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MEDICARE PRESCRIPTION DRUG DISCOUNT

CARDS: IMMEDIATE SAVINGS FOR SENIORS

HEARING

BEFORE THE

SUBCOMMITTEE ON HEALTH

OF THE

COMMITTEE ON ENERGY AND

COMMERCE

HOUSE OF REPRESENTATIVES

ONE HUNDRED EIGHTH CONGRESS

SECOND SESSION

MAY 20, 2004

Serial No. 108–130

Printed for the use of the Committee on Energy and Commerce

(

Available via the World Wide Web: http://www.access.gpo.gov/congress/house

COMMITTEE ON ENERGY AND COMMERCE

JOE BARTON, Texas, Chairman

W.J. ‘‘BILLY’’ TAUZIN, Louisiana

RALPH M. HALL, Texas

MICHAEL BILIRAKIS, Florida

FRED UPTON, Michigan

CLIFF STEARNS, Florida

PAUL E. GILLMOR, Ohio

JAMES C. GREENWOOD, Pennsylvania

CHRISTOPHER COX, California

NATHAN DEAL, Georgia

RICHARD BURR, North Carolina

ED WHITFIELD, Kentucky

CHARLIE NORWOOD, Georgia

BARBARA CUBIN, Wyoming

JOHN SHIMKUS, Illinois

HEATHER WILSON, New Mexico

JOHN B. SHADEGG, Arizona

CHARLES W. ‘‘CHIP’’ PICKERING,

Mississippi, Vice Chairman

VITO FOSSELLA, New York

STEVE BUYER, Indiana

GEORGE RADANOVICH, California

CHARLES F. BASS, New Hampshire

JOSEPH R. PITTS, Pennsylvania

MARY BONO, California

GREG WALDEN, Oregon

LEE TERRY, Nebraska

MIKE FERGUSON, New Jersey

MIKE ROGERS, Michigan

DARRELL E. ISSA, California

C.L. ‘‘BUTCH’’ OTTER, Idaho

JOHN SULLIVAN, Oklahoma

JOHN D. DINGELL, Michigan

Ranking Member

HENRY A. WAXMAN, California

EDWARD J. MARKEY, Massachusetts

RICK BOUCHER, Virginia

EDOLPHUS TOWNS, New York

FRANK PALLONE, Jr., New Jersey

SHERROD BROWN, Ohio

BART GORDON, Tennessee

PETER DEUTSCH, Florida

BOBBY L. RUSH, Illinois

ANNA G. ESHOO, California

BART STUPAK, Michigan

ELIOT L. ENGEL, New York

ALBERT R. WYNN, Maryland

GENE GREEN, Texas

KAREN MCCARTHY, Missouri

TED STRICKLAND, Ohio

DIANA DEGETTE, Colorado

LOIS CAPPS, California

MICHAEL F. DOYLE, Pennsylvania

CHRISTOPHER JOHN, Louisiana

TOM ALLEN, Maine

JIM DAVIS, Florida

JANICE D. SCHAKOWSKY, Illinois

HILDA L. SOLIS, California

CHARLES A. GONZALEZ, Texas

BUD ALBRIGHT, Staff Director

JAMES D. BARNETTE, General Counsel

REID P.F. STUNTZ, Minority Staff Director and Chief Counsel

SUBCOMMITTEE ON HEALTH

MICHAEL BILIRAKIS, Florida, Chairman

RALPH M. HALL, Texas

FRED UPTON, Michigan

JAMES C. GREENWOOD, Pennsylvania

NATHAN DEAL, Georgia

RICHARD BURR, North Carolina

ED WHITFIELD, Kentucky

CHARLIE NORWOOD, Georgia

Vice Chairman

BARBARA CUBIN, Wyoming

JOHN SHIMKUS, Illinois

HEATHER WILSON, New Mexico

JOHN B. SHADEGG, Arizona

CHARLES W. ‘‘CHIP’’ PICKERING,

Mississippi

STEVE BUYER, Indiana

JOSEPH R. PITTS, Pennsylvania

MIKE FERGUSON, New Jersey

MIKE ROGERS, Michigan

JOE BARTON, Texas,

(Ex Officio)

SHERROD BROWN, Ohio

Ranking Member

HENRY A. WAXMAN, California

EDOLPHUS TOWNS, New York

FRANK PALLONE, Jr., New Jersey

BART GORDON, Tennessee

ANNA G. ESHOO, California

BART STUPAK, Michigan

ELIOT L. ENGEL, New York

GENE GREEN, Texas

TED STRICKLAND, Ohio

DIANA DEGETTE, Colorado

LOIS CAPPS, California

CHRIS JOHN, Louisiana

BOBBY L. RUSH, Illinois

JOHN D. DINGELL, Michigan,

(Ex Officio)

(II)

C O N T E N T S

Page

Testimony of:

Baumhofer, Stan, Medicare Beneficiary ......................................................... 101

Fuller, Craig L., President and Chief Executive Officer, National Association of Chain Drug Stores ............................................................................ 68

Grealy, Mary R., President, Healthcare Leadership Council ....................... 85

Hayes, Robert M., CEO, Medicare Rights Center .......................................... 97

McClellan, Mark B., Administrator, Centers for Medicare and Medicaid

Services .......................................................................................................... 30

Pollack, Ronald F., Executive Director, Families USA ................................. 76

Material submitted for the record by:

McClellan, Mark B., Administrator, Centers for Medicare and Medicaid

Services, response for the record ................................................................. 125

(III)

(1)

MEDICARE PRESCRIPTION DRUG DISCOUNT

CARDS: IMMEDIATE SAVINGS FOR SENIORS

THURSDAY, MAY 20, 2004

HOUSE OF REPRESENTATIVES, COMMITTEE ON ENERGY AND COMMERCE, SUBCOMMITTEE ON HEALTH, Washington, DC.

The subcommittee met, pursuant to notice, at 10 a.m., in room

2123, Rayburn House Office Building, Hon. Michael Bilirakis

(chairman) presiding.

Members present: Representatives Bilirakis, Hall, Upton, Greenwood, Deal, Burr, Whitfield, Shimkus, Wilson, Shadegg, Buyer,

Ferguson, Rogers, Barton (ex officio), Brown, Waxman, Pallone,

Eshoo, Stupak, Engel, Green, Strickland, Capps, Rush, and Dingell

(ex officio).

Also present: Representatives Wu and Walden.

Staff present: Chuck Clapton, majority counsel; Ryan Long, majority professional staff; Jeremy Allen, health policy coordinator;

Bill O’Brien, projects assistant; Eugenia Edwards, legislative clerk;

Amy Hall, minority professional staff; Bridgett Taylor, minority

professional staff; Purvee Kempf, minority professional staff; and

Turney Hall, minority staff assistant.

Mr. BILIRAKIS. The hearing will come to order. Today, the Health

Subcommittee will be focusing on a very important issue and that

is the new Medicare Prescription Drug Discount Card Program.

This is the first time most seniors will realize a tangible benefit

from the recently enacted Medicare Modernization Act. Since Medicare beneficiaries will be able to use these new cards beginning

June 1, I felt it was critical that the subcommittee explore the implementation of this program and its benefit.

I’d like to thank all of our witnesses for joining us today including and especially Dr. Mark McClellan, the Administrator of the

Centers for Medicare and Medicaid Services. This is Dr.

McClellan’s first appearance before the subcommittee and this is a

new role, God knows he’s been here a few times before in other

roles and we do welcome him and his always valuable insight.

I won’t spend a lot of time discussing the details of the Medicare

Prescription Drug Discount Card Program. Suffice it to say it will

provide millions of seniors, particularly those with low incomes

with much needed help in purchasing their prescription medications. While this is certainly not a panacea, it is an important first

step.

I know that we will hear a good deal of criticism from certain

members today about many aspects of this new law, including the

2

Prescription Drug Discount Card Program. Some will say, as they

will, that the savings aren’t large enough. To that I would say that

the savings available through these cards and more importantly,

the $600 per individual transitional assistance are a heck of a lot

better than what many seniors were getting before this Congress

and its President enacted to provide Medicare beneficiaries with

prescription drug coverage.

I’ve always maintained that since we have limited resources

available to us, we should target our resources to those who need

help the most, the poorest and the sickest. The Transitional Assistance available under these cards will provide a lot of help to an

awful lot of people.

I’m aware that other members will argue that the high number

of drug discount card sponsors will needlessly confuse seniors. I

know that the system still has a few kinks that need to be worked

out and I agree that some beneficiaries will need extra assistance

in choosing the card that’s right for them. However, the Medicare

Modernization Act is based on the principle that choice and free

market competition will lower prices and continue to foster innovation.

As we will no doubt discuss today, this principle is already resulting, it’s not really in effect yet, in discounted prices that continue to drop. In fact, CMS recently found that the average discounted price declined by approximately 11.5 percent from brand

name drugs and 12.5 percent for generic drugs over a 1-week period.

It’s clear to me that this new benefit is headed in the right direction and will provide seniors with real help. And that’s why I continue to be so disappointed that some continue to demagogue this

issue. When I learn of a partisan analysis, if you will, how the Prescription Drug Discount Card benefit that concludes that the program is a failure before a single beneficiary uses the card, well,

let’s just say it makes me wonder, although I guess I don’t really

wonder any more.

Scare tactics designed to frighten and confuse seniors will only

ensure that some beneficiaries will choose not to access a benefit

that could save them hundreds, if not thousands of dollars annually. I, along with many Members of this Congress, certainly members of this committee have fought for years to add a prescription

drug benefit to Medicare. Finally, 39 years after the program was

first created, Medicare will help seniors with the cost of their prescription medications.

I intend to diligently oversee the implementation of this benefit

and I hope that we have the cooperation of everybody on both sides

of the aisle to oversee the implementation so that every senior

saves the greatest amount possible.

I again would like to thank our witnesses for joining us and I

now yield to the ranking member, the gentleman from Ohio, Mr.

Brown for an opening statement.

Mr. BROWN. Thank you Mr. Chairman. Year after year, surveys

show that Medicare is more popular than private insurance. Medicare is reliable, it works, it’s a single program with a single mission, to ensure that seniors and disabled Americans have access to

the health care that they need. In fee for service Medicare, seniors

3

don’t face endless choices. They face only the important ones,

choice of doctor, choice of specialist, choice of hospital. The new

Medicare Drug Discount Card Program begins to erase that legacy.

It replaces the uniformity and clarity of Medicare with mountains

of glossy brochures and government sponsored advertisements,

some of them illegal, it turns out, conflicting claims about prices

and coverage and a system that can change fundamentally week to

week, all, Mr. Chairman, in the name of choice.

One constituent wrote to me, ‘‘I find everything related to the

new Medicare law totally confusing. I have two master’s degrees

and it’s beyond me. I don’t know how most people are going to cope

with this. What’s wrong with these cards? There’s no guarantee

first that your plan covers your drugs at the rates they advertise.

The real rates are often different from those catalogued on the

Medicare website. The prices listed in the website are often different from those given out over the hotline, that is, if you can get

someone on the hotline.’’

My constituents report to me that trying to get the help of a

human being at 1-800-MEDICARE is nearly impossible. I hope that

senior and disabled Americans benefit from these discount cards.

I’m pleased to joint Mr. Dingell and other members of this committee on legislation to automatically enroll low income beneficiaries into the program so they do, in fact, get the $600 subsidy.

But this discount program should teach us a lesson. More is not always better. Multiple choice is not always the right answer. The

mess of the discount cards, the confusion that seniors are experiencing, the clamor of competing drug companies and insurance

companies, it’s all a pretty good indicator, unfortunately, of what

we can expect when the full drug benefit goes into effect in 2006.

Medicare, as we know, is now spending millions of dollars and

hiring thousands trying to make this card less confusing. As we

also know, in the papers today they’ve been doing this illegally.

Those dollars could have instead been used to deliver real drug

benefits to seniors, benefits that don’t feature the huge donut hole,

the huge gap in coverage.

I find it ironic that my colleagues on the other side of the aisle

who for 38 years since the great majority of them opposed the creation of Medicare, attack Medicare as the pinnacle of big government. I find it ironic that they created what must be the big—

might be the biggest bureaucratic nightmare in the Nation’s history.

We could have a simple Medicare discount card where the government has negotiated the price on behalf of 40 million beneficiaries and get Canada or France or Germany or Japan or England-type drug prices instead of one simple card that a senior could

go in and show. We have these. This card could be a discount for

Fosamax. This card might be a discount for Vioxx. This card might

be a discount for Lipitor. This card might be a discount for Zocor.

This card might be a discount for Zoloft. This card might be a 22

percent discount, but then next week it becomes 12 percent. This

discount card for Lipitor might be 15 percent and 2 weeks later

drop to 12 percent.

We could have used instead, Mr. Chairman, the combined purchasing power of 39 million Medicare beneficiaries to secure real

4

discounts, but the President and my Republican colleagues again

showing their allegiance to the prescription drug industry which

will benefit $150 billion in additional profits from this bill, decided

that instead of using the clout we could have to get real drug discounts, 50, 60, 70 percent, the way they do in Canada, instead of

using that clout, we have surrendered it to the drug industry.

Republicans sheltered their friends in the drug industry at the

expense of seniors and they capitalized on the desperate need for

prescription drug relief in order to privatize Medicare. First, the

choice of multiple private discount cards which feeds into the

choice of multiple private prescription drug plans, after all, what

better drug plan than the one associated with your discount card

which bleeds into the choice of multiple private HMOs. After all,

isn’t it more convenient to consolidate all your coverage with an

HMO than to have Medicare, plus Medigap, plus stand alone prescription drug coverage.

Mr. Chairman, we could have one discount where government

could ensure that seniors would get a 40, 50, 60 percent discount.

Instead, our friends in the drug industry, the President of the

United States and the Republican leadership in this House has

given us this confusing choice of discount cards which at best might

give us 10 or 15 or 20 percent if, in fact, you qualify.

I yield back my time.

Mr. BILIRAKIS. I thank the gentleman for his discourse. I find it

ironic, even though the gentleman himself was not here, that during the what two—better than two decades that his party controlled the House and controlled the White House at the same time

during much of that time, no efforts were made to do what needed

to be done for our senior citizens and it was this party that decided

to take the bull by the horns, know it was not perfect, but we were

going to—attempting to help some people, not all of the people, but

some of the people, some of the time.

The Chair now would yield to the chairman of the full committee,

Mr. Barton, for an opening statement.

Chairman BARTON. Thank you, Mr. Chairman, and I would ask

unanimous consent that my formal statement be put into the

record in its entirety.

Without objection, hopefully.

Mr. BILIRAKIS. You choose not to make a——

Chairman BARTON. I’m going to make an extemporaneous statement.

Mr. BILIRAKIS. By all means, the opening statement of all members of the subcommittee will be made a part of the record, without

objection.

Chairman BARTON. All right, thank you, Mr. Chairman. I want

to welcome Dr. McClellan to the full committee, former full-blooded

Texan and I know his mother very well and worked with him at

FDA and we’re glad to have him at CMS.

I hope this hearing today will show the American people that the

Medicare Prescription Drug Card Benefit Program is several

things. No. 1, it’s voluntary. If there are senior citizens out there

that think it’s too confusing or too complex or they don’t feel that

they need to participate or they just feel that they don’t want to

participate, they don’t have to. It’s totally voluntary, No. 1.

5

No. 2, if they do want to participate, I don’t apologize for helping

to create a program that gives seniors choices. That is a good thing,

not a bad thing. Now admittedly in this beginning period with the

various groups and companies scrambling to create the drug cards

and I think we’re somewhere in the neighborhood of 40 to 60 drug

cards that out there on the national level, there’s some glitches. It’s

a startup program. But I would point out that if the seniors want

to wait a month or 2 and pick a card in July or August, they can

do that. They don’t have to pick a card right now and if they pick

a card and they don’t like it, they can change next year. They’re

not stuck for life with it. And how in the world it is a bad thing

to create a new prescription drug benefit program that gives seniors choices on a voluntary basis is beyond me. I think it is a good

thing. I’m going to sit down with my mother who lives in Waco,

Texas next week and she’s got a stack of mail on her desk and

she’s going to go through it with me and we’re going to help try

to sort out what’s the best prescription drug benefit card for her,

if any. She’s got a pharmacist that’s about two blocks from her

house and we think they have some cards and we’ll see.

So I know there’s going to be a lot of rhetoric today at this hearing and various folks are going to engage in gnashing of teeth and

all of this, but I don’t want to forget the bottom line. We have a

new prescription drug benefit for seniors. That is a good thing. It

is voluntary. That is a good thing. There are lots of choices. Those

choices may be confusing, but the fact that we give seniors choices

is a good thing.

And if you’re a low income senior, you get the benefits of the prescription drug discount, plus you get $600 to help defray the cost

of your drugs. And for a fair number of seniors, that will mean they

don’t have to pay much of anything out of pocket, other than what

ever the small co-pay is for the particular drug that they’re using.

I look forward to the hearing. I look forward to a good dialog and

debate on it, but I encourage all seniors that are thinking about

participating to seriously look at the various number of cards that

they have available to them and decide what’s best for them.

Mr. Chairman, with that, I would yield back the balance of my

time.

Mr. BILIRAKIS. The Chair thanks the gentleman and yields to

Mr. Dingell for an opening statement.

Mr. DINGELL. Mr. Chairman, thank you. I commend you for holding this hearing and Dr. McClellan, welcome to the committee. I

am anxious to hear your testimony explaining how these cards are

going to work. I’ve been concerned about these cards and the private companies that run them since the Bush Administration first

proposed them 2 years ago.

Thus far, I’ve seen little to allay my concerns. I want to be clear.

I do not find these cards bad. I do find them, however, often misleading, consistently confusing and of dubious workability. I also

find the efforts of the administration to publicize them and to explain them to be of questionable character.

I would note that if they don’t work, all of this is going to have

serious implications for Medicare and the seniors who depend upon

it and many seniors will be hurt. The confusion and difficulty proVerDate 11-MAY-2000 11:03 Jan 07, 2005 Jkt 000000 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 93975.TXT HCOM1 PsN: HCOM1
6

duced thus far could well undermine the long-standing trust that

seniors have in Medicare.

First, there’s 73 cards to choose from, each one offering something different that changes constantly, while at the same time the

seniors who are dependent upon these are chained to one card for

a period of 1 year, regardless of whether they had made a mistake

in choosing it or whether or not they are properly treated under it.

Second, I have yet to see convincing evidence that the savings

from these cards would justify the difficulty and confusion for seniors and the expense to Medicare and the taxpayers. The amount

of discount seniors are getting with these cards doesn’t appear to

be any better than what is available in the market today. The majority of pharmacies already give cash-paying seniors a 10 percent

discount at the register. Places like drugstore.com or Costco have

better or comparable discounts. And the Veterans’ Administration

has the best prices around.

I would direct your attention to a CMS chart which I will be

showing you later which has since been recalled. I’m interested as

to why it has been recalled, but I have both the original and the

following one and after I think we have explored this, we will find

why it has been recalled.

This chart shows how prices under various discount cards compare to Canadian prices and prices that the Veterans’ Administration gets bear the test of reality. Prices in the supply schedule by

the Federal Government were $300 lower than the most generous

card listed on the CMS table for general basket of drugs commonly

used by the elderly. This administration has fought bitterly, however, to prevent seniors from getting similar discounts.

Confusion and bureaucratic reluctance are hindering the one bright spot, the $600 for low income seniors. Unfortunately, the

people eligible for this money are the most likely persons to be intimidated by the confusing process. CMS has not done what is

needed to assure that all eligible beneficiaries receive this subsidy.

In fact, there are predictions now that only 65 percent of those eligible will enroll in this subsidy and will be eligible to receive it by

reason of that enrollment.

I don’t think that you can justify the acceptability of this circumstance. CMS could automatically enroll low income seniors who

are currently in the Medicare savings program in the discount card

subsidy. It is doing so for seniors in the State Drug Assistant Programs. CMS has the information to enroll these other low income

seniors who are also eligible for the $600. But you have for reasons

suitable to yourself, declined to do so. I and other Democratic Members will be introducing a bill today to automatically enroll all low

income seniors. It is the least we can do. It is strange that we must

introduce legislation to assist you to do that which you could do

without legislative authority because you already have that authority.

I look forward to your testimony and that of other witnesses and

perhaps some explanations of the curious, confusing and difficult

situation that seniors face in addressing the question of which card

they may take and how they may avoid being skinned in the process.

Thank you, Mr. Chairman.

7

Mr. BILIRAKIS. The Chair thanks the gentleman. Mr. Whitfield,

for an opening statement.

Mr. WHITFIELD. Mr. Chairman, thank you very much and I also

want to welcome Dr. McClellan and to also commend him for the

tremendous job that CMS has done in trying to implement this program. I’m sure it has been quite difficult and I know that the volumes of phone calls coming asking for assistance has been overwhelming, so although there are still a lot of problem areas out

there, I think overall, you all have done a tremendous job and I

want to thank you for that.

Those of us who supported this prescription drug benefit, I think

we have a lot to be quite proud of. We have 6 months now before

the election and I don’t think any of us are surprised that there’s

a lot of criticism of this program. It’s very easy to be critical of a

program, particularly one that’s getting started that is complicated.

But one of the things that I am most proud of is that each one of

us in our Districts represent a lot of people who are at the Federal

poverty level or below and under this plan for the first time ever,

under Medicare, people who are 135 percent of the poverty level

and below, not only are they going to get a $600 credit this year

and then also next year, but they’re also going to be paying only

a small co-pay for generic drugs and name brand drugs.

So the question about drug reimportation are all those things for

those people, really does not make any difference at all because

they basically are going to be getting free prescription drugs, a benefit that they’ve never had before.

So I don’t think this Congress needs to apologize for anything in

our efforts to look out for those people who need it most and this

program is particularly effective at doing that. In addition to that,

all of our seniors are going to benefit from this program.

I want to make one other comment. We hear a lot about price

controls in Canada and in Europe and elsewhere. And we hear a

lot on the other side about how we caved into the drug industry.

I would just make this comment. That the drug industry, the pharmaceutical industry in the United States has been most effective,

more so than any other drug industry in the world of coming up

with new medicines to treat diseases and prolong the lives of people in America.

Unfortunately, the Europeans, the Canadians and others have

been instituting price controls and they’re making Americans pay

for their low prices to benefit, so that their citizens can benefit

from the research and development that our drug companies do in

America. So from my perspective, they’re really engaged in unfair

trading practices and I think that is something that we need to explore on our side of the aisle because there’s no reason that the Europeans and others will be benefiting from the research and development that our drug companies do.

And Mr. Chairman, I look forward to this hearing and commend

you for your leadership.

Mr. BILIRAKIS. The Chair thanks the gentleman. Mr. Waxman

for an opening statement.

Mr. WAXMAN. Thank you, Mr. Chairman. We can all agree on

one goal for the discount cards. They should save as many seniors

as possible as much money as possible in the simplest fashion posVerDate 11-MAY-2000 11:03 Jan 07, 2005 Jkt 000000 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 93975.TXT HCOM1 PsN: HCOM1
8

sible. Unfortunately, after 3 weeks, it’s pretty clear that the cards

are failing that test for most Medicare beneficiaries. Seniors are

confused, frustrated and angry and with good reason. They can’t

get enough accurate information about the discount cards. The 1-

800-MEDICARE number is either busy or doesn’t seem to be of

much help when seniors can get through to it. And the Medicare.gov website is all but useless for most seniors. It is slow, confusing, and according to complaints from people who manage benefits from seniors and pharmacists, doesn’t even provide accurate

prices.

According to the Washington Post, seniors can’t even get any accurate information on pricing for drugs that just come in pill or

tablet form. According to the Wall Street Journal, posted prices are

going up and down like a yo yo with no apparent rhyme or reason

and seniors can’t even get good information from their local pharmacists because the local pharmacists don’t know which cards they

will be accepting and don’t have any sense of what prices they will

be charging on June 1.

Well, this aggravation is worth it for low income seniors who at least get the $600 Transitional Assistance, but for other Medicare

beneficiaries, even if they are finally able to wade through this

jumble of confusion or have a son who is the chairman of the Energy and Commerce Committee to explain it to them, it’s not at all

clear that they will even see savings from these drug cards.

I take no joy in being right about this issue. I opposed the Medicare bill. I thought that this Medicare bill when it was written was

legislation drafted to benefit the insurance companies and the drug

manufacturers instead of the Medicare beneficiaries and the drug

benefit and the drug cards could have been provided in a simple

straight forward manner, but that wasn’t what the Republican

leaders in the Congress chose to do or what this administration

told them to do.

Instead, we’re faced with a situation where this complicated, confusing and poorly planned drug card program is undermining seniors’ confidence in the entire Medicare program. Seniors rely on

Medicare. They trust it implicitly, but with this discount card benefit they can no longer be certain that the Medicare brand name

guarantees them the affordable, quality health care to which they

have become accustomed.

We need to fix this problem and we need to fix it right away. If

we don’t, I fear that it’ll be a prelude to a worse situation. My Republican colleagues seem to have lost sight of the goal of the Medicare program. It’s not about experiments with privatization or give

aways to health care providers or insurance companies or drug

companies. Medicare is suppose to work for seniors. Let’s fix this

drug card program and this drug benefit so we can make sure that

happens.

Mr. BILIRAKIS. The Chair thanks the gentleman. His time has expired.

Chairman BARTON. Mr. Chairman, could I be recognized by

unanimous consent briefly?

Mr. BILIRAKIS. The gentleman is recognized.

Chairman BARTON. I just want to tell my good friend from California that we need an adjective, a caring chairman and a caring

9

son and I will be happy to help the gentleman from California, if

he is over 65 and needs some help determining which card is best

for him.

Mr. WAXMAN. I ask unanimous consent that my opening statement be revised to include the comments of caring son and all the

other suggestions——

Mr. BILIRAKIS. Without objection.

Mr. WAXMAN. But I do take exception to the fact that you think

I’m over 65.

Chairman BARTON. I didn’t say that. I said if. I said if. I did not

say that.

Mr. WAXMAN. That’s bad enough.

Mr. BILIRAKIS. The Chair recognizes the gentleman from Illinois,

Mr. Shimkus for an opening statement. Let’s have some order,

please.

Mr. SHIMKUS. Thank you, Mr. Chairman. I want to welcome Dr.

McClellan and thank you for the work you’re doing and trying expeditiously to move on these cards and then the implementation of

the full plan.

I also want to welcome Mary Grealy from the Healthcare Leadership Council who is in the second panel. She came out to Illinois

and we had a very successful educational seminar and I would encourage other members to do that.

The ranking member of the full committee mentioned that the

discount card initiative was an executive branch initiative and it

was not. For those of us who marked up the bill in this committee,

know that it was led by five rogue members, John Shadegg, Steve

Buyer, Charlie Norwood, now the full chairman and of course, Mike

Bilirakis, working behind the scenes.

So this discount card is a House Commerce Committee at least

Republican initiative. This was not part of the executive branch’s

original plan in that this whole Medicare prescription drug debate.

And I’m going to let the individuals—and Richard Burr was another one. I’ll let those folks be added but they wanted a bridge and

I think it’s going to be a very successful bridge and I really commend them for their work because they bucked, even the House

leadership to have this provision in there. And they were successful

and I want to congratulate them.

Also, Dr. McClellan, since I have your undivided attention, Illinois has passed a Hospital Provider Assessment which comports to

Federal law. We would hope that CMs would swiftly evaluate and

allow for this to be implemented in Illinois. I’m taking my privilege

as a member to bring that up and I thank you, Mr. Chairman. I

yield back my time.

Mr. BILIRAKIS. The Chair thanks the gentleman. Mr. Pallone, for

an opening statement.

Mr. PALLONE. Thank you, Mr. Chairman. I was somewhat concerned and I hope you don’t take this personally with the opening

statement you made about Democrats because you said that Democrats were demagoguing this issue and you know, we were using

scare tactics and you talked about how we needed to marshall

scarce resources and frankly, Mr. Chairman, the reason I am upset

by that is because when I read today’s Washington Post about how

the GAO now says that the Department broke the law with their

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Medicare video campaign, I think that we have an obligation not

only as Democrats, but as nembers of this committee, to have some

oversight about the extent to which the Department has broken the

law. It’s clear now, based on the GAO report, in my opinion, that

laws were broken. My understanding is that there’s an on-going investigation by the Inspector General about Foster and his statements and the fact that he wasn’t allowed to bring up the costs of

the Medicare bill.

And as much as I appreciate the fact that we are having this

hearing today, I think that this subcommittee has an obligation to

have more oversight over to what extend the Department has broken the law with this Medicare bill. And I know that my colleague

on the Senate side, Senator Lautenbeg, is introducing a bill today

that would require that the Bush campaign reimburse the Federal

Government for the cost of this Medicare ad campaign and I intend

to introduce a similar bill in the House because I think there is a

real problem here and this administration and this Department

continue to break the law.

And we have an obligation, I believe, on this subcommittee to

have some sort of oversight, to have some hearings on this issue

with the ads on the Foster issue. I know with regard to Nick

Smith, the Ethics Committee is taking that up. Also the Ethics

Conflicts with some of the previous Medicare Administrators,

Scully. I think this needs to be done and I hope at some point we

will do that.

As far as the drug discount card plan, I know someone was criticized on this side for saying it was a farce, but it is a farce. I tried

to use this 800 number. It took 30 minutes to even get somebody

to respond. My seniors are telling me they don’t have the website.

They don’t have a computer where they can log in and make these

comparisons and we’ve already been told by some of the companies

that are on the website that there’s misinformation on the site.

How in the world is a senior citizen supposed to decipher all of this

information? There’s absolutely no way to do it.

I have a chart over there, if I could point to, that I think probably would be more helpful in navigating a senior through the discount drug card program than the HHS website. There are 50 steps

on this chart, no promises except for massive bureaucratic confusion that quite frankly disgusts me when I think about the seniors

who are forced to play these games with the drug and insurance

industry and the stakes being their health and their lives. That

chart is easier to figure out than the website and the other garbage

that this Department is putting forward on this issue.

Mr. BILIRAKIS. The gentleman’s time has expired. Mr. Buyer for

an opening statement.

Mr. BUYER. I’ll reserve my time.

Mr. BILIRAKIS. You’ll reserve your time. Mr. Green for an opening statement.

Mr. GREEN. Thank you, Mr. Chairman and like the chairman of

our committee, I’d like to welcome Dr. McClellan. I enjoyed working with you at FDA and again looking forward to working with

you at CMS.

I’m glad we’ll see some hopefully common sense brought to CMS

and I know, I talked earlier, what we’re going to talk about today,

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it’s Congress’ fault and the administration, although you’re part of

it, but you’re just new on that watch. So you’re the messenger so

far and not the culprit whereas I have enough problems with the

bill we passed. I don’t think there’s anyone engaging in scare tactics because like a lot of my colleagues, I tried to on the Friday,

the website was up, tried to negotiate that website for my seniors.

And again, like a lot of seniors, particularly in a District that’s 65

percent Hispanic, they don’t have access to the web.

I couldn’t do it on two zip codes. Now there’s new information on

it for the zip codes, but again, much less using the phone message.

My concern is and our Chairman is right, there’s no penalty for

someone not joining or taking those cards, but in 2006, if a senior

does not accept or not pay that $35 a month, they’re penalized

every year for not doing it. So there is a penalty in here, but it’s

not based on these cards.

But I’d like to thank Chairman Bilirakis for calling this hearing

because of all the legislation in the number of years I’ve been on

the committee, I think this is one of the most important in the

health care area and I guess I’m disappointed because we talked

about the limitation of the $400 billion. Mr. Chairman, if I had

known we had $550 billion to expend, maybe we could have prepared a better plan. But when Medicare released its price comparison website, like a lot of folks, we tried to make it fit. And you

know, again our seniors aren’t typically internet savvy but even

seniors who are willing to go through the steps on the website, it’s

confusing as my colleague from New Jersey has shown. Fortunately, I know firsthand, I tried to do it on that Friday morning

to prepare information and just using compare prices for five commonly used drugs in one zip code, we came up with 12 cards, scores

of pharmacies and a grand total of 27 pages of information. A senior would have to have the web to be able to navigate it and even

that was difficult.

It’s not only frustrating for seniors to sift through that information, and finally decide on what card, the sponsor is under no obligation to keep those advertised prices which is frustrating because

as the chairman said our seniors are going to be stuck with that

card for a year and yet they may find out that the prices on their

particular list of pharmaceuticals has gone up on a weekly basis.

To make matters worse, the benefits offered on these cards are

questionable at best.

I know Mr. Waxman’s staff in doing some comparison with prescription drugs, are obtained cheaper in Canada or even under our

Federal Supply Schedule which the Veterans’ Administration already uses. The Federal Supply Schedule is much cheaper than

what’s available under this card. I know it’s frustrating for—and

I’ll go on with my questions later, Mr. Chairman, but I appreciate

your calling the hearing so we can air our differences again on this

issue.

Mr. BILIRAKIS. The Chair thanks the gentleman. The gentlelady

from New Mexico, Ms. Wilson, for an opening statement.

Mrs. WILSON. Thank you, Mr. Chairman, and I thank you for

holding this hearing today and Dr. McClellan, thank you for coming.

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This is the biggest addition to Medicare in a long time and we

all expect that there’s going to be some glitches in the roll out. I

was interested to see an article somebody sent me. It’s from the

Washington Post in 1966 and it says ‘‘the slow payments represent

only one of several bugs to appear in the massive machinery of

Medicare during its first 6 weeks of operation. ’We think there’s

some confusion’ an official said.’’

Whenever you start a new program as big as this one, there are

going to be some initial confusion as people learn what benefits are

best for them, but I think we’ve done the right thing by making

a voluntary benefit. And I think one of the things my friend, the

rogue from Arizona and his colleagues did, was probably the best

little idea in this bill which was to create an open, transparent, understandable market on a website and we’ve already seen the impact of competition.

My colleague from Ohio talks about how much better it would be

if we only had one card and one set of prices and the government

would negotiate what those prices were and whether your medicine

was on the list at all. In the first 2 weeks of the cards even being

posted on the website, the prices have gone down for regular drugs

by 11.5 percent and generic drugs by even more, 12.5 percent because every one of those cards out there knows that in order to get

people to sign up for their cards, they need to negotiate the best

deal they possibly can.

I am aware of no program in the Federal Government that has

managed to reduce its prices by that much in such a short period

of time even before the program officially rolls out. Federal Government isn’t that responsive. But the market is and that’s yet another reason why I think we’ve probably gone in the right way.

As a Member, I think all of us have similar stories of helping

people in our Districts to qualify, particularly those who are low income and get them information so that they and their families can

make choices and give them help. I wish it wasn’t a big election

year because we have made a major new benefit available to America’s seniors and instead of bickering about whether we did the

right thing last year, all of us should be pulling together and helping seniors to understand a new benefit that is demonstrably of

benefit and good for them and for their families. And it’s time to

stop that and get focused on the solutions and helping people with

a marvelous new government service. And I look forward to working in that direction.

Thank you, Mr. Chairman.

Mr. BILIRAKIS. The Chair thanks the gentlelady. Mr. Strickland

for an opening statement.

Mr. STRICKLAND. Thank you, Mr. Chairman. Mr. Chairman,

America’s seniors get it. They understand what’s being done to

them and they understand what’s not being done for them.

When I showed the Family USA video narrated by Walter

Cronkite to the seniors in my District, they audibly gasped when

learning the details of the Medicare plan we pushed through in the

middle of the night. When I talk to them about the arm twisting,

the accusations of bribery, the prohibition against importing cheaper drugs, the prohibition against negotiating lower prices, when I

described the donut hole, when I talk to them about the fact that

13

we were given false information about the true cost of this plan,

they are appalled.

Now I’m glad we’re having this hearing today because I am hearing from seniors all over my District. They’re confused about how

to decide which card to choose and whether the card they choose

will continue to save them money in August or September or December. And quite frankly, I’m confused. And I’ve been giving them

the White House number to call or the 1-800-MEDICARE number

to call, but now I’m going to give them Chainman Barton’s number

because apparently he knows and he’s offered to help.

You know, when I explained to my seniors that the savings can

change every 7 days, that the drugs offered for discount can change

every 7 days, but when they make a decision, they’re locked into

that decision for the entire year, they’re upset. My seniors are confused and they’re disappointed because the benefits they will likely

receive once they choose a card and start using it, may not provide

any savings at all.

Since seniors are likely to take 6, 8, 10 and even 12 prescriptions

at once, it is unlikely that all of their drugs will be discounted by

a single card. And therefore, they will still be forced to pay

undiscounted prices for the drugs that aren’t covered by the card

they choose. And the card they do choose may start out providing

a 15 or 17 percent discount, but once the drug prices rise, seniors

may be left with no more money in their pockets than they would

have had otherwise.

So what if we get a discount card that provides a 10 or an 11

or a 15 percent discount and the drug prices go up 18 percent, the

seniors are still going to be paying more. The answer for this is for

us to provide a comprehensive drug benefit that is a part of traditional Medicare and get rid of these confusing, rather outlandish

deceptive and deceitful, in my judgment efforts to hoodwink our

seniors.

And I would like for my entire statement to be placed in the

record, Mr. Chairman.

Mr. BILIRAKIS. You’ve already made that point and I wonder if

the gentleman knew that Mr. Cronkite was paid an undisclosed

sum for the video that he was referring to.

Mr. STRICKLAND. I don’t think that that in any way undercuts

the validity of what he says about this ridiculous program.

Mr. BILIRAKIS. For the record, he was paid for it. In any case,

who is next? Mr. Ferguson, for an opening statement.

Mr. FERGUSON. Thank you, Mr. Chairman. I’d just say to my

friend, Mr. Strickland, that Families USA video is a joke. It is a

blatant, partisan, political attempt to discredit a program which is

going to make prescription drugs cheaper for millions of American

seniors and the fact that Walter Cronkite was paid some amount

for that I think absolutely undercuts his ability to go out and bash

the program.

I will say thank you to Dr. McClellan for being here. I’m delighted with your leadership at CMS. I think there are a few people

who are going to be better able to handle the enormous tasks of

implementing this important new program and I thank him for

being here today.

14

We’re here to discuss the immediate savings that our Nation’s

seniors are going to realize due to the prescription drug discount

cards provided under the Medicare law that we wrote last year.

After years of promises, this law fulfills our commitment to our Nation’s seniors by providing the first ever universal prescription drug

benefit under Medicare and that’s a huge accomplishment.

One would think that these new benefits for seniors, coupled

with the prescription drug discount card would be a cause for celebration. Rather than educate seniors on the benefits of the discount

cards, the other side of the aisle has continued to simply play partisan politics with the issue and resorted to scare tactics toward

our Nation’s seniors and in some cases even suggest that our seniors are too dumb to figure out how this could benefit them. That’s

simply wrong.

Some have even suggested that there are some on the other side

of the aisle who are discouraging seniors from signing up for the

benefits that these cards offer. Folks, low income folks, will immediately get $600 of free medicine and some have suggested that

there are those on the other side of the aisle who because perhaps

they don’t want a lot of seniors to sign up for this because that

would suggest somehow that the program is a success, are discouraging seniors from taking advantage of $600 worth of free medicine. That’s not just wrong, it’s unconscionable. It’s shameful and

anyone who is engaged in that kind of practice should be ashamed

of themselves.

In my home State of New Jersey, we have a very generous pharmaceutical assistance program called PAD. After working with our

Governor and CMS, New Jersey has had the opportunity to directly

enroll our low income seniors into the drug discount program. Out

of the 81,000 seniors and people, persons with disabilities who are

eligible for the Transition Assistance provided by the drug discount

card, only 220 have opted out of the program, out of 81,000 people,

220 have opted out of the program.

As a result of the discount card and our delegation’s work to get

this card to New Jersey seniors, my home State will save $90 million on the cost of prescription drugs. These savings and my hope

is that will be put back into the PAD program to provide expanded

coverage for additional seniors New Jersey, I think is an example

that other states hopefully will follow, by putting partisan politics

aside, our delegated worked with CMS to provide simple process

which benefits our State and our Nation’s seniors.

Now today and I’m sure in the future, defying logic, you’re going

to hear members on the other side of the aisle, argue that the cost

of prescription drugs will actually increase as a result of the discount card. For those members, I’d like to point to a May 14, as

I close, study by CMS which shows that in the past week more

cards have been offered, increased discounts for our Nation’s seniors compared with prices offered the previous week. This is how

markets work.

Mr. BILIRAKIS. The gentleman’s time has expired.

Mr. FERGUSON. I’ll just finish, Mr. Chairman.

Mr. BILIRAKIS. I apologize to the gentleman.

Mr. FERGUSON. Some on the other side of the aisle would prefer

a government-controlled——

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Mr. BILIRAKIS. Ms. Capps for an opening statement.

Mr. FERGUSON. [continuing] where the government decides who

gets what. That’s not how markets work. It sounds more like the

Soviet Union to me, than America.

Mr. BILIRAKIS. I hope you’re not referring to the chairman.

Mr. FERGUSON. I ask my whole statement be made a part of the

record. Thank you, Mr. Chairman.

[The prepared statement of Hon. Mike Ferguson follows:]

PREPARED STATEMENT OF HON. MIKE FERGUSON, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF NEW JERSEY

Today we are here to discuss the immediate savings that our nation’s seniors realize due to the prescription drug discount cards provided by the Medicare Law that

Congress wrote last year. After years of promises, this law fulfills our commitment

to our nation’s seniors by providing the first ever universal prescription drug benefit

under Medicare.

One would think that these new benefits for seniors, coupled with the prescription

drug discount card would be a cause for celebration. Rather than educate seniors

on the benefits of the discount cards, the other side of aisle has continued to play

politics with this issue and resorted to scare tactic towards our nation’s seniors and

in some cases suggest that seniors are too stupid to make decisions for themselves.

There are even those who are discouraging seniors from signing up for the discount

card. Perhaps because if seniors sign up, the program will be a success; that is not

just wrong, it is unconscionable and shameful, and anyone who engages in that sort

of behavior should be ashamed of themselves.

In my home state of New Jersey we have a very generous state pharmaceutical

assistance program called PAAD. After working with our Governor and CMS, New

Jersey has the opportunity to directly enroll seniors into the discount card program.

Out of the 81,000 seniors and persons with disabilities who were eligible for the

transition assistance provided by the discount card, only 350 opted out of the program. As a result of the discount card and our delegation’s work to get this card

to New Jersey’s seniors, my state will save $90 million on the cost of prescription

drugs. These savings can be put back into the PAAD program to provide expanded

covered for additional seniors. New Jersey is one example that I encourage more

states to follow. By putting partisan politics aside, our delegation worked with CMS

to provide a simple process which benefits our state and our state’s seniors.

Defying logic, today and in the future, you will hear members on the other side

of the aisle argue that the cost of prescription drugs will increase as a result of the

discount card. For those members I would like to point to a May 14th study by CMS

which shows that in the past week more cards have offered increase discounts for

our nation’s seniors compared to prices offered the previous week. Sponsors are now

comparing their discounts to their competitors, more cards are offering favorable

prices, and CMS is working with card sponsors to make sure that the best discounts

are published for Medicare beneficiaries. This is what happens when competition is

injected into the marketplace. That’s how markets work. Some on the other side of

the aisle would prefer a government run, command and control system where bureaucrats or politicians tell people what medicines they can have, how much they

can have and when and where they can have it. That sounds more like the former

Soviet Union to me.

Today you will also hear members who will criticize the pharmaceutical industry

for charging too much for prescription drugs. Yet they will not mention the miracle

drugs or treatments these companies create. Representing the scientists and researchers who live in my district of New Jersey, I would like to highlight the good

work that two of the pharmaceutical companies are doing to help seniors. Once a

low-income beneficiary has exhausted his or her annual $600 transitional assistance

allowance, Merck and Johnson and Johnson will provide its medicines free to that

beneficiary’s participating discount card plan or directly to the beneficiary, through

the pharmacy. Neither company will receive any fees from these programs.

In closing, I encourage all members to put aside partisan politics and help seniors

recognize the benefits of the drug discount card. This can be accomplished by working with CMS to clarify any questions our seniors may have and allowing seniors

to realize the discounts that are available to all seniors through the discount card.

Mr. BILIRAKIS. Ms. Capps for an opening statement.

Ms. CAPPS. Mr. Chairman, thank you for holding this hearing.

16

Dr. McClellan, welcome.

I think it is critical that we look into this discount card program.

We’ve heard the administration and many Members of Congress

laud the prescription drug discount cards that have just been revealed and will go into effect soon. I don’t see where there’s much

to crow about. The President created the card in order to hide the

fact that his Medicare prescription drug benefit plan is a sham.

The Medicare bill signed into law last year does nothing to actually

lower the cost of prescription drugs. It prohibits Medicare from

using the bargaining power of America’s 40 million seniors to negotiate lower prices. And it upholds the prohibition on reimportation

of American made drugs from Canada which would lower prices for

seniors. And it is very doubtful that the discount cards we’ve been

learning about will give seniors much more help either. If the discount card does not work at a senior’s regular pharmacy, too bad.

So far, these cards have been proven to be exceptionally confusing

to my constituents who have discovered that many of the sponsors

have even been providing inaccurate information. To get a card, a

senior will have to pay $25 to $30. He or she will be limited to just

one card, but after buying a card, a senior has no guarantee of anything. The cards do not give discounts for all drugs, nor do they

provide a discount at all pharmacies. The discount itself is not

guaranteed and once they sign up, seniors cannot change cards

until the end of the year.

But the insurance company or drug company providing the card

can change the cost of the medications at any time, really making

the discount meaningless. And they can even change the drugs

they cover on a weekly basis. If a senior needs a new medication

that is not covered, too bad. The senior can’t get a new card and

thus won’t get a discount. If the card sponsor stops covering the

medication the senior is on a week after signing up, again, too bad.

The senior can’t get a new card and doesn’t get a discount. If it

doesn’t work at their regular pharmacy, as I said, too bad. The senior can’t get a new card and therefore has to go to a new pharmacist and if a senior has more than one medication and no card

that covers them all, the senior has to choose which medication

they want a discount on.

Seniors deserve better than this. They deserve real discounts and

real drug coverage. So I hope this committee will work hard to correct the mistakes that the Congress made last year and give seniors the help they need and finally, I’d like to enter into the record,

Mr. Chairman, an article from the Washington Post May 18, the

byline, Lisa Barrett Mann, with the headline ‘‘She Thought Choosing Mom’s Medicare Drug Card Would Be An Easy Trick, It Turned

Into a Real Stumper.’’ This is a personal narrative which I highly

recommend to the committee.

Mr. BILIRAKIS. Without objection, that will be placed into the

record, along with the article dated August 31, 1966 of the Washington Post entitled ‘‘Thousands Failed to Pay Premiums.’’

[The articles follows:]

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Ms. CAPPS. Thank you, and I would just want to recommend to

our Chairman, Mr. Barton, that this is a similar kind of narrative

that he’s suggesting he embark upon with choosing his mother’s,

her Medicare card and those of us who he’s also going to help.

Thank you and I now yield back.

Mr. BILIRAKIS. Thank you. Mr. Upton for an opening statement.

Mr. UPTON. Well, thank you, Mr. Chairman, I’m going to put my

full statement into the record.

Dr. McClellan, I welcome you before this hearing today and I

thank my Chairman for it. This is, I think, going to end up being

a very good program. We look forward to having a constructive relationship with you and I’m going to relay just a little story.

I was at my son’s Little League game and a woman came up to

me and sadly her mom had had a stroke. And they didn’t know

how they were going to pay for an extra $600 a month in prescription drug costs in addition to the other things that she had. She

said, ‘‘Mr. Upton,’’ she said, ‘‘is the bill that you all passed, is that

going to help?’’ And my guess is that it’s going to help in a big way.

My guess is that it’s probably going to cover at the end of the day,

probably about half of the cost that she would otherwise have to

pay without this bill.

This next week I’m going to be in Michigan like most of our

Members back in their home states. They’re going to be talking to

literally hundreds of seniors, talking to them in terms of how they

can participate in this new program and I’ve got to tell you, as I

have done that earlier this year, I was most alarmed, in fact, I was

more than alarmed, I was visibly angry with the Families USA videotape that I’m told has been sent to all of my senior centers, all

the way across the country. And as I sat and watched that, I said

to myself, you know, if this was true, I would have voted against

the bill. I would have taken time and spoken against the bill, because it is just flat out wrong.

And I think about this woman who has suffered with a stroke,

the Little League grandma from the son and I see these stories

that are in the papers today. They talk about these scam artists

that are going out already. I guess some firms have been identified

as sending information, trying to get people to hook up and it’s just

rip them off. It’s just awful stories. You see this stuff now that the

senior centers are beginning to witness and seniors are confused.

My Dad is 80 years old, but there’s a lot of folks in their 80’s and

90’s, they don’t perhaps know how to use that computer as well as

you and I can use it. They think that there’s a program out there,

there really is a benefit, but when they see this stuff, the wrong

stories, the bait and switch stories that are out there, you can understand how they get confused. And that’s why I’m glad you’re

there and I look forward to working with you. I look forward to

working with my Chairman Bilirakis and Chairman Barton to tell

the real story, for us to sit down with our seniors and show them

how they can benefit from this program, rather than resort to partisan politics which sadly seems to be taking center stage.

I yield back the balance of my time.

[The prepared statement of Hon. Fred Upton follows:]

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PREPARED STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN CONGRESS FROM

THE STATE OF MICHIGAN

Dr. McClellan, I want to start today by commending you and your staff in the

strongest possible way for the great job you have done in a scant five months to

get the new Medicare drug discount card program up and going. I know it’s been

a Herculean task. Sure, there have been a few glitches—with an undertaking of this

magnitude, that is bound to happen. But more importantly, you’ve found them and

moved swiftly to correct them. Our nation’s seniors and persons with disabilities are

being well-served by you and will be well-served by this new Medicare drug discount

card program.

Mr. Chairman, I am very glad we are holding this hearing today. I hope a lot of

seniors and their loved ones are listening today. There are organizations out there

claiming to represent the best interests of seniors—and especially low-income seniors—who want this new prescription drug plan to fail. If the new Medicare Modernization Act were as terrible as is being portrayed on the video tapes Families

USA paid Walter Cronkite to make or in the dire emergency alert mailings going

out from the National Committee to Preserve Social Security and Medicare, I

wouldn’t have spent over three years working on the law, and I sure wouldn’t have

voted for it.

I am concerned that because of these negative campaigns, seniors across the nation and in particular low-income seniors who will benefit the most from the drug

discount cards may be discouraged from signing up. Let me set the record straight:

Right now, unless you already have prescription drug coverage under the Medicaid program, you are eligible to voluntarily sign up for a Medicare-certified prescription drug discount card. Card holders can expect discounts on brand name

drugs of 10 to 20 percent or more and on generic drugs of 20 to 35 percent, with

some drug card sponsors reporting discounts as high as 40 to 50 percent. There is

an enrollment fee which will vary by card sponsors but cannot be more than $30

per year. Importantly, if you are a beneficiary with an income at or below $12,569 ($16,852 for couples), your card will come with a $600 credit to be used for the purchase of

your prescription drugs. Another $600 credit will be provided in 2005. Medicare will

pay the enrollment fee.

For more information or to sign up for a card, you can call 1-800-MEDICARE (1-

800-633-4277). The phone lines are open 24 hours a day. Or you can go on the Internet at www.medicare.gov and select ‘‘Prescription Drug and Other Assistance Programs.’’ This is a very helpful website. It will allow you to enter your prescriptions,

compare prices on the discount cards available in your area, and see which pharmacies in your neighborhood are participating.

Check it out, seniors. This is a solid program that will provide real assistance

with your prescription drug costs. I am proud to have helped write it and pass it,

and I stand by it.

Mr. BILIRAKIS. The gentleman’s time has expired. Mr. Rush for

an opening statement.

Mr. RUSH. Thank you, Mr. Chairman, and I also want to welcome Mr. McClellan.

Mr. Chairman, I sincerely hope that this hearing will be an informative hearing and I want to just make a comment on the statements that—one of the statements made by my colleague, my colleague and my friend from New Mexico. She said that this program

has some glitches in it. Well, Mr. Chairman, I want you to know

that in my estimation this program has some gaps, some extraordinary gaps in it. And while I have a lot of problems with this prescription drug discount program, basically for some of the same

reasons that my colleagues have voiced.

I still remain hopeful that we can salvage some good out of this,

in my estimation, ill-conceived discount card program and give the

seniors in our nation some real relief, particularly some seniors

from my State and from my District. And in this regard, I want

to touch on the $600 Transitional Assistance to low income seniors.

This subsidy is one of the few aspects of the discount program that

supposedly offers beneficiaries guaranteed savings.

25

However, at a closer look, the program does virtually nothing for

many low income senior citizens and proponents of this program

greatly over-estimate the generosity of the yearly subsidy. In my

home State of Illinois, CMS and the Illinois Department of Public

Aid have estimated that 348,000 seniors could benefit from the

$600 yearly subsidy. However, Mr. Chairman, they also concluded

that the vast majority of these seniors are ineligible for the subsidy

because Illinois already provides a Medicaid prescription drug benefit known as Senior Care for beneficiaries 200 percent above the

poverty level.

Illinois’ threshold is far greater than the 135 percent threshold

under the discount program. Moreover, Illinois already offers a

state prescription drug discount card which offers Illinois seniors

an average of 21 percent in savings, far, far better than the estimate 10 to 25 percent in savings CMS estimates for its faulty discount card. As such, this discount card program does virtually

nothing for the seniors in my State.

Mr. Chairman, with that, I’d like to submit for the record a letter

from the Illinois Department of Public Aid——

Mr. BILIRAKIS. Please finish up.

Mr. RUSH. Dated May 20, 2004 and I would like, Mr. Chairman,

at the time of the questions to the panelists to explain how this discount program, this hyped up program is going to help my senior

constituents in Illinois.

[The letter follows:]

ILLINOIS DEPARTMENT OF PUBLIC AID

SPRINGFIELD, ILLINOIS 62763-0001

May 20, 2004

Rep. BOBBY RUSH

2416 Rayburn House Office Building

Washington, D.C. 20515

DEAR REP. RUSH: Your staff recently inquired about the number of Illinoisans who

are currently covered by the existing Illinois drug programs and who are, therefore,

excluded from the Medicare Discount Card Transitional Assistance. This letter responds to that inquiry and lays out the programs available to Illinoisans today.

Residents of Illinois benefit from a wide range of state programs providing them

with increased access to affordable drugs. These programs include Medicaid,

SeniorCare, Illinois Pharmaceutical Assistance Program and the Save Rx—the Illinois Discount Card.

The State of Illinois provides coverage through the Medicaid program for individuals who are Aged Blind or Disabled (AABD) whose income is below 100 percent

of the Federal Poverty Level (FPL). As of April 30, 2004 , there were 372,262 Illinoisans enrolled in the AABD program. These enrollees receive a comprehensive

drug benefit with minimal copays ($3 for brand name drugs and no copay for generic drugs).

The State of Illinois also provides comprehensive drug coverage for Illinois seniors

whose income is less than 200 percent of FPL through the SeniorCare program,

which is a Medicaid waiver. As of April 30, 2004, 173,726 Illinoisans were enrolled

in this program. IDPA has previously estimated that the total population of seniors

eligible for SeniorCare at approximately 360,000. There is no enrollment fee for

SeniorCare. Copays are minimal ($4 for brand name drugs and $1 for generic

drugs).

You asked whether seniors in Illinois would benefit from the $600 temporary assistance (TA) available through the Medicare discount card. Neither of the above

mentioned populations, AABD or SeniorCare are eligible for the $600 temporary assistance as part of the Medicare discount card. TA is only available to individuals

with incomes below 135 percent of FPL. Income eligibility for SeniorCare extends

beyond the income eligibility for TA. Therefore, seniors who are eligible for TA

would generally already be covered or eligible for the more comprehensive programs

AABD or SeniorCare.

26

The only individuals in Illinois that would benefit from TA who are not eligible

for the more comprehensive SeniorCare program are those under 65 years old who

are disabled, whose income is between 100 percent of FPL and 135 percent of FPL

and who are on Medicare but not enrolled in Medicaid. We anticipate that many

of these individuals with drug need will currently be enrolled in the Illinois Pharmaceutical Assistance Program (IPAP), as described below.

IPAP is a drug program funded by the State of Illinois. It offers both seniors and

disabled individuals access to a limited formulary of drugs for Alzheimer’s disease,

heart and blood pressure problems, arthritis, cancer, osteoporosis, diabetes, glaucoma, lung disease and smoking-related illnesses, multiple sclerosis and Parkinson’s

disease. This program is available to those whose income is up to approximately 240

percent of FPL. We estimate that a maximum of 9,237 of these individuals will be

eligible for TA through the Medicare discount program.

I hope this information will be helpful to you.

Sincerely,

ANNE MARIE MURPHY, PH.D.

Medicaid Director for the State of Illinois

Mr. BILIRAKIS. Mr. Deal for an opening statement.

Mr. DEAL. Thank you, Mr. Chairman. I want to also welcome Dr.

McClellan here and I thank him for undertaking a very huge job

and for his dedication to that. I thank him also for meeting with

me on a constituent matter that we’ve had and look forward to concluding that successfully.

The enormity of this job, I think is certainly one that we all have

difficulty comprehending and I thank you for your efforts.

Mr. Chairman, we have heard a lot of talk today and I think

there’s one thing that my senior citizens in North Georgia understand and that’s the difference between somebody who tries to do

something and somebody who simply talks about it. The 10 years

preceding, for a decade, Congress has simply talked about prescription drugs. My senior citizens understand that talking about it

doesn’t help them one bit. Doing something is what begins to help

them.

We have taken that step. It may not be perfect and certainly I’m

sure it’s not perfect, but first of all, we can’t even agree on what

the definition of perfect is. So let’s deal with what we have. Let’s

try to make it work.

Now if they think the discount card is confusing my 97-year-old

mother who lives with me is a retired school teacher. She’s under

the public retirement system of the State of Georgia as a school

teacher, which provides pharmaceutical benefits. They’ve just now

put out a new proposal for the different plans that are available

to them which include pharmaceutical benefits. Now if you think

this is confusing, you ought to see those choices and try to select

the plan that’s going to cover the medicines that she takes.

Nothing is perfect. Let’s take the issue that we have dealt with.

Let’s try to make it work to the best way possible, and if it needs

perfecting, we can work on that in the days to come.

Thank you, Dr. McClellan, for being here.

Mr. BILIRAKIS. The Chair thanks the gentleman. Ms. Eshoo for

an opening statement.

Ms. ESHOO. Good morning, Mr. Chairman, and good morning, Dr.

McClellan. Thank you for being here today and it’s a pleasure to

see you.

Mr. Chairman, thank you for holding the hearing. I think this is

an important one.

27

As we move from one side to the other, there is a great deal of

passion about this and it’s understandable on the Democratic side,

this is not the way the Democrats would have liked to have reformed Medicare and added this benefit and that’s eminently clear

and we really, I don’t think, need to go after each other on it. This

is really a major difference between the two major political parties

in our country.

My Republican friends are proud of what they have constructed

and now that the law is passed, we’re here, we’re here to talk about

how this thing is working. And so that’s what I’d like to make my

comments about and that we concentrate on what is on the table

and what’s out there in terms of our constituents.

I have a town hall meeting coming up. Each one of us in our own

way is responsible for putting this information out to the people we

represent. Whether we vote for something or not, we still represent

everyone and we have to explain it to them. So I think today I’d

like to hear more about how we’re going to move over some of the

early very apparent bumps in the road which is not a surprise.

Plus, this is complicated. It’s not really the simplest thing to carry

out.

What I want all of us, I think, to keep in mind is that over four

decades Medicare has been the gold standard for seniors. They always want more things to be a part of it. They’ve never wanted it

scrapped. They like what they have, but they have, with legitimacy

wanted benefits added. So it’s a trusted program. And I think that

where we are right now, we have to be sure that that trust is not

damaged and that’s what I’m concerned about because I think the

discount card is, well, the Republicans made fun of the Clinton

health plan and said that it was a Rube Goldberg plan. I think that

sometimes when you complain about something so much, that

maybe it’s a catchy disease. There’s something that kind of smells

and tastes and looks like that Rube Goldberg plan right now, because it is enormously complex.

Yesterday, the Wall Street Journal reported that there were wild

fluctuations in the cost of drugs from 1 week to the next and no

one could explain why. And the woman that wrote the article is

someone that—oh, from the Washington Post, is the health writer.

So this is a knowledgeable individual.

So today, Dr. McClellan, you know and it’s been said by others,

what the problems are right now. You know my District and there

are a lot of people that are plugged in and make use of the internet, so they’re going to be able to navigate.

What about the rest? And what about the things that have now

surfaced? How are they going to be addressed?

I want to throw one more thing in, Mr. Chairman——

Mr. BILIRAKIS. Quickly.

Ms. ESHOO. The full chairman of the committee chaired INO

here and I think that for the transparency and the importance of

the Congress leaning in, we should have an INO hearing on the

ruling that the GAO came out with. We are big enough, tall

enough, mature enough and American enough to review those

things and learn from them. Thank you very much.

Mr. BILIRAKIS. The gentlelady’s time has expired. Mr. Shadegg

for an opening statement.

28

Mr. SHADEGG. Thank you, Mr. Chairman, and I want to thank

you for holding this hearing. I guess I want to begin by noting the

title of the hearing, ‘‘Medicare Prescription Drug Discount Cards:

Immediate Savings for Seniors.’’

There has been a great deal of criticism, but none of the criticism

claims that we aren’t doing something about the problem. And I

want to kind of hue the line followed by my colleague, Mr. Deal,

in talking about the difference between criticism and action.

I’d like to begin by thanking my colleague, Mr. Shimkus, for

pointing out that under the leadership of Chairman Barton of this

committee, Mr. Burr, Mr. Buyer, Mr. Norwood, and myself, it was

this committee’s so-called rogue group that produced the idea for

a drug card and it became a part of this program.

I think it is not, of course, perfect. But I think that the vitriolic

criticism of some people, which has gone so far as to discourage

seniors to even try to make the card work for them, is inappropriate. I simply want to quote a rather famous quote from Theodore Roosevelt on the difference between criticism and action.

Theodore Roosevelt once said, ‘‘it is not the critic who counts, not

the one who points out how the strong man stumbled or where the

doer of deeds could have done them better. The credit belongs to

the one who is actually in the arena, whose face is marred by dust

and sweat and blood, who strives valiantly, who errs and comes up

short again and again because there is no effort without error and

shortcomings, but who does actually strive to do the deeds, who

knows the great enthusiasms, the great devotions, whose spends

himself in a worthy cause, who at best knows in the end the triumph of high achievement and who at worst, if he fails, at least

fails while daring greatly so that his place shall never be with

those cold and timid souls who know neither victory nor defeat.’’

We enacted a drug discount card last year. It is the law of the

Nation. We need to work to make it the best we can for the American people and I commend you, Mr. Chairman, and I think this

hearing is a step in that direction.

Mr. BROWN. Mr. Shadegg, will the gentleman yield for a moment?

Mr. BILIRAKIS. Will the gentleman yield?

Mr. BROWN. Just for 30 seconds.

Mr. SHADEGG. Certainly.

Mr. BROWN. A lot of us wanted to be in the arena during the

Medicare debate. We weren’t allowed to offer floor amendments.

We were pretty much locked out of the conference——

Mr. SHADEGG. Reclaim my time.

Mr. BROWN. I love that quote and I appreciate your bringing it

up.

Mr. BILIRAKIS. Thank you. The gentleman’s time has expired.

Mr. Stupak for an opening statement.

Mr. STUPAK. Thank you, Mr. Chairman, and thanks for holding

this hearing. For almost 40 years, our seniors have counted on

Medicare to be dependable, simple and affordable. These cards do

not meet the Medicare standards. Our seniors need a prescription

drug plan that they can understand and that will offer a real discount they can count on.

29

This drug card fiasco is not what seniors want or what they deserve. I think it will become very clear today that there’s an infinite amount of confusion and frustration surrounding these cards. Even though HHS is spending $18 million, now we understand the $18 million was illegally spent according to GAO, but they’ll

spend $18 million to tell of the savings generated by these cards,

telling seniors to wait to enroll. Are seniors supposed to wait or not

wait?

HHS says seniors should monitor the website for a week before

choosing a card because prices will change. But there’s evidence

that the prices on the Medicare websites aren’t always correct.

Many of the prescription drug card companies have said that the

prices on the Medicare websites are wrong. HHS is still taking new

applications for cards. And the drug prices and drugs covered can

change weekly.

How can a senior, how can anyone, make good decisions when

the administration is giving them bad information and information

which is changing every week? The bottom line is that these discount cards do not have to be this confusing and we could have provided a real drug benefit.

Had we leveraged the bargaining power of the Federal Government as many of us have advocated, seniors would be receiving real

savings. Instead, seniors under this plan are going to pay 75 percent more than what the VA pays for their drugs.

Why can’t we have one card instead of 73, with a real benefit

leveraging the purchasing power of all seniors? That’s the question

seniors across my District are asking me and that’s the question

I put to my colleagues and the administration.

I wish to thank Families USA and Walter Cronkite for their efforts to put forth accurate information in the videos that we have

seen. Not only have they pointed out the pitfalls of the discount

cards, but they have really looked at and examined how an individual applies, what are the qualifications, and put forth questions

that I think we all need to ask, not just simply disregard the questions that are out there.

There are some complex issues with this card. I don’t think it

had to be that difficult and so with unanimous consent, Mr. Chairman, I’d like to put in my whole statement and also the Washington Post article of Tuesday, May 18, entitled ‘‘Pick a Card!#?$!’’.

I believe you already said it would be accepted, but I just want to

make sure it’s part of my whole statement and part of my statement here this morning.

I yield back and I look forward to listening to Dr. McClellan and

other panelists here today.

Mr. BILIRAKIS. Without objection. Mr. Hall for an opening statement.

Mr. HALL. Mr. Chairman, I’ll not make an opening statement. I

just want to put it in the record. I just commend you and Dr.

McClellan and all on both sides of the aisle that are participating

and have put some input into it. I just think it’s great that Americans have a wide range of needs, and a one-size-fits-all program is

not good. That’s not what this is. I think of 39 cards to choose from

in Texas alone, seniors can surely find one. The beauty of it is if

they don’t want or need a discount card and because of the volVerDate 11-MAY-2000 11:03 Jan 07, 2005 Jkt 000000 PO 00000 Frm 00033 Fmt 6633 Sfmt 6602 93975.TXT HCOM1 PsN: HCOM1
30

untary nature of the program, they don’t have to buy one. There’s

going to be bumps along the road, but I think that the Center has

done a good job and I’m looking forward to this hearing today and

listening to how they will be improving their service to the public

in the coming weeks and months.

And I yield back my time.

Mr. BILIRAKIS. The Chair thanks the gentleman. Mr. Rogers for

an opening statement.

Mr. ROGERS. I’ll waive.

Mr. BILIRAKIS. Mr. Greenwood for an opening statement. That

completes all of our opening statements. Let’s move right into the

first panel. We appreciate your patience, Dr. McClellan.

Mr. MCCLELLAN. Thank you, Mr. Chairman.

Mr. BILIRAKIS. The first panel consists of Dr. Mark McClellan,

Administrator for the Centers for Medicare and Medicaid Services,

in case any of you out there didn’t already know that.

You have 10 minutes, sir. Please proceed.

STATEMENT OF MARK B. McCLELLAN, ADMINISTRATOR,

CENTERS FOR MEDICARE AND MEDICAID SERVICES

Mr. MCCLELLAN. Okay, Chairman Bilirakis, Representative

Brown, all of the distinguished committee members here today,

thank you for your strong interest in the Medicare-Approved Drug

Discount Card and the $600 credit. As you know, Mr. Chairman,

we are going to have a few extra minutes as part of my presentation to show you exactly how to get the benefits from this program.

As you all also know in the 5 brief months since the Medicare

Modernization Act was signed into law, CMS has created and implemented the first major drug assistance program to be offered

through Medicare. As we speak, Medicare beneficiaries who choose

to do so are enrolling in the voluntary Medicare-approved drug discount cards to get some immediate relief from prescription drug

costs. And they are. Studies of the card prices show significant savings of 11 to 18 percent off the average retail prices paid by all

Americans; 16 to 30 percent off of the usual retail prices for brand

name drugs and even greater discounts of 30 to 60 percent or more

on generic drugs. Prices are also generally significantly lower for

mail order drugs on Medicare-approved drug discount cards and

are available on the internet. And many cards have open

formularies, meaning discounts across the board on drugs.

An especially important feature of the cards, especially important, is the substantial help that has been mentioned before that’s

coming right now for the more than 7 million Medicare beneficiaries with incomes below 135 percent of the poverty level who

don’t have good drug coverage. Just this week CMS completed an

analysis that shows low income Medicare beneficiaries will be able

to see big savings of between 30 and 77 percent on bundles of

brand name drugs that they commonly use and up to 92 percent

on individual generic and brand name drugs when they combine

the lower prices they’ll be paying with the $1200 in credit available

to them over the next year and a half. And these large savings

don’t include the low prices that many drug manufacturers are proVerDate 11-MAY-2000 11:03 Jan 07, 2005 Jkt 000000 PO 00000 Frm 00034 Fmt 6633 Sfmt 6602 93975.TXT HCOM1 PsN: HCOM1
31

viding in working with us to the low income beneficiaries who use

up their $600 credit.

As an example, one beneficiary’s savings in this study increased

from about 59 percent with the drug card alone, to 88 percent off

their drug costs with the additional manufacturer offerings. Counting these special pricing arrangements, the significant discounts

and the $1200 credit, the new sources of savings mean thousands

of dollars in savings this year and next for low income beneficiaries, ahead of the comprehensive drug benefit. Starting next

month, it’s no longer talk about Medicare providing help with drug

costs. And that overdue help is especially important for our beneficiaries who have been struggling between the costs of drugs and

other basic necessities of life.

Of course, one of the cornerstones of the discount card program

is the new Medicare price compare tool which we’re going to demonstrate for you today. Through this feature on both our website

and our 1-800-MEDICARE number, we’re providing beneficiaries

with information they’ve never before been able to access and we’re

using it to fundamentally change the way that Medicare helps people in this country to buy drugs. With the new ability for seniors

to band together to negotiate lower prices from drug manufacturers, combined with an unprecedented ability to find out about drug

prices at more than 50,000 retail and mail order pharmacies all

over the country, it’s also our responsibility to provide beneficiaries

with the help they need to get the most out of this new program,

based on their individual and diverse drug needs.

To get the most out of the program, you need to remember three

things: your zip code, your medicines and their doses, and your

total monthly income, if you think you may qualify for the drug

credit. Zip code, medicines, income. With this information you can

call 1-800-MEDICARE and talk to a trained customer service representative to find out about your best options. And we can also

help you with special preferences about particular pharmacies or

cards including low fee cards and free cards. Our customer service

operators will even send a personalized brochure which many of

you have an example of sitting at your table, with information on

the best cards based on that individual beneficiary’s drug needs

and the simple two-page standard enrollment form. And we can

typically do all of this in 15 minutes or less. Or you can get all of

this personalized help by visiting our website at Medicare.gov. It’s

that simple.

We’re committed to getting beneficiaries the information they

need to get the most from this program, so we have expanded our

phone and website support to ensure timely assistance 24/7 to respond to truly unprecedented call volume, averaging 400,000 calls

per day during the beginning of May. We quadrupled the number

of 1-800-MEDICARE customer service operators from more than

400 to more than 1600 and we’ve added more in the past week. We

will be adding as many more as are needed. We’ve added voice

messages to help callers be better prepared to speak to customer

service representatives. We are providing self-service information

in our voice response system and we developed best practices to

help customer service representatives reduce call times. We’re also

making many improvements in our website which I’ll be happy to

32

talk about as well in response to some very constructive feedback

from consumers, from advocates, including some that are testifying

today, and from reporters and others.

As a result of these improvements, we’re getting to meet the demand. Waits are usually no more than a few minutes at our call

centers this week and no more than 15 minutes even at the peak

times. Moreover, we work with card sponsors to ensure that the

prices they have submitted to us for posting on the website are

prices that they can assure the beneficiaries when they go to the

participating pharmacies. We believe the information now in the

website reflects just that, the best assured price. We’ve also taken

new steps to make sure that we can take effective action against

cards that don’t live up to their promises.

Now at this point I’d like to turn over this presentation to Mary

Agnes Laureno from CMS’ Center for Beneficiary Choices, who is

going to walk us through a quick demonstration of the price compare tool.

Mary Agnes. I think you’ll be able to see this on your viewers.

Ms. LAURENO. Thank you, Dr. McClellan. What you’re seeing

here——

Mr. BILIRAKIS. You’ll have to pull that mic closer, please.

Ms. LAURENO. Thank you. What you’re seeing here is the home

page of the Medicare.gov website and you’ll see that the first link

under the features tool is our prescription drug and other assistance tool program. Now at the very beginning, the first thing that

we tell them is what you need to get started and we explain it as

Dr. McClellan mentioned. You need the name of your drug, the

dose, the pill size, etcetera, so that they can be fully prepared to

go through this tool.

We have a quick search feature for those individuals with higher

incomes who aren’t interested in learning about other assistance

programs or the $600 Transitional Assistance. And then we have

our screening questions for the rest of the individuals. And our first

question is ‘‘do you currently have Medicare?’’

We ask other screening questions that help us determine eligibility for the $600 credit and for the drug card such as ‘‘Are you

currently receiving Medicare? Do you use TriCare, FEHBP or other

insurance coverage?’’

I’m going to demonstrate a low income beneficiary from Clearwater, Florida, so I’m going to enter her zip code. We ask screening

questions about whether the individual is an American Indian

using Indian Health Service pharmacies or in a long-term care facility because that helps us to determine whether they might be interested in one of the specialized drug cards. We ask whether the

individual is married or single because that affects the income levels. And as I said, I’m going to enter a low income beneficiary with

minimal resources.

We then simply click the continue button. The next bit of information that we ask the user for is for the drugs that they are currently taking. And this individual is taking Celebrex, so I type in

the first few letters and Celebrex will come up. And she’s taking

Zocor to lower her cholesterol. And she’s taking Paxil. And she’s

taking Norvasc. So those are the four drugs that she’s taking and

then again I’ll click the continue button.

33

Now we’re screening individuals based on the information they gave us, not only for eligibility for the discount card or for the $600

Transitional Assistance, but also for any other programs that

might be a good fit for their individual situations. So in this particular example, this person would qualify or appears to qualify for

Medicaid for the State of Florida. So we put information about the

Medicaid program, the eligibility criteria, who is eligible, where to

apply and any important notes about that program.

We also have information about other sources that she may be

eligible for, but again, we put the one that looks like, the best fit

for her in the first page so we have information about State pharmacy assistance programs, both the Prescription Discount Program

in Florida as well as the Pharmacy Plus Silver Saver program

that’s available in Florida. Again, we put contact information, eligibility criteria, who has to apply, where to apply and how to contact

them.

Similarly, we put information about pharmacy assistance programs that are available, again geared toward the specific drugs

that this individual is taking. So for example, the GlaxoSmithKline

program covers Paxil and again, we give all the information about

eligibility and how this individual can go about applying and contacting Glaxo for that program.

We also want to make sure that individuals have all the information that they need about all the ways that they can save on their

drugs. So on our More Ways to Save program, we also provide

some educational information about generic alternatives and mail

order. And again, we customize this to the individual drugs. So we

list the drugs that she’s taking and explain that there is a generic

available for Paxil where she can save additional money.

For individuals who are interested in one of the Medicare managed care plan options or are currently enrolled in a Medicare managed care plan and want to see whether they offer a discount card,

we have the simple tab there. We list all of the Medicare Plus

Choice organizations available in the individual’s zip code, the

monthly plan premium. We provide information about whether

that plan currently has a benefit that offers prescription drugs. If

so, the co-pay information and then we tell them whether they currently offer a Medicare-approved discount card, yes or no, and

whether there’s a charge for that card. If the individual was interested in more information about the Humana Plan, they would

simply click on that and pull up a full screen of all the benefits.

With that, I’m going to go ahead and go into the actual compare

prices for the drug discount card. We have a simple link here called

Compare Prices that will take you into the tool. We do have a user

agreement to explain that we do not want unauthorized use of this

for people to take the information and then sell it, for example. The

user just simply clicks ‘‘agree.’’

We’re now on the page where you enter the dosage and the frequency with which you’re taking the particular drug. And this information, we do need in order to be able to accurately price it. So

for this individual, she’s taking 5 milligrams of Norvasc. She’s taking 20 milligrams of Paxil. She’s taking 40 milligrams of Zocor.

And she’s taking 200 milligrams of Celebrex. If I had forgotten to

add one of my drugs, I could simply use this ‘‘add another drug’’

34

button here. She does take these once a day, so she takes them 30

pills a month.

I have a choice if am I interested in looking for cards and pharmacies close to my zip code or do I want to go farther out and I’m

going to just keep it close to my zip code. And I can have a choice

of, am I interested in getting information on the mail order pricing

and generic alternatives, which I’m going to say yes.

This is the summary information for the discount cards. It has

a listing of all of the discount cards that are available that cover

all of her drugs. You can see it’s a nice list. We tell them how many

pharmacies are available in the zip code radius. In this instance,

one and a quarter miles around her zip code. We list the information by lowest to highest price, so Argus does have the best price

for retail drugs for her area at $298.75 to $375. And we also offer

the pricing information for the generic alternatives. Argus doesn’t

happen to have a mail order pharmacy, but U Share does, so where

there is a mail order pharmacy available, we also offer information

on that pricing.

And I’m going to say that I’m interested in information on the

five drug cards that have the best retail pricing for this individual.

I can then drill down to our pharmacy by pharmacy, drug by drug

pricing information. So now I can see that I have, for example, the

Argus drug card program that had three pharmacies in their area.

And I can see Eckerd, Publix pharmacy and Walgreens. Walgreens

seems to have the best pricing for the drugs that this individual

currently offers. And I can go drug by drug to see exactly what the

pricing is for Celebrex, Vorvasc, Paxil and Zocor. Since this individual was eligible for the $600 credit at the 5 percent co-share, we

also list information on the co-share amount that they would currently pay. Again, I can go down card by card for the five drugs

that I picked and look at each of the pharmacies that are in that

drug card’s network as well as the pricing that’s available.

Thank you.

Mr. MCCLELLAN. Thank you, Mary Agnes. Mary Agnes is an example of the talent and hard work at the Agency that’s enabled us

in just the 5 months since the law was passed to begin to help

Medicare beneficiaries, especially the millions of beneficiaries with

low income and no coverage. On this example, if the person had

called up, we would have gone through this with them. They would

be mailed a personalized brochure with their name on it. I think

you have copies of the kind of brochure that we send out in this

case, which is a personalized booklet about prescription drug and

other assistance programs including all those additional assistance

programs that Mary Agnes mentioned, Medicaid, other public and

private sources of drug savings, all designed for that individual

beneficiary’s needs. Very personalized service.

By combining this kind of unprecedented transparency in prescription drug pricing and the negotiating power of our beneficiaries, with this new level of personalized assistance, and also by

listening to the constructive suggestions that we’re getting in these

early days about how we can do even better, Medicare is beginning

to provide real help for beneficiaries with lower drug costs and

that’s definitely the case in this example where for her basket of

drugs, the lowest price offered at retail pharmacy right in her

35

neighborhood was about $300. That was a savings of 18 percent off

the national average retail prices of those drugs and many seniors

can’t even get those average prices because they don’t get the same

kind of discounts that people with public or private insurance are

allowed to get. So this translates into savings of over the next 7

months, the rest of this year, totaling almost $500 for the discounts

and if you include the $600 credit, the savings are well over $1000

or 41 percent of this beneficiary’s medications’ cost.

So thank you for the opportunity to testify today. Thank you for

that opportunity to go through an example of how this program

works and how beneficiaries can get the most out of it and I look

forward to answering all of your questions.

[The prepared statement of Mark B. McClellan follows:]

PREPARED STATEMENT OF MARK MCCLELLAN, ADMINISTRATOR, CENTERS FOR

MEDICARE AND MEDICAID SERVICES

Chairman Bilirakis, Representative Brown, distinguished Committee members,

thank you for inviting me to discuss the Medicare-Approved Drug Discount Card

and the Transitional Assistance Program, which were enacted into law on December

8, 2003, as part of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA). This May, we reached the five-month mark since the legislation was enacted. CMS worked diligently to meet this aggressive deadline to implement the drug card and transitional assistance program—and we succeeded. In

that time, we issued an interim final regulation and guidance, set up the new drug

discount card program with new information and outreach systems to support them.

Drug card sponsors began marketing and enrollment efforts on May 3 as scheduled.

As we speak, Medicare beneficiaries are enrolling in Medicare-approved drug

cards that will give them immediate assistance with high prescription drug costs.

We are already seeing evidence of significant savings between 10-17 percent off the

retail prices that the average American pays, and even greater discounts of 30-60

percent or more on generics. These cards will offer real help to those Medicare beneficiaries struggling with their drug costs. And many cards have a low annual fee

(or no fee at all) so many beneficiaries can recoup the cost of enrollment in their

first purchase. In addition to the real savings, low-income beneficiaries may get

even more help in the form of a $600 annual credit on the discount card, nominal

cost sharing, and other price reductions from manufacturers.

BENEFICIARY ACCESS IMPROVEMENTS

In spite of substantial progress we have made thus far and the fact that beneficiaries are seeing savings, we recognize there have been some operational problems. However, we are identifying and correcting these problems and, with each

passing day, improving the efficiency of this program. As you all know, in the brief

five months since MMA was signed into law, CMS took the drug card program—

the first of its kind to be offered through Medicare—from conceptual idea to reality.

Implementing the drug card in such a short period of time presented many challenges for the Agency, including developing the technical platforms to support public

display of unprecedented amounts of drug pricing information.

The initial phase of a major new program is clearly a time of learning, and what

we have seen is that millions of seniors and people with disabilities are very interested in learning about the best ways to save on their drugs. During the first few

days of May, we averaged 400,000 calls to 1-800-MEDICARE each day. This is an

extraordinary call volume for one week, particularly when you consider that we had

6 million calls in all of 2003. Responding to this volume of calls was a significant

challenge to our high customer service standards in Medicare. Even with this unprecedented level of interest, we are committed at 1-800-MEDICARE to provide

service that reliably gets customers the help they need in a matter of minutes.

We have worked quickly to improve the program and we will continue to do so

as we identify problems. At 1-800-MEDICARE, we tripled the number of customer

service operators from 400 to more than 1400 available by last week. In recent days,

we added another 600 customer service staff, and we expect to add many more

trained representatives in the next couple of weeks to handle the unprecedented

number of callers in a timely and effective manner. We’ve also taken steps to reduce

the time that our customers have to take when they call, by adding voice messages

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resentative. We have also provided self-service information in our interactive voice

response system so that callers can get information to address their questions without needing to speak with a customer service representative. And, we have also developed additional tools to help our customer service representatives use ‘‘best practices’ to work more efficiently—reducing our call handle time significantly and allowing our representatives to serve more callers more quickly. As a result, we are

achieving much better support results—the kind of results our beneficiaries deserve

and expect. We are tracking our call center wait times and call times, and we are

reaching the balance we want between calls and caller support. This week, during

our busiest times of the day, the wait times were from 4 to 15 minutes (and we

are advising beneficiaries about approximate wait times), and at many times the

waits have been even less.

We are committed to getting people with Medicare the information they need to

get the most out of the drug cards, and that starts with personalized facts now

available in just a few minutes through 1-800-MEDICARE or Medicare.gov. To help

callers and web visitors who have trouble matching up their medicines with the discount information, we have added a ‘‘drug lookup’’ feature to assist with the spelling

of their drug names and we are expanding our drug entry list—a large and growing

‘‘dictionary’’ of drug names. In the interim, we have also provided instructions to

users that they can ‘‘add another drug’’ if they do not find their drug on our initial

drug entry screens. Further improvements to the drug and dosage entry screens will

be in place in the next few weeks. We are committed to continuing improvements

to the site navigation and functionality features based on feedback from all of our

users.

We appreciate the unprecedented level of interest and feedback we are receiving

from beneficiaries and others in the first days of this new program. We will continue

to refine and improve our 800 number and our web site by using feedback from all

interested parties, including the suggestions we have received from Members of

Congress. By following a few simple steps—especially by being ready with zip code,

drugs and doses, and income information—beneficiaries can get the personalized information they need quickly. And beneficiaries should remember that the drug card

is voluntary—there’s no deadline and no late enrollment penalty, although signing

up by June 1 means that they will start seeing the discounts right away. We also

know that beneficiaries have diverse needs and are waiting to get information to

help make the choice that is best for them.

It’s also important to remember that despite the challenges we face in implementing this brand new program, we are providing beneficiaries with information

they have never before been able to access. Further, the drug card is a fundamental

change in how Medicare helps beneficiaries buy drugs. Beneficiaries will get lower

prices for their drug purchases because they will be able to band together to use

their purchasing clout through the power of large purchasing pools to leverage discounts from drug makers. By combining unprecedented transparency of prescription

drug prices with individualized assistance and educational resources, we are working with card sponsors to use modern technology to provide the medicines Medicare

beneficiaries need at a lower cost. Transparent prices for Medicare-approved cards

gives beneficiaries important information to help them choose the best card for their

needs.

BENEFICIARY ELIGIBILITY FOR LOW-INCOME CREDIT

One of the most important messages I can convey today is the tremendous help

the drug card will provide for low-income beneficiaries. Medicare beneficiaries are

eligible to enroll in the drug card of their choosing, unless they have drug coverage

through Medicaid. If beneficiaries receive help with prescription drug costs through

other sources—retiree insurance, Medigap coverage, or health plan benefits, they

don’t have to enroll if they don’t want to—the program is completely voluntary.

However, beneficiaries with limited incomes who are struggling with prescription

drug costs unquestionably can get much needed financial assistance. More than7

million beneficiaries with incomes below $1,047 a month ($12,569 a year) for single

people or less than $1,405 a month ($16,862 a year) for couples who do not have

drug coverage may qualify for the $600 drug credit as early as next month and an

additional $600 again in January of next year. The discounts from the cards combined with the $600 credit available in June and again in January, and substantial

additional manufacturer and pharmacy discounts specifically targeted at low-income

individuals make this an exceptional program for low-income people with Medicare—our most vulnerable beneficiaries. We want to make sure that everyone who

qualifies for the $600 credits get it. So, we have worked closely with our partners

at the Social Security Administration (SSA) to send letters to millions of low-income

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beneficiaries that are eligible for the $600 credit. We are also working closely with

community organizations to make sure these beneficiaries are aware of the substantial savings and assistance now available to them through the drug card program.

PRICE COMPARE

We are doing everything we can to ease the drug card enrollment process for

Medicare beneficiaries, and a big part of enrollment is selecting the best card for

an individual’s needs. Today, beneficiaries comparison-shop for many decisions in

their daily lives comparing the price and quality of a product or a service. Medicare

beneficiaries with and without prescription drug coverage often find it difficult to

find the best prices on prescription drugs, especially at neighborhood pharmacies.

That’s changing with our new Medicare Price Compare tool, which we will demonstrate for you today. This is a feature on our website, www.Medicare.gov, that

beneficiaries can use directly, or that they can have a representative from 1-800-

MEDICARE helpline walk them through the same process. In addition, beneficiaries

can consult with beneficiary advocates, such as the thousands of local trained State

Health Insurance Assistance Program (SHIPS) volunteers, or consumer groups to

find the best deal. And beneficiaries need only three key pieces of information: their

zip code, the medicines they use, and their income.

The Medicare Price Compare feature—the website and the assistance available

through 1-800-MEDICARE—is designed to help people with Medicare lower their

drug costs by selecting the best discount card. Price Compare is a unique tool that

allows users to customize their search to get the best prices available for that drug

or mix of drugs. Making price comparisons on a drug-by-drug basis is difficult for

many beneficiaries who take multiple medications, and Price Compare permits comparisons involving multiple drugs. Price Compare provides this information for the

retail pharmacy setting—where most Medicare beneficiaries purchase their drugs.

Moreover, card sponsors must assure beneficiaries that they will pay no more than

the discounted prices listed on Price Compare. The price the beneficiary ultimately

pays may be even lower due to the increased visibility of prices and ongoing competition among card sponsors.

Through the new website, beneficiaries for the first time in the Medicare program

will have access to prices for approximately 60,000 products sold at nearly 75,000

pharmacies around the country—all turned into information they can use to get the

best bargains on the drugs they need. Using the website’s therapeutic alternative

function, a person can look up a clinical condition like high cholesterol, and see average prices for Lipitor as well as for other cholesterol-lowering agents like Zocor

and Crestor—options that may be worth discussing with their doctor if they are less

expensive and clinically appropriate. In addition, patients can also get information

on generic alternatives, which are just as safe and effective as the brand-name

versions when approved by the FDA.

We are working with card sponsors to ensure that the prices they have submitted

to us for posting on the website are prices they can guarantee to beneficiaries at

the included participating pharmacies. We believe the information now on the

website reflects just that, and we have also taken new steps to make sure that

Medicare and the HHS Office of the Inspector General can take effective enforcement actions against cards that don’t live up to their promises. Over the coming

weeks, we will continue to work with the card sponsors to help consumers get consistent information whether they visit medicare.gov or the sponsor websites. But in

the meantime, we remain committed to our requirement that beneficiaries must pay

no more than the discounted price listed by Medicare.

With the unprecedented amount of information now available on drug prices

through Price Compare, CMS has put comprehensive systems in place to help beneficiaries use this information to find the best deal on their prescription drugs. The

1-800 MEDICARE customer service representatives will provide detailed information over the phone and then follow up by sending out a personalized report that

includes information on how the drug card program works and detailed information

on the best cards for that beneficiary. Beneficiaries can even designate the number

of cards they want to review—2, 3, or as many as they want. The Price Compare

search can also turn up cards that get the lowest prices on certain drugs, cards with

low or no fee, networks that include specific neighborhood pharmacies, and/or cards

from specific sponsors familiar to beneficiaries. We’ll also include information on

total drug costs, and additional ways to save, such as purchasing generic drugs. The

brochure also includes information on how to sign up for the card the beneficiary

chooses—including the 1-800 numbers for the card sponsor choices for with the best

prices for that beneficiary and our standard 2-page enrollment form. After enrolling,

beneficiaries will get their cards in a matter of days.

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But we’re reminding beneficiaries that they don’t need to sign up yet—this is a

good time for beneficiaries to shop around to consider their options for Medicareapproved drug discount cards. They can window shop now on the website to see how

cards compare on price, and visit again whenever they choose. For those individuals

who sign up by the end of May, they will get the benefits of the discount program

when it starts on June 1. Beneficiaries, however, are not required to choose a card

in May; they can choose a card whenever they wish, with no penalty for enrolling

later. However, we are encouraging beneficiaries with limited incomes to look into

the program now, so they can start saving immediately on their prescription drug

costs. Best of all, it doesn’t cost low-income beneficiaries anything to enroll in a drug

card of their choosing. The $600 credit this year and the $600 credit next year, plus

additional discounts that a growing number of major drug manufacturers are offering to wrap around the discount cards and existing state-sponsored drug programs

all translate into literally thousands of dollars in additional assistance for low-income beneficiaries.

AUTOENROLL AND STANDARDIZED FORMS

Twenty states currently have programs that already provide drug benefits to lowincome beneficiaries, many of whom will be eligible for the $600 credit. Since most

of these Medicare beneficiaries may enroll in both the state program and the Medicare program at the same time, CMS recently announced that low-income Medicare

beneficiaries enrolled in State Pharmacy Assistance Programs (SPAP) that provide

discounts on prescriptions drugs and who act as the beneficiary’s authorized representative in accordance with state law, may, at the state’s option, be automatically

enrolled for the $600 credit on a Medicare-approved drug discount card. Auto-enrollment benefits both Medicare beneficiaries and the states. Medicare and the states

want low-income beneficiaries to get the additional $600 credit, and auto-enrollment

is one way to maximize the number of people who enroll for transitional assistance.

In addition, the states would be exempt from paying the first $600 for each of these

beneficiaries, thus freeing up additional money to finance their own drug assistance

programs.

We are going to work with states to automatically enroll their SPAP members

into a Medicare-approved drug card and obtain the $600 credit so there is no loss

in coverage or confusion for the beneficiaries. However, the auto-enrollment process

must allow a beneficiary the choice to decline being enrolled in a Medicare-approved

card before the actual automatic enrollment takes place. States that have agreed to

automatically enroll Medicare beneficiaries include Connecticut, Maine, Michigan,

New Jersey, New York, Pennsylvania and Massachusetts, as long as they are able

to meet the CMS requirements. A number of other states are also considering autoenrollment, and we will continue to work with states to facilitate this process.

While Medicare is providing price comparison information and assistance with enrollment, beneficiaries must enroll directly with the card sponsor they choose. CMS

has established a standard enrollment form that all card sponsors must accept to

make it even easier to sign up for a discount drug card as well as the $600 credit.

This form will also be used by State Health Insurance Assistance Programs (SHIPs),

and other partners and community-based organizations that assist beneficiaries

with their health care decisions. CMS has made this model form available on the

Internet at http://www.cms.hhs.gov/discountdrugs/forms/, and has included instructions for its use as well as access to the information needed to complete it.

SAVINGS REPORT—FINDINGS SO FAR

While we have long been confident that the drug card program will give beneficiaries real savings on their prescriptions, we are excited to have some data to reflect such savings. According to a recent CMS study, Medicare beneficiaries can, for

the first time, get significantly lower prices through the Medicare-approved drug

discount cards at their local retail pharmacies. This preliminary analysis, released

May 6, compares the best Medicare-approved card prices from the Price Compare

website using randomly selected zip codes to data on national average retail pharmacy prices actually paid by Americans. The findings indicate that savings of at

least 10 to 17 percent compared with the average market prices actually paid by

Americans for brand name drugs that can be obtained from Medicare drug discount

cards. Potential savings from generics are even greater—30 to 60 percent. A recent

Food and Drug Administration (FDA) analysis underscores the savings available

through generic substitution. For mail-order prescriptions, which are generally less

expensive because they are available less quickly, in higher volumes, and without

face-to-face assistance and advice from a pharmacist, Medicare-approved drug disVerDate 11-MAY-2000 11:03 Jan 07, 2005 Jkt 000000 PO 00000 Frm 00042 Fmt 6633 Sfmt 6621 93975.TXT HCOM1 PsN: HCOM1
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count cards also compare favorably to mail-order prices available from such sources

as drugstore.com and costco.com.

CMS has also recently completed analysis of the savings low-income beneficiaries

(incomes below 135 percent of the federal poverty line, or FPL) who are eligible for

$600 in transitional assistance and, in many cases, additional manufacturer discounts on drug prices, can expect to see under the drug card program. Our results

indicate that our illustrative low-income beneficiaries can save 29-77 percent over

the next 7-month period through the end of 2004 compared to national average retail prices for ‘‘baskets’’ of commonly used brand name drugs when both discounts

and $600 in transitional assistance are taken into account. In addition, our analysis

indicates that low-income beneficiaries can save 39 percent to over 96 percent on

individual brand name drugs that are commonly used by the Medicare population

when both the discount and transitional assistance are taken into account. Five of

the nine brand name drugs we examined had savings of over 90 percent when including the transitional assistance.

The combination of the discounts and the $600 in transitional assistance result

in a more than 92 percent savings for the random sample of drugs and geographic

areas in the analysis. Furthermore, our analysis does not reflect the special pricing

arrangements some manufacturers have with certain discount cards after the $600

in transitional assistance is spent. If all of these lower pricing arrangements could

be captured, these new sources of savings may lead to thousands of dollars in savings this year and next through the Medicare-approved drug card program for lowincome beneficiaries. For example, based on our analysis, one sample beneficiary’s

savings increased from 58.4 percent with the drug card alone to 88 percent with the

added special manufacturer offerings.

The best way to illustrate the level of potential savings for low-income beneficiaries is through some case study examples. CMS analysts used the data from the

FDA analysis to illustrate potential savings for low-income Medicare beneficiaries

in a number of geographic areas. In all of these cases, Medicare would pay the annual enrollment fee, if any. For example:

• A typical person taking Celebrex (osteoarthritis), Zocor (high cholesterol), Paxil

(depression), and Norvasc (hypertension) might expect to pay $2,545.20 without

the discount card over the 7-month period. A low-income Medicare beneficiary

residing in Pittsburgh, Pennsylvania could enroll in a Medicare-approved drug

discount card and save about 42 percent between June 2004 and December

2004 (7 months). The savings include a discount of about 19 percent and $600

in transitional assistance.

• A person taking Prinivil (hypertension), Glucophage (diabetes) and Lasix (congestive heart failure) would expect to pay $913.50 over a 7-month period. A lowincome Medicare beneficiary in Orange County, California could enroll in a

Medicare-approved drug discount card and save 77 percent over the 7 months.

The savings include a discount of 11.3 percent and $600 of transitional assistance.

• A typical person taking enalapril, a generic medication for hypertension, might

expect to pay $170.10 over 7 months for this medicine. A beneficiary residing

in Louisville, Kentucky with income over 100 percent FPL but no more than

135 percent FPL could enroll in a Medicare-approved discount drug card and

save about 95 percent over 7 months, including savings from the discount and

the transitional assistance. The beneficiary would have several hundred dollars

to roll over for use, if necessary, in 2005.

• An individual taking Celebrex for osteoarthritis might expect to pay $636.30 over

a 7-month period. A beneficiary with income at or below 100 percent FPL residing in Portland, Oregon could enroll in a Medicare-approved drug discount card

and save over 95 percent over 7 months, a savings of over $609.

We are continuing to analyze the data on Price Compare, and are seeing drug

prices continue to fall as more sponsors come online. According to our analysis,

many Medicare-approved drug discounts cards are providing significantly lower

drug prices and savings to beneficiaries over what they receive in retail pharmacies

today. These initial price comparisons demonstrate that the Medicare-approved drug

discount card program will help assure that beneficiaries without prescription drug

insurance will no longer have to pay the highest prices of any American for their

drugs.

CARD MONITORING

While the drug card is proving to be a success thus far, CMS remains vigilant

in overseeing the program and working with outside groups to protect beneficiaries

from cards that try to ‘‘bait and switch.’’ CMS also is monitoring changes in overall

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drug prices and identifying programs that stray from the expected changes in prices.

Drug card sponsors have to report to CMS if prices increase in an amount that exceeds the corresponding increase in average wholesale price (AWP) and such increases must be based on a change in the sponsors’ costs, such as changes in the

discounts, rebates, or other price concessions received from a drug maker or pharmacy. We’ll also engage in other activities to ensure that card sponsors are charging

the advertised enrollment fees and following other Federal guidelines.

We expect that by making the prices of the 200 most commonly prescribed drugs

used by Medicare beneficiaries available to the public, the prices will actually drop

due to competition. And since the Price Compare site began operation on April 29th,

we have been working with the card sponsors to ensure that we change our Price

Compare database in a timely manner when they lower the prices even more. We

stand by our policy of listing the best discount that beneficiaries can be assured to

get on a card, but it is true that some card sponsors may be able to provide significantly better discounts on many prescriptions than the ‘‘assured’’ prices currently

listed on Price Compare.

The discount card programs must get rebates from the drug manufacturers—

along with other discounts—to help keep prices low. Those sponsors with the most

Medicare enrollees will be able to negotiate the best prices. Because the Medicareapproved programs are competing for beneficiaries, the card programs have a real

incentive to pass on the savings in the form of the lowest possible prices. The cards

need to offer savings and service, and we’re going to be taking steps to make sure

beneficiaries get both. The simple fact is that if a drug card wants to succeed in

holding onto its beneficiaries, and in building up its client base for when their drug

benefit becomes available in 2006, the only way to do so is to offer consistently good

deals and consistently reliable service to beneficiaries.

CONTINUED EDUCATION AND OUTREACH

In addition to Price Compare and the personalized drug card information services

provided through 1-800-MEDICARE, CMS has a number of education and outreach

efforts underway. In particular, CMS has prepared customer service representatives

at 1-800-MEDICARE with up-to-date information on the drug card, as well as other

CMS programs, and training on using the Price Compare website. As I mentioned

earlier in my testimony, we are getting unprecedented volume at our 800 number

and on the website. Our latest call volume statistics show that 1-800-MEDICARE

received nearly 407,000 calls on May 3, the day drug card enrollment commenced—

quadruple the last highest call record—and another 328,000 on the subsequent day.

And during the first week of May, CMS received more than 10 times the regular

call volume, with 1.6 million calls to 1-800-MEDICARE and more than 7 million

internet visits. Based on our analysis, we estimate 1-800-MEDICARE will receive

12.8 million calls in FY2004. This compares to an FY2003 call volume of approximately 5.6 million calls. To handle this increased volume and attend to beneficiaries

in a timely manner, we are in the process of increasing the number of customer

service representatives at the Medicare call centers, bringing the total to close to

2,000. We are getting the additional help from trained customer service representatives from some Medicare contractors, including the private companies that process

and pay Medicare Part B claims. Enhancements are also being implemented in

Medicare’s Price Compare services based on feedback from beneficiaries, customer

service operators, and advocates. For example, www.medicare.gov now has a new,

easily visible link making the Price Compare database easier to find, and the ‘‘drug

dictionary’’ of drugs included on Price Compare is being expanded. We will continue

to take user feedback to improve and refine these systems to assure beneficiaries

get the most up-to-date and easy-to-use information as possible.

CMS also has a number of publications designed for beneficiaries that explain

changes in the Medicare program. For example, CMS has published a small pamphlet with an overview of the drug card program and an introduction to the discount

cards and the $600 low-income assistance, as well as a larger booklet with more detailed information about eligibility and enrollment. This larger booklet, the Guide

to Choosing A Medicare-Approved Drug Discount Card, also includes a sample enrollment form and a step-by-step guide to comparing and choosing a discount card.

The ‘‘Guide’’ is currently available in English, Braille and audio-tape (English). A

Spanish-language copy is on the web, and Spanish copies are to be printed and

available in late May.

In addition, a brief document that introduces beneficiaries to the discount cards

and the Medicare-approved seal has been mailed directly to beneficiary households.

CMS has already launched print, radio, and television advertisements to highlight

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the upcoming changes to the Medicare program, including the addition of the drug

discount card.

CMS has produced a variety of products geared toward educating physicians,

pharmacists, and providers who often have one-on-one relationship with beneficiaries, to help them assist their patients in drug card enrollment decisions. The

products include brochures, articles, and journal ads in major medical publications

including the New England Journal of Medicine and the Journal of the American

Pharmacists Association. For states, territories, the District of Columbia, and stakeholders, CMS will sponsor a variety of listening sessions and open door forums to

make the latest drug card developments available nationwide. For example, we

hosted in-person trainings at the Drug Card Kickoff Conference on April 7-8 and

intend to host the National SHIP Conference on May 24-25, where CMS staff will

provide technical assistance and support. In addition, we recently announced unprecedented new funding for the SHIPs. Last year we awarded $12.5 million in

grants to the SHIPs. This year, we are increasing that amount by 69 percent, to

$21.1 million. And next year we are proposing an even larger increase, to $31.7 million. We will continue to work with our partners on the challenge of getting information to beneficiaries so that they can make an informed decision about drug card

enrollment, and begin lowering their drug bills now.

CONCLUSION

For the past thirty years, May has been recognized as ‘‘Older Americans Month’’—

a time to acknowledge the many contributions made by our nation’s seniors. One

of the best things we can do to thank them is to make sure they have access to

affordable prescription drugs. The Medicare-approved drug discount card provides

an unprecedented opportunity for beneficiaries to band together to get lower negotiated prices, along with large-scale public reporting of prescription drug prices.

Starting June 1, 2004, this voluntary card program will provide immediate assistance by lowering prescription drug costs for Medicare beneficiaries until the new

Medicare drug benefit takes effect on January 1, 2006. We recognize the importance

of the discount cards and the low-income credit to Medicare beneficiaries, many of

whom, for too long, have gone without outpatient prescription drug coverage. Medicare beneficiaries will soon have the kind of health care coverage that actually delivers on meeting their needs. Thank you again for this opportunity. Please allow me

to turn the presentation over to Mary Agnes Laureno from CMS’ Center for Beneficiary Choice, who will walk us through a demonstration of the Price Compare tool.

After the demonstration, I look forward to answering any questions you might have.

Mr. BILIRAKIS. Thank you, Doctor. For these low income beneficiaries, I understand some of the manufacturers have indicated

that when their $600 credit has expired, that they would still not

charge them any more than that? Is that correct?

Mr. MCCLELLAN. That’s right. A large number of major drug

manufacturers are going to work with our program to allow beneficiaries on all of these cards to get access to very low prices, usually for just the cost of a dispensing fee or a little bit above it, $5

to $15 per prescription and that’s why the savings for many lowincome beneficiaries can be truly tremendous.

And some additional manufacturers have worked out additional

discounts with particular cards that we can tell seniors about——

Mr. BILIRAKIS. How long after this do they start to receive these

cards, how long after the first of June shall we say will we know

how that is working in terms of that particular portion of it?

Mr. MCCLELLAN. Our plan is to have those wrap around discounts integrated into the cards themselves so that seniors can

automatically get these additional discounts when they use their

cards. Now they first use their $600 and for many seniors that will

last them perhaps for the whole year, or at least for part of the

year, so we may not be seeing the wrap arounds kicking in on a

large scale basis for a few more months, but it’s definitely our intent to make sure it works smoothly for the low-income beneficiaries so they get that extra help.

42

Mr. MCCLELLAN. Good. Well now, this particular beneficiary

from Clearwater, Florida, it’s just a coincidence, was she a low income?

Mr. MCCLELLAN. She was a low income beneficiary.

Mr. BILIRAKIS. And yet she had a computer? She had a computer

and knew how to go to the website, etcetera?

Mr. MCCLELLAN. If she didn’t have a computer and many low income seniors don’t, they can get help from local State Health Insurance Assistance Plan Offices. We have one in Clearwater and we’re

in the process of doubling their funding right now. In addition, they

can call us up at 1-800-MEDICARE and as I mentioned, because

of all of the additional customer service representatives that we’ve

added and the improvements that we’re continuing to make in the

way our phone assistance works, if she called us up, even at a peak

time her wait this week would be at most 15 minutes to get to a

customer service representative and then that representative who

is trained would go through exactly the same process that Mary

Agnes did in this demonstration, except she would be asking the

beneficiary for this information, help her quickly get to the specific

information she needs on how to get the most out of this program.

Mr. BILIRAKIS. How long would that conversation have taken?

Mr. MCCLELLAN. For beneficiaries that are primed and know if

they come ready with their zip code and their pill bottles in front

of them so we can find out quickly about their medicines and the

doses that they want help with, their monthly income and any additional preferences they have about a particular pharmacy or a

card with no fee or maybe about a pharmacy that’s got an open formulary that provides the broad based discounts, typically, they can

get through a call in 10 to 15 minutes.

Mr. BILIRAKIS. Ten or 15 minutes.

Mr. MCCLELLAN. And we’ll send them that personalized brochure.

Mr. BILIRAKIS. Would that vary though? What if this lady did not

have available computer, in one way or another, and it was strictly

over the telephone?

Mr. MCCLELLAN. Well, over the telephone, our customer service

representatives are there 24/7 and they’ll stay on the line as long

as is necessary to answer any questions a beneficiary has or after

they get their personalized brochure and a lot of seniors like to look

at the specific facts in front of them on paper, so they can go

through it at their leisure. They can call us back with further questions, even after they’ve gotten that personalized information. So

we’ll work with them for as long as it takes, but we’re trying to

build as many features into this program as possible to keep that

time down, the senior’s time down and to enable our representatives to serve even more beneficiaries more quickly.

Mr. BILIRAKIS. But in every case, would that beneficiary have

made a decision after that conversation?

Mr. GREENWOOD. Would the gentleman yield for 1 second? I just

dialed 1-800-MEDICARE and I was instantly connected to a service

representative.

Mr. MCCLELLAN. We’ve really been expanding our customer service representative connections. I’m glad to hear you got through.

43

She could sign up—we could tell her how to sign up at the end

of that conversation, but what I think is probably more typical is

that she get the personalized brochure from us, she’d have it in the

mail the next day.

Mr. BILIRAKIS. What we’re saying is that whether it be through

the computer, the website or whether it be through just plain telephone, there would be a follow-up brochure that would be mailed

to that individual?

Mr. MCCLELLAN. That’s right, as you see in the brochure, there’s

a simple two-page form here, front and back, this is it, very large

type for enrolling in the card, just this information, her enrolling—

she qualifies for the low income credit, the automatic $600 as well

and that’s just this two-page form. So she could send that back in

to any of the card sponsors that she chose or she could call up the

card sponsor on the phone, they have 1-800 numbers too and enroll

that way. So it’s just a few minutes to fill out——

Mr. BILIRAKIS. My time has expired. I am concerned about the

bait and switch potential here. We’ll go into that particular area.

I will now yield to Mr. Brown.

Mr. BROWN. Thank you, Mr. Chairman. Dr. McClellan, nice to

see you again. Thank you for being here.

Mr. MCCLELLAN. Nice to see you.

Mr. BROWN. I appreciate very much Mary Agnes’ presentation,

your presentation. I know that you’re sincere and genuine about

this. I just sit here and think we could have this card which would

have brought real discount where we get 40, 50, 60 percent

discount——

Mr. MCCLELLAN. what’s that card?

Mr. BROWN. Just a Medicare card that we could take, that every

senior could take to a drug store, where they would get a discount

based on a negotiated price on behalf of 40 million beneficiaries. Instead, we have the presentation of Mary Agnes, which is a good

presentation, if you have internet access and if you understand

how to do it, or you can go to the State Health Insurance Program

and go through this whole bureaucracy. It just sort of puzzles me

that that was the choice that this Congress made.

I want to ask about the cost analysis, Dr. McClellan. I understand that CMS putout two versions of the cost analysis within a

week of each other. The first contained a table comparing card

prices to prices available in Canada and to prices obtained by the

Federal Government through the Federal Supply Schedule for Veterans. It’s a chart that Congressman Dingell highlighted earlier in

the hearing. This comparison was removed from the second chart.

Can you tell me why the comparison was removed?

Mr. MCCLELLAN. I think you’re referring to a study that CMS

did. I think that was a week or so ago looking at savings on the

discount cards and what we saw then, as I mentioned before, savings at 11 to 18 percent off average retail prices and even larger

savings on typical retail prices and savings on internet prices for

U.S. pharmacies that are generally available to our seniors.

The additional information on Canadian prices and the VA price

information was removed from the subsequent table for two reasons. One is that we couldn’t verify the Canadian prices. Those

prices have been changing a lot. The pharmacies often can’t assure

44

that drugs are going to be delivered in a timely and for those reasons, what we’re trying to do with this program is give beneficiaries actual prices that they can count on. And that’s not the

case with the Canadian internet pharmacy prices.

With respect to the VA prices, as you know, those prices are not

generally available. They’re only available to beneficiaries who are

getting government-run health care in the VA’s government-run

hospitals and health care facilities on the VA’s formulary. And it

is true that VA negotiates a low price for their formulary drugs,

but it’s also true that not all of our beneficiaries prefer that particular kind of formulary, even if they could get it. So we focused

in the revised report on the choices that are actually available

widely to beneficiaries in this country where we could assure and

report the prices correctly. I think assured prices are very important for seniors in making decisions about comparing the cards to

other sources that they might use.

Mr. BROWN. I accept what you said about Canadian prices, that

they move, although one of the reasons they move, apparently, is

because some of the drug industry and my understanding is the

White House has had some role in this, putting pressure about

supply, a question of supply on Canadian—on behalf of the drug industry with Canadian pharmacists so that—because so many

Americans are doing what some of my constituents are, taking

buses to Canada.

But back to the Federal Supply Schedule. I mean the point here

is not just that some information has been denied to the public,

some information about drug prices, understanding of course that

many seniors don’t have access to those drug prices because they’re

not in the VA system. But it just begs the question that why are

we doing it this way when the FSS prices are almost, I won’t say

they’re in every single case, lower than the discount cards, but they

clearly have much deeper discounts than the discount cards. It just

seems there’s this ideological, political slant to sort of everything

in this legislation, everything your Agency does because privatization always works better than government. Well, privatization

doesn’t work better than government.

Medicare has a 2 or 3 percent administrative cost. Private insurance is much higher. But particularly on this, it’s clear that every

other country in the world uses the power of government to get

lower drug prices. Our own government through Federal Supply

Schedule uses the power of government on behalf of a large number of Veterans to get lower prices. I just ask again, why did your

agency and the President push so hard to prohibit, literally prohibit your agency from negotiating lower drug prices?

Mr. MCCLELLAN. Well, again first, we’re focused on getting the

lowest prices for seniors that we can today and we are getting significantly lower prices because seniors through these cards are able

to negotiate discounts from manufacturers and that was not

present before. The cards require manufacturer rebates and they

require them to be passed on to beneficiaries and we also are giving seniors a broad choice of formularies.

As you mentioned in one of your earlier statements, you want

seniors in the Medicare program. We’ve got a great tradition of

people being able to have choices about what they want, about

45

what kind of providers to use, doctors and what kind of medicines

to use. The VA has one specific formulary and I’m not ready at this

point to say that the best thing for Medicare is one single formulary for all of our beneficiaries. Many people might be interested

in using drugs and do use drugs today that are not on the VA formulary and I want to provide that option as well, and I want to

do it in a way that lets them get lower prices for the drugs and

the types of formulary, maybe an open formulary that includes everything, that they want to use. That’s not what the VA does. That

kind of option may be good for some seniors and we want to encourage them to get it.

Mr. BROWN. I believe any drug is available in the Federal Supply

Schedule, so that’s not a restrictive formulary. Thank you.

Mr. BILIRAKIS. The gentleman’s time has expired. The Chair recognizes the gentleman, the chairman of the full committee, the gentleman from Texas, Mr. Barton.

Chairman BARTON. We thank the chairman. Dr. McClellan, I just

want to make one editorial comment. You’ve had to sit here for

about an hour and a half before you got to make your presentation

and we’re a big family on this committee and we’re a little cranky

this morning. We want to go home. Memorial Weekend. Those of

us that are World War II Veterans and we have Mr. Hall, Mr. Dingell both are World War II Veterans. They’re being honored later

this afternoon in the Statuary Hall in a special ceremony. So we’re

not disrespectful of you, we’re just as in anybody when you’re here

together a long time, sometimes you get a little bit cranky, but

we’re going to work through it.

I want to ask the first question. There’s been some concern about

these drug prices that are posted on these websites that they’re

changing. Now I take that as a good sign if the general change is

to continue to have lower prices. Is there any evidence that all

these changing prices, that the prices are going up or is there evidence that as these various providers of the cards find out what the

competition is doing they’re actually lowering their prices? Which

way does the trend seem to be, higher drug prices or lower drug

prices?

Mr. MCCLELLAN. Mr. Chairman, what we’ve seen over these first

2 weeks are some big changes overall toward lower prices.

Chairman BARTON. Lower prices.

Mr. MCCLELLAN. We’re seeing the cards that had higher prices

initially coming way down. That happened again, 11 to 13 percent

declines on average in the first week, a couple more percent this

past week. That’s not to say there will never be a price increase

anywhere in the drug discount program. There are price increases

all the time in every part of our economy, but there are some additional assurances built into the cards to make sure that prices

don’t go up for some kind of bait and switch tactic.

Chairman BARTON. Do you think the average senior citizen that

sees that trend, they may be confused by the price being changed,

but do you think most seniors will think drug prices trending

downward is a good thing or a bad thing?

Mr. MCCLELLAN. I think they’ll generally support that and hopefully they’ll call us up and get right through at 1-800-MEDICARE

and see exactly what lower prices they can get for their own drugs.

46

Chairman BARTON. I want to say that my friends on the other

side do have a point about being able to get through. We’ve had

several occasions we tried to get staff people through and you get

a busy signal or you get this if you’re calling and really in a hurry

press 1 and if you’re really not in a hurry press 2 and if you really

don’t care press 3. All of that. So I think that’s valid. I mean any

program this massive, you’re going to have some startup problems.

Do you all have a program in an effort to try to add additional

numbers, additional help, whatever it is so that we can handle the

demand of the seniors that are trying to get information?

Mr. MCCLELLAN. We do, Mr. Chairman. The first day of this program we had over 400,000 calls. That is unprecedented, not only

in this program, but I think in any kind of telephone type of campaign. We exceeded the capacity of the phone system to support us

and there were, unfortunately, callers who were dropped that day

and people who couldn’t get through. That’s why we’ve taken steps

like adding lots of additional customer service representatives.

Chairman BARTON. My point, you are doing that, you’re not just

sitting there with tough luck, call back in 3 months. You’re adding

capacity so that as people continue to call in——

Mr. MCCLELLAN. That’s right, and we’re tracking very closely

how we’re doing because our beneficiaries deserve prompt attention

and that’s the customer service standard that we want to maintain.

At the peak times this week, the longest waits have been about 15

minutes and at most times the waits are not significantly longer

than only a few minutes. We want to——

Chairman BARTON. You mean less than that.

Mr. MCCLELLAN. We want to get back into balance and we want

to keep getting those times down.

Chairman BARTON. Now I also think it’s a valid point, a lot of

senior citizens, my mother does have a personal computer and she

knows how to use it and all that, but there are a lot of seniors that

either don’t have the computer or they depend on somebody else to

use them. How efficient is the system if you don’t have a computer?

How easy is it to get assistance if you’re not computer literate?

Mr. MCCLELLAN. That’s why we want you to call us and if you’re

ready with your zip code and your medicines in front of you, you

know your income level and any other special preferences you have,

we’ll have a trained representative go through this process with

you. You don’t have to look at a computer at all. We’ll ask you the

questions. We’ll help you along to make sure you’re getting what

is best for your particular needs and we’ll follow up with a personalized brochure like this one that you can look at in front of you

and make sure that you’re seeing exactly what you want to get into

before you sign up.

Chairman BARTON. Do you have any documentation of how many

seniors have gone through the process and have chosen a card?

Can you give us any——

Mr. MCCLELLAN. We’ve had hundreds of thousands of seniors go

through this process successfully on the phone, get the personalized

information and the brochures that they need. I don’t have counts

today of how many people have enrolled. As many of you have

pointed out, there’s no deadline for this program. People can enroll

if and when they’re ready to and they should do that based on

47

good, personalized information relevant to them. A lot of seniors

have already signed up. Many thousands.

Chairman BARTON. But you can document that of the people that

are touching base, we are getting seniors to sign up?

Mr. MCCLELLAN. That’s right, many are signing up and we are

also monitoring how well we’re doing on getting the right information out to them. That’s our customer service.

Chairman BARTON. Would you commit to continue to work with

the committee to give us information?

Mr. MCCLELLAN. Absolutely. We want to keep a close eye on that

and we appreciate the oversight in this area. It’s very important.

Chairman BARTON. We are going to continue to oversee the implementation.

Mr. MCCLELLAN. I’m sure you will, Mr. Chairman.

Mr. BILIRAKIS. Thank you, Mr. Chairman. Mr. Dingell, is he

there? Yes. Mr. Dingell to inquire?

Mr. DINGELL. Welcome, Doctor.

Mr. MCCLELLAN. Thank you.

Mr. DINGELL. I have before you two charts down there which are

identical in all particulars save one, that one particular is that we

do not, that the most recent one does not show the same drugs or

programs under the FSS program which is a Federal Civil Service

program or Canada’s program. And I would note that the FSS plan

which is an American plan is cheaper even than Canada.

There is one unique difference in those matters and that is that

in the FSS plan, the entire negotiating power of the Federal Government is brought to play to get the lowest cost for the consumer

and for the Federal Government. I would note that it is cheaper

even than the Canadian plan.

I would note that the first plan which you chronicalled in the

original release of your agency showed the FSS plan and the Canadian plan. I would note that the perfected plan which you have

since issued does not show those things. Is there any reason other

than that you did not want the American people to know how much

better the FSS plan and the Canadian plans are than the discount

plan which you have at this Department have worked out with the

issuers of these cards? Is there any other reason other than the

fact that you were denying the people the information on this?

Mr. MCCLELLAN. There’s two reasons. First of all, we don’t want

to deny Americans any information and many members of this

committee——

Mr. DINGELL. You excised the important information.

Mr. MCCLELLAN. [continuing] have made available this kind of

information, so I think many people are aware of it, thanks to everyone’s efforts. The purpose of this table was to provide information that’s generally available to beneficiaries on the prices for

drugs that are generally available——

Mr. DINGELL. I have limited amount of time. You’ve not told me

that there’s any other reason.

Mr. MCCLELLAN. The reason for the——

Mr. DINGELL. Now let’s go to these other questions here because

my time is very limited. These cards are Medicare approved, are

they not?

Mr. MCCLELLAN. Yes sir.

48

Mr. DINGELL. Are there rules and regulations with regard to the

issuance of these cards?

Mr. MCCLELLAN. Absolutely.

Mr. DINGELL. Would you please submit them to the record?

Mr. MCCLELLAN. We have issued regulations——

Mr. DINGELL. I ask unanimous consent that those regulations be

inserted in the record.

Mr. MCCLELLAN. And we recently, the Office of Inspector General also just issued new consumer protection regulations for this

program this week.

Mr. DINGELL. If you don’t mind——

Mr. BILIRAKIS. Without objection——

Mr. DINGELL. [continuing] if you would hold yourself to the answer to the question.

Now having said that, what sanctions are imposed for disregard

of those regulations?

Mr. BILIRAKIS. We have a broad range of sanctions available.

They start with imposing marketing and other types of restrictions

on the cards and we’ve done that in a few cases where cards don’t

provide the complete, reliable information that we require. We can

also impose civil monetary penalties on the cards, not just us, but

the Office of the Inspector General. We can remove a card from the

program.

Mr. DINGELL. What will you impose civil monetary penalties for?

Mr. MCCLELLAN. For a range of consumer protection violations

or violations of the terms of our contract.

Mr. DINGELL. What will the consumer protection violations

be——

Mr. MCCLELLAN. Violations might include patterns of not providing accurate information about prices, not having discounts that

people can actually get when they go to their drug stores. It might

include patterns of inaccurate information about pharmacies that

are participating——

Mr. DINGELL. How will that work since the issuer of the card

may change the prices weekly?

Mr. MCCLELLAN. Well, if they change the prices downward,

that’s just fine. We’re not going to bring an action for that.

Mr. DINGELL. And if they change them up, what sanctions——

Mr. MCCLELLAN. If they change them up, they have t provide

documentation to us that their costs actually increased. They can’t

just increase the prices because they got somebody enrolled in their

plan and they want to jack it up. They have to have a cost-based

reason for the increase and we’ll be monitoring that.

Mr. DINGELL. Now you have 73 cards issued. You are going to

be supervising 73 cards. How many people are going to be doing

the supervision? How many people do you have assigned to that responsibility?

Mr. MCCLELLAN. We have a large number.

Mr. DINGELL. How many?

Mr. MCCLELLAN. I can’t give you an exact number now, but I’ll

send it to you.

Mr. DINGELL. Please submit for the record how many——

Mr. MCCLELLAN. It includes staff of the Office of Inspector General, staff at our national office, staff at our regional office.

49

Mr. DINGELL. I don’t want an obfuscating—I just want you to tell

me an answer to my question.

Now you have to follow the regular process with regard to opportunity for the Federal Government to impose sanctions and also

you have to afford opportunity for the sponsor to appeal where

there is wrong doing that is found. You could not, in a few words,

describe the wrong doing for the changing of the drug or drug price

on the card which may change weekly without any sanctions by the

Federal Government.

How many people are you going to have enforcing this? Do you

know?

Mr. MCCLELLAN. We’re going to have individuals——

Mr. DINGELL. Just tell me number.

Mr. MCCLELLAN. We have very many staff. I don’t have the exact

number today, but I’d say dozens if not hundreds of staff involved,

hundreds of staff in the Medicare program.

Mr. DINGELL. A hundred people you’re going to have doing this

for 73 cards that are going to be issued for how many million

Americans?

Mr. MCCLELLAN. The cards are all Medicare beneficiaries that

want to sign up and aren’t enrolled in Medicaid.

Mr. DINGELL. I note my time has expired, Mr. Chairman. I would

ask unanimous consent that I be permitted to write a letter to the

good Doctor to allow him to explain these matters in greater detail.

Mr. MCCLELLAN. And I’d be delighted to respond to that.

Mr. DINGELL. If you please, Doctor. And that be inserted into the

record.

Mr. BILIRAKIS. All right. I don’t know that you need unanimous

consent to write a letter, but as is customary after our witnesses

testify, we always tell them that we will have written questions to

them and we request timely responses, but by all means if that’s

what the gentleman wants unanimous consent for, we’ll give it to

him.

The gentleman’s time has expired. Mr. Whitfield to insure.

Mr. WHITFIELD. Dr. McClellan, frequently those people who are

opposed to this legislation refer to the fact that the Veterans’ Administration negotiate lower prices and I notice even in Mr. Pollack’s testimony that he said one of the shortcomings in this legislation and of our prescription drug plan is that they were unable

to negotiate lower prices like the Veterans’ Administration.

It’s my understanding that the Federal Supply Schedule which

regulates the VA’s process, that the VA does not negotiate. Is that

correct?

Mr. MCCLELLAN. They have a set schedule. They also have a single formulary. They don’t allow beneficiaries in that program to

choose what kind of formulary they want as well, so those are two

kinds of important restrictions.

Mr. WHITFIELD. But it’s all set by regulation and statutes so

there’s no negotiation.

Mr. MCCLELLAN. It is a statutory program, that’s right.

Mr. WHITFIELD. So I think all this reference all the time to the

VA negotiating, negotiating that that absolutely is not the case.

And it’s also my understanding that in the 1990’s Congress took

steps to allow Medicaid to have access to the VA system and as a

50

result of that the VA prescription drug costs increased by in some

instances by 100 percent and that Congress had to go back and address that issue and reverse itself. Is that correct?

Mr. MCCLELLAN. That’s correct. Part of the problem there is that

if everybody’s on this same schedule that’s supposed to get a discount, then nobody is really getting a discount when more and

more people come into it, the prices do tend to go up.

Mr. WHITFIELD. Mr. Chairman, I’ve got to go out and take one

phone call, but I would at this time like to yield to Mr. Buyer, if

he would like to make some comments because I know he has some

real familiarity with the——

Mr. BILIRAKIS. He has 8 minutes of his own time coming, but if

you want to yield your remaining 3 minutes to him, you’re free to

do so.

Mr. WHITFIELD. Thank you.

Mr. BUYER. I just want to add, the point that you brought up,

we deal with this on the Veterans’ Affairs Committee all the time

and I’m just going to concur that you’re absolutely correct. And it

is a falsehood for anybody to put into the public domain that somehow that these are prices that are negotiated between the VA and

the manufacturers, when in fact, Congress set the procedures in

statute.

So anybody that says this, anybody that gives testimony, please

you better start correcting your testimony because it’s not correct

at all. And the then Democrat-controlled Congress learned a very

difficult lesson when they opened up the VA and the Medicaid,

they immediately, immediately, had to come back in and say we’ve

made a terrific mistake here and they made the right judgment in

correcting it and then protecting the VA pricing.

Even when I was a subcommittee chairman on the personnel

committee dealing with the military health delivery system, i.e.,

pharmaceutical benefit, we then tried to examine the difference between our pricing with regard to military drugs and the VA and

discovered that well, even if we tried to gain access to that schedule, the same thing was going to happen. Those prices were going

to increase within the VA.

So those of us in Congress who serve on the Veterans’ Affairs

committee of both parties, jealousy guard what has been said,

rightfully so, by then the Democrat-controlled Congress. And we’ll

continue to jealously guard that schedule from those of whom had

this belief that somehow if we only open up that access, that everybody can gain those lower costs. That, in fact, is a fallacy. Because

you’re correct, Dr. McClellan, all prices will increase.

I yield back to the gentleman.

Mr. BILIRAKIS. Mr. Waxman to inquire.

Mr. WAXMAN. Dr. McClellan, I’ve wondered if you had a chance

to read the article in the Health Section of the Washington Post

this week written by Lisa Barrett Mann, an experienced health reporter, on the difficulty she had trying to pick a good discount card

for her mother and it presented a very different picture of how easy

it is to get any information, let alone any accurate information. It

took her over 9 hours. She couldn’t figure out how to get information on eye drops because the site doesn’t help with liquid dose.

She couldn’t get through the Medicare phone number, getting adVerDate 11-MAY-2000 11:03 Jan 07, 2005 Jkt 000000 PO 00000 Frm 00054 Fmt 6633 Sfmt 6602 93975.TXT HCOM1 PsN: HCOM1
51

vice to call before 6 in the morning and after 9 at night. Now I

know seniors are up at night worrying about drug prices, but that

seems to be the time they’re told maybe they can get through.

She called the card companies directly and they gave her completely different price information, asking the pharmacy what calls

they’d honor, showed they had no idea what card they would be

participating in.

So in other words, what she presented, and I’m hearing it from

people all over the country, this is a mess. And the best advice people seem to get is to try again in a few weeks and see if the information is better. Now I really—my question was whether you read

that article? If you have, do you understand what she had to say

and if you haven’t, I recommend it.

But the point that I want to make is I’m just stunned by the fact

that I’ve been in politics for many, many decades and it used to be

Republicans who were against deficit spending and bureaucracy.

And now we’ve got Republicans supporting huge deficits and creating a monstrous bureaucracy in just discount cards that are

made available to seniors for them to compare and choose and try

to figure it all out. In Medicare, people don’t have to do that for

doctors, do they? They don’t have to do it for hospitals? They don’t

have to go out and price the doctors and figure out which hospital

or physician services they should go to. Medicare simply negotiates

on behalf of seniors, sets a price and any doctor that participates

in the Medicare program gets paid by Medicare and the seniors

don’t have to go through all this. Isn’t that right?

Mr. MCCLELLAN. That is correct and I don’t want to take up

much of your time, but I do have a statement. I read that article

with a lot of concern. It turned out the reporter contacted us on

those very initial days of the program when we were getting an

awful lot of calls in when we had not yet had a chance to respond

to the constructive criticism we received on how to make the

website work——

Mr. WAXMAN. I want to put that in the record.

Mr. MCCLELLAN. We’ve got that available.

Mr. WAXMAN. Good. I think we ought to have that in the record.

But I’m going to ask you some specific questions.

Now I think we should have a negotiated price where the government represents seniors and everything is covered and they get a

better price. Now we’re told get a card and you’ll get a discount.

Can you tell us how the rebates under the drug program compare

to the prices under the VA system?

Mr. MCCLELLAN. The rebates under the drug program compare

very favorably, in fact, better than any choice that’s generally

available to seniors today. The VA program as Representative

Buyer just noted, is not generally available to seniors today. For

those seniors who are in VA, that’s a good source of drugs.

Mr. WAXMAN. They get a better price if they’re in the VA system,

don’t they?

Mr. MCCLELLAN. It’s a special program. It’s a drug insurance

program.

Mr. WAXMAN. It’s a drug insurance program run by the government.

Mr. MCCLELLAN. With a particular formulary.

52

Mr. WAXMAN. As I understand, a chart released by your office

earlier this month showed that the VA has considerably better

prices, for example, than the lowest card charging $119 for Aricept,

but the VA price was $76. Just to correct the record for Mr. Buyer,

and others, the VA system has a statutory schedule for all FDAapproved drugs and that statutory schedule makes sure that the

prices that the VA pays for their members, their beneficiaries, is

no more than the lowest price that the drug company charges any

private insurance company.

And then second, on top of that, after they get the lowest price

that any insurance company pays for it, the VA goes further to negotiate a formulary for thousands of drugs for even a better price.

Am I wrong in how the VA operates?

Mr. MCCLELLAN. The statute says lowest price for an insurance

company, but if you make that statute apply to basically every one

in the country or every heavy user of drugs in this country, then

nobody is going to end up with a discount. They’re all going to be

required to pay the same price and that’s why the prices go up.

Mr. WAXMAN. I think the seniors are pretty annoyed that they’re

not getting the discount. Everybody else gets a discount. People in

Canada get discounts. People in the VA get discounts. People on

Medicaid get discounts. And they’re told go call us on this bureaucratic website and phone line and see if you can sort through hundreds or 75 cards to figure it all out. That pushes the burden all

on them and that sounds to me like the worst Kafkaesque nightmare of bureaucracy that the Republicans used to be against and

I would hope you would still be against.

My time has expired. I have a lot of other questions and maybe

we’ll get back to you later.

Mr. BILIRAKIS. Mr. Shimkus to inquire.

Mr. SHIMKUS. Thank you, Mr. Chairman. I’ll try to go quick. I

want to give Dr. McClellan some time too, but what was the projection of the amount of call volume before we started? What did you

think you’d get?

Mr. MCCLELLAN. We were expecting and had prepared for

100,000 to 200,000 calls per day.

Mr. SHIMKUS. And you moved up to 400,000. Let me go quickly

so we can give you plenty of time. So you moved to 400,000. We

have that same problem in our office. When there is a hot legislative item, the phones ring off the hook and there can’t be a member

here that’s answering their phone every time.

I did what Congressman Greenwood did. I just called. I want to

give you more time, but I challenge anybody, call it now. I just got

answered. But I do have a problem in this booklet when you say

1-800-MEDICARE spell it right. M-E-D-I-C-A-R. Don’t put the E on

there because you’re going to confuse people. I mean if you’re going

to dial 1-800-MEDICARE, don’t put the full MEDICARE name

there because it’s longer than would be allowed on the telephone.

So that might be a change.

Mr. MCCLELLAN. We do have a 7-digit number and we have increased the callers in, so when people call in, they can get through.

Our beneficiaries deserve prompt service.

Mr. SHIMKUS. It’s not criticism, but in the literature just put dial

1-800-MEDICAR, drop the E.

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Mr. MCCLELLAN. Drop the E. Thank you. We’re getting a lot of

constructive suggestions on how we can do this as well as possible.

I appreciate that one too.

Mr. SHIMKUS. What I liked about the plan was it directs people

to if they have a State program that’s beneficial, as my colleague

Bobby Rush said. We have a great program. One of the parts of the

Medicare prescription drug benefit was, in this bill was, addressing

the dual eligibles which is going to bring millions of dollars back

to Illinois because what we do on Medicaid. What we do. Illinois

is benefiting in other venues because of this bill.

It will also, the pharmaceutical companies, when consumers had

called us previously for help, which they do to the Members of Congress, we would go through the state-supported plan, we would

work with them through Medicare. And Members of Congress

know, we have like Big Five constituent service type problems dealing with a one system, large Federal bureaucracy. Medicare has a

tremendous problem getting reimbursed from fees and coverage.

Social Security, INS, IRS, VA, yeah, they do great benefits and

they’re very helpful, but to say that a one government-run plan is

simplistic and clear, when I go out in my District, one of the best

things we do is we help our constituents work through the Federal

bureaucracy.

So make sure we understand the criticism as a whole. A large

Federal bureaucracy, we fight against that all the time in all those

other arenas. So a marketplace bureaucracy, I’m not that upset

with respect to the other battles.

The 24/7, that means if you called at 2 a.m. on Sunday morning

someone is going to answer the phone?

Mr. MCCLELLAN. Any time, day or night.

Mr. SHIMKUS. Eleven p.m. tonight?

Mr. MCCLELLAN. Any time.

Mr. SHIMKUS. Five fifty on Monday morning?

Mr. MCCLELLAN. Any time.

Mr. SHIMKUS. 24/7.

Mr. MCCLELLAN. That’s right.

Mr. SHIMKUS. We’ll give that a try, but I think that’s noted that

there’s people going to be answering the phone.

I have a minute left, why don’t you address some of the concerns

that my colleague, Mr. Waxman, brought up with the Washington

Post article?

Mr. MCCLELLAN. Those are good examples of why we’re not trying to crate a bureaucracy here. What we’re doing is giving seniors

the assistance they need to get the most out of a program and since

the time that that member of the press called, we have vastly increased our customer service support. We’ve improved our phone

service system so that people can get through it quicker and as a

result, when you call in, as you just did right now, there are no

waits. You can get right to a person who can help you get the information that you need for finding out how to get the most out of

this program. And if this person had been able to get through, she

would have found out that there were cards available, a number of

cards that covered every single one of the nine medications that

her mother was taking and that her mother would have been able

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to get 30 percent savings off of what she’s paying now, more than

$100 a month for in some cases cards that had no fees at all.

Mr. SHIMKUS. I have 5 seconds left. Let me just finish by saying

maybe this reporter with all due respect to the fourth estate,

maybe she should have allowed her mother to call and maybe her

mom should call now. Maybe the story would be different.

Mr. MCCLELLAN. We’d certainly like to help her right now because our goal is to make sure that all of these patients who have

very complex medication needs, including non-oral medicines, eye

drops, and inhalers; that we can handle what they need quickly.

We’re making the improvements to make sure we do that reliably

and it does mean real savings as it would in the case of this reporter’s mother.

Mr. BILIRAKIS. The gentleman’s time has expired. Mr. Pallone to

inquire.

Mr. PALLONE. Thank you, Mr. Chairman. Dr. McClellan, I wanted to go back to these illegal actions on the part of the agency with

regard to the ads. My understanding is that the White House has

spent $18 million on these illegal ads promoting the drug cards and

another $20 million on illegal ads about the new so-called Medicare

benefit. Now these funds were secured from taxpayers and I would

contrast that with you know, there’s been a lot of talk here today

about the Walter Cronkike Families USA ads which were paid for

by a nonprofit organization as opposed to the Republican Bush Administration ads that are paid for by the taxpayers.

Now the GAO said in its decision yesterday, it’s in today’s paper,

that the Medicare tv video news releases or ads were false, misleading, in violation of the law. They’ve made several suggestions.

One is that they determined that the agency should report the misuse of funds to Congress and the President.

Is the Department going to do that?

Mr. MCCLELLAN. First, just a clarification. The ad campaigns

have not been found to be illegal. In fact, the advertisement we do

is a proven, effective way to——

Mr. PALLONE. What have they found to be illegal?

Mr. MCCLELLAN. The point that you were talking about is for one

aspect of this video news release. That’s not the ad campaign.

Mr. PALLONE. No, the video news release.

Mr. MCCLELLAN. Right. But be clear, the spinning on the advertising is to reach beneficiaries and inform them.

Mr. PALLONE. Are they going to comply with the GAO’s determination and report the misuse of funds to Congress and the President?

Mr. MCCLELLAN. Well, we certainly are looking closely at the

opinion. I’m absolutely committed to making sure that we take actions within the law.

Mr. PALLONE. So you’re not sure. You’re not sure if you’re going

to do it yet.

Mr. MCCLELLAN. What I am sure of is that there’s some concerns

about the findings here. VNRs have been widely used.

Mr. PALLONE. I just wanted to know if you were going to report

the misuse of funds and you said you’re not sure yet, you’re going

to make a decision.

Mr. MCCLELLAN. We’re going to comply with the law.

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Mr. PALLONE. Okay, second. Do you agree that these funds

should be returned? In other words, do you agree that, as I said,

I’m going to introduce a bill that the Bush Administration should

take, should reimburse the government for these illegal activities

with their own campaign funds. Would you agree with that?

Mr. MCCLELLAN. First, again, it’s not the advertising campaign.

Mr. PALLONE. But whatever it is illegal, should they reimburse

the government?

Mr. MCCLELLAN. We’re going to look at this opinion. We’re going

to make sure we comply with the law.

Mr. PALLONE. Okay, so you’re still thinking about it.

Mr. MCCLELLAN. Well, we just got this view yesterday. VNRs

have been widely used by government entities.

Mr. PALLONE. Well, get back to us.

Mr. MCCLELLAN. And this one particular aspect of it——

Mr. PALLONE. How many more ads are going to be run? I know

you spent $18 on the drug cards. $20 million on the so-called new

benefit. How much more money is going to be spent?

Mr. MCCLELLAN. We are going to spend more education funding

where we find that it has an effective impact.

Mr. PALLONE. Can you give us the amount?

Mr. MCCLELLAN. I can’t tell you the amount because we design

our campaign——

Mr. PALLONE. Through the chairman, could I ask that you get

back to us with the specific amount?

Mr. MCCLELLAN. Absolutely. As we continue to plan our education effort——

Mr. PALLONE. All right, I appreciate——

Mr. MCCLELLAN. I absolutely will consult with you about it.

Mr. PALLONE. All right, now, can you tell me who at HHS or

CMS authorized these video news releases that were found to be

in violation of the law?

Mr. MCCLELLAN. I’m sure they were authorized and reviewed

through standard procedures since these have been done——

Mr. PALLONE. What I’m trying to find out is whether there were

specific people at the White House who were involved. For example, was Karl Rove involved or was Andy Card involved in putting

these together?

Mr. MCCLELLAN. I really don’t think so. I think there’s a standard procedure in the Agency in the Department for doing VNRs.

The Department has done them before. They did——

Mr. PALLONE. If you can get back to us again with the permission of the Chair.

Mr. MCCLELLAN. [continuing] the last administration.

Mr. PALLONE. And tell us who specifically authorized them and

whether there was anybody at the White House involved?

Mr. MCCLELLAN. I’ll be happy to do that as well.

Mr. PALLONE. All right. You know, I have to say I’m kind of

shocked when I hear you say that you still haven’t made a decision

about what you’re going to do about it.

One of the things that bothers me also is that I’ve heard all this

talk today about all the money that’s going to be spent to hire people to explain this with the hotline and the website.

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Don’t you think it would make more sense, maybe to just take

all the money that’s involved in this and just use it maybe to plug

up the donut hole of provide the seniors with more of a benefit?

Have you given us any figures about how much it’s going to cost

to produce this website, to hire these people who are going to run

the 800 number? Do you have any figures about that?

Mr. MCCLELLAN. I can give you the ballpark. We’re talking about

several thousand customer service representatives total for this

program. That brings the cost with the advertising and everything

else into tens of millions of dollar range. In return, seniors are

going to get access to many billions of dollars in discounts and——

Mr. PALLONE. I only have a couple minutes. With the permission

of the chairman, you’re going to get back to me about the cost of

the ad campaign and who was involved with it?

Mr. MCCLELLAN. Yes.

Mr. PALLONE. If you could also get back with us about the actual

cost of running this website, the amount of money for the people

that are hired for the 800 number, the website, the cost of all that.

Mr. MCCLELLAN. And we’ll also get you information on the many

billions of dollars in new savings that seniors are going to be able

to get through the discount——

Mr. PALLONE. I would appreciate that too.

Mr. BILIRAKIS. The gentleman’s time has expired. As you get

back with us, Doctor, would you also let us know whether it might

have been common practice over the years to use this type of release and when in your opinion it’s been used in the past?

Mr. MCCLELLAN. It’s absolutely been a common practice. That’s

right.

Mr. BILIRAKIS. Will you do that?

Mr. MCCLELLAN. Yes. And this one particular aspect of the VNR,

not the VNR itself. VNRs are legal and most aspects of this VNR

we have no problem with.

Mr. BILIRAKIS. The aspects that I believe the gentleman is referring to, let’s see now—Mr. Buyer for 8 minutes.

Mr. BUYER. I think this is a pretty exciting day. It’s an exciting

day for those of us, five of us, along with our staffs that work together on creating a new idea, taking a vision, molding it into a

concept, working with great minds, applying our analytical skills,

putting it on paper based on principle, let people take shots at it,

move it into the public domain and then get shoved into the ditch

like a big bus. That’s kind of what happened to us.

We wanted the drug discount card to be, in fact, the prescription

drug benefit under Medicare. It didn’t happen. We find ourselves

in the minority position. The Democrat Party leadership completely

different in their ideology on the issue wanting government control

versus the benefit of the marketplace and individual choices. One

size fits all versus individual choices.

So what do we do? We end up utilizing this as the transitional

benefit. This is an exciting day for those of us who designed this

because real people are going to get real savings based upon individual choices. Isn’t what this is about, Dr. McClellan?

Mr. MCCLELLAN. Yes, that’s right.

Mr. BUYER. Real people, not the rhetoric you get out of this town.

What I’m listening here this morning reminds me of the story, RobVerDate 11-MAY-2000 11:03 Jan 07, 2005 Jkt 000000 PO 00000 Frm 00060 Fmt 6633 Sfmt 6602 93975.TXT HCOM1 PsN: HCOM1
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ert Fulton, invented the steamboat, 1807. There’s a great story

about it. Three thousand people were on the banks of the Hudson.

The Clermont is there. He’s had difficulty getting it started. So a

little group in the crowd began to chant and then soon everybody

starting chanting. Do you know what they were chanting, Dr.

McClellan? ‘‘It will never start. It will never start. It will never

start.’’ Finally, they got the steamboat going. Breaks away from

and it’s headed right up the Hudson against the fast currents. It

stunned the crowd into silence. Then what did the crowd start to

do? ‘‘It will never stop. It will never stop. It will never stop.’’

It’s a classic example of the critic has one role. They are the critic. So what have I heard here today? The drug discount card program, even though it’s not even been introduced to the public, we’re

trying to get individual choices, making it right, what do they say,

‘‘it’s confusing. It’s complicated.’’

You now make an effort to educate people. How dare you educate

people. If you educate people, they’ll understand the program.

They’ll receive the benefits. ‘‘Oh no. If you educate people, you

must be misusing government funds. How wrong that is for you to

educate people, Dr. McClellan.’’ You see, it’s the critic. They’ve got

their face on two sides of the coin so they’ll always win. It’s sort

of cheating the process.

The critic also here today said ‘‘You can’t get through on the hotline. It can’t be done. Try calling. My mom couldn’t get through.’’

Really. So you go out and you hire additional people. You hire additional people, ‘‘oh my gosh, how dare you hire additional people. Do

you know what the cost of that is? Give me the cost. Put it down

in writing. We could use those funds to cover up the donut hole.

How dare you put additional people.’’ The critic is the critic.

You see it will never start, it will never start. It will never stop.

It will never stop. It’s the critic.

So I compliment you because what you’ve done here is you’ve

taken the reins of a new program that’s going to have real effect

in the real lives of people. If the critic wants to confuse the American people about this transitional benefit that is a voluntary program that’s going to affect them in a measured way, fine. Make

your noise. Make your clamor. But please, don’t confuse people of

whom want to gain access to this benefit.

So I really, what I want to do here is praise you. I want to compliment you. I want to compliment your staff. You’re working very

hard with us. You’ve been in touch. You’re saying is this your intent, is this how you want it to work, is this how it’s supposed to

happen? There can be some bumps along the way. There also can

be true constructive criticisms. The constructive critic is the best

critic. The critic is a pain in the—pain.

Let me ask this, taking a drug discount card program that is tailored to an individual’s own health needs from a Federal Government standpoint in a country of almost 300 million people, quite

a task, isn’t it?

Mr. MCCLELLAN. It is. We’ve got 42 million beneficiaries, 15

million——

Mr. BUYER. When you narrow that to the eligible population,

that is one task.

Mr. MCCLELLAN. That’s right.

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Mr. BUYER. So of the eligible population, it’s what?

Mr. MCCLELLAN. Forty-two million beneficiaries over all, and

many millions, about 15 million who don’t have coverage now that

helps them get their drug prices down, and 7 million low income

beneficiaries who really are struggling between drugs and other

basic necessities of life that we’re trying to reach.

Mr. BUYER. When somebody makes a call and you have maybe

Privacy Act concerns or problems, let’s say I make a call on behalf

of my mother. Do you cooperate on behalf of children who are helping out with their moms or dads. They’ve got the drugs in front of

them. We’re not pulling any—how are you working with them?

Mr. MCCLELLAN. We welcome those calls from children, from advocates, from reports, you name it. We want them to find out about

the program and get the help or the information they need.

Mr. BUYER. So every community has individuals who are community leaders who help seniors in many capacities in a volunteer

basis, is that correct?

Mr. MCCLELLAN. That’s right and that’s an area where we are

increasing funding. We want more face to face individualized assistance for our very diverse population to help them get the most

out of this program and all of the many public and private programs out there.

Mr. BUYER. And of course, the critic would say how dare you, you

mean you’re actually using government funds to help educate people so that people can actually help each other in a voluntary fashion to improve the quality of their life? I think that’s pretty bizarre.

Because you know what? That’s the strength of our country is people helping people, really and truly volunteerism. So again, let me

compliment you.

Getting that education function to the grass roots level into those

volunteer organizations who are doing it because of their compassion for each other, it may even be a teacher that they had as a

young student, or who was a mentor at some point in their lives.

I think that’s extremely important and I want to compliment you.

Mr. MCCLELLAN. Thank you. I came to this job from the FDA

and one of the things that we see coming there is much more individualized medicine, genetically based treatments, based on our understanding of genomics and proteomics mean that hopefully 1 day

soon we’re going to know a lot more about exactly what works and

what doesn’t in individual patients. So it’s not just some chance

that you might get a 10 or 20 percent increase in survival, but we’ll

be able to tailor your medical care much more to your individual

needs based on better information, better science.

We need to personalize Medicare programs to go along with that,

that takes advantage of people in the community who care about

our beneficiaries. It takes advantage of the volunteer programs

that are supported by our State health insurance assistance plans.

It takes advantage of the knowledge that doctors, pharmacists and

other health professionals can bring to bear to make sure that an

individual, an individual patient gets the best treatment. So that’s

definitely the goal here.

Mr. BUYER. Thank you, Mr. Chairman.

Mr. BILIRAKIS. I thank the gentleman. We have three votes on

the floor.

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Dr. McClellan, what does your schedule look like?

Mr. MCCLELLAN. For you, Mr. Chairman, I make time.

Mr. BILIRAKIS. Well, the problem that I have is we’re going to

have to break because of those three votes.

Mr. MCCLELLAN. I do have a 1 o’clock——

Mr. BILIRAKIS. You do have a 1 o’clock. Even for me, you have

a 1 o’clock.

Mr. MCCLELLAN. Sorry.

Mr. BILIRAKIS. Darn it. I don’t know what to do. Gene, I know

you’re up next, Gene.

Mr. GREEN. Mr. Chairman, I think I can do my 5 minutes very

quickly and then——

Mr. BILIRAKIS. If you can do your 5 minutes within maybe 3 minutes so we can break and I guess we’ll try to be back——

Mr. GREEN. I’ll do my 5 minutes, Mr. Chairman, and we should

have 5 minutes.

Mr. BILIRAKIS. I don’t want to miss the votes.

Mr. GREEN. Neither do I.

Mr. BILIRAKIS. I’ll let him go, but the trouble is with Dr. McClellan, he’s going to go too.

Mr. GREEN. Okay.

Mr. BILIRAKIS. Can you come back?

Mr. MCCLELLAN. I’m sure we’ll be dealing with this issue, Mr.

Chairman. I hope we’ll have these continuing hearings, so as we

learn more about it—

Mr. BILIRAKIS. Mr. Green, see if you can finish up in 3 minutes.

Mr. GREEN. I’ll do the best I can.

Mr. BILIRAKIS. I’m sorry, I don’t know what to say.

Mr. MCCLELLAN. We’ll answer any additional questions you have

in writing.

Mr. BILIRAKIS. In writing, right.

Mr. MCCLELLAN. I’ll try to be as responsive—

Mr. BILIRAKIS. And we’ll just get back about one or just as soon

as we can after that third vote and I guess we will not be able to

question Dr. McClellan, except in writing. C’est la vie.

Mr. GREEN. Let me go ahead and get started. First, let me talk

about some of the discussion from all my colleagues, first, and I

know Illinois has a great program for their citizens, but I point out

that the legislation that the Congress passed and the President

signed prohibits imports and I understand Illinois is actually benefiting from the Canadian import, lower cost.

My colleague from Indiana, the steamboat analogy, I can understand that, but I don’t know if I want to experiment with the boilers blowing up before we have a lot of people hurt by it. And I

think we have a duty to make sure that whatever plan is put out

there is that something we don’t have a lot of our seniors who

think they’re going to get a benefit, maybe drop their current employer or retiree coverage and pick this up and find out that boiler

exploded before we had the success of a Fulton. So let’s talk about

analogies.

Let me point out and ask you, we’ll consider the demonstration

you gave in Medicare.gov. We saw that the particular beneficiary

would pay $298 per month for these four drugs. Once the prescripVerDate 11-MAY-2000 11:03 Jan 07, 2005 Jkt 000000 PO 00000 Frm 00063 Fmt 6633 Sfmt 6602 93975.TXT HCOM1 PsN: HCOM1
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tion drug plan comes on line, this discount card program is completely scrapped, is that correct?

Mr. MCCLELLAN. Well, I’d like to build on the best features of

this program, giving people accurate price information, giving them

the ability to negotiate—

Mr. GREEN. Under the law, in 2006 this card program will go

away?

Mr. MCCLELLAN. We want to take the best features—

Mr. GREEN. Let me finish my question because I’m cutting 5

minutes to 3 and you know us Texans talk pretty slow.

Is it fair to say that with $300 a month in drug costs or more,

this beneficiary will hit that $2250 threshold in 7 months and will

basically have to pay the remaining costs out of pocket because of

that donut hole? That analogy you gave, $298 per month, we would

hit that, that particular person would hit that before. It’s just the

math. I’m glad you used that analogy.

Mr. MCCLELLAN. First, you get discounts on the prices as she

does here. Second, it’s a higher level of spending where that possible gap will kick in. Third, since she’s a low income beneficiary,

she’d be paying no more than a few bucks for all these prescriptions anyway.

Mr. GREEN. But on average, some are not eligible for the low income would still fall in that donut hole.

And Mr. Chairman, I know I don’t have enough time, but I’d like

to submit a question and I’ll read it because it will take a good

while for the question.

We have a study that was done by the American Institute of Research found that Medicare did a better job of cost containment

than private plans. The Congressional Budget Office also calculated that payments to private plans would add $14 billion in

costs. In a study recently released today by the Common Wealth

Fund indicates that Medicare and private plans are being paid an

average of $552 more than each beneficiary than the fee for service

plan. And in fact, their own estimates from the department in 2003

will show that the program that has the design like we have is

wasteful in taxpayer dollars and I have a document from September 2003 from CMS actually stating greater number of PPOs

yields greater cost and lower number of PPOs participating yields

lower costs. And isn’t it true that this competition level isn’t necessarily cost beneficial? And is it fair to conclude that the rush to

privatize Medicare isn’t necessarily the best use of taxpayers’ dollars during a time of our record-setting deficits? And I’ll submit all

of the copies of the letters and wouldn’t it be logical to conclude

that traditional Medicare offers a better program from a cost benefit perspective? Again, Mr. Chairman, we’ll put this in writing

with the supporting documents.

Mr. BILIRAKIS. Respond in writing, in other words?

Mr. MCCLELLAN. If I could just say very quickly that one of my

main goals for evaluating our program is what beneficiaries pay

and the most recent studies that we’ve done show a difference of

about $800 in what beneficiaries pay out of pocket in the Medicare

Advantage plan versus traditional Medicare for people who don’t

have access to good, comprehensive employer coverage and that’s

61

an important consideration too, but I’ll be happy to answer these

questions more—

Mr. GREEN. And the concern I have is I agree that benefits for

the person, but also if the goal is to reduce Medicare over the next

10 years, if we’re paying more to the private sector, and it’s not

cost competitive for the taxpayers.

Mr. Chairman, I’ll submit this and thank you, Dr. McClellan.

[The document follows:]

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Mr. BILIRAKIS. Dr. McClellan, your dedication is amazing. I know

over the years we’ve worked together on health care matters for

the American people and you are a dedicated servant and I’ve

heard many members on this side of the aisle said the same thing.

So I want you to know that and appreciate so much your coming

here. And again, there will be a series of questions, as you know,

and hopefully, you’ll respond to them and we’re going to have oversight, whether it be the Oversight and Investigations Subommittee

or probably maybe a joint thing with the Health Subcommittee, but

we’ll have oversight over a period of time to see how things are

working.

Mr. GREEN. Mr. Chairman, I’d just like to associate and since I’m

the only one left on our side, say that we feel the same way. We

obviously have a contentious issue, but again, I can’t think of a better person to have there.

Mr. BILIRAKIS. Those good comments came from your side of the

aisle. I wanted to make that clear. We’re going to break until 1:15.

I think it will give you all an opportunity to maybe do what you

might have to do over that period of time.

Mr. MCCLELLAN. And I would just say in concluding, we will answer all of your additional questions. We look forward to additional

close oversight and working with you to make sure we’re doing all

we can. We are getting beneficiaries lower prices and drug savings

right now, especially low income beneficiaries and we need to do

that effective.

Mr. BILIRAKIS. We need to follow up on the history of all that because it’s continuing, is it not?

Mr. MCCLELLAN. That’s right and I especially want to thank the

staff.

Mr. BILIRAKIS. Thank you very much, Doctor.

[Off the record.]

Mr. BILIRAKIS. Let’s have order, please. As you know, we’ve just

completed three votes on the floor, so members, I trust, will be

streaming in slowly. We’ve gotten the okay from the minority to get

started and in the interest of time, we will.

Do we have all of our witnesses here? Panel 2 consists of Mr.

Craig Fuller, President and Chief Executive Officer of the National

Association of Chain Drug Stores; Mr. Ron Pollack, Executive Director of Families USA; Ms. Mary Grealy who was here, but

stepped out. She’ll be back, president, Healthcare Leadership

Council; Mr. Robert M. Hayes, CEO, Medicare Rights Center, and

Mr. Stan Baumhofer from Portland, Oregon.

Mr. Baumhofer, you have a couple of Oregon Members of Congress who wanted to be here to introduce you to us, so as they

come in and as your turn arises, we’ll have them do that. But I

want you to know you have a lot of respect with those people.

All right, that being the case, we’re going to start off with Mr.

Fuller. Your written statement is a part of the record. We would

hope that you would sort of complement, supplement that written

statement. Five minutes. We try not to cut you off, but we really

run pretty late, as you know, so hopefully, you can stay within that

as much as you can.

That being the case, we’ll start off with Mr. Fuller. Craig, please

proceed.

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STATEMENTS OF CRAIG L. FULLER, PRESIDENT AND CHIEF

EXECUTIVE OFFICER, NATIONAL ASSOCIATION OF CHAIN

DRUG STORES; RONALD F. POLLACK, EXECUTIVE DIRECTOR,

FAMILIES USA; MARY R. GREALY, PRESIDENT, HEALTHCARE

LEADERSHIP COUNCIL; ROBERT M. HAYES, CEO, MEDICARE

RIGHTS CENTER; AND STAN BAUMHOFER, MEDICARE BENEFICIARY

Mr. FULLER. Thank you very much. It’s a pleasure to be before

you and your committee. As you said, I do represent the National

Association of Chain Drug Stores. We have some 200 retailers with

120,000 pharmacists in nearly 35,000 stores across the country.

Virtually all of them will participate in the Medicare-endorsed senior prescription drug discount card.

I wear another hat because along with Express Scripts, NACDS

formed the Pharmacy Care Alliance. Pharmacy Care Alliance has

sought and won Medicare endorsement for the Pharmacy Care Alliance card, and so I want to talk a little bit about that as well

today.

I really wanted to just touch upon three items that are discussed

more completely, perhaps, in my testimony. First, I wanted to just

comment a little bit on the path that the retail community pharmacy industry has been on. As you know, when the administration

first raised the idea of a discount card, we were opposed to it. We

were opposed to it because it did not have a grounding in law. It

did not have the benefit of this committee’s deliberations and other

committees within Congress. And we felt that in order to have a

meaningful drug benefit for seniors, you had to have a program

that brought both concessions from both, the pharmaceutical manufacturers as well as retail pharmacy.

The card program, of course, that was announced in 2001, while

not enacted, it did spark manufacturing card programs and those

programs have been embraced by retail pharmacy and in fact, our

first efforts with the Pharmacy Care Alliance concept were to support that program.

We actively participated, as you know, in the discussions and deliberations last year. We felt very strongly about four or five significant points. We felt that anybody that—any pharmacy that

wanted to participate in a drug discount card program should be

able to. We felt that the program should provide a meaningful benefit to seniors. We felt that, in fact, there should be rules of transparency and assurance that rebates provided by the manufacturers

flowed through to those seniors.

Those elements were all part of the legislation that was passed

and that debate was one that ended with the passage of the law.

With the passage of the law last year, the retail pharmacy community, at least the National Association of Chain Drug Stores, decided to work to do everything we could to make this law a reality.

And so last December, with the authority of my board, we formed

the Pharmacy Care Alliance.

We needed somebody to partner with, an organization that had

experience running national card programs. Express Scripts is one

of the three largest pharmacy benefit managers in the country with

considerable experience in that area. And the first set of questions

we asked were whether the principles on which we would run a

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program if we were to join forces would be consistent with those

principles that I just mentioned and that we articulated throughout

the debate last year.

The leadership of Express Scripts assured us that they were in

full alignment with those ideals and would run a program as we

described it. With that, we went forward. The time lines were tight.

I commend the Centers for Medicare and Medicaid Services, Mark

McClellan and a very able staff for driving this process as effectively as they have, answering hundreds of our questions and those

of the other sponsors.

With the endorsement, we began a process of education. And I

wanted to just show, as I talk, a few of the slides that represent

part of that process. First, we wanted to let people out in the community know that these cards were coming, that the marketing

would begin on May 3. So with Medicare-approved materials, and

I know the wording is too small to perhaps see, we began a process

of making available in our stores not only the Medicare information, but our information as well, to begin that education process.

Next, it was very important to make sure that pharmacists

began to better understand how the program would work. We have

a pharmacy practice memo that goes to all pharmacists across the

country, not just chain drug store pharmacists, the 120,000, but the

150,000 or 160,000 throughout retail pharmacy because we firmly

believe that where most seniors are going to go for information

about this program is, in fact, to their pharmacy and they will consult with their pharmacist and with pharmacy personnel. So that

was an important element of that program.

Next the promotional materials began to tell people that they

were going to be able to sign up for the Pharmacy Care Alliance

card. This material began appearing in the stores, again, Medicareendorsed material.

Go to the next slide. We have been actively engaged in running

programs to reach seniors who could take advantage of this program. Some 260 educational and enrollment events have taken

place and are scheduled across the country in 44 different markets

nationwide. This is by no means the limit of activity because individual retailers may be doing their own work, but the Pharmacy

Care Alliance and staff and personnel working with us and with

Express Scripts are involved in these events. Indeed, our President

of the Pharmacy Care Alliance who would be with me here today,

but for the fact that she is out across the country for the next few

weeks, meeting with seniors in community centers and pharmacies,

talking to the local media, all designed to help people better understand the Medicare-endorsed prescription discount card. She’s really leading that effort.

I also wanted to give you just a sense of sort of the early days

and it’s only been 2 weeks, but I hope in doing so, that I might

share a little bit of the reality, as we see it, not theory, but the reality as we see it. First of all, Pharmacy Care Alliance has a

website, 1-800-PCA 7015. We’ll get you an answer in probably less

than 30 seconds. For a while we were running it under 5 seconds.

We have had hundreds and hundreds and hundreds of thousands

of calls. We’ve had millions of hits on our website. We have seen

twice the number of applications come in the second week as we

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did the first week. And I think we are seeing really a steady

growth every day. Interestingly, 42 percent of the applications we

receive, we receive by mail.

Thirty-seven percent are faxed to us. Thirteen percent come off

of our website, so to answer do seniors actually use the website, my

answer is 13 percent are actually, not only using it, but they’re

submitting their applications to us that way. And 8 percent come

in by phone.

Now the call center has been very active. I don’t claim the same

numbers that Dr. McClellan has by any means, but it has been a

very, very active place and every time we get a call, we seek to better understand just where those callers learned about the Pharmacy Care Alliance Medicare Drug Discount Card Program. Perhaps not surprisingly because we’re behind it, but 45 percent tell

us they’ve learned about it from their pharmacy. And I think that

is instructive. Again, we really believe seniors have a lot of information they can get at their local pharmacy. Thirteen percent

heard about it from the Medicare website or the call center; 12 percent from television, 9 percent from newspapers and then others at

less than 5 percent, family, friends and the like.

Mr. BILIRAKIS. Will you try to summarize?

Mr. FULLER. I sure will. Because the key here is probably best

captured in this next slide. This is a real couple. Somebody wrote

to me a letter indicating that they were very concerned about how

this would affect their parents. Simply put, ‘‘we took the drugs, we

were given permission and the drugs they were taking, we took the

drugs they were taking, we applied the PCA card. The PCA card

produced 24 percent savings all by itself, or $260 per month.’’ They

also had two drugs that together RX card would give them an additional $56 of savings. ‘‘It totaled $316 of savings for this couple

every month, but then we also did what a pharmacist would do and

we explained to them that there were some generic substitutions

that would save them additional money which would total $341 or

a 32 percent savings.’’

This is not hypothetical. It’s an actual example. It’s what people

are doing on our website every day, helping seniors learn how they

can save money. I think we have a competitive card out there. I

actually think competition is a good thing. I know transparency is

a good thing. We remain very determined to make this program

work and we look forward to your questions.

[The prepared statement of Craig L. Fuller follows:]

PREPARED STATEMENT OF CRAIG L. FULLER, PRESIDENT AND CHIEF EXECUTIVE

OFFICER, NATIONAL ASSOCIATION OF CHAIN DRUG STORES

Mr.Chairman and Members of the Health Subcommittee. I am Craig L. Fuller,

President and CEO of the National Association of Chain Drug Stores (NACDS).

NACDS is pleased to be here today to talk with you about our industry’s views regarding the Medicare-approved prescription drug discount card program. In addition

to today’s discussion, we would like to invite all members of the Health Subcommittee, as well as your House colleagues, to visit a community pharmacy over

the next few months to see first hand how the Medicare prescription drug discount

program is being implemented.

NACDS represents more than 200 companies that operate more than 32,000 community retail chain pharmacies. Our members include traditional chain pharmacies,

supermarket pharmacies and mass merchandisers that operate pharmacies. We represent large and small chain-operated pharmacies from all over the United States.

Our industry employs more than 120,000 pharmacists, and almost 3 million total

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individuals, providing more than 70 percent of all outpatient prescriptions in the

United States. We believe that our industry plays a critical role in implementing

the discount card program that will be utilized in less than two weeks, as well as

the full Part D prescription drug coverage program in 2006. We appreciate the opportunity to express our views today.

There are three areas I would like to discuss in my presentation:

• First, a review of the path the National Association of Chain Drug Stores traveled

during the past few years to reach our current alliance with Express Scripts,

one of the nation’s three largest pharmacy benefit managers (PBMs), in the

sponsorship of a Medicare-approved drug discount card through the Pharmacy

Care Alliance (PCA);

• Second, a review of our experience with the Pharmacy Care Alliance program

and its implementation to date working with the Centers for Medicare and

Medicaid Services (CMS);

• Finally, our experience in the early days of enrolling seniors in the PCA program.

COMMUNITY RETAIL PHARMACY: WORKING TO IMPLEMENT MMA

The enactment last year of the Medicare Modernization Act (MMA, P.L. 108-173)

created the most significant expansion of Medicare benefits in the nearly 40-year

history of the program. While NACDS participated in a healthy debate last year,

there is only one view among NACDS members today. We must and will do everything possible to make this program work. We know you expect nothing less and

America’s seniors certainly deserve nothing less.

Of the nations nearly 45 million Medicare eligible seniors, about 25 percent have

no prescription drug coverage, while others only have partial coverage. For those

seniors who pay for their prescriptions out of pocket, they all too often cannot afford

the medication they need or they pay for only some of what they need. Significantly,

this card program can help millions of low income seniors by paying for $1200 in

medications over the next 18 months. In addition, the card program can provide an

additional safety check in detecting medication related problems, such as drug interactions, for seniors who might obtain their prescriptions from multiple pharmacies.

In our view, MMA took several important steps to improve the situation for our

seniors. The Act also developed a framework for the structure of a meaningful discount card program. The structure addresses some of the most important elements

we discussed last year during the formulation of the legislation. We said then, and

we continue to believe that:

• Patients Should Choose Pharmacy: The patient should be the one to choose

who should serve their medication needs. That is, choices among retail pharmacies and mail order pharmacies should be left to the patient;

• Financial Incentives Should be Transparent: There should be rules of transparency so that policymakers, the Administration, and seniors can see how the

dollars flow to different interested parties in the management of any kind of

Medicare related drug benefit;

• Seniors Should Realize Savings: The savings for the senior should come both

from the pharmaceutical manufacturers—with rebates flowing through to the

senior at the point of purchase—and from concessions made by retail pharmacy;

and,

• Pharmacies Should be Allowed to Participate: Those pharmacies desiring to

participate in a card sponsor’s network should be able to do so. All these elements are all a part of the Pharmacy Care Alliance program which will be described in more detail later in this statement.

We had serious reservations about a card program regulatory initiative announced

by the Department of Health and Human Services in July, 2001. Our concern was

that, without deliberations by this committee and others, and without a law on the

books, there was no framework for a meaningful senior drug discount card program.

While we did oppose this Administration’s effort, it did serve as the catalyst for the

development of discount cards offered by pharmaceutical manufacturers. These included the TogetherRx Card, the Lilly Answers Card and the Pfizer Share card. For

all practical purposes, these manufacturer-sponsored discount card programs were

embraced by retail pharmacy, and in our view many seniors benefited by the discounts that were being offered by manufacturers to seniors through participating

pharmacies.

NACDS initially formed the Pharmacy Care Alliance to help pharmacists and patients understand the value of these cards. We coordinated events with the sponsors

and communicated regularly on the importance of these programs. Some of these

cards will remain in the marketplace as the new Medicare card program is rolled

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out, and we applaud those manufacturers who are working with card sponsors to

make their programs seamless with the various CMS approved card sponsors.

THE PHARMACY CARE ALLIANCE (PCA)

Once MMA was enacted, the Board of NACDS expressed a commitment to do all

we could do to make the program work for our patients and customers. Last year,

we concluded that the best way for our industry to assure that we were full participants in the new law, as well as to protect the important principles we fought for,

was to develop our own discount card program. Knowing that there were likely to

be many competing cards in the marketplace, we wanted to work with a partner

who had a proven ability to implement a national discount card program.

We spoke with several potential partners, but found Express Scripts to be an organization committed to our principles—as described previously. They have a leadership team that is committed to making the MMA work.

Our card program is structured around simple principles, which we believe are

resonating with seniors. Namely, that seniors should have the right to choose the

retail pharmacy from which they want to obtain their pharmacy services, and that

seniors should have the ability to obtain their maintenance medications through

their local retail pharmacy or mail order. That is, the card that we are offering will

include a mail order component, but will not drive patients away from retail pharmacy by requiring them, or creating financial incentives for them, to use mail order.

We believe that mail order should be an option for seniors under the PCA card program as well as the 2006 voluntary drug benefit, but seniors should not be economically coerced into using mail order.

THE CHALLENGES IN IMPLEMENTING PCA

Early this year, all prospective card sponsors had a challenge. By the end of January we were required to have our organization plans set for running a discount card

program. We had materials designed for review by the Centers for Medicare and

Medicaid Services, and we had to agree on a business model for going forward with

a completely different kind of discount card program. Finally, we had to interact

with and seek approval from CMS on all of these matters.

CMS Administrator Mark McClellan and his team at CMS have done an extraordinary job in driving forward the implementation of complex and historic legislation

enacted only late last year. The outreach to us and other card sponsors has been

constant. Literally thousands of questions have been fielded from sponsors, and currently CMS is dealing with millions of consumer inquiries. While everyone is hearing about bumps in the road, it is unrealistic to think that a program of this scope

and magnitude could run without flaws in the initial ramp up.

We believe that challenges will continue to exist as the program moves forward,

but we should all be committed to making this program work for seniors.

What specific tasks did PCA, as well as other card sponsors, have to perform to

make this card program a reality? First, as part of the discount card program, Express Scripts, on behalf of the Pharmacy Care Alliance, built a network of retail

pharmacies from across the country. Any retail pharmacy that wants to participate

in the PCA network is able. This network currently consists of almost 44,000 retail

pharmacies, including chain drug stores, independent drug stores, supermarket

pharmacies, and mass retailers. By the start of the program, we believe that 50,000

retail pharmacies will be enrolled or almost 90 percent of all pharmacies. That is

a very sizeable network—providing significant access for seniors to the local pharmacy of their choice.

At the same time the pharmacy network was being built, Express Scripts entered

into negotiations with the pharmaceutical manufacturers to obtain concessions on

their prices in the form of rebates that will be passed directly to the consumer at

the point of purchase. Passing through manufacturer price concessions at the pharmacy counter is a relatively new phenomenon in discount card programs. To date,

most of the price concessions that seniors have realized for prescriptions through

commercially-available prescription drug discount card programs have come from

price concessions made by retail pharmacies. We believe that the ultimate success

of this program will depend on the desire of manufacturers to provide, and of card

sponsors to pass through, the price concessions that they obtain from manufacturers.

NACDS AND PCA EDUCATIONAL INITIATIVES

We knew from the beginning of this discount card initiative that millions of seniors that currently come to our pharmacies to obtain their prescription medications

would continue to do so after the discount card program was launched. As we said

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earlier, our industry employs 120,000 pharmacists that interact with millions of individuals, including Medicare beneficiaries, each and every day. We also knew that

many of them would seek our advice and counsel on how to choose among card programs, based on the medications they were taking.

NACDS has created several general educational materials for our pharmacists

and seniors about the card program. For example, NACDS created a special continuing education program for our pharmacists to help them learn about the card,

as well as a special edition of our regular ‘‘Practice Memo,’’ which is a unique communications vehicle our industry uses to provide information to practicing pharmacists. We prepared two ‘‘Top 10’’ facts about the Medicare discount card and the

transitional assistance benefit program.

The Pharmacy Care Alliance and its marketing partners have also created materials that are being used in retail pharmacies across the United States. PCA is expending considerable resources to conduct education and training programs. We

have provided materials to participating pharmacies to use if they desire. We have

provided booklets and information to the pharmacies to give to patients that will

explain the program. All of these materials are reviewed and approved by CMS. In

addition, we have trained hundreds of individuals who have in turn trained thousands of pharmacists.

Let me say that no one underestimates the tremendous task that lies ahead to

educate Medicare beneficiaries about the card program in general, and their multiple options in particular. But, we believe that seniors, their caregivers, and the

various public and private sector agencies representing the interests of seniors will

help them sort through many options to make the best selection possible. Like any

new program, there will be a learning curve and bumps ahead. However, we view

this as an important trial run for the new Part D drug benefit that will ramp up

late next year, and we all have a vested interest in taking lessons learned from the

discount card program and applying them to the Part D program.

CARD PROGRAM ENROLLMENT: EXPERIENCES FROM THE FIRST TWO WEEKS

Let me now discuss our experiences in the first two weeks of marketing the PCA

card to seniors and enrolling seniors in the program.

Through phone and personal conversations as well as website contact, we have

seen growing interest among patients and caregivers seeking information about the

card program. During the second week of promotions, we processed more enrollment

applications than the first week—we continue to see growth daily.

While we cannot provide specific information for proprietary reasons, we can

share with you some interesting statistics to give you a feel for how seniors are accessing information about the Pharmacy Care Alliance program. For example, as of

May 18, 2004:

• We received twice as many applications the second week as we did the first week.

• Applications came to us by mail (42 percent), by phone to our call center (8 percent), by FAX (37 percent) and via the web (13 percent);

• Of the applications we received, 42 percent were for cards with ‘‘transitional assistance’’ and 58 percent were for regular discount cards;

• Our PCA call center is actively engaged in counseling Medicare beneficiaries, with

the average length of a counseling call running about six and a half minutes;

• When we ask where a caller reaching our call center heard about the Pharmacy

Care Alliance program, 45 percent say from their pharmacy; 13 percent say

from the Medicare website, call center or materials; 12 percent say from television; 9 percent say newspaper, and there are a number of other sources below

5 percent ranging from family and friends to physicians and community groups.

At the heart of this program, of course, are not statistics, but rather savings for

seniors. Below is an actual example of the savings that a senior couple in California

would realize using the PCA card. The couple’s son contacted NACDS personally,

skeptical about the benefits of the card program for his parents, who take multiple

medications. We sought permission to review his parent’s medication needs and

then to suggested how they may benefit from the discount card program.

• Based on the medications they were taking, we found substantial potential savings for the California couple, over 24 percent savings, or about $260 each

month using the PCA discount card.

• In addition to PCA discount card savings, the couple is also eligible for the Together Rx discount card, and can save an additional $56 per month using both

cards.

• Last but not least, many patients can realize additional savings each month simply by asking their community pharmacist if lower-priced generic alternatives

or a lower-priced drug in the same therapeutic category exist for any of their

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medications. In this case, we were able to find an additional $25 in potential

savings each month, allowing our couple in California to potentially save a

grand total of $341 each month, or 32 percent of what they are currently paying.

To conclude, our experiences thus far have been as expected. Patients with medication needs interact with their physician and their pharmacist. However, the pharmacist is available 24 hours a day, 7 days a week in many locations, and is available without an appointment or charge. So, it is not surprising that millions of seniors will consult their pharmacist about the availability of the Medicare approved

discount cards. They seem to be doing this not all at once, but rather when they

come in to fill prescriptions. This shows the application process will be spread out

over more weeks, thus providing for more interaction in the pharmacy and in our

call center.

Today, pharmacists around the country have choices in what they can recommend. The Pharmacy Care Alliance is but one choice. We have worked hard to

make certain that is a good, competitive and trusted choice for both the patient and

the pharmacist. By doing so we are convinced we are doing everything we can to

help make this important program work.

SENIORS HAVE POSITIVE PERCEPTIONS OF DRUG CARD PROGRAM

As we launch this historic initiative, we thought it would be instructive to know

what seniors really believed about the value of the card program. We asked Wirthlin

Worldwide Research to study the perceptions toward the drug card program of

Medicare-eligible seniors that do not have any other form of insurance that covers

prescription drugs. Among those without any drug coverage, a slight majority (54

percent) have heard at least some information about recent Medicare changes. The

results of this survey should demonstrate the importance of this card program to

policymakers.

• First, most of this population favors the basic concept of these discount cards.

Based on the simplest description of the cards, a majority (70 percent) say that

the cards sound like a good idea. After hearing a number of more specific pieces

of information about how the cards will work, 76 percent say the discount cards

sound like a good idea (six percentage point increase), including 28 percent who

say they sound like a very good idea, and another 48 percent who think they

are a fairly good idea. • In addition, a large majority (76 percent) believe the cards will be helpful to those

without drug coverage, and more than four out of ten (43 percent) think the

cards will be very helpful to others like themselves. • A majority (58 percent) of those without coverage say they are likely to get a discount card. Among those who take any prescription drugs, 61 percent are likely

to get a card, and among those who take three or more drugs, almost two-thirds

(64 percent) are likely to get a card.

• When the Transitional Assistance program is described, more than four out of five

(84 percent) believe the program will be helpful to low income Medicare recipients, including two-thirds (68 percent) who believe it will be very helpful. Twothirds (67 percent) say they would probably apply for the Transitional Assistance if they qualified for it.

Thus, it appears that, while we are about 18 months away from the Part D coverage program, seniors find that this interim card program is a good first step toward helping them obtain their prescription drugs.

IMPLEMENTATION ISSUES FOR BENEFICIARIES AND PHARMACIES

Now we would like to provide additional detail about some of the issues relating

to what seniors, pharmacies and the marketplace can expect as the discount card

program is implemented on June 1st. First and foremost, pharmacies will be responsible for managing beneficiaries’ expectations regarding the discount card program.

This may be just as important in helping them manage their drug benefits or drug

therapy. Pharmacies will have an important role in helping to explain to seniors the

nature of the discount card program, that the discount card is not drug coverage,

and that they still need to pay for their prescriptions out-of-pocket, minus their discount.

Price and Discount Expectations: It is clear that seniors will measure the success of this program by whether or not they are paying less for their medications

at the pharmacy counter. Already, we are seeing dueling reports and studies trying

to document the extent to which the various card programs are (or are not) saving

money, and whether prescription prices have fallen since the CMS pricing website

went live.

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NACDS wants to offer some observations about the issues relating to prescription

pricing, and how we should measure whether seniors are actually saving money

through the card program.

• First, we should all recognize that every senior has different prescription drug

needs, and that actual retail prescription drug prices do vary from pharmacy

to pharmacy. Thus, studies on savings from the card program based on reduction from ‘‘average prescription prices’’ fails to recognize prescription prices

variances, and that many seniors can already obtain a 10 percent discount on

their medication by simply telling the pharmacist they are a senior citizen. • We also have to recognize that part of the goal of this discount card program is

to help seniors better manage their prescription drug spending by encouraging

them to use more cost effective drugs, including generics. Thus, we should focus

on helping seniors choose the best card for them, and assist them in reviewing

their whole drug regimen to determine where their physician might prescribe

more cost effective drugs. • We can never forget, however, that at the end of the day, this effort cannot and

should not be all about price. We should attempt to get seniors the best drugs,

to treat their medical condition. And, assure they take the medications appropriately.

Because many discount cards existed before the Medicare-approved cards, many

successes of the new Medicare-approved discount card program will depend on

whether card sponsors are able to obtain significant rebates and discounts from

manufacturers, and the extent to which they are passed along to beneficiaries. In

that regard, we believe that the PCA card has been able to obtain significant discounts from manufacturers and will be passing those through to beneficiaries at the

point of service. We also believe that the transparency brought to the market by the

pricing website has also resulted in further price concessions by manufacturers to

various card sponsors to make their prescription products attractive to an important

and cost-conscious group of purchasers—seniors.

Pricing Website: While we support transparency in medication pricing at all levels,

we believe that this discount card website will create some challenges to seniors and

pharmacies. After some initial start up issues with the website, we believe that it

contains accurate pricing information, at least for the PCA card, and think it will

be a valuable tool for seniors. That is not to say that this pricing website does not

have several issues which we would like to bring to your attention.

For example, once the program gets started, prices for prescription drugs under

the card programs will be allowed to change weekly on this website, consistent with

changes in manufacturers’ charges for medications, as well as other changes in the

market such as a change in discounts that are available from manufacturers or

pharmacies. We believe that, consistent with free market principles, prescription

prices under these card programs must be allowed to change since prices of pharmaceuticals increase, as does the cost of doing business. Anything less would be price

controls on pharmacies.

But, by the time the beneficiary arrives at the pharmacy to purchase their prescription, those prices may have changed, and the beneficiary may have to pay a

higher price than the one that was on the website. CMS must be diligent in all its

educational materials—as should all card sponsors—to make clear to beneficiaries

that card sponsor prescription drug prices will likely not remain the same during

the year, and in fact, that there may be frequent price changes, and that drugs covered on the formulary might change as well.

Transparency in Rebates and Discounts: We think it is key for seniors, Medicare

and Members of Congress to know whether card sponsors are obtaining significant

price reductions from manufacturers and pharmacies, and whether these are being

passed through to beneficiaries in the form of lower prices. The discount card law

requires that this type of information be reported to CMS, which cannot make it

public. We think it is important, however, to ensure that any PBM or other private

health plan involved in the Medicare program be required to disclose any relevant

financial data so that federal officials can monitor whether money is spent wisely,

and savings are passed on to seniors.

In fact, we think this issue is so important that the PCA program will go beyond

what is required by statute and have our own clear and rigorous rules regarding

transparency, verified by an independent auditor, who will have the right to review

proprietary information to ensure compliance. Congress, CMS, and Medicare beneficiaries should expect the same from every card program receiving CMS endorsement.

Transitional Assistance Issues: Pharmacies will also work with low-income seniors

that are eligible for the $600 in annual transitional assistance to help them make

the most of this dollar amount. We can do this by offering generic drugs where posVerDate 11-MAY-2000 11:03 Jan 07, 2005 Jkt 000000 PO 00000 Frm 00079 Fmt 6633 Sfmt 6621 93975.TXT HCOM1 PsN: HCOM1
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sible, and working with a beneficiary’s physicians to assure they are taking the most

cost-effective brand drugs possible.

In other words, pharmacies can make the $600 stretch further if we can work

with the beneficiary and their physician on assuring appropriate prescription drug

use. Because we often know our patients’ financial ability (or inability) to obtain

their medications, pharmacies are also in an excellent position of identifying lowincome seniors that might be eligible for transitional assistance so we can encourage

them to enroll in a card program.

Automatic Enrollment in Card Programs: Many states with individuals enrolled

in state pharmaceutical assistance programs are taking advantage of CMS’ recent

decision to allow them to automatically enroll these individuals in the Medicare discount card program. Some states are requiring these individuals to enroll in only

one card program, while some states are providing choices. We believe that automatic enrollment of these individuals in the card program—as well as individuals

in the Medicare Savings Program—will enhance participation in the card program.

This is particularly important for Medicare beneficiaries below 135 percent of poverty who qualify for the $600 annual transitional assistance. We believe, however,

that automatic enrollment programs should give seniors a choice of card programs

so they can select the one that best meets their needs for the drugs that they are

taking, and the pharmacies that they want to use, before they are defaulted into

one specific card program.

Administrative Issues Relating to Card Programs: We envision some potential administrative issues with the card program, especially in cases where state Medicaid

or state pharmaceutical assistance programs decide to ‘‘wrap around’’ the benefit,

and pay the copays or any additional coverage, for transitional assistance individuals. This information about ‘‘wrap around’’ benefits must be provided to pharmacies at the point of care in a real-time manner by the card sponsor to coordinate

these benefits, without any charge by the card sponsor to the pharmacy for providing this necessary information. This information will help pharmacies determine

who is responsible for paying for the prescription, and the pharmacist can bill the

appropriate and liable third party.

We also see potential issues where beneficiaries have both a CMS-approved prescription drug discount card and multiple non-approved prescription drug discount

cards, which is a very real possibility. Beneficiaries may ask pharmacies to determine which card provides them a better price for their medication, an approved card

or a non-approved card.

Finally, consistent with current industry practices, CMS must also allow card

sponsors to adjudicate claims transactions for drugs and supplies covered under the

discount card program in an on-line, real time manner. CMS cannot require that

any part of the transactions for this program be conducted in any form of batch

transaction standards.

CONCLUSION

In conclusion, we believe that there will be many challenges for all stakeholders

in implementing this Medicare-approved prescription drug discount card program.

The next eighteen months will go a long way in helping us prepare for the prescription drug coverage program that will begin in 2006. Medicare beneficiaries will continue to rely on pharmacists—as they have done in the past—to help them understand how to use the new Medicare-approved discount card programs. We continue

to meet this challenge.

We think that these card programs can be a success. Seniors will ultimately judge

these programs on the discounts they offer—if they offer a wide range of choices for

obtaining medications, and the level of customer service provided. We welcome the

opportunity to provide additional information on any of the issues we discussed

here. Thank you, Mr. Chairman and members of the Subcommittee for asking us

to present our views here today.

Mr. BILIRAKIS. Thank you very much, sir, and you will get an opportunity, I trust, with the questioning to expand on what you have

said.

Mr. Pollack, please proceed. You’ve done this before.

STATEMENT OF RONALD F. POLLACK

Mr. POLLACK. I have once or twice. And I want to thank you for

your perseverance for holding the hearing.

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First, I want to just say very briefly there are a couple of things

that I’m pleased about with respect to the program, but then I

want to get into the heart of the testimony. I’m pleased that there’s

a $600 transition benefit for low income people. It’s crucially important. I wish it were more. I certainly hope that as many people eligible sign up and we’re certainly helping with that. I’m also

pleased that we’re taking some steps, not enough, toward transparency. I think that’s a step in the right direction.

Now let me summarize what I believe about this drug discount

card program and I can best—

Mr. BILIRAKIS. Mr. Pollack, excuse me, sir. Are you aware or do

you know or do you agree that there are some manufacturers who

are basically expanding that $600 figure?

Mr. POLLACK. I’ve actually talked to them directly.

Mr. BILIRAKIS. You have? So you are aware that that is taking

place.

Mr. POLLACK. I am.

Mr. BILIRAKIS. Good. You know, we hear these things, but it

hasn’t gone into effect yet and I just wondered, you agree that it

is going to take place?

Mr. POLLACK. Well, the drug companies, they like people to know

about it. They’ve let us know.

Mr. BILIRAKIS. Okay, good. Please proceed.

Mr. POLLACK. I guess I would summarize this whole drug discount card effort as much ado about very little. And let me tell you

why I have that summary conclusion. First of all, if you take the

administration’s numbers at face value, which I think is the best

we can do at this juncture, they tell us that they project that 7.4

million people are going to enroll in these discount cards. Another

way of saying that is one out of six Medicare beneficiaries will get

these discount cards, only 18 percent according to the administration’s projections. And what that means is that the remaining five

out of six seniors who are in the Medicare program will not receive

direct relief from this program and they will bear the full brunt of

cost increases that have been going on for each year over the past

decade that I’ll talk about in a moment.

Second, when somebody tells me, irrespective of what the product

is, that I’m going to get a discount, whether it’s a car or a television, I don’t jump up and down right away. I normally ask discount off of what price? Because if the base price keeps on increasing, then surely I may be getting a discount, but I may not be getting any cost relief. And that indeed is a significant problem here

because there is nothing in this regimen that deals with the base

price. We have been looking at the base price for each year over

the past decade. Last year, the base price rose 3.4 times the rate

of inflation. We are about to issue another report that will show

the latest year and we will do that soon and I will tell you that

base price increase is unabated.

And so if nothing is done about the base price, sure, people are

getting a discount, whether it’s 10 percent, 11 percent, 17 percent,

but in terms of what they’re spending, if the base price goes up,

it really doesn’t help with respect to the discount.

Third point. If we were serious about trying to provide some real

relief for the beneficiaries of Medicare, we had choices that we

78

could have made and unfortunately, the Congress rejected those

choices.

Now there was discussion earlier this morning concerning the

Veterans’ Administration versus the discounts. Now in my testimony I took a look at the eight most prescribed drugs for seniors

and we looked at what the prices are in some Districts and we

looked at for you, Mr. Chairman, and for ranking member, so let

me turn to Tampa, Florida so that we could see what really we

could have done here. Lipitor. The lowest price under the discount

card program in your area, Mr. Chairman, is $65. The highest price

under these discount cards is $72. In contrast, the Veterans’ Administration gets $41 and you can get the same drugs in Canada

for $35.

Fosamax. In your community, the lowest price, $57 to $54; highest price, $71. VA gets $43. And Canada, it’s $28. You’ll see, we’ve

listed it for all eight of the top drugs and in no place does it come

close in terms of what the discount cards yield as opposed to what

we could have done if we would have enabled the Medicare program to bargain on behalf of seniors.

Fourth point I guess I’d want to make is that one of the things

we had recommended to CMS was that they explicitly place into

the regulations rules governing the potential of bait and switch.

And here, by that I mean in specific terms each of these card sponsors are saying which drugs are subject to a discount, what the size

of the discount and yet even forgetting changes in the price, they

can switch what drugs are subject to a discount. And now we hear

the administration saying well, we’re going to monitor this, but

they refuse to put that in their regulations so that up front it

would have been said to the discount card sponsors, you can’t engage in these specific practices. We’ve lured people in based on certain drugs being subject to a discount and then they no longer are.

I must say, I feel that Mark McClellan is a wonderful Administrator. I think very highly of the man. I shared the comments you

made at the end of the testimony. So this is not a personal observation. But can you imagine if 100,000 people sign up for a card and

then all o fa sudden that card sponsor perpetrates these bait and

switch practices and it knocks off a whole bunch of drugs that

lured people onto that card. Are you going to tell people, the

100,000 people who have signed up for that card they no longer can

benefit from that card or that they now have to re-enroll? I don’t

think that’s likely to happen and it would have been much better

if the administration would have said up front, these practices

shall not be allowed. Those drugs that you advertise as being subject to a discount must stay as a discount throughout the course

of the year.

Enough has been said about the administrative morass. I will

just tell you in terms of our own efforts with respect to that, when

we heard complaints about people trying to get through on the 1-

800 number, we made calls ourselves. We made over 70 calls. And

what we found is that almost half of those calls you did not speak

to a live person. In a very high percentage you got cutoff, just cutoff. In other instances, we did the prompts, all these different

prompts that take a whole bunch of minutes and after we did all

79

the prompts, we went back to the very first prompt, never speaking

to a live person.

Now I believe that with the increase in the number of people answering the phones, hopefully it will be better. I will say, however,

I want to say something complimentary. Once you get through and

those instances where you did get through people were courteous

and most of the time they answered questions accurately. And so

I think that was—

Mr. BILIRAKIS. Can you summarize, please, sir? I kind of like

what you’re saying right now.

Mr. POLLACK. Selectively. I guess I would conclude, Mr. Chairman, that we’re not telling people don’t sign up for discount cards

and particularly low income people we’re not saying that. Quite the

contrary. We’re telling them to sign up. But if we were truly serious about doing something for America’s seniors to get prices down,

we had alternatives and unfortunately those alternatives were rejected and this is a pale substitute, a pale substitute that only one

out of six seniors will even participate in and even that one out of

six will get a relatively small benefit.

[The prepared statement of Ronald F. Pollack follows:]

PREPARED STATEMENT OF RONALD F. POLLACK, EXECUTIVE DIRECTOR, FAMILIES USA

Mr. Chairman, Members of the Committee: Thank you very much for this opportunity to testify on the Medicare prescription drug discount card program.

DISCOUNT CARDS: MUCH ADO ABOUT VERY LITTLE

The new drug discount card that goes into effect on June 1, 2004 is much ado

about very little. This new card program, which the Department of Health and

Human Services projects will enroll only 7.4 million Medicare beneficiaries—merely

one out of every six people (18 percent) in the program—will be of no consequence

for the vast majority of seniors. Those seniors will continue to face the brunt of everincreasing prices that have risen at multiples of inflation for every year over the

past decade.

Perhaps most important, this drug discount program is an extremely weak substitute for what should have been in the recent legislation—namely, enabling Medicare to bargain for lower prices with the drug companies, similar to what the Veterans’ Administration does for veterans. This alternative would have helped all seniors, not simply the one out of six that receive discount cards. Moreover, for the one

out of six seniors who enroll in the discount card program, it would have provided

considerably larger savings.

Before I describe in greater detail why this discount card program is much ado

about very little, I do want to make clear that we support the transitional assistance

program that provides $600 per year for those under 135 percent of the federal poverty level. This benefit will be particularly useful, especially when it can be combined with state and pharmaceutical assistance programs, and we all must do all

we can to help enroll eligible beneficiaries in this program.

Having said that, we feel that beneficiaries should be warned to approach the program with low expectations, so that they are not disappointed.

We do not know how much discount card prices may increase in coming months,

but as Families USA’s research work has repeatedly shown, brand name drug

prices consistently inflate at approximately three or more times the underlying

rate of inflation. Last year, we found that the cost of the 50 drugs most used

by seniors increased at 3.4 times the rate of inflation in 2002. We will be releasing a new report on the rate of inflation of the most popular brand name drugs

used by seniors soon. Thus a discount card may provide some much-needed relief, but the relief erodes—rapidly—as drug prices keep rising much faster than

inflation.

Many of the companies involved in these discount cards have an inherent conflict

of interest: they are likely to make more money by encouraging the use of more

expensive prescriptions and keeping a portion of the larger absolute dollar discounts and rebates they receive from manufacturers of those more expensive

80

1 Note, this is Social Security income only. The previous paragraph referred to median total

income, thus the different percentages.

drugs. The just-announced Federal Court Order settlement with Merck-Medco

is an example of the kind of anti-consumer practice ‘‘bait and switch’’ that needs

to be guarded against if consumers are to obtain true savings.

The information available on the Medicare website may not be accurate and should

be double-checked. At least one major news report notes major discrepancies between what’s reported on the Internet and what local drugstores are actually

willing to do (see Washington Post story cited below).

A MISSED OPPORTUNITY

In looking at the discount card prices, one is continually reminded of the missed

opportunity: If the United States had the type of cost containment that other nations had, or if the purchasing power of the Department of Veterans Affairs had

been used, huge savings could have been obtained, not only in discount cards, but

for Medicare and Medicaid. These savings would have allowed Congress to provide

a comprehensive benefit that would truly excite Medicare beneficiaries and that

would have helped the states deal with their Medicaid budget crises.

In attachment #1, we have listed the high and low Medicare-endorsed discount

card prices of the 8 most common prescription drugs used by Medicare beneficiaries.

We then listed the VA price and the Canadian Ontario government prices for those

same drugs in late April. We have picked six comparison zip codes corresponding

to the three most senior Majority and Minority Members of this Subcommittee.

The data make it clear that the drug discount cards are a pale benefit compared

to Medicare bargaining or re-importation of drugs from Canada. It shows savings

are possible. And it shows those savings pale compared to the prices available when

a government uses truly effective purchasing power.

NEED TO DO MORE TO CONTROL DRUG PRICES FOR SAKE OF MEDICARE AND TAXPAYERS

The failure of the new law to obtain any meaningful drug cost containment is a

disaster for beneficiaries, Medicare, and taxpayers. Using the CBO’s own data, because of drug inflation, the amount beneficiaries will pay will change as follows:

Benefit

2006, when

program

starts

2013, at

end of CBO

budget

window

Estimated premium ................................................................................................................................. $420 $696

Deductible ................................................................................................................................................ $250 $445

Initial coverage limit where beneficiary pays 25% between deductible and start of ‘‘donut’’ ............ $2,250 $4,000

Donut ....................................................................................................................................................... $2,850 $5,066

Catastrophic threshold starts when your out-of-pocket expense equals ............................................... $3600 $6,400

Families USA believes that a ‘‘donut’’ of $5,066 is ridiculous. Beneficiary disappointment at a $2,850 gap in coverage will turn to anger at the thought of a yearly

$5,066 gap.

If these inflation changes coincided with changes in income, it would not be as

much of a problem. But drug inflation far exceeds seniors’ income gains. Again

using CBO numbers and Census estimates, the following is what a typical senior

at median income and average drug use will experience between 2006 and 2013:

2006 (est.) 2013 (est)

Average drug expense ............................................................................................................................. $3,167 $5,425

What you would pay with those drug expenses (+ premium) ............................................................... $2,087 $3,455

Income ..................................................................................................................................................... $23,708 $28,181

Percent of your income spent on drugs and premiums ..................................................................... 8.8% 12.3%

Because of the failure to obtain true cost containment, despite the expenditure of

$400 or $534 billion over ten years, beneficiaries will still see more and more of

their income consumed in drug expenses.

The recent 2004 Medicare Trustees’ report makes the point even more starkly: the

addition of the prescription drug benefit means that the combined premium/copay/

deductible burden of Medicare Part B in 2010 rises from 16.6% of Social Security 1

income before the addition of Part D to 36% of income after Part D is added. Obviously the new drug benefit saves beneficiaries significant amounts, but the Trustees’

81

2MMA, Sections 801-804

3QMB, SLMB, and QI-1, which pay Part B premiums and, in the case of QMB, deductibles

and copays.

report example shows how burdensome the gaps in the new program will be to those

who live only on Social Security.

The failure to obtain cost containment is a major reason, of course, that the next

Congress is likely to see the new law’s 45% trigger reached 2, and that your Subcommittee will be faced with making major changes in the program just two years

from now. Many of those changes could hurt beneficiaries.

THE NEW LAW IS TOO COMPLEX: THAT’S WHAT WE ARE HEARING FROM ALL OVER THE

NATION FROM BENEFICIARIES

The new law, including the new discount card program, is much too complicated.

That’s what we are hearing from seniors all over the nation. If there were a single

negotiated price, like the VA obtains, that would be simple, understandable, and

popular.

We would like to include for the Record a piece from the Washington Post of May 18, 2004 entitled, ‘‘Pick a Card! #?$!’’ by Lisa Barrett Mann, a younger person who

describes spending nine hours trying to help her 82-year-old mother get the best

card. It is an excellent description, with perhaps one error: the writer says that

‘‘changes aren’t allowed until open season at the end of the year.’’ Actually, according to CMS, changes can occur at any time, both in price and the specific drug covered. Ms. Mann’s article makes a good recommendation at the end:

‘‘We’ll wait a few weeks. There’s no deadline for enrolling and, as far as I can

tell, the savings aren’t going to be so great (if there are any at all) that deferring the decision could cost Mom much . . . So I’ll give Mom’s pharmacy time to

sort out which programs it participates in and then get a list from Medicare.

‘‘In the meantime, maybe Medicare will clear up some of the Web site

glitches. Maybe the discount card programs will work out their customer service

and database issues and update some of those 1997 prices. Maybe the PBMs

will let the pharmacies know which programs they are working with. Maybe

Medicare will spring for a few more phone operators [note: they did!] and cut

back on the TV commercials... ‘‘I figure that, in a few months, helping Mom pick a discount card will be

easy. It should take about an hour.’’

Waiting until the data becomes more available and accurate is good advice, but

for millions of seniors without help, it will still take much more than an hour. Most

seniors are not internet comfortable. And most of all, we need to remember that

about 20 percent of Medicare beneficiaries, about 9 million people, have some form

of cognitive or mental illness. For these people, it is not a joy to shop among 40+

different plans—it is a nightmare—a task so daunting many will not even try.

THE $600 BENEFIT IS IMPORTANT FOR LOW INCOME INDIVIDUALS, BUT MANY WON’T GET

IT BECAUSE OF CONFUSION: BENEFICIARIES IN MEDICARE SAVINGS PROGRAM SHOULD

BE PRESUMPTIVELY ENROLLED.

Not only is the program confusing, when you add it to existing state programs

of assistance, it becomes even more baffling. In an event in Illinois, a member of

Families USA staff started to recommend the $600 card to lower-income seniors, but

was corrected by local experts, who noted that such people should be advised to join

the much better Illinois program. We note recent press reports that the Speaker of

the House of Representatives, in an Illinois town meeting event attended by the

Medicare Administrator, made the same ‘‘join Medicare discount’’ recommendation

without mentioning the better Illinois program, but unfortunately was not corrected.

I cite this just to indicate how terribly complicated the new program is, especially

when it interfaces with local programs.

Historically, it has been very difficult to reach out to lower-income individuals and

enroll them in key means-tested programs of assistance. Despite nearly 15 years of

work enrolling Medicare beneficiaries in the Medicare Savings Programs (MSP),3

only about half the eligibles have enrolled. Add the complexity of the new, temporary 19-month discount card program, and Families USA is very concerned that

CMS will be unable to achieve its goal of enrolling 4.7 million out of a total of 7.2

million eligible low-income beneficiaries.

We hope we are wrong, and that the full 4.7 million and more are enrolled—but

Congress should demand to know what the enrollment figures are early in June.

If the enrollment levels are below CMS’s predictions, it is not too late to act. Individuals who are enrolled in the MSP programs could be presumptively enrolled in

82

4The $600 benefit is not available to those in TRICARE, FEHBP, or who have other health

insurance with any outpatient prescription drug coverage (except a M+C plan or a Medigap policy), but those under 135% of poverty are very, very unlikely to be eligible for or enrolled in

such programs, and this provision should be presumed met.

the discount card program.4 Senators Bingaman and Lincoln have just introduced

legislation (S. 2413) that would provide for such a presumptive enrollment program,

and we urge you to consider such legislation. It is certainly the type of legislation

that could be passed on the suspension calendar—and probably the consent calendar. Enrolling these individuals would free up a tremendous amount of time and

energy for outreach to other eligible individuals.

THE 1-800-MEDICARE NUMBER: CALL 911

The 1-800-Medicare number was overwhelmed in its first two weeks. It is certain

to get better, but the initial experience has been a real turn-off—or one could say,

disconnect. The Washington Post reporter cited above tried to get through seven

times on one day and never did. Families USA decided to try a few calls last week

to judge the accuracy of responses to some fairly simple test questions. We had better luck. On 70 calls, we were ‘‘only’’ disconnected 36 percent of the time, sometimes

on purpose and with the warning ‘‘call back later,’’ and other times abruptly and

without warning. On another 9 percent of calls, we were told to punch various numbers on the phone, and found that after a circuitous route, we were eventually redirected to call 1-800-MEDICARE! There was no way to get to a human. When we

did get through—the longest we were on hold was 17 minutes—I am pleased to report that the answers were 86 percent accurate, and the staff courteous, helpful,

and willing to ‘‘walk the second mile.’’

There are clearly mechanical problems with the 1-800 number and some of its

routing codes. They need to be fixed, ASAP. Unannounced disconnects are infuriating, and must be stopped.

Most importantly, CMS needs to learn from this experience and be better prepared for the fall of 2005, when the entire Medicare population will be trying to

make sense of the new choices. Call volume is likely to be much higher than it is

this May. The choices will, frankly, be much more important for people to understand. We need to do a better job. Disconnects at the 36 percent level are not acceptable.

Congress needs to make sure that CMS has the resources to meet this future,

larger tsunami of calls. The new law provided an extra $1 billion for CMS in FY

2004 and 2005 for administrative start-up costs. This is money available outside the

regular appropriations process. But that extra money runs out on September 30,

2005, 46 days before the new Part D enrollment period begins and three months

before the new law starts. The following chart shows the very difficult budget situation facing CMS. The chart shows total administrative spending. As you can see,

there is an increase of funding pre-FY 2006 largely due to the extra $1 billion, but

then there is a dramatic reduction of half a billion dollars in FY 2006—before the

new law starts! This is a train wreck coming! It will make this May’s telephone and

counseling situation seem efficient.

CMS ADMINISTRATIVE BUDGET ONLY, DRAWN FROM 2004 TRUSTEES REPORT

(numbers in billions of dollars)

Fiscal Year HI SMI Rx D Total

2002 ....................................................................................................................................... 2.5 1.8 N/A 4.3

2003 ....................................................................................................................................... 2.5 2.4 N/A 4.9

2004 ....................................................................................................................................... 2.8 3.0 0.3 6.1

2005 ....................................................................................................................................... 2.8 3.1 0.8 6.7

2006 ....................................................................................................................................... 2.8 2.7 0.7 6.2

2007 ....................................................................................................................................... 2.8 2.8 0.8 6.4

2008 ....................................................................................................................................... 2.8 2.9 0.8 6.5

2009 ....................................................................................................................................... 2.9 3.0 0.8 6.7

2010 ....................................................................................................................................... 2.9 3.1 0.9 6.9

Source: From 2004 Medicare Trustees’ Report, prepared by Families USA

To avoid another rocky 1-800-Medicare start-up to the permanent program, Congress needs to ask tough questions about the resources available to CMS and prevent the huge fall-off in resources on October 1, 2005.

83

MORE RESOURCES NEEDED FOR STATE HEALTH INSURANCE ASSISTANCE PROGRAMS

(SHIPS)

We also urge Congress to provide more money for the State Health Insurance Assistance Programs (SHIPs), the largely volunteer-run, state-based counseling services offered in each of the states. These programs provide one-on-one counseling to

seniors and specialize in small meetings in local neighborhoods to help Medicare

beneficiaries navigate the insurance system. Polling of seniors shows that they like

the type of one-on-one, face-to-face assistance provided by SHIPs. The Internet and

1-800 numbers are not as useful. Providing more money for SHIP computers, training and recruitment would be one of the most effective ways to ensure a smoother

launch of the permanent Medicare drug program.

Prices on 8 drugs commonly used by seniors, 30 day supply

Zip Code: 33618 Tampa, Florida

Drug Quantity VA Canada

CMS-endorsed retail

discount card low

price

CMS-endorsed retail

discount card high

price

Liptor ................................................. 10 mg ................ $41 ..... $35 ............ $65 ..................... $72

Plavix ................................................. 75 mg ................ $100 ... $53 ............ $113 ................... $123

Fosamax ............................................ 70 mg, 4 tabs/

month.

$43 ..... $28 ............ $57-$64* ............ $71

Norvasc .............................................. 5 mg .................. $25 ..... $28 ............ $42 ..................... $48

Celebrex ............................................. 200 mg .............. $63 ..... $28 ............ $77-$84 .............. $88-$178 5

Zocor .................................................. 20 mg ................ $69 ..... $49 ............ $101-$105 .......... $129

Prevacid ............................................. 30 mg ................ $71 ..... $44 ............ $111-$114 .......... $131

Protonix .............................................. 40 mg ................ $27 ..... $42 ............ $86—$89 ........... $104

Price for all 8, in one card (i.e., the

CMS column does not add cumulatively).

$439 ... $307 .......... $657-$691 .......... $765

** Where a range of prices are listed, it means that the price available using that low (or high) cost discount card varies by the amount of that range among different pharmacies within the zip code. So one can pick a ‘‘low’’ card, but one will still need to be careful which drugstore one uses. 5 These $178 high numbers, listed for two cards, may be an error. It is hard to imagine that much difference between drugstores that

have an agreement with the same card company.

Prices on 8 drugs commonly used by seniors, 30 day supply

Zip Code 75087, Rockwall, Texas

Drug Quantity VA Canada

CMS-endorsed retail

discount card low

price

CMS-endorsed retail

discount card high

price

Liptor ................................................. 10 mg ................ $41 ..... $35 ............ $65 ..................... $72

Plavix ................................................. 75 mg ................ $100 ... $53 ............ $106 ................... $124

Fosamax ............................................ 70 mg, 4 tabs/

month.

$43 ..... $28 ............ $61 ..................... $71

Norvasc .............................................. 5 mg .................. $25 ..... $28 ............ $43 ..................... $48

Celebrex ............................................. 200 mg .............. $63 ..... $28 ............ $78 ..................... $88

Zocor .................................................. 20 mg ................ $69 ..... $49 ............ $101 ................... $129

Prevacid ............................................. 30 mg ................ $71 ..... $44 ............ $112 ................... $131

Protonix .............................................. 40 mg ................ $27 ..... $42 ............ $87 ..................... $104

Price for all 8, in one card (i.e., the

CMS column does not add cumulatively).

$439 ... $307 .......... $671 ................... $765

Prices on 8 drugs commonly used by seniors, 30 day supply

Zip Code 49007, Kalamazoo, Michigan

Drug Quantity VA Canada

CMS-endorsed retail

discount card low

price

CMS-endorsed retail

discount card high

price

Liptor ................................................. 10 mg ................ $41 ..... $35 ............ $65 ..................... $65

Plavix ................................................. 75 mg ................ $100 ... $53 ............ $113-$114 * ....... $128

Fosamax ............................................ 70 mg, 4 tabs/

month.

$43 ..... $28 ............ $57-$64 .............. $74

84

Prices on 8 drugs commonly used by seniors, 30 day supply—Continued

Zip Code 49007, Kalamazoo, Michigan

Drug Quantity VA Canada

CMS-endorsed retail

discount card low

price

CMS-endorsed retail

discount card high

price

Norvasc .............................................. 5 mg .................. $25 ..... $28 ............ $43-$44 .............. $49

Celebrex ............................................. 200 mg .............. $63 ..... $28 ............ $77-$84 .............. $89

Zocor .................................................. 20 mg ................ $69 ..... $49 ............ $101-$105 .......... $134

Prevacid ............................................. 30 mg ................ $71 ..... $44 ............ $111-$114 .......... $136

Protonix40 mg ................................... $27 .................... $42 ..... $86-$89 ..... $108.

Price for all 8, in one card (i.e., the

CMS column does not add cumulatively).

$439 ... $307 .......... $657-$691 .......... $792

* Where a range of prices are listed, it means that the price available using that low (or high) cost discount card varies by the amount of

that range among different pharmacies within the zip code. So one can pick a ‘‘low’’ card, but one will still need to be careful which drugstore one uses.

Prices on 8 drugs commonly used by seniors, 30 day supply

Zip Code 44052, Lorain, Ohio

Drug Quantity VA Canada

CMS-endorsed retail

discount card low

price

CMS-endorsed retail

discount card high

price

Liptor ................................................. 10 mg ................ $41 ..... $35 ............ $65 ..................... $72

Plavix ................................................. 75 mg ................ $100 ... $53 ............ $113 ................... $123

Fosamax ............................................ 70 mg, 4 tabs/

month.

$43 ..... $28 ............ $57-$64 * ........... $71

Norvasc .............................................. 5 mg .................. $25 ..... $28 ............ $43 ..................... $48

Celebrex ............................................. 200 mg .............. $63 ..... $28 ............ $77-$84 .............. $93

Zocor .................................................. 20 mg ................ $69 ..... $49 ............ $101-$105 .......... $129

Prevacid ............................................. 30 mg ................ $71 ..... $44 ............ $111-$114 .......... $145

Protonix .............................................. 40 mg ................ $27 ..... $42 ............ $86-$89 .............. $104

Price for all 8, in one card (i.e., the

CMS column does not add cumulatively).

$439 ... $307 .......... $657-$691 .......... $765

* Where a range of prices are listed, it means that the price available using that low (or high) cost discount card varies by the amount of

that range among different pharmacies within the zip code. So one can pick a ‘‘low’’ card, but one will still need to be careful which drugstore one uses.

Prices on 8 drugs commonly used by seniors, 30 day supply

Zip Code: 90048 Los Angeles, California

Drug Quantity VA Canada

CMS-endorsed retail

discount card low

price

CMS-endorsed retail

discount card high

price

Liptor ................................................. 10 mg ................ $41 ..... $35 ............ $65 ..................... $72

Plavix ................................................. 75 mg ................ $100 ... $53 ............ $106 ................... $123

Fosamax ............................................ 70 mg, 4 tabs/

month.

$43 ..... $28 ............ $61 ..................... $71

Norvasc .............................................. 5 mg .................. $25 ..... $28 ............ $43 ..................... $48

Celebrex ............................................. 200 mg .............. $63 ..... $28 ............ $78 ..................... $88

Zocor .................................................. 20 mg ................ $69 ..... $49 ............ $101 ................... $129

Prevacid ............................................. 30 mg ................ $71 ..... $44 ............ $112 ................... $131

Protonix .............................................. 40 mg ................ $27 ..... $42 ............ $86 ..................... $104.33

Price for all 8, in one card (i.e., the

CMS column does not add cumulatively).

$439 ... $307 .......... $667-$679 * ....... $765

* Where a range of prices are listed, it means that the price available using that low (or high) cost discount card varies by the amount of

that range among different pharmacies within the zip code. So one can pick a ‘‘low’’ card, but one will still need to be careful which drugstore one uses.

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Prices on 8 drugs commonly used by seniors, 30 day supply

Zip Code 11241 Brooklyn, New York

Drug Quantity VA Canada

CMS-endorsed retail

discount card low

price

CMS-endorsed retail

discount card high

price

Liptor ................................................. 10 mg ................ $41 ..... $35 ............ $65 ..................... $74

Plavix ................................................. 75 mg ................ $100 ... $53 ............ $113 ................... $127

Fosamax ............................................ 70 mg, 4 tabs/

month.

$43 ..... $28 ............ $63 ..................... $74

Norvasc .............................................. 5 mg .................. $25 ..... $28 ............ $43 ..................... $49

Celebrex ............................................. 200 mg .............. $63 ..... $28 ............ $78 ..................... $89

Zocor .................................................. 20 mg ................ $69 ..... $49 ............ $102 ................... $134

Prevacid ............................................. 30 mg ................ $71 ..... $44 ............ $112 ................... $136

Protonix .............................................. 40 mg ................ $27 ..... $42 ............ $87 ..................... $108

Price for all 8, in one card (i.e., the

CMS column does not add cumulatively).

$439 ... $307 .......... $671-$674 .......... $790

* Where a range of prices are listed, it means that the price available using that low (or high) cost discount card varies by the amount of

that range among different pharmacies within the zip code. So one can pick a ‘‘low’’ card, but one will still need to be careful which drugstore one uses.

Mr. BILIRAKIS. Thank you, sir.

Ms. Grealy.

STATEMENT OF MARY R. GREALY

Ms. GREALY. Good afternoon, Mr. Chairman, and members of the

subcommittee. On behalf of the members of the Healthcare Leadership Council, I want to thank you for inviting me to testify today

and convey to you that HLC’s views on the Medicare prescription

drug discount card program.

I will devote my time today discussing a study that the

Healthcare Leadership Council has commissioned to fully understand the impact of the Medicare discount cards. Let me preface

my remarks though by saying that the members of the Healthcare

Leadership Council, an organization that represents the full spectrum of American health care believes that it is important for

Medicare beneficiaries to have information about the discount card

program. The drug discount card is an extremely important interim

step, one that will provide financial assistance to millions of seniors

who need that helping hand until the full prescription drug benefit

takes effect on January 1, 2006.

How much money can Medicare beneficiaries save on their prescriptions by using the drug discount cards? That is the most relevant and important question on the minds of beneficiaries, particularly the millions who currently have no form of prescription

drug coverage. And it’s a question that the Healthcare Leadership

Council is seeking to answer.

We have commissioned the Lewin Group, a nationally respected

economic analysis firm to take a critical look at all of the discount

cards that have price comparison information on the Medicare

website.

We’ve approached this study in a way to make it relevant to the

every day lives of the Medicare beneficiaries who will be using

those cards. To do that, we have focused on 150 drugs that are

most frequently used by senior citizens. We are looking at the difference between what a cash purchaser would pay for those drugs

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at a retail pharmacy, compared to a buyer using the Medicare discount card.

We are also looking at the impact of the discount card for beneficiaries with chronic health conditions who take multiple medications.

I want to stress that these results are preliminary. we anticipate

releasing a final version of the study next month. I also want to

emphasize that we have taken a very conservative approach to

these estimates.

If anything, I think we have underestimated rather than overestimated the average savings for discount card users. Well, here

is what we have learned about these savings so far. Looking at

these 150 most frequently used drugs, we are finding that the best

available prices on those drugs, using the discount cards represent

a weighted average savings of more than 20 percent in many

states. Specifically, to list a few examples, we are seeing average

savings of 27 percent in Florida; 26 percent in Louisiana; 25 percent in Illinois; and 23 percent in New York.

We are also finding very little geographic disparity in the drug

discounts. The best price offered for a single drug rarely varies

across markets. For example, the lowest available price for a bestselling brand new hypertension drug varies by less than $1 across

20 zip codes.

We’re very pleased to see that the discount card users will receive significant savings regardless of the State or region in which

they live.

Finally, we have found that there are considerable savings for

beneficiaries who have chronic disease conditions and are using

multiple drugs. These savings are even greater for low income

beneficiaries who use the $600 low income credit available to them.

Let me cite one example. A beneficiary taking the most common

combination of drugs for diabetes would spend on average almost

$3,100 during the year if paying retail prices. The Medicare discount card that provides the best price on those drugs will save the

individual over $753, a 24 percent savings. With the low income

credit included, those savings increase to $1,353 or a 44 percent

savings.

Low income seniors should also be aware that several of the

major pharmaceutical companies have already announced that they

will make drugs available at minimal or no cost to those beneficiaries who exhaust their $600 Transitional Assistance before the

year is out.

Mr. Chairman, because our time is limited today, I won’t go into

more detail about this study, but we’ve provided information and

would be happy to answer questions about it. But let me just add

that the Healthcare Leadership Council will be continuing its effort

to work with seniors like Mr. Baumhofer that we have here today,

throughout the country to provide information and assistance on

this program.

We look forward to working with this committee and to continue

ensuring that Medicare beneficiaries receive the very best possible

health care.

Thank you.

[The prepared statement of Mary R. Grealy follows:]

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PREPARED STATEMENT OF MARY R. GREALY, PRESIDENT, HEALTHCARE LEADERSHIP

COUNCIL

Good morning Chairman Bilirakis, Congressman Brown, and members of the subcommittee. Thank you for your invitation to appear here today to convey the views

of the Healthcare Leadership Council on the Medicare prescription drug discount

card program. I want to commend this committee for conducting this hearing and,

in so doing, enabling the nation’s seniors to learn more about this extremely important initiative. Along the same lines, I want to thank the committee for your leadership over the past several years in building a stronger Medicare program.

The Healthcare Leadership Council (HLC) represents providers and innovators

from all sectors of American health care. Our membership is comprised of chief executives of leading companies and institutions from across the health spectrum.

Since its inception, the HLC has been dedicated to advancing a health care system that provides affordable, high-quality care in a patient-centered environment.

We are committed to accessible medicines, technologies and treatments that can

help people lead longer, more active and fulfilling lives. Consistent with this philosophy, we have long supported improvements to the Medicare program to give beneficiaries greater access to the high-quality preventive care that can bring greater

health and enrichment for the disabled and the elderly.

The Medicare prescription drug discount card program is the first step—an important interim step—toward that goal. The Healthcare Leadership Council is involved

in helping seniors to better understand the discount cards and the application process, and we have also undertaken research to fully comprehend what the discount

cards will mean to Medicare beneficiaries in terms of cost savings. As part of my

testimony, I will be very pleased to share the preliminary results of that research

with you today.

BACKGROUND

When Congress passed, and President Bush signed into law, the Medicare Modernization Act of 2003, it represented a major advancement on behalf of millions of

older and disabled Americans. With this legislation, Medicare is beginning to make

a critical transformation into a 21st century health care program that makes prescription drugs, preventive care and diagnostic care more accessible to its beneficiaries.

In 2006, Medicare will, for the first time, offer a prescription drug benefit, a benefit that will substantially reduce beneficiaries’ out-of-pocket costs. Realizing,

though, that it will take time to put this benefit into effect, and that Medicare beneficiaries should begin to reap savings immediately, Congress wisely created the discount drug card program. This is an important interim step intended to give beneficiaries assistance right now, lasting until the full prescription drug benefit takes

effect on January 1, 2006.

The structure of the discount card program enables participating seniors to have

the power of consumer choice and the fruits of competition. With 73 vendors involved in the discount card program, beneficiaries have the opportunity to select the

card that gives them the greatest savings on the specific prescription drugs they are

using. And with the card vendors able to see, on the Centers for Medicare and Medicaid Services website, the discounted prices their competitors are offering, we have

an environment in which market competition can bring lower prices and greater

value to Medicare beneficiaries.

Seniors and disabled Americans are currently applying for their drug discount

cards. Some media attention has been focused on the difficulties some seniors are

having in negotiating the CMS website to gather comparative data on cards and

prices. We support Administrator McClellan’s efforts to correct problems on the site

and to make it as user-friendly as possible. It should be pointed out, though, that

individuals who are having difficulty with the CMS website or are simply not comfortable with the Internet can and should call 1-800-MEDICARE to receive personalized assistance with their discount drug card inquiries. I note that CMS has recently added even more customer service representatives to their 800 line, which

should make it easier for callers to get through.

As well, there are numerous public and private organizations, such as State

Health Insurance Assistance Programs, that are working with seniors to provide

guidance and to ensure that they are able to register for the right discount card.

In fact, our own organization, the Healthcare Leadership Council, is working with

senior centers throughout the country to provide information about the discount

cards, and we’re making a special effort to reach those low-income seniors who qualify for the $600 annual subsidy in addition to their drug discount cards.

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THE LEWIN GROUP STUDY ON DISCOUNT CARD SAVINGS

How much money can Medicare beneficiaries save on their prescriptions by using

the drug discount cards? That is a question the Healthcare Leadership Council is

seeking to answer and, in so doing, give seniors a comprehensive sense of how the

discount cards can affect their personal finances and their health care.

To answer this question, we have worked with The Lewin Group, a nationallyrespected economic analysis firm that specializes in health and human services research and consulting. In structuring the Lewin study, we wanted to make it as relevant as possible to the everyday lives of the Medicare beneficiaries who will be

using the discount cards. So, our analysis is focused upon 150 of the drugs that are

most frequently used by senior citizens. We looked at the difference between what

a cash purchaser would pay for those drugs and what someone would pay when

using the Medicare discount card. We also took a look at the impact of the drug

card for beneficiaries with chronic health conditions, using multiple medications. In

this case, Lewin analyzed the total cost for the drug regimen for beneficiaries using

the discount card and also for those using the discount card plus the $600 low-income credit.

Before I discuss what we have learned, thus far, from this study, I would like to

make a couple of prefacing remarks. First, I would note that our retail price data

is based on a national database of prescription drug utilization data compiled by

Verispan. Verispan is considered one of the 12 months of price data, running

through March of this year, to establish the average retail price for a customer without any insurance or discounts. I want to emphasize that, in conducting this research, we have chosen to err on the conservative side. If anything, this study

underestimates, rather than overestimates, the average savings for discount card

users. Our estimates are for people who do not currently benefit from an existing

discount card or state pharmaceutical assistance program.

Second, I want to stress that the results I am sharing with you today are preliminary in nature. Our study is ongoing. And, in fact, just as Dr. McClellan has noted

publicly that the discount card prices are moving downward as a result of price

transparency and competition, our finalized study, to be released next month, may

show even greater average savings than we are witnessing thus far.

With those points in mind, let me turn to the early findings of the Lewin study.

These findings, by the way, can be found on the Healthcare Leadership Council

website, www.hlc.org. Answering the question regarding how much a beneficiary

can save overall, we worked from the premise that beneficiaries are likely to choose

a discount card based upon the best savings for the drugs they take today. Looking

at the 150 most frequently used drugs, we are finding that the best available prices

on those drugs represent a weighted average savings of more than 20 percent in

many states. (See attachment, Table 1)

Let’s look at some specific examples. We’re finding a weighted average savings of

27 percent in Florida, 26 percent in Louisiana, 25 percent in Illinois, 23 percent in

New York, 21 percent in California and 19 percent in Michigan. We believe these

estimates of savings are representative and that many beneficiaries will receive savings of similar magnitude.

In fact, it should also be pointed out that we are seeing very little in the way of

geographic disparities in the discounted prices. The best price offered for a single

drug rarely varies across markets. For example, the lowest available price for a

best-selling brand name hypertension drug varies by less than one dollar across 20

zip codes and was offered by the same card sponsor in 18 of the 20 zip codes. This

is a very positive finding. We’re seeing that, regardless of the state or region in

which a beneficiary lives, they will still receive the best price available nationally

from the discount drug cards. (See attachment, Figure 1)

We have found, as well, that the savings are considerable for beneficiaries who

have chronic disease conditions and are utilizing multiple drugs. Those savings are

then significantly increased in cases in which the beneficiary is also using the $600

low-income credit for prescription purchases.

Again, allow me to provide some examples from our findings. A senior citizen taking the most frequently used combination of drugs for hypertension—a calcium

blocker, an ACE inhibitor and thiazides—would pay an average retail price of

$956.78 over the course of a year. With the drug card, that beneficiary will save

$243.50, a savings of 25 percent. Add in the low-income credit, and the total savings

increases to $843.50, or 88 percent off of the retail price.

In another hypothetical example, a beneficiary taking the most common combination of drugs for diabetes would spend $3,099.23 during the year if paying retail

prices. With the discount card that provides the best price on those drugs, that person will save $753.59—a 24 percent savings. With the low income credit included,

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the savings increase to $1,353.59, a 44 percent total discount from the retail price.

Savings for each of the drug regimens identified in our study were estimated by collecting prices for the specific prescribed drugs using a single card at a single pharmacy. (See attachment, Table 3)

On the subject of low-income seniors, there is another fact that needs to be discussed that doesn’t receive the visibility that it should. Several of the major pharmaceutical companies have already announced that they will make drugs available

at minimal or no cost to those beneficiaries who exhaust their $600 transitional assistance before the year is out. That is in addition to the many company-sponsored

patient assistance programs that are already providing medicines at no cost to people of limited means.

As I mentioned earlier, Mr. Chairman, this study is a work in progress. We are

going to continue to monitor and analyze the prices that are available on the CMS

website with the intent of producing a final report next month that gives a complete, accurate and comprehensive view of the savings Medicare beneficiaries can

experience by using the Medicare drug discount cards.

And, in the meantime, the Healthcare Leadership Council will be continuing its

efforts, working with seniors throughout the country to provide information and assistance so that all of those who can benefit from this program are able to do so.

We believe strongly that the Medicare drug discount card program is an important interim step, prior to the implementation of the prescription drug benefit in

2006. We believe, as well, that private organizations like ours and public institutions and officials should be working together to educate seniors on this interim assistance, to urge them to contact CMS for comparative information on the discount

cards, and to encourage them to apply for a financial benefit that can bring considerable relief to those who need it the most. Thank you for your leadership on this

issue, and we look forward to working with you to continue to improve America’s

Medicare program.

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Mr. BILIRAKIS. Thank you very much, Ms. Grealy.

Mr. Hayes.

STATEMENT OF ROBERT M. HAYES

Mr. HAYES. Thank you, Mr. Chairman, and committee members.

Joining me this afternoon is Gene Smith. Ms. Smith is a retired

school teacher from Charlottesville, Virginia and she works

throughout the Commonwealth of Virginia on behalf of people with

Medicare who have been struggling to find ways to pay for their

prescription drugs. Ms. Smith is a member of the Medical Rights

Center Consumer Action Board and she, among others, filters information into our policy work.

I’d like Ms. Smith to just explain briefly some of her efforts on

behalf of folks in Virginia in recent days.

Mr. BILIRAKIS. Within your 5 minutes’ period, Ms. Smith can do

so. Go ahead, please proceed.

Ms. SMITH. Thank you. I’m an unpaid volunteer and I’m trying

to help a neighbor who is a retired broadcaster. He has severe arthritis, hemochromatosis and other health problems and I tried to

help him by calling 1-800-MEDICARE because he has hundreds of

dollars in prescription drug costs and he’s in severe pain without

those drugs.

So I called 1-800-MEDICARE and after a few attempts on a day

that was recommended to me, I got through to a human voice. Unfortunately, the voice, the woman said that she could not help me

because not only did I not know his monthly gross income, but I

did not know his total financial assets and I needed to know his

total financial assets with exception of a car, home and burial plot.

Mr. BILIRAKIS. You know that the asset test does not apply. Go

ahead.

Ms. SMITH. That’s what she told.

Mr. BILIRAKIS. That’s what she told you. Yes, I understand.

Ms. SMITH. So she said she couldn’t help me. This week, early

this week I went to a statewide video conference for training which

was sponsored by the Department of Health in Virginia and the

people who were training were members of CMS. We had the

PDAP internet program and we had another slide presentation program and afterwards people who were there, social service people,

substance abuse people, community health people asked questions

and they couldn’t get answers. The answers were always ‘‘we don’t

know, we will get back to you, just fill out the form and ask your

question.’’ So I left very frustrated and couldn’t help my friend and

I can’t help anybody in my community because I can’t get the answers.

Mr. HAYES. Let me say that we at the Medical Rights Center

have been feeding this information into the folks at CMS. Dr.

McClellan mentioned this morning that he was getting that and we

have found receptivity, whether or not any human enterprise will

be able to untangle these problems in the foreseeable future remains something for the committee to oversee.

Mr. Chairman, let me just take a couple of minutes to give some

perspective from the trenches, in a sense, that we work in. We are

as was discussed this morning, folks who are in the arena with

people with Medicare. We’ve got a lot of blood, a lot of sweat and

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a lot of tears these days in our office. We are striving mightily to

try to help people work through the opportunities or the challenges

that this discount program is presenting.

No. 1, Mr. Chairman, it’s no exaggeration to say that the men

and women who turn to us for help are indeed in a state of high

anxiety. They’re confused. They’re angry. They’re perplexed.

No. 2, and I don’t think this needs to be seen as a partisan critique, it is no exaggeration to say that people with Medicare, most

people with Medicare will receive little, if any benefit, from the discount cards.

But No. 3, there’s also no exaggeration to say that some people,

largely those without any drug coverage and unaware of existing

discounts will be able to afford some medicine thanks to the Medicare discount card. And let me underscore, that is too important a

point to lose. Because we do come today, Mr. Chairman, as critics

of what is, in many ways, a tragically wasteful program, yet people

will have better health, better access to medication by enrolling

into this discount card and we consider it our responsibility day in

and day out to help people enroll in the program and further to

push the administration to make enrollment as feasible as possible.

So how can that be done? First, websites, voice automated phone

systems will not be more than a small piece of the solution. Two

well known facts: one in five people with Medicare has internet access. Sixty-two percent of people with Medicare, according to a recent poll, were unaware that there is a discount card out there.

The angry, confused people are really a minority. The silent majority are unaware of the program.

We think the most way to assist people access, what is indeed,

we all agree the most useful part of the benefit, the Transitional

Assistance benefit, is to require automatic enrollment of anyone

who can establish eligibility through some existing program, principally the Medicare Savings Programs, Medicare Buy-In programs.

Now we’ve heard from folks in the administration that this kind

of auto-enrollment would undermine the voluntary nature of the

drug benefit. Come on. Neither the White House, nor the Internal

Revenue Service requires Americans to jump through hoops two

summers ago to receive tax refunds. They were just mailed. People

with Medicare, eligible for the $600 Transitional Assistance should

be treated similarly.

I was happy to hear this morning, Mr. Ferguson of New Jersey,

talk with praise about the auto-enrollment of people from his State

who are enrolled in a State pharmaceutical assistance program. I

think this is one area where people can come together from both

sides of the aisle to help both access the Transitional Assistance

which across the board we agree is a good thing.

[The prepared statement of Robert M. Hayes follows:]

PREPARED STATEMENT OF ROBERT M. HAYES, PRESIDENT, MEDICARE RIGHTS CENTER

Good afternoon, Mr. Chairman, Committee members. My name is Robert M.

Hayes, and I am the President of the Medicare Rights Center. Joining me is Ms.

Gene Smith, a retired school teacher from Charlottesville, Virginia. Mrs. Smith

works throughout the Commonwealth of Virginia on behalf of people with Medicare

struggling to find a way to pay for the medicines their doctors prescribe. She is a

member of our Consumer Action Board, and filters her day to day experiences into

MRC’s policy work.

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Without doubt, the greatest and gravest unmet need of older and disabled Americans is the unavailability of affordable prescription medicine. From the trenches in

which we work, Mr. Chairman, the unaffordability of prescription medicine is a national emergency. It is within that reality that we approach the Medicare discount

card program, and it is the faces of men and women who cannot afford needed medicine that we bring to you.

The Medicare Rights Center

The Medicare Rights Center (‘‘MRC’’) is the largest independent source of Medicare information and assistance in the United States. Founded in 1989, MRC helps

older adults and people with disabilities get good affordable health care. Day in and

day out we work to assist people with Medicare access needed health care. Tens of

thousands of callers use our help-lines annually, and we reach out to assist people

with Medicare enroll in programs that can assist them.

The Medicare Rights Center is a not-for-profit consumer service organization, with

offices in New York, Washington and Baltimore. It is supported by foundation

grants, individual donations and contracts with both the public and private sectors.

We are consumer driven and independent. We are not supported by the pharmaceutical industry, drug companies, insurance companies or any other special interest

group.

Through national and state telephone hotlines, casework and both professional

and public education programs, MRC provides direct assistance to people with Medicare from coast to coast. By way of example, MRC currently is providing, in partnership with the American Society on Aging, a series of web-based tele-trainings on the

Medicare discount cards to social workers and other professionals across the country. You can access that training at www.asaging.org/medicare.

We are also bringing to counselors and consumers across the country Medicare

Interactive, a web-based counseling tool that assists people with Medicare access the

health care they need. Invitation: every Congressional district office that requests

it will be provided a password to access Medicare Interactive to assist constituents

with Medicare problems or questions.

MRC also gathers data on the health care needs of the elderly and disabled Americans that we serve. We share that data with researchers, policy makers and the

media. Just one of MRC’s services, its New York State Health Insurance Assistance

Program (SHIP), offers counseling support to one out of every 14 Medicare recipients in the nation. Each year, the Medicare Rights Center receives some 70,000

calls for assistance from people with Medicare. By far, the greatest numbers of callers are seeking help in finding ways to pay for medicines that their doctors have

prescribed.

For many, many years this Committee, this Congress, our nation have been

numbed by the overwhelming data that has documented the human hardship, the

needless pain, the lost lives caused by the unaffordability of prescription medicine.

I cannot shake from my memory the elderly woman who tearfully told me that she

lies to her husband whenever her doctor gives her a prescription. If she told him

about the prescription, she said, her husband would insist that she fill it. She wants

him to keep taking his heart medicine, and she knows they could not afford another

prescription. That is an obscenity in America in the 21st Century, and I know that

is why we are here today.

Ms. Smith faces these painful images routinely in her work in Virginia.

The most typical problem she reports is the question: ‘‘How can I afford my prescription drugs?’’ Heartened by the news that Medicare would be covering prescription drugs, many people turn to Ms. Smith for advice. As she puts it, ‘‘I have kept

my ears to the ground to stay informed so that I could be of help to others.’’

Like many other people of good will, Ms. Smith had done all she could to learn

more about the Medicare-approved drug discount cards. At a meeting earlier this

week sponsored by the Virginia Department of Health, representatives of the Centers for Medicaid and Medicare Services came to train counselors on the new cards.

Ms. Smith can report to you her own feelings: she left the meeting feeling confused,

frustrated and angry—the experts were unable to answer many questions that Ms.

Smith and her colleagues raised. The CMS representatives asked the counselors to

write down questions, saying they would get back with answers.

Ms. Smith asks the obvious: How can she explain this to one of her neighbors who

holds out hope that she can help him at last secure affordable drugs. He is a retired

broadcaster, has no drug coverage and suffers from severe arthritis. His medications

cost hundreds of dollars a month but without them he would live in constant pain.

Here’s what Ms. Smith reported to me:

‘‘To try and help him find a Medicare-approved drug discount card, I called 1-800-

MEDICARE. After a number of attempts—including on a day that the recording recVerDate 11-MAY-2000 11:03 Jan 07, 2005 Jkt 000000 PO 00000 Frm 00103 Fmt 6633 Sfmt 6621 93975.TXT HCOM1 PsN: HCOM1
100

ommended I call—I finally got through. It was a shock to hear the representative

say she could not help me, because I did not know my neighbor’s monthly income

or have any information about his assets. I explained the one thing I did know was

that he was not eligible for a card that came with low-income assistance, so I could

not understand why this information was necessary. Additionally, I didn’t feel comfortable asking my neighbor about this. The customer representative said that there

was absolutely nothing she could do to help me until I had all of his financial information. She suggested I get the information and call again. Despite my efforts to

arm myself with information about the cards at a CMS training program and my

attempts to get help from 1-800-MEDICARE, I now feel even more frustrated and

less equipped to assist people with Medicare who knock on my door because they

need help to pay for their prescription drugs.’’

I will take just a couple minutes to outline what consumers are experiencing in

the wake of the Medicare discount card roll out.

One, it is no exaggeration to say that the men and women who turn to us for help

are in a state of high anxiety, feeling both confused and angry.

Two, it is no exaggeration to say that most people with Medicare will receive little

if any benefit from the Medicare discount card program.

Three, it is no exaggeration to say that some people—largely those without any

drug coverage and unaware of existing discounts—will be able to afford some medicine thanks to the Medicare discount program. This is far too important a point to

lose.

We are indeed critics of this tragically wasteful program. Yet some people will

have improved health and a better life if they enroll in the discount program, especially transitional assistance. We consider it our responsibility to help enroll these

people, and to push this Administration into making enrollment of them as feasible

as possible.

How can that be done?

First, recognize that web sites and voice automated phone systems are—even if

they worked—a sliver of a solution. Two well known points: one in five people with

Medicare currently have internet access. More basic: the most recent Kaiser Family

Foundation poll showed that 62 percent of older Americans did not even know that

Medicare discount drug cards would be available. This indeed is the silent majority—the angry, confused people are among the best informed.

The most useful step to assist people access the $1200 transitional benefit—as it

is now designed—is to require automatic enrollment of anyone who has established

eligibility through some existing program, principally the Medicare Savings or Medicare buy-in programs. We have heard from some in the Administration that autoenrollment would undermine the voluntary nature of the drug benefit. Come on.

Neither the White House nor the Administration forced Americans to jump through

hoops to claim their tax refunds two summers ago. It was just mailed to you. People

with Medicare eligible for the $600 transitional assistance should be treated similarly.

I won’t speak about the difficulties of the CMS web site or the 800-MEDICARE

phone line now; we have provided CMS with a good deal of feedback since late last

month. We recognize that CMS is trying, but it is also true that not just consumers,

but CMS as well, has been dealt a cruel hand by the structure of the discount card

program. At the end of the day, a reasonably informed choice for most people with

Medicare will be impossible. Congress should not allow the spending of millions of

tax dollars in futile attempts to explain nuanced choices involving scores of plans

offering hundreds of medical products and services. Rather than providing multiple

choices with scant benefits, provide a few well vetted options that provide meaningful benefit. The structure of the discount program, and we expect the 2006 benefit

as currently designed, does not work and no magic by a CMS webmaster can change

that.

Scores of choices of discount cards allow no real choice. The chaos and pain of this

crazed market should send a plain lesson to the next Congress on one three-word

remedy for the 2006 drug benefit: simplify, simplify, simplify.

And at the end of the day, the obligation to drive the prices of prescription drugs

down remains the great lost opportunity of the 2003 Medicare legislation. The sound

and fury of the discount cards, and of the 2006 benefit, cannot obscure that.

The discount cards will do some people some important good, but the discount

cards are leaving the overwhelming majority of people with Medicare without help

and angry. Look ahead, use the government’s market power to drive down drug

prices for all Americans, and then create a benefit with three words in mind: simplify, simplify, simplify.

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Mr. BILIRAKIS. Thank you, Mr. Hayes. If only we would stop

sniping at each other and almost expressing hate at times toward

one another we could probably accomplish a heck of a lot more

than we do, but unfortunately that’s the nature of the beast, I

guess. The Founders, I suppose, I hate to keep saying it, the

Founders, I suppose, intended it this way. I’d like to think they did

not intend it to be with the animosity that we now have.

Mr. STUPAK. Will the chairman yield on that point?

Mr. BILIRAKIS. I don’t have time, but go ahead.

Mr. STUPAK. We don’t mean to snipe, we just want to be included

in the discussions and help draft the legislation. We were totally

excluded and never even offered a chance to offer an amendment.

You’re sort of excluding us. We don’t mean to snipe. We just want

to be part of the process. We represent 49 percent of the country.

Mr. BILIRAKIS. Mr. Baumhofer, Mr. Walden from your State and

Mr. Wu from your State both wanted to be here to introduce you

and I guess because of the delays in the votes that we had and

what not, we got all mixed up. If they walk in, we’ll give them an

opportunity to say a thing or two.

In the meantime, please proceed.

STATEMENT OF STAN BAUMHOFER

Mr. BAUMHOFER. As you’ve mentioned to the committee, my

name is Stan Baumhofer. I live in Portland, Oregon where I’ve

lived for the last 55 years. I feel a little unique here today because

I may be one of the few or maybe the only one in the room that’s

going to benefit from this program, a real user of the discount card.

You may wonder why did a retiree, 75 years old, come all the

way across the country here to appear before you. The reason is

very simple. I came here to thank you for helping save my life. My

written testimony explains that I have a friendship in our local

Toastmasters Club and his wife is a volunteer that helps senior

citizens. She encouraged me to pay attention to the mailings I was

getting from Social Security and to inquire about the discount card.

She even made some estimates and said it looks like you should

really inquire, Stan.

Well, I called the 800 number and in less than 10 minutes I was

talking to a very pleasant, knowledgeable lady. She to my surprise,

calculated the benefits to the medications that I am using. She

clarified my eligibility. And the most surprising thing to me was

that she made comparisons with five drug stores that are within

walking distance of my apartment. It was local information, two of

which I had been buying drugs from already.

You can also see from my written testimony that I live only on

my Social Security. This amounts to just a little over $16,000 a

year. My daily medications cost over $400 a month. And with the

use of this card I will be reducing that cost by $150, a little over

35 percent of my medication costs. Now my health story is also

quite simple. I have enjoyed good health all of my life until a year

ago. I required a stent implant for a clogged artery. My cardiologist

prescribed five medications that I take daily to cover the body’s reaction to this stent and to keep my blood flowing properly. So naturally, when I heard of this Medicare discount card program, I was

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one of the, maybe one of the 400,000 that the Doctor alluded to this

morning that called.

Now not only will it help me, but it’s going to help many people

who are applying for this discount card. I live in an apartment

building of over 250 senior citizens and many of them are low income and will benefit from the $600 credit which I will not be eligible for. I also volunteer about 20 hours a week at a hospital and

meet many people in the predicament of having prescriptions prescribed for them and they’re unable to pay for them.

Well, I’m here to testify that Congress did a very, very good

thing for senior citizens and I congratulate you.

My last point, I think, would be to try to dismiss a couple of comments that had been made earlier concerning the negative side of

this program. Now it is completely untrue in my experience and

from others that I’ve talked to that it’s difficult to get through or

to get a calculation made. And when there’s a savings to me of over

a third of my drug costs, that’s a Godsend to me. You referred that

it may not be a panacea this morning, but to me, it certainly is

close to that.

And the matter of choices. Shopping is recreation for senior citizens. It has to be, not only for recreation, but for survival in many

cases. So we enjoy the fact that there are recreations and it gives

us a chance to do some shopping. So Mr. Chairman, you and your

colleagues have done a great service to seniors and I for one am

here to say thank you in helping me to avoid ever having to take

this nitroglycerin that I carry with me constantly. Thank you.

[The prepared statement of Stan Baumhofer follows:]

PREPARED STATEMENT OF STAN BAUMHOFER

Mr. Chairman and members of the committee, my name is Stan Baumhofer. I live

in Portland, Oregon, and I appreciate you making the time for me to say a few

words this morning about the new Medicare discount drug cards.

I should probably begin by telling you what brings me here to tell my story. I’m

involved in the Toastmasters organization in Portland, and I got to know someone

in my local chapter who is involved in helping senior citizens understand how these

discount drug cards work and how to apply for them.

Well, I’m a senior citizen, 75 years young. I live in subsidized housing in Portland

and make do on my fixed Social Security income of $16,000 per year. I was eager

to pick her brain and find out if this discount card program could make a difference

in my life.

To cut right to the chase, this card is going to mean a lot to me in terms of helping pay for my prescriptions. So, I volunteered to come to Washington and tell my

story in the hope that other seniors on Medicare will hear what I have to say and

go take advantage of this program themselves.

My story is this. I received a stent implant last June to alleviate a clogged artery.

In order to offset my body’s reaction to the stent, and to keep my blood flowing, my

cardiologist has me on four prescription medications. Once each day, I take 20 milligrams of Lipitor, 30 milligrams of Lisinipril, 75 milligrams of Plavix and 50 milligrams of Toprol. So, naturally, when I heard about this Medicare discount program,

I was ready to be one of the first in line to see if it would work for me.

I called the Medicare 800 number, 1-800-MEDICARE, and I had the pleasure of

speaking with someone on the other end of the line who was very pleasant, very

knowledgeable and very helpful. She took down the information about where I live

and what types of prescription drugs I’m taking. I could hear her punching the information into her computer as we talked. Not long after I finished giving her my

information, she told me which discount card would work best for me and how much

money I would be able to save on my prescriptions.

Well, let me tell you, for someone who has lived a frugal life and who does not

have much in the way of excess funds, this came as very welcome news.

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The drugs that have been costing me $403.31 each month will now cost $250.60.

monthly. That’s a more than 30 percent decrease in my monthly medicine bill. My

savings will add up to over $1,750 for the year. Maybe, to some people, that amount

of money doesn’t seem like a lot, but it means a lot to me and also to many of my

friends in Portland who are also on fixed incomes and also finding out that these

cards are going to save them money at the pharmacy counter.

Let me make another point, Mr. Chairman. A number of people I know are not only going to apply for the discount drug card, but they also qualify for the $600

credit for low-income seniors. With the discount card and that $600, they are going

to be able to buy their medicines without having to make difficult sacrifices in other

parts of their lives. Congress did the right thing in passing this law, and you should

all be proud of how you’ve helped people.

I want to say one last thing before I finish. You know, I read the newspapers and

I see some people picking this discount card program to pieces. They say it’s too

complicated, or that it doesn’t offer enough help. I have to shake my head at these

criticisms, because my experience, and the experiences of people I know, is completely different. It’s easy to get information over the Medicare 800 number. With

the discount card, I’m going to be paying less for my prescriptions in June than I

am today—quite a bit less, for that matter. So, all I can say is, what’s not to like?

Mr. Chairman, you and your colleagues did a good thing for seniors in passing

this law, and this is one senior who is pleased to be here to say thank you.

Mr. BILIRAKIS. Thank you very much. First, let me commend Ms.

Smith, Mr. Baumhofer and the volunteer that Mr. Hayes or somebody referred to earlier and all the volunteers out there who take

time. Mr. Baumhofer, you’re not exactly in the best of shape and

yet here you are donating 20 hours of your week volunteering to

help others and I think that’s just a terrific thing. We probably

would have more of that were it not for the fact that we’ve all gotten accustomed to sort of looking to government or to others for

what we need.

The bait and switch, Mr. Pollack. You have heard me refer to

that a couple of times before you even testified. I think we all feel

very strongly about that and hopefully we’re going to fulfill our obligation as far as following up on oversight and what not to keep

that sort of thing from happening. The Doctor did refer to the fact

that there are established rules and established punishments and

what not. He couldn’t go into any details regarding the workings

of the entire process which would include, of course, the bait and

switch. So we feel very strongly about it, about as much as you do.

Mr. POLLACK. Mr. Chairman, I just want to say that there are

regulations concerning changes in prices. They’re not regulations

about changing what drugs are subject to a discount. So to the extent that you are—you’re going to focus on this issue, I would urge

that you focus on both facets.

Mr. BILIRAKIS. Basically, what you’ve said, what others have

said, in terms of the discount card program being complex, God

knows it is. Is there confusion there? Certainly there is.

Now I referred to an article which we put into the record, the

Washington Post article dated August 1966, right after the Medicare program was put into effect. And it talked about the same

things. It talked about the complexities. It talked about the confusion. I said to Mr. Brown earlier that when my Dad, God rest his

soul, passed away in the mid-1980’s and I tried to help my mom

with the paperwork and things of that nature, I threw up my

hands in disgust saying it was just too complex. And I guess we

gave it to a professional or whatever to try to do whatever they

could. So we’re still talking about complexities and maybe even

confusions in the program.

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But certainly and who knows, going back at that time what the

rhetoric was. There were Members of Congress who were against

it. I was not in Congress at the time, but I was very supportive of

the program. And if we had given up or if they had given up at

that time because there were so many nay sayers out there and

said it’s confusing and it’s complex and will never work and that

sort of thing. Mr. Buyer put it pretty darn well, we certainly would

not have Medicaid as we know it today and we’ve all acknowledged

the fact that it’s a Godsend of a program.

So there we are and something was done. Something was accomplished. Is it perfect? Is it a panacea. Mr. Baumhofer says it was

in his eyes. I think it probably could have been better. There are

a lot of glitches. There are a lot of mistakes. As time goes on, hopefully, we’re going to be able to improve upon those. But we had a

group of people here who took a lot of courage to basically say hey,

it’s time to quick talking about and to try to do something about

it.

The discount card program came in late in the game. It was not

part, as was stated earlier, part of the administration’s process. It

came later in the game as a transitional kind of a thing. Could it

have been better? I suppose so.

But it is the law and I think what we are trying to do here today

is to help our constituents out there understand that it does exist

and it’s going to be helpful to an awful lot of people and we should

be encouraged. I’m very pleased to hear Mr. Pollack say and Mr.

Hayes and others say and Mr. Brown said it probably too, he said

he was encouraging people to take advantage of the card as many

of them would be able to get some advantage, good advantage out

of it. So that’s really where we are. There are a series of questions

here. I’m not going to go into them in the interest of time. You all

have been very patient and waited for an awfully long time for

your time, your turn to come up.

Mr. POLLACK. Mr. Chairman, when you recounted the history

going back to 1965 and 1966—

Mr. BILIRAKIS. I was not here then, but go ahead.

Mr. POLLACK. You were in elementary school.

Mr. BILIRAKIS. Go ahead.

Mr. POLLACK. One of the things that we’ve learned, I think in examining the history of the Medicare program is that even when

changes get made, they get changed again and they get modified

and they get perfected. And I suggest to you we’re going to be doing

that again with this legislation. I don’t believe——

Mr. BILIRAKIS. I think you’re right.

Mr. POLLACK. I don’t think that this Congress, I don’t believe

that ultimately whoever is in the White House, is going to stand

for the enormous costs of this program that are going to be borne

(a) by seniors and (b) by the taxpayers. And I suggest that what

happened earlier with the Medicare program, with respect to in-patient care and out-patient care, where the political price to pay in

order to get those benefits included was a lack of meaningful cost

containment. That ultimately got corrected. And I suggest to you

that we’re going to have to do that with respect to prescription

drugs and it’s not going to be through the palliative of a discount

card. It’s going to have to be to take a look at what we have been

105

able to achieve in other contexts, like with Veterans, and try to do

the same thing, both for the benefit of seniors and for the benefit

of the taxpayer. And so I think it’s important—

Mr. BILIRAKIS. You’ve made that clear, Mr. Pollack, and told it

very, very well.

Let’s see who do we have over there? Mr. Brown, just in time.

You’re going to waive.

Ms. SMITH. Mr. Chairman, Mr. Chairman. Could I just ask a

question? When I was speaking and telling you that the CMS said

total financial assets, you said that wasn’t true.

Mr. BILIRAKIS. No, no, I didn’t say that. What I said is the asset

test has nothing to do with the discount card, but they are asking

that question for other purposes. In other words, there are State

programs, you know, State programs that exist that are available,

depending on certain asset tests and things of that nature. So they

have reasons for asking that, but not directly associated with the

discount card.

Ms. SMITH. It was supposed to be with that and then—

Mr. BILIRAKIS. That’s why they’re asking the question. Let me go

on here because my time has long expired.

Mr. Stupak.

Mr. STUPAK. Thank you, Mr. Chairman. Ma’am, you said when

you were at the Virginia Training Center there were some questions CMS didn’t know the answers to?

Ms. SMITH. Yes.

Mr. STUPAK. Could you tell us what those questions were?

Ms. SMITH. One was because people in rural areas are often elderly, often illiterate and how can you have illiterate access this

program and then also how do people without computers access

this program? And then also the Social Services people and the

substance abuse people and the community health clinic people and

the rural health outreach people are not getting any additional

funding to help them when they answer these questions. The only

funding is going to the Virginia insurance, what’s called VICAP,

Virginia Insurance Counseling and Advocacy Program or SHIP. All

these other people will be helping others and this is just more or

less like an unfunded mandate to these professional people.

Mr. STUPAK. Thank you. Mr. Pollack, we’ve had testimony that

there are 73 different cards out there right now being offered under

this program and I’m concerned that seniors really aren’t going to

get the best discounts they otherwise could have because of many

cards being offered. As I understand it, a manufacturer or pharmacy will give a greater discount to a card sponsor, if the card

sponsor can guarantee them a greater volume of business. Do you

think having fewer cards or one card would have gotten Medicare

beneficiaries just as good, if not a greater, discount?

Mr. POLLACK. I think that when you have the benefit of a big

pool of people, you obviously have far greater bargaining power.

That’s why it would have been far better if Medicare were doing

this bargaining, rather than 73 different cards.

But you know you raised a very important issue here that I just

want to touch upon and that is the card sponsors are going to be

bargaining to try to get some kind of discount or rebate and the

regulations in no way say that those rebates need to be passed on

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to the consumer. And that creates a potential for conflict of interest

because if the card sponsor is making a significant portion of their

money from those rebates and they’re holding on to those rebates,

and under the regulations they can retain and untold percentage

of it, they’re more likely to place on their list of those drugs that

are subject to a discount the more expensive drugs for which

they’re going to get a higher rebate.

Mr. STUPAK. Sure.

Mr. POLLACK. And so I think it creates an inherent conflict of interest.

Mr. STUPAK. Thank you. Ms. Grealy, you indicated a study that’s

on-going right now and you hope to have the results next month.

I want to ask a couple of questions about the methodology, if I can,

in the report that you cited. Is it true that the report compared

drug card prices to a nominal retail average price or the usual and

customary price that’s reported by the pharmacies?

Ms. GREALY. I have the Lewin researcher here. I’ll describe it as

best as I can.

Mr. STUPAK. Sure.

Ms. GREALY. The firm that collects the data is called Verispan

and on a State by State basis, collected the prices for the 150 drugs

that we have listed there at the retail pharmacy level.

Mr. STUPAK. Right.

Ms. GREALY. So in other words, what a cash customer, someone

with no insurance coverage.

Mr. STUPAK. No insurance. So you’re going to base this discount

on the highest possible price that a non-insured senior is going to

pay?

Ms. GREALY. Retail, cash paying customers. Because you’re going

to have a whole variety of prices if you’re trying to figure out the

discounts that have been negotiated for those seniors that have

coverage.

Mr. STUPAK. Sure, but don’t you think the seniors should get the

largest possible discount and not compare it to that cash and overthe-counter sale?

Ms. GREALY. Well, this goes to a point, I think that Ron mentioned, the fact that not all Medicare beneficiaries in his view are

going to be helped by this. I look at it another way. What we found

as we were beginning this debate on Medicare prescription drug

coverage, that there are many seniors probably around 70 percent

that already have someone negotiating lower prices on their behalf.

Mr. STUPAK. Sure.

Ms. GREALY. And I think the challenge for Congress was to try

and develop coverage and discounts for those that don’t currently

have the benefit of that coverage and someone negotiating for

them.

Mr. STUPAK. And isn’t it true, even the retail person who is paying cash who has nothing behind him to back him up, no insurance, won’t they get 10 percent just by paying cash? Don’t they get

10 percent discount rate on cash?

Ms. GREALY. One, if shopping can probably do it. What I think

we see as an advantage here is you can go to the pharmacy that

you want to go to in your neighborhood. The card is doing the shopping on your behalf and getting you a larger discount than you can.

107

Craig might be able to address that a little better.

Mr. STUPAK. Your study is really not factoring in things about

the 10 percent discount that they would pick up, what other people

paid based upon average wholesale price, a big insurance company,

the Federal Supply Schedule. You’re not taking those comparisons,

right?

Ms. GREALY. To make it consistent, we were looking at those seniors that have no coverage and are going in and paying cash for

their drugs. And we think also that it’s a conservative estimate as

well, that the base that we’re using—

Mr. BILIRAKIS. The gentleman’s time has expired. Mr. Shimkus,

please.

Mr. SHIMKUS. Thank you, Mr. Chairman. The first two questions,

I’d like a yes or no answer. Starting with Mr. Fuller, do you qualify

for Medicare?

Mr. FULLER. No.

Mr. SHIMKUS. Mr. Pollack, do you personally qualify for Medicare?

Mr. POLLACK. I aspire for it, but not yet.

Mr. SHIMKUS. Okay, great. So that’s a no.

Mr. POLLACK. I think so.

Mr. SHIMKUS. Ms. Grealy?

Ms. GREALY. No.

Mr. SHIMKUS. Mr. Hayes?

Mr. HAYES. No sir.

Mr. SHIMKUS. Mr. Baumhofer?

Mr. BAUMHOFER. Yes sir.

Mr. SHIMKUS. Thank you. Ms. Smith?

Mr. HAYES. Ms. Smith?

Mr. SHIMKUS. No, I said you, members of the panel.

Second question. Who has tried on this panel, who has tried to

access the Medicare information for themselves.

Have you, Mr. Fuller, for yourself?

Mr. FULLER. No.

Mr. SHIMKUS. No, because you don’t qualify for it.

Mr. Pollack?

Mr. POLLACK. I think the answer is rhetorical.

Mr. SHIMKUS. That’s probably correct. So I will take that as a no?

Mr. POLLACK. You may.

Mr. SHIMKUS. Ms. Grealy?

Ms. GREALY. Not for myself.

Mr. SHIMKUS. Great, thank you. Mr. Hayes?

Mr. HAYES. We help hundreds of people every day.

Mr. SHIMKUS. The question is for yourself, sir?

Mr. HAYES. I’m trying to be responsive and helpful, sir.

Mr. SHIMKUS. You’ll be helpful by answering the question.

Mr. HAYES. I’m not going to answer that question.

Mr. SHIMKUS. You’re not going to answer the question?

The question is one, do you qualify for Medicare. You answered

no.

The second question is have you tried to access the Medicare prescription drug information for yourself and I asked for a yes or no

answer.

Have you tried to access it for yourself?

108

Mr. BILIRAKIS. Let’s move on here. Mr. Hayes, I’m sure your answer is no?

Mr. HAYES. Of course, it’s no.

Mr. SHIMKUS. Thank you, thank you. Mr. Baumhofer?

Mr. BAUMHOFER. Yes sir.

Mr. SHIMKUS. So you’re the only one on the panel who qualifies

for Medicare and tried to see if this is the benefit to yourself?

Mr. BAUMHOFER. Evidently.

Mr. SHIMKUS. And your testimony is clear that you have received

a lot of benefit from it, is it not?

Mr. BAUMHOFER. Yes.

Mr. SHIMKUS. I think you testified $360 a month?

Mr. BAUMHOFER. It will save about $150 a month.

Mr. SHIMKUS. So over a year that’s?

Mr. BAUMHOFER. $1,800.

Mr. SHIMKUS. And you think that’s helpful?

Mr. BAUMHOFER. You bet it is.

Mr. SHIMKUS. Thank you, sir. You also do not fall into the poverty categories of this benefit, is that correct?

Mr. BAUMHOFER. That’s correct.

Mr. SHIMKUS. But you know people who do?

Mr. BAUMHOFER. Very many.

Mr. SHIMKUS. Are they receiving a benefit from this card?

Mr. BAUMHOFER. They will be.

Mr. SHIMKUS. Have you attempted to assist any of these folks in

knowledge of the opportunity to access these cards?

Mr. BAUMHOFER. Approximately half a dozen to date.

Mr. SHIMKUS. Have you had any problems in doing so?

Mr. BAUMHOFER. Not any insurmountable ones, no.

Mr. SHIMKUS. I appreciate that. This hearing is on whether we

agree with the public policy or not, the legislation has been passed

to offer a bridge, a prescription drug benefit card until the full plan

comes forward. And I just think it should be noted that of the two

panels, we have one Medicare recipient, one person who’s accessed

the plan and one person who has testified that they’re receiving

benefits.

I know there’s also been talk about getting information about

and a lot of things are saying well, not now, it’s one out of five,

who are accessing now. The best form of advertising in this world

is also the cheapest and that’s word of mouth. You do it for your

barber, you do it for hairdressers, best grocery stores, local pharmacists.

Mr. Baumhofer, have you told people about your benefit other

than the committee here?

Mr. BAUMHOFER. Very few. I’m fearful that I’d be deluged with

requests for help, frankly.

Mr. SHIMKUS. But since you have a positive benefit, that would

be a good story to have out there, would it not?

Mr. BAUMHOFER. Certainly.

Mr. SHIMKUS. Would it encourage more seniors to take a look at

what’s offered by CMS and take—should we not as a country, if we

have a defined benefit, albeit not perfect, that we should do all in

our power to make sure that we fully provide information for our

109

seniors to have access to a program that could be, I’ll qualify it,

could be helpful to them?

Mr. BAUMHOFER. Absolutely.

Mr. SHIMKUS. Mr. Baumhofer, I’m a little biased, I’ll have to

admit, although David Wu and Mr. Walden is not here. My wife

is a graduate of Concordia, Portland, a Lutheran college, university

now, in downtown Portland and I visited it a couple of times. We’re

glad to have you. Thank you for your testimony.

I yield back the balance of my time.

Mr. BILIRAKIS. The Chair thanks the gentleman. Mr. Brown to

inquire.

Mr. BROWN. Thank you, Mr. Chairman. I apologize for having to

leave and I’ve looked at your testimony. I have come comment on

Mr. Baumhofer’s testimony and I’m glad to see the discount card

is I guess you—your testimony you mentioned RX Plus and you get

your drugs now, you’re taking four drugs and according to your testimony you were originally paying $403.31 each month. Now you’ll

pay $250.60, correct?

Mr. BAUMHOFER. That’s correct.

Mr. BROWN. That’s good. That’s obviously great for you, but if

you could qualify for VA or more to the point if Congress would

have passed something that you would not have had to go through

all this bureaucracy and you simply would have had one Medicare

card and it would be equivalent to the VA negotiated price, something we’ve been talking about here, you would be paying $188 per

month for your drugs, for those four drugs.

So I guess I’m not asking a question, I’m just pointing out that

as I said earlier today, we have this choice of seniors have in my

state, 50 some cards to choose from, 73 overall, around the country.

But this drug may take care of Lipitor, this one may take care of

Fosamax and this one might be 12 percent this week, but only 10

percent next, instead of one card with a negotiated price where we

really could save 40, 50, 60, 70 percent, similar to what the Canadians pay or similar in our own country to what the VA has negotiated.

Mr. Pollack, I would like to hear your comments about, would

you speak to the types of discounts seniors can get or negotiate outside of Medicare today? You had said in your testimony that the

discount cards are not significant compared to prices that seniors

may be getting in the market already, not that the cards are all

bad, by a long shot, but we could have done so much better. Tell

us, sort of the lay of the land now that prior to these cards before

these cards go into effect, what kind of discounts can people get,

AAA senior discounts, other non-Medicare approved card discounts?

Mr. POLLACK. Well, as you know, Congressman Brown, there are

a host of different discount cards that were in effect prior to this

program going into effect. Some of the drug manufacturers were offering discount cards. AARP was offering discount cards. Some of

the retail companies were offering discount cards. And when you

take a look at the CMS website, some of them are below, some of

them are above. But when you take a look at what you could have

gotten prior to this time, in the commercial world, it’s not a signifiVerDate 11-MAY-2000 11:03 Jan 07, 2005 Jkt 000000 PO 00000 Frm 00113 Fmt 6633 Sfmt 6602 93975.TXT HCOM1 PsN: HCOM1
110

cant savings at all, but I think the more important point is the

point that you were making a moment ago.

In my testimony, I showed for each of the top drugs, in six Districts, including yours, what the savings would have been for each

of the drugs had we done what you had suggested, namely, had a

single discount system where Medicare did the bargaining, the savings would have been extraordinarily different. And that’s what we

should have tried to do.

Mr. BROWN. Ms. Grealy, who funds the Healthcare Leadership

Council?

Ms. GREALY. We’re a dues based organization with very diverse

membership, as I mentioned. We do have pharmaceutical manufacturers as part of our membership, along with hospitals, medical device manufacturers, health plans, hospital——

Mr. BROWN. Insurance companies too?

Ms. GREALY. Insurance companies.

Mr. BROWN. What percent of your dues come from insurance

companies and drug makers?

Ms. GREALY. All together totaled, 27 percent.

Mr. BROWN. It just seems, and I appreciate Mr. Baumhofer for

coming in. It just seems to me the only senior sitting here other

than Ms. Smith who is not allowed to answer, I guess, Mr. Bilirakis, the chairman was very good about it. Mr. Shimkus did not

seem to want to hear from her on a question earlier as one of the

seniors. But the only senior here comes from the Healthcare Leadership Council which sort of makes sense on this piece of legislation when you consider that this legislation was written for the

drug companies, the insurance companies with seniors coming in a

distant third and I guess I should expect the make up of the panel

to be somewhat similar to that.

Ms. GREALY. Well, Congressman Brown, we have many members

that are very interested in keeping drug prices as low as possible.

Mr. BROWN. That must cause a conflict in your group, huh?

Ms. GREALY. They’re all very interested in making the marketplace work and if that is the better way to drive down prices, we’re

already beginning to see that with the new transparency.

Mr. BROWN. We’re beginning to see it?

Ms. GREALY. Rather than——

Mr. BROWN. You know, Ms. Grealy, we’re beginning to see drug

prices, we’re beginning to see prices come down. I’ve heard this

all—I’m sorry, I stepped out for an hour, but I’ve heard this all

morning from the Director of CMS and now to this panel that drug

prices are coming down. Drug costs in this country have gone up

17 percent a year in the last 6 years. We’re going to give a discount

at 12 percent and then we’re going to dislocate our arms by patting

ourselves on the back and saying boy, we’re bringing drug prices

down because of competition.

If we want to bring drug prices down, forget all these cards, forget this bureaucracy that my friends want to set up, get a discount

on behalf of 39 million Medicare beneficiaries and do it like every

other country in the world that knows how to bring prices down so

seniors don’t have to choose between their food and their medicine

or in my part of the country, their heat and their medicine. It just

doesn’t make sense.

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Mr. Chairman, thank you.

Mr. SHIMKUS [presiding]. I suppose, Mr. Brown, if you wanted

America to have socialized medicine, then it would make sense. At

this point I yield to the chairman of the full committee, Mr. Barton,

you’re recognized for 5 minutes.

Chairman BARTON. Thank you, Mr. Chairman. I want to welcome this panel. I’m sorry I wasn’t here to hear your testimony but

I have scanned it in its written format.

In the interest of full disclosure, I’m for the prescription drug

benefit. I was one of the group that offered the prescription drug

discount card as an alternative to the full-blown insurance program. I was one of the more adamant ones that if we’re going to

have a prescription drug benefit, some of that benefit ought to be

available this year, not 2 or 3 years from now. So I make no apologies that we have it in the program and that we’re offering it to

seniors now.

My good friend from Ohio, Mr. Brown, is opposed to the benefit

program and he’s got every right to do that and have an alternative

and that’s what democracy is all about, but before I ask my questions, I want the world to know that I’m for this program.

Now when we were preparing for this hearing, we got witnesses

that the Majority wanted and we got some witnesses that the Minority wanted, so we should have a diverse panel in terms of pros

or cons. So my first question is a general question, do any of this

panel believe that this voluntary program is going to be harmful

to seniors?

Mr. BAUMHOFER. I would speak to that. In no way, do I see it

harmful at all. In fact, if I might speak to our third place role here

as alluded to, being in the race is better than not at all.

Chairman BARTON. It’s a voluntary program and I think you can

argue plausibly that it might be neutral and obviously a senior is

not going to be forced to participate in the prescription drug discount benefit card, but I see no way it can be harmful. Are we all

in agreement on that, at best, at worst, it’s neutral, that no way

is it harmful?

Mr. POLLACK. Mr. Chairman, I certainly don’t think this is a

harmful program. Quite the contrary and in terms of low income

people, I want them to get the $600 in Transitional Assistance. I

do say it’s a very disappointing program and it’s much ado about

very little, but it’s not a harmful thing.

Mr. FULLER. Mr. Chairman? If I may, I would add that it’s not

only not harmful, it is very beneficial to those seniors who have the

greatest need. As has been pointed out 42 million seniors are eligible for Medicare; 15 million lack any coverage whatsoever and they

pay cash. They pay the highest prices today. That’s why the comparisons are done against cash prices. Not only is there great benefit in terms of price, there’s also for the first time for many of

these people a real opportunity to have the medications they’re taking reviewed by a pharmacist because they’re going to be captured

in the system. There is enormous benefit. There’s also enormous

benefit to all of us and I think I’m the only up here who’s offering

or involved in offering as a sponsor of a card. It’s enormous benefit

to us as we prepare to understand how to better serve the entire

Medicare population as we move toward 2006.

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Chairman BARTON. Well, Mr. Fuller, you represent the retail

pharmacies, I think, is that correct?

Mr. FULLER. Correct.

Chairman BARTON. What’s been the general reaction of your constituency, your association, the pharmacists, the corner drug store,

literally. Do they tend to think this is something they are ecstatic

over or they think it’s a good idea, it’s got some flaws or they just

not rather be bothered with it or——

Mr. FULLER. That’s an excellent question. Let me answer it in a

few ways. First of all, I also indicated at the outset that I’m here

because the National Association of Chain Drug Stores, along with

Express Scripps formed the Pharmacy Care Alliance and we actively went into the marketplace, sought and won Medicare endorsement for our card program.

We have now over 43,000 individual pharmacies in our network.

I fully expect in June when the program is up and live, we’re still

adding more to have 50,000. Fifty thousand individual pharmacies

participating in the network. By the way, my membership is comprised of 35,000 individual pharmacies. Obviously, we not only

have chain pharmacies, we have independent pharmacies participating as well.

Chairman BARTON. Now we’ve documented in the first panel,

with Dr. McClellan, like any large program that’s getting started,

there’s some glitches, inability to get through on these hotlines and

the webpages and the usual misinformation because it’s a new program. Would it be fair to say that as the program matures that

those are going to work their way through the system and that in

a reasonable future, we’re going to have a program that seniors can

access and make intelligent decisions on.

Mr. FULLER. First, I want to publicly indicate that Dr. McClellan

and his staff have been extraordinarily good to work with. We have

had issues as one would expect in something like this. They are

worked on and resolved quickly. Hundreds and hundreds of questions have been dealt with. We have our own call center for the

Pharmacy Care Alliance. The response times were less than 5 seconds. Initially, I think today if you call 1-800-PCA1075, I think

you’ll get a response in well under 15 seconds. In fact, if Ms. Smith

has time available, one of my colleagues here is a pharmacist. In

15 minutes, I think we can walk through, if she has medication information available, walk through and get an answer to the kinds

of questions she has.

All of this is improving. The prices have come into, I think conformity on our site and their site as well as other sponsors. I can’t

speak for them, but I think all of those kinds of issues are beginning to get resolved. One of the reasons that our call times are

about 6 minutes when we talk with a senior on the phone which

is much less than we anticipated, I am convinced is because people

are getting through to the Medicare site. They are reading the materials in the stores. They are reading the materials that’s been

mailed to them. They are seeing the television advertising. So

they’re coming as a better informed consumer.

I honestly do not think any of you should beat yourself up about

the law that was passed last year. We’re working with the law.

We’ll be happy to discuss policy alternatives as we go forward, but

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the law today is one that is going to bring a real benefit to seniors

and they’re coming to us better and better informed as we go forward and we think, you ask how the stores are doing. We’re seeing

a steady climb in the number of applications that we are receiving

day after day after day. We’re only into the second week. We actually think this will simply keep rising into June when the actual

benefits are being received in the store.

Chairman BARTON. My time is expired. I would encourage all of

these panelists as the program actually begins if you were to let

problems, opportunities for corrections, anything at all about how

to improve the administration of the program and if you think

there’s some technical things that need to be done to change the

law to make it an improvement in terms of just applicability, we

would be happy to receive those comments from you?

Mr. POLLACK. Mr. Chairman, may I just take that invitation and

just second something that was said earlier. I don’t know whether

you were in the hearing room at the time and that pertains to this

low income population. Mr. Hayes testified to something that I

think is extraordinarily important and it’s something I would hope

can be done on a bipartisan basis and that is that the very poor

who we think could get help through this thing, there are a whole

bunch of poor folks who have been getting the benefit of a variety

of Medicare/Medicaid subsidization programs. We call them the

Qualified Medicare Beneficiary, QMB, SLMB. All of those people by

virtue of their being eligible for those programs are below the income levels of 135 percent of poverty.

I think it would behoove us to say anybody who has gone

through that process and has been certified for low income assistance should automatically be enrolled in terms of getting this Transitional Assistance. This is something I know Mr. McClellan is taking under consideration.

I would urge on a bipartisan basis do that. If we want to make

this program work as best as possible, putting aside the differences

that we may have about bigger policies, that’s something that can

be done. You can do it on the suspension calendar and do it real

quickly and you will enroll many, many more people than you will

if we fail to do——

Chairman BARTON. We’ll take everything under advisement. I reserve the right to look at the details and all that, but we certainly

want to encourage constructive participation and implementation of

the program.

I yield back. Thank each of you.

Mr. SHIMKUS. Mr. Engel, you’re recognized for 5 minutes.

Mr. ENGEL. Thank you, Mr. Chairman. First of all, I want to

take issue with my colleague from Illinois, Mr. Shimkus. I talked

to many seniors in my District. They’re confused. They believe that

they might make a wrong choice and be locked in and frankly, I

think it’s ridiculous to question people’s ages on the panel and

imply that only someone who is a senior citizen can understand

what is being done. Obviously, the people on the panel who are not

seniors work with seniors and I don’t mean to denigrate Mr.

Baumhofer’s testimony, but frankly I can get 100 seniors that will

say just the opposite of what Mr. Baumhofer said.

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And you know, in relation to what my friend, the chairman, said.

I don’t think this bill is harmful, but I think to some degree it’s

harmful if it builds up seniors’ expectations and then they find that

they’re really not getting much of a discount after all or that they

cannot make clear choice because as Mr. Brown showed when he

held up all those cards, people are just simply confused.

Also, the prices of drugs are going up every single year way beyond the rate of inflation to simply say we’re going to give people

a discount which is less than that really doesn’t give them a net

balance discount at all.

Now I’m hearing from some of the pharmacies in my District

that they don’t even know what prices they’re going to be able to

charge come June 1. It’s being said that they will be offering it at

X amount, but there have been no negotiations. I’m also hearing

from pharmacies in my District that some pharmacies are showing

up as providers for the $600 cash discount cards, but they haven’t

been asked nor have they signed any agreements. They’ve not

agreed to any reimbursement number and are concerned about seniors being scammed. They’re concerned that seniors will show up

with cards that have no value and also some of the pharmacies are

telling me in New York that many of the card networks have listed

pharmacies that closed down years ago and some are just vacant

lots, boarded up buildings, things like that. So I want to ask, let

me start and ask Mr. Hayes, have you heard about these horror

stories? Is this problem across the country or only in New York?

What can you tell us about it?

Mr. HAYES. Mr. Engel, it’s not merely in New York. I mean those

startup points whether they’re glitches or are a product, an inevitable product of the structure of the program, I guess remains in

debate, but without question the overwhelming sense of frustration

is something we’ve experienced, but are trying to do good with,

frankly, because one of the lateral benefits of the discount cards,

good or bad for any particular individual, is that there are many

other opportunities that go beyond the discount cards approved by

Medicare to help a better informed consumer.

And I’m intending to talk to Mr. Baumhofer, in fact, after this

meeting because there may well be deeper discounts that he’ll be

able to find. We’re hoping that the attention consumers are paying

to the Medicare discount cards may trigger other explorations.

Sadly, a small piece of the Medicare population, however, who

aren’t at the level of sophistication that Mr. Baumhofer is.

Mr. ENGEL. The other piece that I’m hearing is that perhaps

some of these card networks are not acting in good faith, that

many simply want to get their foot in the door by listing pharmacies that don’t exist to boost their networks and what it might

do is coerce or force seniors to use mail order to get their pharmaceuticals. If people like to use mail order, great for them. I think

my preference is to be able to see a pharmacist and be able to discuss my individual needs with those pharmacists. I don’t want to

see seniors being pushed into mail order if that’s not what they

want.

Mr. POLLACK. Mr. Engel, there’s one issue that I think that we’ll

have to take a look at particularly as we move closer to 2006 and

that is as these discount card sponsors serve people who enroll in

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their programs, they’re going to have new data concerning the drug

usages of people who have enrolled in those plans. One of the

things that we’re going to have to look at very closely is whether

the data that’s being collected is going to result in a clear understanding that there are people you don’t want enrolled starting in

2006 versus there are people that you do want enrolled in 2006. In

2006, I believe you’re going to see many private plans are going to

do what they can to avoid the high users of drugs. And now, with

the data that can be and will be collected as a result of the discount card program, they’re going to know who the high and low

users are. So one of the things we’re going to have to do as we

move toward 2006 is to make sure that the collection of that data

does not result in discrimination against those people who need

drug care the most.

Mr. SHIMKUS. Thank you. Mr. Rogers, you’re now recognized for

8 minutes. Thank you, Mr. Engel.

Mr. ROGERS. Thank you, Mr. Chairman. I have to tell you I’m

confused, not about the bill, but what I find back in the District.

I have never seen a more coordinated effort by a bunch of individuals to deny information to senior citizens in my entire life. And

I was an FBI Agent and I saw some pretty rotten dogs out there

doing some pretty bad things. I

I have talked to seniors with tears in their eyes who are confused

and they’re scared, one of which happened to see your video, Mr.

Pollack, with Mr. Cronkite on it and Mr. Brown brought up some

good questions to Ms. Grealy and I want to follow up on that. Because I’m confused. I want you to help me understand what this

is all about. The bill passes, I hear you today say this is not bad

for seniors, this is good. We’re encouraging them to do it. I saw

that video and there is nothing in there that says this is a good

bill and that we ought to encourage you to participate, and by the

way, seniors who are low income are finally for the first time in

their live going to have access to prescription drugs that may increase the quality and their longevity. Wow, powerful stuff.

You sent out a video just after the bill passed to all of these seniors, people who I talked to, people who I had the chance to visit

and talk about other things and this as well. Why did you do that?

Mr. POLLACK. Well, I’m very proud of that video and I’m glad you

raised it. I think it provides extraordinary information, far more

than you get from the government. If you took a look, for example,

at what HHS was circulating, they had a 30 second commercial

that provided no information, used a fake set of people who were

actors. We provided information that all across the country when

we showed that video people felt they learned a great deal about

the legislation. By the way, if you remember from that video, I personally was quoted in talking positively about the low income benefit. I don’t know if you remember that. But my quote is very specific with respect to the low income benefit. I said it was a good

thing.

Mr. ROGERS. And you also said in your testimony it would be no

consequence to any of the other seniors. This bill will be of no consequence, quote unquote.

Mr. POLLACK. I didn’t say it would be harm, but on the other

hand, I want to be clear, Mr. Rogers——

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Mr. ROGERS. My time is limited. I understand that you want——

Mr. POLLACK. Well, if you want to pull——

Mr. ROGERS. Just a minute, you made an interesting point. You

said you used actors. Was Walter Cronkite a paid advocate for you?

Did he receive remuneration for appearing your video?

Mr. POLLACK. The answer is yes, he did.

Mr. ROGERS. Can I ask how much he received?

Mr. POLLACK. You may ask, but Mr. Cronkite——

Mr. ROGERS. Are you going to answer my question, sir? How

much was Mr. Cronkite paid?

Mr. POLLACK. I’m not going to tell——

Mr. ROGERS. How much was the production value of that video?

What did you pay in total costs to print the video, get the video

out and mail it to every senior home?

Mr. POLLACK. It was over $100,000.

Mr. ROGERS. How much over $100,000?

Mr. POLLACK. I believe and I’d have to calculate, probably about

$125,000. And I have to say and I want to say very quickly to the

extent that there’s any concern that you have with respect to Mr.

Cronkite being paid, by the way, at a cost that was considerably

lower than what he charges people in the commercial field because

he thought this was a very important service.

But if you’re concerned about that, I think you’d be horribly offended that the administration used paid actors and tried to portray them as regular individuals and use——

Mr. ROGERS. But it’s okay for you to use paid actors to communicate your point, but apparently the administration can’t—next

question I have—excuse me, sir, it’s my time.

Mr. POLLACK. [continuing] was not a——

Mr. ROGERS. Excuse me, sir, it’s my time. You talked about your

worry of inflation and before this card has even gotten in the year

yet, that card hasn’t been on the counter yet 1 day. Prices have

dropped according to the first panel 11 percent and we’re watching

the free market starting to work a little bit. That is a very powerful

thing and my friends on the other side of the aisle seem to have

ignored that point and you’ve ignored the point and you’ve said

there’s nothing in here that keeps costs down, that put pressure on

costs.

Mr. POLLACK. I didn’t say that.

Mr. ROGERS. Yes, you did, sir, in your testimony. Let me finish

my quote——

Mr. POLLACK. You’re misquoting me. What I did say is that the

base price keeps on going very substantially and when you get a

discount off a base price that keeps on increasing, it’s like going to

used a car salesman and the used car salesman says ‘‘I’m going to

give you a $3,000 discount’’ and just before that he increased the

sticker price by $4,000.

Mr. ROGERS. I appreciate that. The total disregard for the work

of the market is astounding to me and the fact that you would take

money from folks to go out and mislead the public I say shame on

you, sir. Here’s a great example, happened right in my District.

Somebody got up, they wanted to have this press conference and

say boy, this is bad and it’s awful. And they had an 80-year-old

woman up there, God love her, and said she was going to have to

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go to Canada to save 40 percent on her drugs and this was awful

and there was nothing in the bill to help her and this is terrible

things and it’s terrible that we’re doing this to our seniors. And

they listed her drugs in this particular press conference. So went

back and we just—let’s say she’s a higher earner. We don’t have

a clue if she fits all the low income criteria. She pays $160 a

month. So we plugged it into the computer and what does this bill

do for somebody just like this, even if she’s not a low income earner? It happened just very recently, unfortunately. She was $160 per

month. Her monthly drug spending would fall between $80 and $87

for almost every card that’s available in my area in Michigan. And

that’s 50 percent at the lowest end over 50 percent at the best end.

And you know what? They’re U.S. safe-produced drugs that she

can get in the car and drive just a few miles away and get. She

doesn’t have to get on a bus. This poor woman was never given the

information and is scared to death about this bill. She doesn’t even

want to get on—she’s scared of it because folks and organizations

like yours are getting out there and saying yes, be afraid of it.

Now here you say it’s really good because the cameras are drafting away and half the audience is gone, but you’re going to go back

and you’re going to spend that money for people who have, as a

matter of fact, your largest contributor said his whole goal in life

is to beat George W. Bush. That doesn’t sound non-partisan to me.

Doesn’t sound like you’re doing something for seniors to me. It

doesn’t sound like you’re caring enough to try to get them the right

information so that one woman who is in her house maybe crying

today, that lack of compassion here is astounding to me, that you

would appear before this panel and try to play it off that you are

this non-partisan helpful group when you’re providing deliberate

misinformation for people who are counting on us to provide solution. It may not be perfect, but you know what, next month, they’re

going to get over 50 percent off on their drugs?

Mr. POLLACK. Mr. Rogers, I would suggest, tell me one thing, either in the video or in the written materials that is incorrect and

I suggest to you, you can’t do it. The reason you can’t do it is

there’s nothing misleading in our materials. There’s nothing misleading in the video. And by the way, if we’re really talking about

doing something for America’s seniors, then we would have done

the thing that——

Mr. ROGERS. We would have done, we would have done—you’re

deliberately misleading the point and that’s my concern——

Mr. POLLACK. [continuing] we would have enabled people all

across the country to get the benefit of bargained prices that would

have been considerably lower and that, I think, would have been

the more compassionate thing to do.

Mr. ROGERS. Your organization in the past was supportive of, as

I understand it, and I think the New York Times quoted you as

saying as the de facto public relations manager for the Clinton Administration’s campaign for comprehensive health care legislation.

Mr. Brown talked about cost containment. You talk about cost

containment of other countries like Canada. Just so I understand

your organization, you support rationing, limited drug use, pharmaceutical use. Do you support those issues?

Mr. POLLACK. What do you mean by rationing?

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Mr. ROGERS. In Canada, if you reach a certain age, you get put

on a list and if your health reaches a certain point, you can be

taken off the list for care because they have to ration health care

because of the socialized, capitated health care provider system.

They also do that for pharmaceuticals as well. They don’t have access to the wide variety of pharmaceuticals that we do in the

United States. So if I understand this argument correctly, you’re

saying Canada is a good system to go. So you support rationing

health care for American citizens and limiting the ability for them

to have access to pharmaceutical treatment in order to keep costs

down. Is that correct, sir?

Mr. POLLACK. No, that’s not correct.

Mr. ROGERS. And so you embrace the tenets of a socialized medicine system, but you don’t want to embrace the way they use it to

keep their costs down. So you don’t support a nationalized, socialist

system of health care, is that correct?

Mr. POLLACK. That’s correct.

Mr. ROGERS. You do not?

Mr. POLLACK. I do not.

Mr. ROGERS. That’s a wonderful thing. That’s a little different

than what you just told us earlier.

Mr. POLLACK. No, that’s not—no sir, that is not different than

anything I’ve said here today or in the past.

Mr. SHIMKUS. The gentleman’s time has expired.

Mr. ROGERS. I yield back, Mr. Chairman.

Mr. SHIMKUS. The Chair would yield himself, oh, Mr. Dingell.

Mr. DINGELL. I appreciate your courtesy. Thank you, Mr. Chairman.

These questions are for Mr. Pollack. Mr. Pollack, I’m concerned

about the games that drug card sponsors might play at the expense

of seniors enrolled in a drug discount card. A number of recent lawsuits such as the Merck Medco suit in Massachusetts have shown

how pharmacy benefit managers or PBMs are not passing along

the discounts they negotiated with the pharmaceutical manufacturers.

Can you briefly describe what in the PBM case was doing to

scam the system?

Mr. POLLACK. Sure. Medco negotiated large discounts from manufacturers that were supposed to be passed along and passed along

95 percent of those savings. They only passed on a portion by renaming some of the discounts that were generally referred in the

contract as formulary savings to rebates. In fact, in this instance,

the PBM passed along $9 million in rebates, but kept $10 million

in rebates for themselves.

Mr. DINGELL. I believe that is stated in the complaint.

Mr. Chairman, I ask unanimous consent that the complaint be

inserted into the record at the appropriate point so we can see

what’s going on here?

Mr. SHIMKUS. Please identify the complaint?

Mr. DINGELL. Yes, I have it here and I will submit it to the committee. And I thank you, Mr. Chairman.

Mr. SHIMKUS. Mr. Dingell, could you identify the complaint?

Mr. DINGELL. Yes, it’s entitled United States of America, et al.,

versus Merck Medco Managed Care, LLC, Medco Health Solutions,

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Inc. It’s in United States District Court for the Eastern District of

Pennsylvania.

Mr. SHIMKUS. It shall be entered into the record. Thank you.

Mr. DINGELL. Thank you, Mr. Chairman, I appreciate your courtesy.

Mr. Pollack, I’m concerned that the drug sponsors could be doing

similar things to seniors under the prescription drug discount card

by playing games that they define as discounts, sponsors could still

claim they’re passing on all the pharmaceutical manufacturers’ discounts to senior when, in fact, they’re skimming off a portion for

themselves. Do you see this happening or being possible to happen

under the Medicare drug discount card and if so, to what extent?

Mr. POLLACK. Well, Mr. Dingell, one of the things that we had

suggested to CMS was that any kind of rebates that would be negotiated with the pharmaceutical companies would actually be passed

on to America’s seniors. Unfortunately, the regulation——

Mr. DINGELL. And there was the Cantwell Amendment in the

Senate which got dropped in conference.

Mr. POLLACK. That’s right. And instead, what the regulations say

is that the PBM can hold on to an undefined portion of the savings

they achieve. It doesn’t indicate that there’s any kind of a cap on

how much they retain. They have to pass along some portion of the

savings, but what portion it is and whether it’s a significant

portion——

Mr. DINGELL. Well, first of all, there is little transparency in the

way the matter has been dealt with. Second of all, there is a significant weakness in the regulations to control this kind of behavior and third of all, there’s virtually nonexistent enforcement authority on the part of HHS and Federal Government to address

these matters. Is that not so?

Mr. POLLACK. It is and we had hoped and explicitly asked that

any kind of savings achieved through this negotiation process actually wind up to the benefit of America’s senior. Unfortunately, the

regulations do not actually require that any specific portion of

those savings be passed on.

Mr. DINGELL. Now this could be a problem then when the benefit

is implemented in 2006, could it not?

Mr. POLLACK. Absolutely.

Mr. DINGELL. And as I mentioned earlier, the Cantwell Amendment offered by Senator Cantwell and adopted by the Senate required transparency for both prices and rebates, but that was

dropped in conference. Isn’t that right?

Mr. POLLACK. That’s correct.

Mr. DINGELL. Is there any remaining authority on the part of the

Federal Government to address the possibility of this kind of game

being played on seniors either in connection with the drug discount

card or in connection with the actual delivery of the prescription

pharmaceuticals to the seniors when the insurance companies are

managing the matter?

Mr. POLLACK. I’m not clear whether that’s going to require a

statutory change or whether that could be done through regulations. My belief is it probably needs to be done via statute.

Mr. DINGELL. Thank you. Mr. Chairman, I notice I have 19 seconds left which I gladly yield back to the Chair.

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Mr. SHIMKUS. Thank you, Mr. Dingell. The Chair yields himself

8 minutes.

And I continue my enthusiasm. Mr. Hayes, I was out of the room

when you expressed your pride in being a critic. I’ve never claimed

to be a critic because I believe people discount them pretty quick.

Being constructive to the process, being a constructive critic is

probably what you should really pride yourself in.

Mr. HAYES. Sir, maybe being out of the room you missed what

I said which was two things. One, with regard to constructive criticism that CMS has indeed been quite welcoming of the on-going information we’ve given them with regard to the so-called glitches in

the project. And second, with regard to the quote from President

Roosevelt——

Mr. SHIMKUS. I don’t care about that—President Roosevelt? I

don’t care about that.

Mr. HAYES. Your colleague was interested.

Mr. SHIMKUS. I don’t care about that. Mr. Fuller, I have a question and I’m going to go down the line. In the designing of this program and thinking about individuals and their health care needs,

even to the two critics who are here at the table, place ourselves

in how we best want to help people. We want to help people by saying what are your individual health needs and requirements, right?

And how do we then keep them in the comfort of being able to obtain their drugs from their local pharmacy and so as we design the

drug discount card, we felt that it was a very, very positive thing

to do, a very positive element to have a card whereby seniors have

the ability to choose a card that best fits their individual health

needs and then be served by their individual pharmacists. Isn’t

that not yet a positive element of this program?

Mr. Fuller, yes or no?

Mr. FULLER. Yes sir, it’s a very positive element.

Mr. SHIMKUS. Mr. Pollack? Yes or no?

Mr. POLLACK. Yes, and it would have been a whole lot better——

Mr. SHIMKUS. Thank you. Ms. Grealy, yes or no.

Mr. POLLACK. It would have been a whole lot better——

Mr. SHIMKUS. Ms. Grealy, yes or no?

Ms. GREALY. Yes.

Mr. SHIMKUS. Mr. Hayes, yes or no?

Mr. HAYES. I can’t honestly answer that yes or no, sir. I’m sorry.

Mr. SHIMKUS. Then you are being the critic. Mr. Baumhofer?

Mr. BAUMHOFER. Yes.

Mr. SHIMKUS. Yes, it is. Thank you. It does dumbfound me

though, Mr. Hayes. I choose not to quibble with you. You have a

role for which you’ve chosen to play here today.

Mr. HAYES. I regret you’ve neither read nor heard our testimony,

sir, because you basically have mischaracterized——

Mr. SHIMKUS. Mr. Hayes, excuse me. I’m not going to quibble

here. I have a question with Ms. Grealy regarding Mr. Waxman’s

report from the Government Reform Committee, released a report

only hours when this program came on line.

Can you tell me, have you conducted a study or analysis of what

Mr. Waxman had done, the Healthcare Leadership Council?

Ms. GREALY. No.

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Mr. SHIMKUS. Can you comment with regard to what has happened with regard to drug price since the Waxman report first

came out?

Ms. GREALY. What we had seen, even in the first 2 weeks that

the prices have been available and were more transparent than

ever before, that there has been a lowering of the prices.

Mr. SHIMKUS. Mr. Fuller?

Mr. FULLER. We did check our website against the prices listed

that Mr. Waxman provided and Pharmacy Care Alliance prices are

now about $140 less than what was represented and actually takes

us to the lowest of all of the price listings he offered which does

at least suggest for whatever reason may be out there with our

card, anyway, that using the prices on April 29 versus using the

prices today, you’ll get a distinctly lower answer today than you did

on April 29.

Mr. SHIMKUS. I’ll go personal for a second. Being one of the five

authors of this program, I had an interesting discussion with Mom.

My mother is a diabetic. Uses insulin every day, and so I asked

Mom has she called 1-800-MEDICARE and she had not. And I said

Mom, why? And she said well, I have the American Legion drug

discount card and I can obtain my drugs through my insurance

company and I don’t think it’s going to benefit me. And I said well,

Mom, I’ll tell you what. Why don’t you just do me a favor. Why

don’t you call 1-800-MEDICARE and do this for me. Why don’t you

tell me how long it took you to get on line, document everything,

how you were treated, what questions they asked, the whole thing.

So I took my notes from the conversation. She called me back and

she said you know, I couldn’t get on between 11:22 and 11:25, then

finally I was answered at 11:25. There was a computer that assisted me, answered my questions. The whole entire process took

10 minutes. Only one of her drugs was not covered and that she

was excited to learn that she would save $407 and she goes I didn’t

think this was going to save me anything. $407. And she got excited at the fact that yes, this is really going to save me. I said

well, get Dad’s medications together, please call on behalf of Dad

and maybe you can find you may even save $800 or $1,000. And

so your testimony, Mr. Baumhofer?

Mr. BAUMHOFER. Stan.

Mr. SHIMKUS. Stan, your testimony, Stan, when I listened to you,

I just had to smile because you sounded just like my mother. And

so there are individuals of whom have chosen to say it means nothing. Well, it means something to you. And I assure you listening

to my mother on the other end of the phone, being able to obtain

those types of savings, when in fact, she believes she wasn’t going

to be able to obtain any savings at all. She said she’s really anxious

to get the report from CMS and this is a Mom making the phone

calls.

So I don’t want to really get into the politics of this. Mr. Fuller,

Mr. Hayes, you have your ideology, you have your ideals about

what you want to do. I just want you to know that there are five

of us wanting to make a difference in the lives of people and that

you may, you obviously disagree with what we’ve done, but what

I would ask is that you can be helpful in the process to the seniors,

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rather than—well, you can be helpful to the process. That’s why we

made the system voluntary.

I noticed from your testimony, you’d even disagree with the volunteer aspects of the program, but I just wanted to let you know

from an author, from an author, I believe in a country that is about

freedom and individual liberties and how do we get people more interested in their own health care and taking care of their bodies

and this is—when one of you testified about the intangible benefits

of the program, getting people more actively involved and price

conscious, I think it’s an exciting intangible.

Mr. Fuller?

Mr. FULLER. I would just add to that point that one of the things

we absolutely know as a certainty is that when the price of medication is more affordable, these seniors will actually take the medication as it’s prescribed and therefore and thereby improve the outcome of using medication. All too often, seniors are forced to choose

in our stores, between food and medicine. By having the medication

more affordable, a great many, thousands of seniors will actually

be able to use the medication as it’s prescribed and not take it

every other day which in many cases renders it almost ineffective.

Mr. SHIMKUS. Thank you. At this time, I’ll yield to Mr. Green.

You’re recognized for 5 minutes.

Mr. GREEN. Thank you, Mr. Chairman. I appreciate our panel

being here. It seems like every time I turn to ask questions we

have votes. That’s what you get for not having seniority.

Because then I hope—I didn’t vote for the plan. I spoke against

it. We spent all night here in this subcommittee on our committee

drafting up this plan and I hope it works. I just know that there’s

been a lot of problems in the last 2 weeks and maybe CMS has corrected it in the last 10 days, but let me just ask Mr. Baumhofer,

did you actually call the pharmacies in Portland, Oregon and get

these drug prices?

Mr. BAUMHOFER. Yes sir, I did.

Mr. GREEN. Since everybody was going out and calling CMS, our

office tried to call the pharmacies in Portland, Oregon and the

pharmacists wouldn’t confirm any of the drug prices that you had.

And perhaps the discounts are being shown in CMS website, but

there was no guarantee that they were actually available in Portland, Oregon. Again, we just called to see because I’ve been frustrated trying to serve my own constituents and my senior citizens

in dealing with it.

And again, the voluntary plan is correct. You don’t have to go out

and choose one of these cards now, but in 2006, if you don’t choose

it, a card, for every year you don’t you will be penalized, so that’s

not very voluntary to me. And so for 2 years may be a card, but

once you select it, I think the structure of the legislation, hopefully

we’ll revisit that and some of these hearings we’re going to have

in oversight on our committee, the full committee or the Health

Subcommittee, will be able to look at that and say we are creating

a problem. It’s effective in 2006.

Mr. Pollack, regarding your enrollment in the program, well, for

one thing, I heard from Mr. Rogers that the video cost about

$100,000, maybe CMS should have probably contracted with whoever you did to provide it because it would have saved a lot of taxVerDate 11-MAY-2000 11:03 Jan 07, 2005 Jkt 000000 PO 00000 Frm 00126 Fmt 6633 Sfmt 6602 93975.TXT HCOM1 PsN: HCOM1
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payers’ dollars, but HHS projects that only 7.4 million Medicare

beneficiaries will enroll in this program.

First, do you think that’s a reasonable figure of their projection?

Mr. POLLACK. I don’t know what a reasonable figure is, but I

must say I find myself amused hearing people talk about Walter

Cronkite being paid money which he was. We’ve been very open

about that. But then the same people are saying there’s nothing

wrong with the government paying actors to portray real people

and to mislead the public with respect to what that is designed to

portray and there’s no concern about that whatsoever.

We usee the most respected narrator in America and he provided

information that is not misleading or wrong in any way and so I’m

very proud of it.

Mr. GREEN. Well, I viewed both of the tapes and again, maybe

if we want to question Walter Cronkike, we could bring him in. In

your testimony, you state that the drug card is very little or no consequence, that five out of six of the Medicare beneficiaries will

probably not select one of these drug cards. Is that correct?

Mr. POLLACK. I can just go by what CMS is telling us. CMS is

telling us that at most, there are going to be 7.4 million people who

will enroll in this program. That’s 18 percent of those in the Medicare program, 1 out of 6. that means that 5 out of 6 seniors will

not participate in this program. Where in the alternative that you

and others had wished to offer that would enable Medicare to bargain on behalf of everyone, it would have helped everybody.

Mr. GREEN. I’ve got a whole bunch of questions. One of them is,

and I’ll ask anyone on the panel. Has there been any focus groups,

you know in the last 2 weeks or something that you could share

with us the problems that or the factors that are dissuading beneficiaries from signing up?

Mr. FULLER. Actually, we’ve done a considerable amount of research because we’re a card sponsor. We need to know how people

feel. It’s very important to remember of the 42 million seniors, almost three quarters of them have coverage to date. Not all of it’s

good, but they have coverage. You’ve got to look at the 15 million

without coverage. Sixty percent, almost 60 percent of those people

when we surveyed that population, the population that pays cash

today, almost 60 percent said they thought the card was a good

idea and they would sign up for it. When they got a little more information those percentages went up to about three quarters. And

84 percent——

Mr. GREEN. I’m asking the questions and I’ll let you answer

when I get a chance.

When you said that you provided more information, I hope it

wasn’t provided by someone who maybe was trying to give them

maybe questionable information because when I have a witness

that tells me that, whether it’s you or Mr. Pollack, I want to know

what was your criteria.

Mr. GREEN. Sir, I represent 120,000 pharmacists who deal with

seniors millions of them every day and 35,000 stores across the

country. We treat them honestly and with respect. We don’t mislead them. On top of that, the information presented to them is the

information that Medicare approves and has official condoned to

educate seniors with. The only point I was making is if they have

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more information, they’re interested in signing up for the card and

the TA population tells us at a rate of about 84 percent that they

want to sign up.

Now the information, the marketing information that’s approved

by Medicare wasn’t even made available by regulation until May

3. We’ve only had a couple of weeks to make the information available. It is being made available by 120,000 of our pharmacists, another 30,000 or 40,000 independent pharmacists who counsel with

patients every day.

I just urge you let this program work. We’ll be back here in a

couple of months with metrics to explain——

Mr. GREEN. We’re not going to stop it from going forward. It’s

going forward, but again, these oversight hearings are trying to

correct the problems that we see may happen and hopefully, they

won’t happen.

Mr. SHIMKUS. The gentleman’s time has expired. Mr. Walden,

you are now recognized.

Mr. WALDEN. Thank you, Mr. Chairman. Stan, welcome, we’re

delighted to have you here and I’m delighted you found that this

card can be very helpful to you. How much do you think you can

save a year on your drugs?

Mr. BAUMHOFER. Approximately $150 a month or $1800 over the

year which is substantial in my condition.

Mr. WALDEN. You know, I think you hit it on the head here. Is

changing Medicare sometimes confusing for some? Of course, it is.

When it was rolled out in the 1960’s, there were front page stores

all across America about the confusion about the new program. But

what’s the benefit? That’s what we have to look at.

Mr. Chairman, I’m delighted your parents are going to receive

the savings that you’ve outlined. Unfortunately, mine both passed

away waiting for this Congress and the last Congresses to act in

this area as did a lot of seniors. They died waiting for Medicare to

be modernized.

We have taken a giant step forward, I think, to provide assistance to those most in need.

Now did you find it confusing?

Mr. BAUMHOFER. Not at all. In my written testimony, I explained

how simple it had been to get the information and how quickly the

comparison of prices and I feel complimented that the chairman

compared me to his mother.

Mr. WALDEN. By voice, not appearance.

Mr. BAUMHOFER. Thank you. I feel a little bit like a piece of rope

here in this tug of war today, but the rope’s life is dull and being

in the game is better than not at all. In my case, my medical incident cost over $22,000. Medicare paid $14,000 of that. I hope that

this discount card allows me to not have a similar incident and

saves that $14,000 for Medicare.

Mr. WALDEN. That’s been one of our—certainly my concerns and

I think a driving force behind what this committee and this Congress has done. Because if we can allow for seniors and I think Mr.

Fuller, you spoke to this. If they take their prescriptions as requested by their physicians because they can now afford and have

accesss to them, maybe we prevent a heart attack. If you can get

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them on Lipitor for $67 a month, maybe you avoid a $20,000 bypass surgery which I think is very important.

I know Mr. Dingell in the conference was supportive of this drug

card benefit and sure, there are going to be some bumps in the

road. We all recognize that. And we’re going to work to fix it. We’re

going to watch it closely. And as I’ve gone out and met with seniors, they start out having heard sort of the Mediscare rhetoric

from some and they’re a little confused and I walk them through

how it works. I invite them to work with CMS to make the call to

1-800-MEDICARE or to go to the website.

One of the most important things I think we’ve done is encouraged the harnessing of the internet power to comparison price shop

so you don’t have to make the phone calls.

Have you found that to be helpful? Have you gone on and used

the web?

Mr. BAUMHOFER. I have, yes, and I made the phone call also and

they both were helpful.

Mr. WALDEN. I ran into a senior out in Ontario, Oregon where

I did a Medicare workshop and he said I’m not sure I’m going to

do the card because I call around, my wife and I do every month

to various pharmacies in our area to find the best price. I said well,

you know, you might not have to do that now. If that’s how you

want to do it, that’s fair, that’s fine, that’s your choice, it’s voluntary. And I’m being given the cue card here that we’re out of

time because the votes on, but I wanted to thank you for coming

from Oregon and the other panelists for your participation today.

Thank you, Mr. Chairman.

Mr. SHIMKUS. I thank all the panelists for coming. This hearing

is now concluded. Mr. Brown, I appreciate your contribution.

[Whereupon, at 3:10 p.m., the hearing was concluded.]

[Additional material submitted for the record follows:]

RESPONSES FOR THE RECORD BY MARK MCCLELLAN, ADMINISTRATOR, CENTERS FOR

MEDICARE AND MEDICAID SERVICES

QUESTIONS BY REP. PALLONE

Question: What is the specific amount to be spent on educational efforts connected

to the drug card?

Answer: CMS has spent $18 million on media buys for TV ads informing the public about the drug card program. This number includes ads about the general card

program and one on the availability of the $600 in transitional assistance.

We spent $10 million for a mailing to all beneficiary households containing a

short fact sheet on the card program. We will also include information on the drug

card in the regularly mailed handbook that goes out in the fall of each year.

We also spent money on print ads, with costs running under $500,000. The Social

Security Administration also mailed information concerning the card program to

low-income beneficiaries, but CMS did not bear that costs.

Spending on outreach and education in the future will depend on response to the

card program and what CMS believes needs to be done in order to ensure that people who can benefit from the cards are enrolling in them.

We are tentatively planning additional ads for August. Costs for these new ads

are not well known at this time, because we are waiting to see where the need for

this information is greatest before proceeding. It is likely that any future media

buys will not be as costly as our initial efforts.

In FY 2004, SHIP funding will total $21,062,500. This amount consists of $13.5

million in basic funding, $1,562,500 additional funding to help the SHIPs prepare

for activity related to the Medicare-approved Prescription Drug Card, and $6 million

additional funding to help them prepare for activities related to the Drug Card and

the upcoming Part D Prescription Drug Benefit.

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In FY 2005, SHIP funding will be $31,675,000. This will include $14,175,000 in

basic funding, $2,500,000 to assist SHIPs with Prescription Drug Card related activity, and $15,000,000 for activities related to the Part D Prescription Drug benefit.

CMS has also awarded a $4.16 million task order to Ogilvy PR Worldwide for the

purpose of supporting the work of community-based organizations (CBOs) to help

low-income Medicare beneficiaries learn about Medicare-approved discount drug

cards and how to enroll in the program. With the support of the Administration on

Aging the funding for this task has been increased by another 1.75 million. The

focus of this effort is to identify at least 200 CBOs that can conduct outreach activities in the top 30 markets; these top 30 markets target the locations where approximately 70 percent of the low-income beneficiaries reside. The activities of these

CBOs will complement and extend other outreach efforts of the National Medicare

& You Education Program (NMEP). The task order includes monies that will be

used to fund the grassroots, community-based organizations; the remaining funds

will be used to obtain the support of national organizations who have been engaged

to help coordinate the outreach effort and contractual overhead and management

fees.

In addition, CMS is in the process of engaging in several other Federal Agency

partnerships to provide additional resources to organizations/efforts that inform lowincome, diverse populations about the drug card and to assist them in enrolling. Examples include an Interagency Agreement (IA) with the Indian Health Service and

an IA with USDA to provide training to their Extension Services to educate rural

and urban low-income audiences about MMA and the discount drug card.

Moreover, these outreach efforts under the drug card will be useful for more than

just the drug card. By reaching out to the drug card population now we are starting

to be able to reach out to beneficiaries for the drug benefit as well. This is particularly important for the low-income populations who have frequently been hard to

reach—so the payoff on outreach will extend way beyond the drug card to the drug

benefit.

Question: Who, specifically, within HHS, authorized the release of the VNR that

has recently attracted criticism and were specific people in the White House, such

as Karl Rove, or Andy Card, involved in putting together that VNR?

Answer: The release of the VNR was authorized by Kevin Keane, Assistant Secretary for Public Affairs in HHS. The VNR was done in a professional manner by

a recognized public relations firm, and it meets the highest standards for production

of VNRs, which are a common and accepted public relations tool used by the private

sector, the government and members of Congress. There was absolutely no involvement by anyone from the White House

Question: What is the actual cost of running the www.medicare.gov site, and the

cost for the CSRs at 1-800-MEDICARE?

Answer: Please find the total investment from December 8, 2003 until June 21,

2004 by month, on the 1-800 MEDICARE call centers, including data on incoming

calls and average length of call:

1-800 Monthly Call Volume

12/2003 = 684,450

01/2004 = 763,393

02/2004 = 681,409

03/2004 = 946,306

04/2004 = 1,261,908

05/2004 = 3,811,455

06/2004 = 446,897 (as of 06/19/2004)

On the average, the unit cost is about $1.00 per minute. This is a fully loaded

cost. The cost does fluctuate based on the introduction of new initiatives. Sometimes

these new initiatives require mass hiring and ramping up of staff such as in the

case of MMA. Traditionally, our average length of call for 1-800 MEDICARE is 7.5

minutes but a longer length of call can occur due to special campaigns and new Department or CMS initiatives. Based on the call volume from 12/2003 through 06/

19/2004 and an average call length of 7.5 minutes, the overall average cost is $64.4

million.

How much did the additional CSRs cost?

As of June 2004, we have about 3,000 Customer Service Representatives (CSRs)

on duty at 1-800 MEDICARE. In January 2004 we had approximately 738 CSRs.

The average cost of a 1-800 MEDICARE CSR is about $35,000 per year. This is a

fully loaded amount that includes health and benefit packages, training, etc. The

costs for the CSRs are included in the fully loaded $1.00 per minute cost. Traditionally, labor costs account for a significant amount of the overall 1-800 MEDICARE

operating budget.

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1Medicare Approved Drug Discount Cards Provide Drug Prices Significantly Below, Average

Paid by Americans. Centers for Medicare and Medicaid Services. May 6, 2004. 2Medicare-approved Drug Discount Cards Provide Substantial Savings with Generic Drugs.

Centers for Medicare and Medicaid Services. June 4, 2004.

www.medicare.gov website

Please find below how much it cost CMS to add the additional features and resources to the drug compare website (include contracts, etc.). Also, included is the

total cost of the contract (beyond implementing, running it too) in 2004 and 2005:

The costs of the changes and enhancements to PDAP are incremental. Current

and projected costs are:

Jan-June 2004—$3.2M

June-Sept 2004—$700,000

FY05—$1.5M

CMS chose to incorporate the drug pricing information for the Medicare-approved

drug discount card programs into the existing Prescription Drug and Other Assistance Programs database on www.medicare.gov. This decision provided people with

Medicare with the ability to access the new drug pricing information through a tool

that was familiar to many people and that had been enhanced based on consumer

research. Prescription pricing information is provided for both brand and generic

drugs offered through retail pharmacies and mail order pharmacies.

CMS is currently exploring a means to use similar technology to provide similar

prescription drug pricing information to people with Medicare when the actual drug

benefit is implemented in 2006. CMS will utilize a ‘‘lessons learned’’ approach when

developing a Web based tool for the drug benefit. A thorough analysis of information

received from people with Medicare, consumer research, and other sources will be

used to provide people with Medicare with an accurate and easy to use tool to access

information about the Medicare drug benefit.

Volunteered information on the many billions of dollars in new savings available

to seniors as a result of the discount cards:

• CMS studies indicate that any Medicare beneficiary in America today can save

11 to 18 percent, or much more compared to average market prices, on their

drug costs with a drug discount card. These average market prices include discounts available through private health insurance, Medicaid plans, and other

discount sources like manufacturer drug cards. Before the Medicare-approved

prescription drug cards, beneficiaries without drug coverage paid the highest

prices in the nation for their prescriptions. Savings of 11 to 18 percent beyond

private health insurance levels is a significant improvement for America’s seniors. This base level of savings is expected to grow as market competition drives

discounts even lower.1

• A June 4, 2004 study by CMS showed that beneficiaries could save even more

than 11 to 17 percent by substituting generic drugs—which are chemically

equivalent and just as safe and effective as their brand name counterparts—

for branded drugs. The study indicates that beneficiaries who switch to generics

can save between 46 and 92 percent off the prices of branded drugs. This savings is the result of two factors: generic drugs are cheaper than brand-name

drugs and card sponsors are negotiating extremely low prices with generic manufacturers. In fact, generics purchased with Medicare-approved drug discount

cards cost 37 to 65 percent less than the national average price for generics.

In the study, 7 out of 10 generic drugs paid for the $30 enrollment fee in less

than two months—and that is with savings on only one drug. Generic substitution combines with the Medicare-approved drug discount card to afford beneficiaries huge savings on the order of 46 to 92 percent, without any additional

subsidy.2

• CMS studies indicate that our illustrative low-income beneficiaries can save 32 to

86 percent over a 7-month period compared to national average retail prices for

‘‘baskets’’ of commonly used brand name drugs when both discounts and $600

in transitional assistance are taken into account.

• The drug discount cards can be especially helpful to eligible low-income beneficiaries who do not have drug coverage through Medicaid by:

• Offering additional discounts off retail prices that are, in some instances,

more than the 11-18 percent for brand name drugs and 3 0-60 percent off generic drugs being offered to non low-income beneficiaries;

• Providing $600 in each of 2004 and 2005 for the purchase of prescription

drugs;

• Having the annual enrollment fee, if any, paid by Medicare;

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• Offering free or low-cost prescription drugs from several manufacturers including Abbott, Astra Zeneca, Eli Lilly and Company, Merck, Novartis, Pfizer

and Wyeth for beneficiaries enrolling in certain Medicare-approved drug discount cards who exhaust their $600 credit;

• Therefore, when multiplying the savings by 7 million beneficiaries expected to enroll in the drug discount card only or the drug discount card with the $600 transitional assistance, it is clear that Medicare beneficiaries will see billions of dollars in savings. With more than 4 million people already in a drug card program, the savings have already greatly exceeded the administrative costs of establishing the program.

QUESTIONS BY REP. DINGELL

Question: How many people will be working on oversight of the 73 approved

cards? Specifically, how many people will be working on issues of consumer protection and ‘‘bait and switch’’ ?

Answer: A broad array of government and contractor personnel will ensure the

integrity of the drug card program. CMS personnel have been conducting statistical

analysis of pricing data submitted by card sponsors since they began providing us

with that data. We have recently signed an agreement with a contractor who will

focus specifically on analyzing data provided by card sponsors to ensure that price

fluctuations are justified and appropriate. Certain CMS employees, in their role as

card managers, are overseeing our communications with each card sponsor and examining and investigating beneficiary complaints about card sponsor programs.

CMS program integrity employees have hired an additional contractor to look at

price changes and to ensure consumer protection against ‘‘bait and switch.’’ as well.

Another contractor will conduct ‘‘mystery shopping’’ with the drug card sponsors to

ensure that pharmacies that are supposed to be participating in a given card sponsor’s network do in fact participate in that card sponsor’s pharmacy network. Any

inappropriate activities will be reported to CMS and in some instances, the HHS

Inspector General’s office. We will also work with the resources of the Department

of Justice, should we need to do so. In addition, each of the ten CMS regional offices

maintains a fraud unit that can be used to assist any efforts to reduce fraud and

abuse. We believe that the array of personnel we have looking at these issues will

ensure a high degree of integrity within the program and make it possible for beneficiaries to take advantage of this very beneficial program.

Question: Pharmaceutical discounts or rebates come from two different areas: (1)

volume—having a lot of people who will buy your particular drug, and (2) moving

market share—that is the ability to move people to a certain drug or brand. The

more people a card has enrolled, the better discounts or rebates for beneficiaries.

Let me cite two examples:

a. A CMS document dated September 25, 2003, states, ‘‘If a PPO can anticipate a

large number of enrollees, and therefore a large VOLUME of services, it can

negotiate favorable prices . . .’’ The document also notes, ‘‘The cost per beneficiary would be... lowest with three plans.’’ CMS advocated for fewer PPOs in

order to get better prices and lower costs per beneficiary.

b. The State of Michigan expects to realize $8 million in savings on their Medicaid

program this year by banding together with Vermont to purchase drugs. They

expect to get even greater savings next year when they aggregate their purchasing power with other states—they will have $2 billion in purchasing

power—the VA system is $3 billion and they are getting some of the lowest

prices around, even lower than Canada. Again, greater numbers of people give

better leverage in negotiating discounts.

CMS, however, set up the drug discount card program to have 73 different

cards, greatly diffusing any negotiating leverage that seniors and individuals

with disabilities could expect to achieve by banding together.

When CMS implemented the drug discount cards, why did you set up a program

that ran counter to your own recognition that the smaller number of entities providing the service, the better the prices for seniors? How does protecting drug manufacturers from stronger negotiation help seniors?

Answer: The Medicare-approved drug card sponsors are competing for beneficiaries and have a real incentive to negotiate and pass on savings in the form of

the lowest possible prices for the drugs that their beneficiaries need. To obtain these

discounts, the card sponsors negotiate prices on the drugs that are included on their

formularies. In a discount program like this one, the only way that cards can generate any revenues is by providing attractive prices on the drugs that beneficiaries

want, so that beneficiaries use the cards to fill their prescriptions. However, no one

formulary possibly could meet the diverse needs of the Medicare population. To best

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serve Medicare beneficiaries, the program is designed to allow a number of card programs to participate, enabling beneficiaries to have choices based on the drugs they

need and the pharmacies that are closest to them. The cards need to offer savings

and service, and we will be monitoring card programs to make sure beneficiaries

get both. Thus, to succeed in holding onto its beneficiaries, and in building up its

client base for when their drug benefit becomes available in 2006, a card must offer

consistently good deals and consistently reliable service to beneficiaries.

Question: Will CMS limit the number of private prescription drug plans in order

to help seniors get better discounts? Or will you again allow so many choices that

seniors are paralyzed, and discounts are diffused?

Answer: As required by the statute, CMS will ensure that at least two drug plans

are available in each region of the country, although we are not limited to just two

plans and seniors may well have the opportunity to select a plan that best fits their

needs from among a range of plans. The plans will compete with each other directly,

and this competition will work to lower prices for seniors who voluntarily select

such coverage. Our experience with the drug card program has conclusively demonstrated that when drug programs compete, prices drop. As we have done with the

drug card, CMS will provide educational information and personal assistance to

beneficiaries to help them select a drug program that best fits their needs and saves

them the most money. CMS will provide assistance in determining which plan best

suits a particular beneficiary’s needs.

Question: What level of rebate are drug cards getting from the drug manufacturers? (Not the discount at the register but the actual amount of rebate that manufacturers are providing)? How do the rebates compare with what people would get

under the Medicaid best price rule? How do the rebates under the drug card program compare to prices under the VA system? According to representatives of the

Pennsylvania PACE program drug card, that program is only receiving a four percent discount from manufacturers. Are there any cards that are getting manufacturer rebates of less than four percent? Are there any cards getting manufacturer

rebates that are greater than 15 percent?

Answer: We’re still looking at the data, and the information may change over the

coming weeks as more sponsors come online, but so far we are seeing that many

Medicare-approved drug discounts cards will provide significant discounts to beneficiaries:

• For brand name prescription drugs, sponsors are reporting discounts off AWP that

are generally 15%, with some discounts of 20% or more—(we plan to have information on drug card sponsors’ rebate level as this is a reporting requirement);

• Larger discounts are available on some cards for mail-order drugs;

• For generic prescription drugs, sponsors are reporting average discounts off AWP

in the 20-35% range, with some as high as 40-50%

As for comparing prices under the drug card program to those under the VA, in

October 2000, GAO issued a report that examined the possibility of expanding the

VA pharmacy benefit to Medicare. The report discovered that such a scenario would

result in negative ramifications for the entire health care system. In addition, any

Medicare savings would be short-lived.

It is difficult to make comparison between the drug card program and the VA system, because the VA system is a drug insurance program with a particular formulary. While the VA system is a good source for seniors who qualify for coverage,

it is typically not available to seniors. In addition, statute dictates how prices are

determined for drugs that are included on the VA’s formulary. If that statute applied to practically everyone in the country, competition would be hampered and

prices would increase for everyone.

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