [Bush] administration," she said.
Who Gets the Bill?
To cover the 10% to 25% discounts promised to cardholders, retailers are wondering, "Who is going to pay, and how much?"
The answer is not so easy to find. "That's the $64,000 question," said Don Clark, director of pharmacy operations, K-VA-T Food Stores, Abingdon, Va.
One thing is clear: It is not the federal government. The tab is to be picked up by drug manufacturers, card sponsors and, of course, retailers. With few specifics in the legislation, retailers worry that most of the burden will fall to them.
There is little planned to monitor how much of the rebates and other discounts the card sponsors pass along to retailers. "Most of the oversight will be through complaints filed by anybody who uses the program, whether it's through the pharmacist or through the beneficiary," said Peter Ashkenaz, spokesman, Centers for Medicare and Medicaid Services, Washington.
However, "the onus cannot be completely on the pharmacist. The pharmacy shouldn't be picking up the entire discount," he said.
According to the legislation, the sponsoring entity has to get "some" discount rebates from the drug manufacturers; they, in turn, have to share "some" of that with the card holders, said John Rector, senior vice president and general counsel, National Community Pharmacists Association, Alexandria, Va. "The operative word is 'some,"' he noted.
"Otherwise, the regulations are silent about who bears the brunt. You can argue about what 'some' is, but it is not more than 'a little.' With these big PBM cards, it looks like the bulk of the burden will be on the pharmacy," Rector said.
Based on numbers from the federal government, NCPA is projecting a 2.5% reduction in pharmacy revenue, he said. "It could be a more significant reduction than that, but we were very conservative and just took the government's own numbers and extrapolated from those," Rector said.
"We are looking at this as if we don't participate, we will lose business," said Clark of K-VA-T. "There's supposed to be some kind of rebate setup with manufacturers, but it's very, very unclear how that ever makes its way back to pharmacy." The budget models K-VA-T has created are based on the chain getting very little of the discounts back, he said.
"We have to look at this as if we are going to lower our price by that much. We are going to take a gross margin hit," he said.
"There's not a lot of oversight in the legislation that allows us to go in and audit somebody's books to make sure we are getting all the money we are due. The contracts are written specifically the way the legislation is, which is very vague," Clark said.
The PBMs obtained discounts from the manufacturer, said Ty Kelley, director of government relations, Food Marketing Institute, Washington. "Hopefully, the PBM will not be getting much of a discount, if any, from the community retail pharmacy."
Representing the viewpoint of the PBMs, Phil Blando, vice president, public affairs, Pharmaceutical Benefit Managers Association, Washington, said the Medicare reforms represent an opportunity for the private sector to work together "because if we don't, there are those in Washington and elsewhere that are ready and willing to step in." This means retailers need to participate in the funding of the discount, he said.
"This is an opportunity for the private sector to show that it can deliver a safe, effective and affordable drug benefit to seniors. If we fail in that task, that simply paves the way for direct government price controls over prescription drugs, and that is in no one's interest," Blando said.
With "razor thin" margins at retail, "there isn't a lot out there to give away," said John Fegan, vice president, pharmacy, Ahold USA, Quincy, Mass. "We are the conduit that those rebates should flow through to the consumer."
What's in Store for Mail Order
Prescription discount card programs that provide a "mail order only" option are not allowed by the Medicare program. However, retailers continue to worry that prescription benefit managers running many of the card programs will encourage patients to use their own mail-order services and not retail pharmacy.
While the drug discount cards will initially have a positive impact on prescription counts, "I'm pretty concerned about the movement of some of that volume to mail order," said a supermarket pharmacy executive in the Washington market, who asked not to be identified.
"Since most of the medications these people get are maintenance drugs, I think that some of the bigger PBMs out there are certainly going to make an effort to push them through their mail-order facilities," he said. The pharmacy executive also applauded the program of Pharmacy Care Alliance, Alexandria, Va., formed by National Association of Chain Drug Stores, also of Alexandria, and Express Scripts, a large PBM based in St. Louis, for not actively pursuing mail order to those patients.
John Rector, senior vice president and general counsel, National Community Pharmacists Association, Alexandria, Va., said the group's card, in partnership with Computer Sciences Corp., El Segundo, Calif., will not have a mail-order option.
"With the discount cards, we feel strongly that the patient should have a choice to use their retail pharmacy," said Cathy Polley, vice president, state and government affairs, NACDS. "Yes, we have a mail-order component, and many of the programs do, but there shouldn't be any incentive that forces a patient to use that mail order."
Phil Blando, vice president, public affairs, Pharmaceutical Benefit Managers Association, Washington, characterized the mail-order issue as "a red herring." At the direction of the Medicare Modernization Act, the Federal Trade Commission is conducting a study into mail-order prescriptions. "We are very confident that the FTC's examination of PBMs will confirm what others have long known, and that is that PBMs lower the cost of prescription drugs," he said.
Rector of NCPA disputed Blando's assertion. While mail order may be less expensive for brand-name drugs, generics are used less frequently, he said. "The average mail-order charge for prescriptions by PBMs to whoever is paying the bills is higher in spite of what they tell people in part because of their underutilization of generics," Rector said.