Drug Cards Dissected

By David Sirota, Christy Harvey and Judd Legum, The Progress Report. Posted March 26, 2004.

The government announced yesterday the names of the 28 private companies picked to provide prescription drug cards to Medicare recipients beginning this June. The prescription cards purport to provide seniors with discounts on their medications. However, no such discount is guaranteed, and the legislation may help pharmaceutical and insurance companies a lot more than the elderly. Little wonder: Remember, the legislation was crafted by the head of one of the companies chosen to provide the card, Bush crony and AdvancePCS chief David Halbert. The 28 private companies, also including such heavy hitters as United Healthcare, Caremark, Aetna, and Express Scripts along with AdvancePCS, worked hard to ensure the law would be in their favor. According to the Center for Responsive Politics, the top groups donated well over $150,000 directly to President Bush and Congress since 2000 and Aetna, United Healthcare and Wellpoint alone have spent over $3.25 million to lobby for their interests. See this American Progress examination of how privatization threatens Medicare.

So who are these companies the White House is entrusting with caring for the nation's seniors? One is Medco, a company which has faced lawsuits over market manipulation in the past for "failing to disclose the extent of their financial ties with manufacturers." AdvancePCS, a company in which President Bush himself was an original investor, was sued last year, accused of "not only 'illicitly diverting' seniors from its drug-discount plan, but of actually putting them at risk for potentially dangerous drug interactions." Both were listed in a federal lawsuit along with Caremark and Express Scripts for engaging in "anti-competitive practices" which harmed pharmacies, for entering into "secret deals with drug manufacturers...in return for 'kickbacks' and other 'undisclosed incentives.'"

So where has the AARP been during all of this? Although the AARP is ostensibly a group dedicated to protecting the rights of seniors, the group shocked its members when it supported the drug legislation last November. Now it turns out there may have been a financial windfall in play: AARP is affiliated with -- and receives "marketing royalties" from -- United Health Care, one of the major companies the Administration included in the drug card program.

The theory behind the discount cards is that companies "will have greater bargaining power with drug makers" the more they enroll Medicare beneficiaries. But why use a middle man? Bowing to pressure from the powerful pharmaceutical lobby, which feared for its bottom line, Congress specifically banned Medicare from using bulk purchasing power to negotiate lower prices. Instead, the Medicare population was splintered into these smaller groups run by private companies, thus giving them considerably less influence.

The law does not require the drug card companies to pass the savings along to customers instead of keeping profits for themselves. They don't even have to guarantee a specific level of savings for seniors. And drug companies have gone out of their way this past year to ensure their profits will stay nice and fat: The Wall Street Journal reports companies jacked up prices for drugs most popular with the elderly "nearly 3.5 times faster on average than overall inflation" in the past year since the cards were announced, already eroding any potential savings. Sen. Tom Daschle (D-SD) is trying to ensure seniors get some of the discount; he introduced a bill yesterday which would guarantee that beneficiaries receive at least 90% of any discounts.

Another massive problem with the cards: Seniors are locked into only one card. However, card companies have much more flexibility and aren't required to return the loyalty to clients. Right now, companies are allowed to change the list of drugs they offer every seven days, as well as the size of the discounts, and there is no oversight mechanism in place to stop that from happening. Ron Pollack, of the watchdog group Families USA, fears cards will offer giant savings on popular medicines, then, after seniors sign up, greatly reduce the savings or stop covering the drug altogether. "The potential for bait-and-switch is enormous."

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