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With the final regulations that will govern the permanent Medicare drug benefit expected in mid-January, retailers are wondering if this program will be any better than the interim drug discount card program, which has been widely disparaged as a flop.Officially known as the Medicare Part D Prescription Drug Benefit, it was created by the Medicare Modernization Act of 2003. Aiming to provide immediate

With the final regulations that will govern the permanent Medicare drug benefit expected in mid-January, retailers are wondering if this program will be any better than the interim drug discount card program, which has been widely disparaged as a flop.

Officially known as the Medicare Part D Prescription Drug Benefit, it was created by the Medicare Modernization Act of 2003. Aiming to provide immediate relief for Medicare beneficiaries who previously had no prescription drug benefit, the government implemented the discount card program in May last year. It will run through the end of this year when the permanent program takes effect.

Final details about the regulations won't be known until the government, through the Center for Medicare and Medicaid Services, Baltimore, releases them, but Part D is expected to provide greater coverage than the cards, allow some new provisions that will benefit retailers and their customers, and by virtue of its permanence, have whatever time it takes to educate consumers and gain acceptance.

On the negative side of the ledger:

There are questions about its financial viability -- conservative House Republicans this month called for the program to be drastically cut back.

There is the so-called "doughnut hole," depriving certain people of coverage. Medicare will cover 75% of the first $2,250 spent on prescriptions [after a $250 deductible], then there is no coverage until spending tops $5,100, when it is 95%.

There is the dilemma of the "dual-eligibles" -- people previously on Medicaid who will be switched to Medicare. How this is handled may or may not be covered by the final regulations.

There is the question of complexity, which was the primary downfall of the card benefit. The final regs may address this, but with many different providers in different regions covering different drugs, observers fear that a crucial lesson may not have been learned from the card program.

Simplify, Simplify

"There needs to be simplification," said John Fegan, senior vice president of pharmacy, Ahold USA, Braintree, Mass. "It needs to be concretely proven that it is a savings to the consumer, that it is a win for the consumer, and that it is a wonderful program that the pharmacies can provide."

"Hopefully, there are not going to be as many choices with the full benefit," said John Beckner, director, pharmacy and health services, Ukrop's Super Markets, Richmond, Va. "If that's the case, and there is reimbursement for helping seniors manage their medication therapy, I think it could be a very good thing for pharmacy." But if there are too many choices, "then I'm not sure that there was a whole lot learned from the first pass with the discount cards," he said.

"There will be at least two choices for a beneficiary in a region, but there will probably be many regions where there will be more than two choices," said John Coster, vice president, policy and programs, National Association of Chain Drug Stores, Alexandria, Va. "While there is a minimum number of choices that a beneficiary has to have in their region, there is no specified maximum."

The primary lesson from the card program, Coster said, was how difficult it is to reach out to low-income seniors "and enroll them in programs where you are literally giving them money. The discount card program had a $600 subsidy for each of 2004 and 2005, and it still became very difficult to reach out to individuals who are eligible for those subsidies." Consumer advertising will be among the vehicles used by CMS to reach these people, he said.

While the industry and beneficiaries wait for details of the new program, there will likely be multiple choices for most recipients. "It's going to be especially complex for low-income seniors and those with cognitive impairments. It is going to be incredibly challenging," Coster said.

Supermarket pharmacies have been recognized for doing a better job than other channels with the card program, Fegan said, but because the cards were supposed to help regulators understand how to design the permanent program, the lack of participation is discouraging. "We were hoping that in this first year and a half, this was going to give us some experience, but the lack of embracement on the part of the consumer is a little bit puzzling and a little bit overwhelming, too," he said. Ahold had implemented its own card program, he said.

The Medicare drug benefit is "still a very big question mark. We have not seen the positive rush. For those who have signed up, they are seeing something positive, but the sign-up has been so limited," Fegan said.

One good thing about the permanent program is expected to be reimbursement for counseling patients, which was a time-consuming part of the card program for pharmacists. "Hopefully, it is going to be a very good thing for seniors when all is said and done," Beckner said, "and it is going to be a really good opportunity for community pharmacy to showcase their value in the medication management therapy situations."

While supermarket pharmacy executives should spend 2005 getting acquainted with the new law, they should also expect some rough sailing around the time of its implementation, said Bill Vaughan, director of government relations, Families USA, Washington. "Pharmacists shouldn't plan too much vacation time in November and December," when enrollment is under way, he said.

"January and February of 2005 are going to be very difficult. The good retailer who wants to minimize the temper tantrums in front of the pharmacy line at the local supermarket is going to need to spend at least a day or two with all of their staff trying to help with this because it will be very confusing to people," Vaughan said.

Lessons Learned

Despite the low participation, some view the discount cards as good preparation for the permanent program.

"The discount card program was a good dry run," said Ty Kelley, director, government relations, Food Marketing Institute, Washington. "From our perspective, it seemed that the discount card worked fairly well; seniors were somewhat satisfied. Of course, they would have preferred a more generous benefit, but it did save seniors a fair amount of money."

A lot of things were learned from the card program, said John Gorman, president and chief executive officer, Gorman Health Group, Washington. "Foremost among them was that the experience of the drug card will be nothing like what's going to happen with this [the Part D] benefit. They are completely different."

The lesson learned from the discount card program was that patients go to their pharmacist for information, said Kristina Lunner, director, federal government affairs, American Pharmacists Association, Washington. While CMS was able to establish a Web site and a toll-free number for beneficiaries, consumers still sought out their pharmacist first, she said. With the permanent benefit, this is likely to be the pattern again.

"Patients are likely to go right back to their pharmacists. Most of our members are happy to handle that, but to educate customers/patients one-on-one takes time," she said.

Not everyone who was eligible for the discount cards signed up, Lunner pointed out, including those beneficiaries considered the most needy. Beneficiaries who did sign up for the drug discount card may be more familiar with administrative issues and other concerns with the new benefit, but they don't represent the whole population of eligible patients under the permanent benefit, she said.

Final regulations for the permanent drug benefit of the Medicare law will be issued this month, confirmed Peter Ashkenaz, spokesman, CMS.

Following the release of the regulations, CMS will start efforts to raise awareness of the benefit. Education will be key, he said.

"We'll be trying to partner with as many of the grocery stores that have pharmacies, pharmacists, and other groups that work with seniors and the disabled to help inform them about the fact that there is a new drug benefit that will be available on Jan. 1," Ashkenaz said.

"We're going to have to once again initiate an education-type campaign along with CMS to explain the benefit to seniors," FMI's Kelley said of the program rollout.

"There is going to be a lot of information provided to those who are interested and will be involved in providing this benefit," said Lunner. "It's incredibly important for everyone to educate themselves so that they are best prepared to educate beneficiaries who will likely go to their pharmacy to talk to their pharmacist about the new program."

Crunch Time

As the deadline for the regulations approaches, speculation about what the final product will look like is difficult, industry sources said.

"It's crunch time over at CMS, and it begs the question whether or not they have adequate time in which to carefully consider all the comments that they received and issue a rule making that people will be able to understand and implement between whenever the rule is issued and Jan. 1, 2006. That's quite a task," said FMI's Kelley.

It is still possible that CMS could ask for more time, could miss its deadline, or could rush to the gates with a rule, he said. "There's a lot of our members and other segments of community pharmacy that are getting somewhat worried that maybe CMS does not have adequate time to do all the things necessary to roll out the Medicare drug benefit in a timely, smooth fashion," Kelley said.

Not all observers anticipate a delay.

NACDS' Coster pointed out that "2006 is an election year, so I doubt they will put it off."

"There is a lot of pressure still to have this be a win for the president. In order for it to be up and running on the timeline that was created, the final regulations need to be out very soon," said APhA's Lunner. While CMS is under the gun to get the regulations out on time so the bidding, education and enrollment processes aren't held up, she added, the organization is still working hard to meet its January deadline.

With the deadline for the regulations looming in the near future, and with 12 months to gear up to the implementation of the permanent benefit, industry observers find it difficult to predict an outcome to the complicated process.

"This is basically uncharted territory. This is the most significant expansion of the Medicare program since its inception. It was long overdue, and hopefully it will be a win/win for seniors and for community pharmacists," said Kelley.

"It's a very intricate, comprehensive benefit. It's important for everyone involved, patients, their caregivers, pharmacists, retailers, to understand both the challenges and the opportunities that the benefit presents," said Lunner.

Give It Time

It's going to take time for the Part D benefit to be accepted by Medicare recipients, some observers told SN.

"I think people should be cautiously optimistic," said John Rector, senior vice president and general counsel, National Community Pharmacists Association, Alexandria, Va. "This is a major new federal program. You don't just snap your fingers and it happens."

"Things aren't going to be running at 100% on day one," said Phil Blando, vice president, public affairs, Pharmaceutical Benefit Managers Association, Washington, the trade group for PBMs. It's not a question of "if" there will be implementation challenges, but rather "how" and "what to do," he said.

"So will there be a constructive resolution to challenges that all players are going to face, or will there be more finger pointing and 'gotcha,' which isn't productive and can only serve to frighten seniors?" Blando asked.