Discounts on Your RX Drugs: Where to Find Lower Prices-And Why Bush's Senior-Discount Plan Could Change Medicare

Newsweek, August 6, 2001 | Go to article overview

Discounts on Your RX Drugs: Where to Find Lower Prices-And Why Bush's Senior-Discount Plan Could Change Medicare


Pay close attention to the drug-discount cards for seniors just announced by President George W. Bush. At first blush, they sound like a small, stopgap way of cutting the cost of prescription drugs while you're waiting for "real" drug benefits under Medicare. In fact, this could be a test run of how a future, privatized Medicare plan might work.

Bush is proposing a pretty radical business structure for these discount cards. I hate to say so, but it's kinda Clintonesque. If the plan succeeds, it could be used not only for drug benefits but for other privatized Medicare services, too.

For now, the administration will tout these cards only to seniors--more than 10 million of them--who have poor or no insurance coverage for prescription drugs. They could be in your hands by next Jan. 1. When you show the card at your local drugstore or order drugs by phone or Web, you might get 10 percent to 20 percent off the retail price--and maybe more.

To get these discounts, Bush proposes to organize older people into vast buying pools, maybe 10 or 12 of them. The pools will be run by pharmacy-benefit managers (PBMs)--the same people who manage drug benefits for corporate health plans now.

The PBMs will negotiate with the drug companies for lower prices on both brand names and generics. Assuming that enough seniors join, the pools should carry real buying clout.

You'll get the biggest discounts on the drugs that the various manufacturers want to promote. Different PBMs will favor different drugs. After the first year all prices are supposed to be listed on the Web. That way you can find the pool that charges the least for the particular drugs you use. There's no annual fee for belonging to a PBM and you can't be charged any more than $25 to join.

As you may remember, President Clinton also proposed health-care pools (he called them "health alliances") with similar disclosures to help consumers choose. OK, OK--Bush's plan is far different in complexity and scope. But in concept, we're talking about a major, government-driven change in the health-care marketplace. It highlights consolidation and competition among giant entities.

To make the government's interest clear, Medicare will give formal seals of approval to big PBMs that meet certain standards. It will help with marketing--publicizing the discount cards and telling seniors where to sign up. This is not a Medicare benefit (yet). You will pay for the drugs yourself. But the plans will carry the "Medicare" endorsement. From there, it's a small step to adding a drug subsidy to the card rather than putting a drug benefit into your government insurance program. Probably cheaper, too.

The administration is taking a lot of flak from drugstores that think that the discounts are going to come out of their hide. The druggists will get a dispensing fee for selling the prescriptions. But price cuts will almost certainly squeeze their already-narrow margins. In theory, drugstores could refuse to take the card. But it will be hard to stay out of any private program that carries a Medicare label. …

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