Final prescription drug discount plan unveiled

Authority to conduct program still in question

Another long-awaited regulation has been published, but the government still might lack regulatory authority to implement it.

The Centers for Medicare and Medicaid Services (CMS) has issued the final regulation for drug discount cards endorsed by Medicare. The regulation establishing the Medicare-Endorsed Prescription Drug Card Assistance Initiative was published in the Federal Register on Sept. 4, 2002. The regulation aims to help Medicare beneficiaries buy their prescription drugs at lower costs and obtain other pharmacy services.

The final regulation differs from the proposed one, published on March 6, 2002, in several respects, CMS says. These include:

  • More information on card program features, including drug prices and generic alternatives, will be provided on the Internet at and by phone at 800-MEDICARE [(800) 633-4227].
  • Card sponsors must secure manufacturer rebates or discounts on brand-name and/or generic drugs.
  • Plans must provide improved access to retail pharmacies in both urban and rural areas.
  • Pharmacy organizations and others have more opportunities to offer a Medicare-endorsed card program by changing the qualifying criteria related to experience and organizational capacity.
  • Card sponsors can offer two program designs.
  • Only programs that ensure that beneficiaries have access to stable formularies and prices will be endorsed. Card sponsors will not be able to increase drug prices or remove drugs from the approved list for the card program for periods of at least 60 days beginning on the first day of the program’s operation.
  • Beneficiaries will have improved privacy protection.

CMS says it expects the initiative to yield average overall savings of 10% to 13%, and possibly up to 15% — with savings of up to 25% or more on individual drugs — for a total savings for seniors of about $1.2 billion to $1.6 billion in 2004. These savings must be shared with enrollees, either directly or indirectly through pharmacies as lower prices or pharmacy services. The initiative also will promote the use of generic drugs by educating beneficiaries about generics and providing information on generic alternatives.

The question remains, however: Does the government even have the regulatory authority to conduct this program?

Pharmacy groups filed suit against the original proposal, and a federal judge in Washington, DC, issued an injunction last September that stopped the program from being implemented. The judge found that Medicare lacked the authority to create such a program unless it either obtained congressional approval or wrote a regulation. The groups argue that the evidence the government can satisfy the court’s requirement is still not apparent.

CMS administrator Tom Scully says 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," according to press reports. He says that if the courts reject the plan again, the administration will ask Congress to approve it.

One pharmacy group is not optimistic about CMS’ chances with Congress. "Congress has not seen enough value in discount card’ schemes to grant CMS the authority to promote these programs using the Medicare name," says Larry Kocot, senior vice president and general counsel of the National Association of Chain Drug Stores in Alexandria, VA.

CMS is continuing with measures to implement the program, even amid these doubts. The agency hopes to issue a request for proposals in the next few months.