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S. HRG. 108–467

THE NEW MEDICARE DRUG DISCOUNT CARD:

AN ADVANCE PROGNOSIS

HEARING

BEFORE THE

SPECIAL COMMITTEE ON AGING 

UNITED STATES SENATE

ONE HUNDRED EIGHTH CONGRESS

SECOND SESSION

WASHINGTON, DC

MARCH 9, 2004

Serial No. 108–30

Printed for the use of the Special Committee on Aging

(

SPECIAL COMMITTEE ON AGING 

LARRY CRAIG, Idaho, Chairman 

RICHARD SHELBY, Alabama 

SUSAN COLLINS, Maine 

MIKE ENZI, Wyoming 

GORDON SMITH, Oregon 

JAMES M. TALENT, Missouri 

PETER G. FITZGERALD, Illinois 

ORRIN G. HATCH, Utah 

ELIZABETH DOLE, North Carolina 

TED STEVENS, Alaska 

RICK SANTORUM, Pennsylvania 

JOHN B. BREAUX, Louisiana, Ranking 

Member 

HARRY REID, Nevada 

HERB KOHL, Wisconsin 

JAMES M. JEFFORDS, Vermont 

RUSSELL D. FEINGOLD, Wisconsin 

RON WYDEN, Oregon 

BLANCHE L. LINCOLN, Arkansas 

EVAN BAYH, Indiana 

THOMAS R. CARPER, Delaware 

DEBBIE STABENOW, Michigan 

LUPE WISSEL, Staff Director 

MICHELLE EASTON, Ranking Member Staff Director 

(II) 

C O N T E N T S 

Page 

Opening Statement of Senator Larry E. Craig ..................................................... 1

PANEL I 

Dennis Smith, acting administrator, Centers for Medicare and Medicaid Services, Washington, DC ........................................................................................... 2

PANEL II 

James Firman, president and CEO, National Council on the Aging, Washington, DC ............................................................................................................. 19

Craig Fuller, president and CEO, National Association of Chain Drug Stores, 

Washington, DC ................................................................................................... 37

Forest Harper, vice president, Pfizer for Living Share Card, Pfizer, Inc., 

Washington, DC ................................................................................................... 52

Karen Ignagni, president and CEO, American Association of Health Plans 

(AAHP–HIAA), Washington, DC ........................................................................ 64

Mark Merritt, president and CEO, Pharmaceutical Care Management Association, Washington, DC ...................................................................................... 78

APPENDIX 

Testimony submitted on behalf of AARP ............................................................... 113

(III) 

(1)

‘‘THE NEW MEDICARE DRUG DISCOUNT CARD: 

AN ADVANCE PROGNOSIS’’

TUESDAY, MARCH 9, 2004 

U.S. SENATE, SPECIAL COMMITTEE ON AGING, Washington, DC. 

The committee met, pursuant to notice, at 10 a.m., in room SD– 628, Dirksen Senate Office Building, Hon. Larry Craig (chairman 

of the committee) presiding. 

Present: Senator Craig. 

OPENING STATEMENT OF SENATOR LARRY E. CRAIG, 

CHAIRMAN 

The CHAIRMAN. Good morning, everyone. The U.S. Senate Special 

Committee on Aging will convene. 

I want to thank you all. Less than three short months from 

today, America’s seniors will get their first real taste of the new 

Medicare prescription drug relief enacted by Congress last fall and 

signed into law by President Bush. I am speaking, of course, of the 

new Medicare prescription drug discount card and the accompanying $600 transitional assistance for lower-income seniors. 

The Congress and the President felt that no senior should have 

to choose between buying food and buying drugs, and the new card 

and assistance program is a critical transition to help those seniors 

in greatest need pay for their drugs during the time it takes to get 

the rest of the Medicare drug legislation up and running by 2006. 

This program is just a beginning, but it is a very important one. 

Our hearing today will take a close look at how the card and the 

assistance program are shaping up so far, and more specifically, 

what seniors can expect as we near the start date in June. So far, 

progress seems to be quite encouraging. For example, the Centers 

for Medicare and Medicaid Services have already received more 

than twice the number of card sponsor application than they originally anticipated, over 100 applications in all. These applications 

have come not just from traditional discount card leaders like pharmacy benefit managers, but also from many insurers and health 

plans, and I should add also from organizations representing America’s pharmacists. This is a group that I know has had questions 

about the discount card approach. 

Also encouraging is the fact that several of the country’s drug 

manufacturers have stepped forward to say they intend to participate in good faith with the new card program, and in many cases, 

to continue or even expand their own existing low-income assistance program for seniors. 

2

I also want to offer very special thanks this morning to Dennis 

Smith, the acting administrator of CMS. This is the man whose 

shoulders the heavy burden of implementing this program have 

fallen and who I suspect may be eagerly awaiting the help of Dr. 

Mark McClellan, the president’s new nominee to head up CMS. Administrator Smith will focus on CMS’s ambitious plans for beneficiary outreach and education. One such plan is the agency’s new 

Price Compare program. Under this program, seniors and their 

families will be able to use an Internet-based discount comparison 

system. Together with real-person assistance from toll-free operators, this system will allow seniors to instantly access and compare 

prices of drugs offered by card sponsors in their areas. 

As we move forward in implementing the card and assistance 

program, a few key priorities will be especially important. First, assuring that seniors get the information they need to understand 

and navigate the program. Second, assuring that the discounts are 

fair and straightforward. Third, seeing that CMS acts aggressively 

to combat possible fraud and to weed out card sponsors who are not 

delivering real values. Finally, it is also critical to assure that 

those seniors eligible for the $600 low-income help get it and get 

it as quickly as possible. 

The new Medicare discount cards have a tremendous potential 

and the early signals, as I said, are encouraging. However, much 

work remains to be done. We appreciate our witnesses for their 

contributions today, and I want to thank them. 

Senator Breaux, the ranking member of the committee, I understand will be joining me for some of the hearing, and I do appreciate that. 

This committee will monitor progress throughout the phases of 

implementation of this new legislation, and this is simply the first 

of a series of efforts that we will undertake to make sure that there 

is thorough, timely oversight as we move toward full implementation. 

As I mentioned, our first witness this morning is Dennis Smith, 

the acting administrator for the Centers for Medicare and Medicaid 

Services. Dennis has played an instrumental role in developing the 

prescription drug card program. I want to thank him for his hard 

work in a clearly complex and difficult process. However, it appears 

it is well under way and moving in a timely fashion. 

So Dennis, we welcome you to the committee and look forward 

to your testimony. Please proceed. 

STATEMENT OF DENNIS SMITH, ACTING ADMINISTRATOR, 

CENTERS FOR MEDICARE AND MEDICAID SERVICES, 

WASHINGTON, DC 

Mr. SMITH. Thank you very much, Mr. Chairman. I appreciate 

the opportunity to come before you and the committee today to update you on our progress for implementing the discount card. The 

drug discount card itself is good news for the millions of senior citizens who do not have access to purchasing through group plans. 

Twenty-four percent approximately of Medicare beneficiaries do not 

have drug coverage, so this will bring access to discounts for millions of our seniors and people with disabilities who are also eligible for Medicare. 

3

While the discount itself is good news, the $600 transitional as- sistance is even better news. We will put $600 for low-income senior citizens and disabled individuals toward the purchase of their 

drugs and that is $600 per year. When you consider that the average Medicare beneficiary without insurance coverage is spending 

approximately $1,400 annually on their drugs, this indeed is a significant benefit to those low-income seniors. 

We are being diligent about implementation. I am here to report 

to you that we are on track for implementation. Our partners in 

the private sector have, as you mentioned, really given an outstanding response to the challenge of providing discounts to seniors 

and I am very pleased that we indeed had over 100 applications 

to offer discounts. We are currently reviewing those applications. 

By the end of the month we will be announcing who the drug sponsors will be. 

You asked me to focus on a number of specific parts of our implementation in terms of savings, the card effectiveness, implementation and outreach, market participation, response by the stakeholders, and I am happy to turn to each of them in turn. 

First in terms of anticipated consumer savings, the card sponsors 

themselves will provide the discounts, as they do in the private sector now, by offering negotiated discounts to individuals through the 

card sponsorship. We believe that the competition between the card 

sponsors and we believe that our new tool, the price comparison as 

you mentioned, will be very powerful incentives to help lower the 

price of prescription drugs. 

For the individual, individual beneficiaries can anticipate savings 

of 10 to 15 percent off their prescription drug spending with discounts of 25 percent or more on specific drugs as they are getting 

their prescription filled. Again so the typical senior without drug 

coverage today is spending about $1,400 annually, so this will be 

a significant benefit to them. 

The card effectiveness itself, we believe that one of our important 

roles is to do outreach to inform as many Medicare beneficiaries of 

this bridge to Part D and this is an important education process 

in anticipation of the full benefit beginning in January 2006. We 

are very aggressively pursuing an outreach strategy that involves 

multimedia broadcasts but it also means people on the ground and 

educating people who senior citizens know well and serve senior 

citizens on a day-to-day basis. So we are working with state departments of aging, our Senior Health Insurance Programs, known as 

SHIPs, state minority health offices, state social services offices, as 

well as our partners in the Social Security Administration. We are 

also working with the providers themselves—with our pharmacists, 

with physicians, again to spread the word of the availability of the 

discount card in anticipation and signing as many seniors up as we 

possibly can. 

We are also working with the states themselves. A number of 

states have state pharmacy programs. We are working to coordinate the benefits with those state programs and helping the states 

to have a seamless transition to the drug card. So those interactions with the drug cards are very important, as well. 

The advertisements we are pursuing because we believe that it 

is incumbent on us to spread the good news and reach as many 

4

Medicare beneficiaries as we can. Let me mention our 1–800-Medicare toll-free number that we have been promoting over the last 

several years, again anticipating the role that it will play to help 

inform senior citizens. 

We anticipate that—to put into context, in fiscal year 2003 we 

received approximately 5.6 million calls over 1–800-Medicare and 

we anticipate more than doubling that amount and are anticipating 

that we will receive about 12.8 million calls this year. To do that 

we are increasing our capacity to handle those calls and we have 

already expanded the number of individuals by more than three 

times in terms of the number of individuals who will be handling 

those calls and also our contracts are such that we can add additional volume, as well. So I want to assure seniors that when they 

do call 1–800-Medicare that they will be well served on the other 

end. 

A number of publications are also planned for release this year to explain the drug discount card and the $600 low-income assistance. We are publishing a pamphlet that provides an overview of 

the discount card and we are also publishing a booklet that will be 

mailed to all Medicare beneficiaries, that they will have the information that they need. 

We are also working with the Social Security Administration 

that they will specifically do a mailing to low-income Medicare 

beneficiaries detailing the drug card and the $600. 

We are sponsoring conferences across the country and regionally. 

We are holding a number of teleconferences with our partners in 

the private sector, the pharmacists and providers, and we will be 

scheduling a national conference here in Washington, D.C. in April. 

Those are some of our outreach activities. We also want to emphasize our outreach to people with disabilities, as well, who are 

also Medicare beneficiaries, and the importance of this benefit to 

them. 

Let me talk very briefly about, as you mentioned, our price comparison. This is a tool that we will be making available and the 

price comparison—again, as you know, information and knowledge 

is power and that is what we are trying to bring to the beneficiaries themselves. 

So as they review their choices and their options, they will be 

able to access through our Medicare website or they can call 

through 1–800-Medicare or, as I mentioned, the other individuals 

who are being trained to use our resources will be able to get information by the card sponsor and will be able to make comparisons 

on the negotiated discounts that will be available to them. 

We believe this information will be a very powerful tool to those 

beneficiaries themselves as they make their choices and to the 

overall market, as well, as competition in the marketplace will in 

itself become a benefit to everyone. 

Let me assure you, as I said, we are working aggressively on our 

implementation strategies. We are on target, meeting our time 

deadlines. We do have some important milestones coming up. At 

the end of this month we will be announcing the drug card sponsors themselves. In April, as I mentioned, a national conference on 

training. The mailings will be going out the first of May. The first 

week of May the drug sponsors themselves will be able to begin 

5

their marketing and outreach and signing up our senior citizens for 

the benefits to begin the first of June. 

So I am very pleased to tell you that we are on target and moving very aggressively. As I said at the outset, the discounts themselves are good news for those without drug coverage. The $600, 

$1,200 over 2 years, is very good news for our low-income seniors. 

We believe that this will set the stage for the full Part D drug benefit to begin in 2006, the education of the senior citizens themselves to make them aware of the options and the choices that they 

will have to be able to lower the cost of prescription drugs that 

they now face. 

Thank you very much, Mr. Chairman. I am pleased to be able 

to answer any of your questions. 

The CHAIRMAN. Well, Dennis, thank you very much. We appreciate again your being here today. For the Congress and the president to hand you late last year a rather daunting task, it appears 

that you are well on your way toward getting it implemented in a 

timely fashion. 

You testified that CMS has received over 100 applications for potential card sponsors, more than expected. What are the reasons 

driving such a positive response? 

Mr. SMITH. Senator, I believe the positive response was as people 

positioned themselves for the full drug benefit in 2006, the manufacturers, the Medicare Advantage sponsors, the discount card 

sponsors are really trying to make their products known to beneficiaries. For their own competition amongst themselves, they are 

positioning themselves for 2006 and again I think that is good 

news for everybody. 

The CHAIRMAN. It now looks likely that seniors will have quite 

an array of cards. That is certainly going to be a lot of choices to 

make in enrollment. To help with these choices, you have talked 

about the 1–800-Medicare number and the ability to log onto your 

Price Compare site. 

A senior does not have to be, I assume, too Internet-friendly to 

be able to get there, do they? Talk to us a bit about that because 

I see that as a very valuable empowering kind of tool for them. 

Mr. SMITH. Senator, I believe that it will be, as well. Our website 

at www.Medicare.gov, we have worked with the senior in mind as 

we develop that website, making it easy to understand, simple, 

check boxes to move you through the process. 

So the pop-up features—— The CHAIRMAN. You should use me as a guinea pig. I am relatively Internet-and computer-ignorant, so I might be a good test 

subject. 

Mr. SMITH. Well first, let me assure you there is no need to be 

hesitant. If seniors do not want to use it at all they can call the 

1–800-Medicare. But as you said, ‘‘Many seniors now are becoming 

very savvy in the use of the Internet.’’

But what they will see as they go to that website is a very userfriendly, simple answers, check boxes, that will then move them 

through the menu. The website is geared to the beneficiary itself 

and to help them also understand other options that might be 

available. For example, we want them to know specifically about 

the $600 but we also want them to know that, in fact, they may 

6

be eligible for Medicaid and that there are other state pharmacy 

programs available to them, as well. 

The CHAIRMAN. That was going to be my next question. How 

much information does the senior have to bring with them to that 

point of contact, be it the 1–800 number or the website? Then what 

kind of options might they be talked through as it relates to 

choices? 

Mr. SMITH. We think it is information that seniors will readily 

know on their own. As I said, we have tried to make it simple in 

terms of the questioning itself but because the $600 is geared to 

an income level, we ask them a question about their income. So we 

need to know that, that they would be eligible for the $600. 

There is also questioning—again they will be able to have a simple check box for the things that they want, that they are answering yes or no to. So they are not filling out a lot of information. 

The information is basically being presented to them and then they 

respond in an easy fashion. 

The CHAIRMAN. Well, for any of us approaching a new task, a 

simple, straightforward approach is, of course, the most valuable. 

For example, will there be a standardized enrollment form? Will 

that variety of options be accessed through a standardized form? 

Mr. SMITH. The enrollment form? Yes, Senator. The enrollment 

form itself we have been testing with seniors, making it easy to 

use, easy to understand, and the process for enrollment itself. So 

we have shared that with the seniors. We have been working with 

the sponsors, as well, and outside groups, advocacy groups, testing 

that to make sure they have all the information so that you can 

complete it, so there is not a lot of back-and-forth, but the standardized form, I think, we have gone through a lot of work and effort to try to refine it down to make it easy to use. 

The CHAIRMAN. Now that we have a senior either on the phone 

or through the Internet, they have filled out a form, obviously they 

are going to be approached with a variety of options. What kind of 

action might CMS take against plans that would offer extremely 

tempting deals in the first instance only to switch later on. I am 

not going to suggest that anyone would do a bait-and-switch, but 

actually I am going to suggest that somebody might do a bait-andswitch. That is, after they got the person enrolled, up would go the 

prices. 

How will you monitor that to make sure that that game is not 

played? 

Mr. SMITH. We will be monitoring that, Senator, and we will be 

monitoring to assure that those discounts that were offered are 

real. 

Also let me assure you again the discount card in many respects 

is positioning people’s plans for the future, so they have every incentive to make sure they are dealing straight with the beneficiary. 

The worst thing, the last thing they are going to want to do is to 

upset the beneficiary, to get themselves in hot water with CMS or 

the inspector general over their marketing strategies or marketing 

tactics. 

The CHAIRMAN. Or some national senior publication highlighting 

an individual group as a bad performer. 

7

Mr. SMITH. When you are looking to the future and what role you 

want to play, the last thing you want to do is mess up between now 

and then. 

The CHAIRMAN. You find someone that has messed up, what do 

you do at CMS? 

Mr. SMITH. We have a number—again, each of the plan sponsors 

sign contracts with us and those contracts deal with enforcement 

activities. So we have the authority to impose intermediate sanctions in terms of halting enrollment. We can impose civil monetary 

penalties and pulling the plugs in its entirety, terminating their 

endorsement of a card sponsor. We have all those tools at our disposal. 

I do want to say, since you gave me an opening, for our seniors 

again to reiterate those basic consumer protections about protecting your individual information—never give out your Medicare 

number, never give out your bank account number, those are not 

things legitimate card sponsors are going to be asking for, so never 

give out that type of information. 

The CHAIRMAN. There are some reports out already that there 

may be some gaming going on. Is it serious? Do we know or have 

you been able to see anybody out there yet? I notice there are a 

few reports of I guess I will use the word con artists at hand. 

Mr. SMITH. We are pursuing a couple of different leads of behavior that may indeed be fraudulent and again we have really a coordinated activity with the Department of Justice, as well as our 

own inspector general, to pursue any of those leads and, in fact, we 

will be doing that. Obviously there are severe penalties associated 

with that if it turns out to be true. 

The CHAIRMAN. Well, we have already mentioned the ‘‘do-nots’’

that certainly a senior ought not get involved in. Are there any 

other kinds of danger signs that are evident that a senior might 

see or red flags, if you will? Will you develop in your information 

a checklist of those kinds of things, a due diligence, due caution 

kind of checklist, let us say, to the average senior? 

Mr. SMITH. Again the legitimate card sponsors who have come to 

us and entered into contracts, we have specific agreements with 

them about the timing of their marketing and they cannot jump 

the gun on everybody else, on specific ways to do their marketing 

to make sure that they do not cross the line in the way the marketing to seniors is being done. 

So those are a part of the criteria and why we invited them to 

come in for our endorsed cards, to assure seniors that those safeguards have been put into place and people with the endorsed 

cards are following those specific guidelines and rules. 

Again I think our partners in the private sector, in consumer 

groups, are going to be out there helping us and to spread the word 

to seniors that if you feel like something is wrong, do not hesitate 

to call and report any activity that you think is not appropriate. 

The CHAIRMAN. Well, thank you. Let me now approach the other 

part of this that you have spoken to and that Congress is very intent on, and that is the $600 direct assistance. Experience from 

some public assistance programs has demonstrated that lower-income folks are sometimes a little harder to reach. What effort is 

CMS planning that would help assist in fully reaching the many 

8

eligible seniors who will qualify for that $600 assistance that we 

have targeted? 

Mr. SMITH. Senator, the Social Security Administration itself will 

be doing a targeted mailing to low-income seniors to inform them 

about that $600 and encourage them to participate. Experience 

does show that the low-income seniors in particular do not always 

avail themselves of the resources that are available to them. 

We are, in addition to working with Social Security, we will be 

working with the other groups at the state level. A number of 

states offer their own pharmacy assistance programs and discount 

cards, so working with the states, they know who a lot of the seniors are and to avail them of that assistance. Again I think that 

this is an area in particular—in my other job in terms of administering the Medicaid program, we know that seniors need that 

extra assistance in reaching them, informing them of the options, 

and helping them to make a choice and make a decision. 

So this is an area that we will be very aggressive in. Our partners in the states will be of great benefit to us and again our partners in the private sector, as well, to make sure people know what 

is available to them. 

The CHAIRMAN. A couple of last questions. I think early on many 

pharmacy groups were opposed to the Medicare-sponsored discount 

card program for a variety of reasons, and yet the final legislation 

included several provisions to help assure adequate access to pharmacies. Now we are seeing the major pharmacy groups seeking to 

sponsor cards on their own. 

What do you see as the effect of the card program on America’s 

pharmacies? 

Mr. SMITH. Well again, the fact that the pharmacists themselves 

are coming to you today to talk about their role in the discount 

card is just a great development and we are delighted to join with 

them as partners. I think that the protections in terms of access 

to include the local pharmacist in the delivery of the discount card 

in itself was an important bridge to cross and Congress did the 

right thing in making sure that those safeguards were there and 

our partners have responded in a very positive way and we are 

very grateful for that. 

The CHAIRMAN. Well, getting off on the right foot, I think, is always important for new programs. It certainly appears at this moment that you are making every effort to make that happen, and 

I hope that the robust interest in the card sponsorship in 2004 

bodes well for and is a prelude to a full drug benefit in 2006 and 

a robust participation there. 

How would you react to that? Is that a reasonable conclusion to 

draw? 

Mr. SMITH. I think that it is, Senator. I think that and the folks 

here in the first row that you see in front of you have worked night 

and day on building relationships that will make this all work from 

our information technology and understanding states of their information systems so that the linkages can be made, so everybody can 

talk together, from a system standpoint to testing out the application form has been a tremendous effort and I do want to thank the 

professionals at CMS who have, I think, done an outstanding job 

in these first few months. 

9

I have been on the front lines of bringing new programs up and 

know what it takes and all the thousands and thousands of decisions that have to be made so it all works smoothly and I come before you today with great confidence that it indeed is going to be 

a very smooth transition. 

The CHAIRMAN. Well, Dennis, thank you very much for your testimony and the enthusiasm you bring to what you are doing, and 

we hope you have the greatest of success, for America’s seniors’ sake. But having said that, we will watch you very closely. 

Mr. SMITH. Senator, I want to thank you for your leadership and 

I am delighted to come before you today and look forward to additional visits to assure you we are on the right track. 

The CHAIRMAN. When you get your website up and it is fully operative, we might get you back before the committee for a full demonstration, to understand it and to again draw greater attention to 

it, as hopefully we can, so that it can be effectively used. I would 

hope that if your better than doubling of calls to the 1–800-Medicare actually develops, that you have a substantial call center to 

handle those. There is nothing that provokes anybody more than 

to dial a 1–800 number and wait 45 minutes for a live body to come 

on line. 

Mr. SMITH. Senator, one of the things about Medicare is we have 

parents and family members who do not hesitate to inform us 

when maybe we did not perform as well as we expected to. So the 

feedback is always welcome and I think our seniors are going to 

be very pleased with the service that they will get. 

The CHAIRMAN. Well, Dennis, again thank you. Thank you very 

much, and let me thank the folks out at CMS for the work that 

is being done. We appreciate it. 

Mr. SMITH. Thank you, Mr. Chairman. 

[The prepared statement of Mr. Smith follows:]

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The CHAIRMAN. We will ask our next panel to come forward and 

please be seated. 

Let me thank our second panel today for being here, and I will 

proceed in alphabetical order. So we will first hear from Jim 

Firman, who is president and CEO of the National Council on the 

Aging. In this capacity, Jim has served as a tireless advocate for 

seniors, and we appreciate you being here today. 

Next will be Craig Fuller, who is the president and CEO of the 

National Association of Chain Drug Stores, whose organization has 

announced its desire to enter into a partnership to offer a drug 

card of its own. 

Then next we will hear from Forest Harper, who is the vice 

president of Pfizer, for Pfizer’s Pfizer for Living Share Card program. He will be talking about Pfizer’s plans to continue to enhance the Share Card as a supplement to the new program, as well 

as about Pfizer’s unique and very encouraging efforts to go even 

further and participate directly in the new Medicare-sponsored discount card program. Overall, the assistance programs offered by 

Pfizer, Merck and certain other drug manufacturers may go a long 

way toward helping make the new card program a success. 

Next we will hear from Karen Ignagni, the distinguished president and CEO of what I understand is now a newly christened organization called America’s Health Insurance Plans, or AHIP. 

AHIP is the product of a recent merger of the American Association 

of Health Plans and the Health Insurance Association of America, 

both of which played vital roles in the creation of the new Medicare 

law. 

Finally, with us today is Mark Merritt, CEO of the Pharmaceutical Care Management Association representing America’s 

pharmacy benefit managers, many of whom have been leaders in 

developing drug discount cards and from whom we can all, I think, 

learn a great deal. 

So I look forward to all of your testimony and again let me now 

turn to Jim Firman, president and CEO of the National Council on 

Aging. Jim, welcome. 

STATEMENT OF JAMES FIRMAN, PRESIDENT AND CEO, THE 

NATIONAL COUNCIL ON THE AGING, WASHINGTON, DC 

Mr. FIRMAN. Good morning, Senator. Thank you for the opportunity to participate in today’s hearing, I am pleased to represent 

the National Council on Aging, the nation’s first organization 

formed to represent America’s seniors and those who serve them. 

There are three messages I want to convey today. First of all, the 

new Medicare law is the single most important opportunity to help 

low-income Medicare beneficiaries that has emerged in the past 35 

years. 

Second, the actual savings to many low-income beneficiaries 

under the new discount card program are going to be far more generous than most people realize. 

Third, the confusion about the new law and the benefits created 

will give us a unique set of challenges that policymakers, government agencies and advocates are all going to have to work together 

to solve. 

20

The new Medicare law is a unique opportunity to provide prescription drugs and other assistance to an extremely vulnerable 

population that is struggling daily to get their needs met; namely, 

low-income seniors and younger people with disabilities, many of 

whom live alone, suffer from multiple chronic illnesses, and take 

several medications. Although most beneficiaries will realize savings of 10 to 20 percent under the Medicare-approved discount 

card, many with incomes below 135 percent of poverty, regardless 

of assets, will be eligible for $600 transitional assistance this year 

and next. 

However, there is very good news to report about the transitional 

assistance benefit. Most low-income beneficiaries who enroll will 

actually save a lot more than $600 because of the commendable action by several pharmaceutical manufacturers to offer savings programs that will wrap around the Medicare-approved card. 

There are two charts over here that I would like to draw your 

attention to. The first is an example of an 82-year-old man from 

Idaho with an income of $10,000 and assets of cash in the bank of 

$20,000. Now as you know, Senator, there is no state pharmacy assistance program in Idaho and he would not qualify for Medicaid 

because of his assets. 

In this particular case this individual would be spending $5,500 

on three different medications. As a result of the transitional assistance and the wrap-around programs offered by the three companies, this person’s actual costs for the year would only be ap- proximately $460. This person will save over $5,000 per year in 

2004 and 2005. 

The second example, is a 68-year-old woman living in Louisiana with income of $11,000 and assets of $30,000. She currently may 

be spending $2,500 a year on medications. As a result of the transitional assistance and the wrap-around program she would be 

spending about $475–480 a year. Her savings will be about $2,100 

a year. 

Now every case is different. It depends on the individual, the 

medications they are taking, how much they are paying retail, 

what the dispensing fees are, but if persons have income less than 

135 percent of poverty and qualify for transitional assistance, many 

of them are going to achieve dramatic savings. 

This is very important because as we are out there encouraging 

low-income people to enroll, the message needs to be that the $600 

savings may only be the beginning of what you can actually save 

in 2004 and 2005. 

However, to fully achieve these substantial savings it is imperative that as many low-income beneficiaries as possible actually enroll in the programs. Unfortunately, as you noted, the track record 

of various past efforts to enroll low-income populations in public 

and private benefits has been, at best, inconsistent and uneven. 

For example, the take-up rate for the current Medicare low-income 

benefits, QMB and SLMB, are estimated to only be 43 percent after 

all these years. Now, we are talking about a very short timeframe 

and much more ambitious enrollment goal. 

In addition, we face the challenge that beneficiaries are already 

very confused about the new law and as the Kaiser poll showed, 

many do not even know the bill passed and was signed into law. 

21

NCOA and others view this as an extraordinary and time-sensitive opportunity to organize and mobilize a broad-based public/

private partnership to significantly increase projected participation 

rates. While proposed CMS and SSA awareness efforts will reach 

millions of low-income beneficiaries, also the private sector has to 

do our part, as well. There needs to be complementary, coordinated 

efforts that go deeper into the community. 

In response to these challenges and opportunities, NCOA and 

other voluntary groups are organizing the Access to Benefits Coalition, a broad-based public/private partnership including CMS, and 

government agencies, dedicated to ensuring that low-income beneficiaries know about and can make optimal use of the new Medicare prescription drug programs and other resources available to 

save them money. 

The goal of the ABC campaign is to quickly and measurably educate low-income Medicare beneficiaries and their families, provide 

hands-on, personalized outreach and assistance, and facilitate actual enrollment in the transitional assistance and other benefits. 

Our plan is to extend and complement Federal efforts, not to duplicate them. This is a huge job and we all have to do our part. 

NCOA is now developing an enhanced version of our 

BenefitsCheckUpRx website to facilitate customized decisionmaking and enrollment in a full range of savings programs. The 

new decision support tool will help beneficiaries to determine the 

individualized combination of programs that will save them the 

most money, not only the new Medicare benefits but state pharmacy programs, manufacturers’ discount cards, 130 private drug 

company patient assistance programs, because the reality is in 

2004 and 2005 people are going to need to piece together a combination of programs in order to be whole. 

If their income is over 135 percent of poverty, they will not qualify for the transitional assistance, but they are still going to need 

help and they are going to need to put together the right package 

for them. 

As part of our effort we will train and support thousands of local 

coalition members and volunteers to serve as intermediaries with 

low-income beneficiaries to use our new tool and the CMS Compare 

tool, which is also a great tool. 

With the cooperation of the card sponsors, we also hope to ease 

the burden of obtaining and completing the enrollment form for 

transitional assistance by including printable e-forms for the Medicare-endorsed card and other important savings programs right on 

the website. 

Other strategies that can be used to maximize low-income participation in the new Medicare benefit would be to automatically 

enroll Medicare savings program recipients in the credit program 

and to create a universal enrollment form for the transitional assistance benefit, which if I understand it, Mr. Smith said CMS is 

planning to do and I think that would be very helpful to this process. 

Let me conclude by saying regardless of whether an individual 

or organization supported or opposed the Medicare legislation, our 

responsibility now is to America’s seniors and people with disabilities and their families. This transcends politics and is very clear. 

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We all must come together and combine our energies and resources 

behind a coordinated, sustained campaign to maximize prescription 

drug savings for underserved older Americans and persons with 

disabilities. 

By working together in a nonpartisan way on outreach and enrollment initiatives focussed on underserved populations, we can 

significantly improve the quality of life for millions of Americans 

who need help this year. Thank you. 

[The prepared statement of Mr. Firman follows:]

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The CHAIRMAN. Well, Jim, thank you very much. Information 

flows are going to be critical. I recently hosted a health care conference in Idaho about the new programs, and it was well attended, 

upwards of 600 folks. What was fascinating to me throughout that 

conference, and I have never seen it before, is that there were nearly 600 people there, all of them taking notes with every speaker. 

There is a great hunger for information. While some have been 

critical of what Congress did in one way or another, there is still 

a true recognition that this is a valuable asset for America’s seniors. 

Now let me turn to Craig Fuller. Craig is president and CEO of 

the National Association of Chain Stores. We welcome you before 

the committee, Craig. 

STATEMENT OF CRAIG FULLER, PRESIDENT AND CEO, 

NATIONAL ASSOCIATION OF CHAIN DRUG STORES, WASHINGTON, DC 

Mr. FULLER. Mr. Chairman, thank you very much. It is a pleasure for me to be here today. I have submitted a statement for the 

record and I would like to just spend a few minutes talking to you 

about some of the experiences we are having and hopefully being 

responsive to some of the good questions you asked a little bit earlier. 

I would also like to reciprocate, frankly, and invite you and members of this committee, indeed your colleagues in the Senate, to 

visit a pharmacy over the next few months and see first-hand how 

seniors are coming to learn about the program, enroll in the program, and receive the benefits from this program because that is 

really where our commitment lies. 

As Jim said so eloquently, we debated various aspects of this legislation as it moved through the Congress but today the Medicare 

Modernization Act is the law. It is a law that reflects some of the 

concerns we had during the course of last year but it is a law that 

we fully intend to do everything we can to ensure is made operational and works for America’s seniors and provides the kind of 

benefits not only in 2004 and 2005 but in 2006, as envisioned by 

the legislation. 

We have, of course, members all across the country. Our members are held within 217 different companies, 33,000 different 

stores. We have 120,000 pharmacists that see hundreds and hundreds of thousands of patients every single day across the country. 

I also wear another hat though, as you suggested. NACDS is the 

co-owner of the Pharmacy Care Alliance. We decided early this 

year to partner with Express Scripts, one of the nation’s largest 

and leading pharmacy benefit managers, in the Pharmacy Care Alliance for the purpose of offering a senior drug discount card. We 

felt if we were going to be able to do this effectively, we had to 

work with an organization that had a lot of experience in this area 

and we have been very pleased with this partnership. I must say 

that it is an intense activity. As you were suggesting with the previous witness, Dennis Smith, you kind of get into this on a 24-houra-day basis in order to get ready for the enrollment that begins in 

May and obviously the benefits beginning in June. 

38

We are going to reach out, though, to all of our pharmacists, as 

well as to independent pharmacists across the country because we 

think that that’s where most of these seniors go. It is always important to remember that of the 40 million plus Americans who are 

Medicare-eligible, 75 percent have some kind of coverage, not always good coverage, but 25 percent or so have no coverage at all 

and those patients today, for their medication needs, are speaking 

with their physicians and with their pharmacists. 

The minute this legislation was passed, people were coming into 

the stores asking about the program, asking about how to enroll, 

asking about when it would be available. For those 10 or 12 million 

people who have no coverage during the course of the year, they, 

and as Jim suggested, their friends or relatives and their caregivers are very much interested in how we are going to deliver on 

June 1. So we are going to be actively involved through the Pharmacy Care Alliance in enrolling patients and in hopefully meeting 

their needs. 

You asked in organizing this hearing to have a discussion of 

some of the issues we face, and there are issues. One, I think, lies 

with expectations. What is that senior going to expect when they 

come into a pharmacy to enroll and when they come in to receive 

the benefit from their card? Well, I am pleased to tell you that I 

actually believe that because the pharmaceutical manufacturers 

and retail pharmacy are going to be participating and making concessions on the cost of this medication that we should exceed the 

estimated 10 to 25 percent savings. I think we can beat that. We 

are working now with the manufacturers on the details of the program and that is good news. 

However, of course, some of the expectations are that this is a benefit program with a $10 co-pay and it is not that, and so we are 

going to have to find ways to help educate seniors. That is why we 

are very pleased, frankly, with what CMS has done. We commend 

CMS. They are working tirelessly with us and many others to get 

this information out to seniors and we have been distributing the 

information they provide to seniors. 

I think there are going to be issues with the sheer magnitude. 

One of those common phrases heard in this town is ‘‘This isn’t rocket science.’’ Well, this is about as close to rocket science as a health 

care program can get when you think of the fact that we may have 

10 or 12 million people, plus another 10–12, 20 million people who 

are concerned about them, coming to stores, coming to organizations like Jim’s, coming to the Congress and to Medicare saying, 

‘‘How do I enroll?’’ They are all going to do it on May 3 when this 

program kicks off and they will have 30 days, if they want to be 

able to participate in June, roughly 30 days to do that. There is a 

lot of technology behind these programs and we are working closely 

with CMS to make sure it happens. 

The website that you asked about is very important. We also will 

have a website for our program to help educate seniors. A lot of 

seniors and their caregivers come to websites for information. A lot 

of seniors come to our retail pharmacy websites for information and 

all of these are going to have to be coordinated. 

It is an important undertaking and I will close by saying that as 

you pointed out, we have had concerns but our concerns were adVerDate 0ct 09 2002 13:52 Jun 03, 2004 Jkt 000000 PO 00000 Frm 00042 Fmt 6633 Sfmt 6633 C:\DOCS\93394.TXT SAGING1 PsN: JOYCE
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dressed last year. We think one of the reasons we wanted a program that was developed within the community of pharmacy was 

to demonstrate that a level playing field that does not push people 

to mail order, a program that has transparency, a program that 

has open access, can be competitive, can work, and can serve America’s seniors, and that is what we are about building as we go forward. Thank you again for allowing us to come and talk to the 

committee. 

[The prepared statement of Mr. Fuller follows:]

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The CHAIRMAN. Craig, thank you very much for that testimony. 

Now let me turn to Forest Harper, who is vice president for 

Pfizer’s Pfizer for Living Share Card program. Forest, we appreciate your participation today, and I will tell you that in the health 

care conference we had in Idaho, we appreciated Pfizer’s involvement there. Obviously your company is taking a very active role in 

this effort. Please proceed. 

STATEMENT OF FOREST HARPER, VICE PRESIDENT, PFIZER 

FOR LIVING SHARE CARD, PFIZER, INC., WASHINGTON, DC 

Mr. HARPER. Thank you, Mr. Chairman and members of the committee and staffers. My name is Forest Harper and I am vice president of Pfizer in charge of the Pfizer for Living Share Card program. I deeply appreciate your invitation and to appear here today 

to talk about our program. I am happy to discuss Pfizer’s continuing commitment to providing patients in need with access to 

prescription medicines. I ask that my written statement be included in the record. 

The CHAIRMAN. It will be. 

Mr. HARPER. It was just 2 years ago that we created the Pfizer 

Share Card program as a bridge to Medicare prescription drug benefits. The Pfizer Share Card has provided immediate assistance to 

those most in need while Congress took on the challenge of creating a more enduring legislative solution. Over those 2 years 

Pfizer’s Share Card has helped more than a half a million low-income Medicare enrollees fill nearly 4.5 million prescriptions. The 

Pfizer Share Card allows low-income Medicare beneficiaries who 

have no prescription drug coverage to purchase most Pfizer medicines for just a flat fee of $15 per month per prescription, as you 

can see on the chart to my left. 

We have learned a number of important lessons that have helped 

make the Pfizer Share Card a success. We believe these lessons can 

help ensure the success of the interim discount card and we also 

learned that to maximize the enrollment of Medicare beneficiaries, 

the program has to be as user-friendly, simple, predictable, and 

convenient as possible. 

We have also learned that to reach this target population a successor program must go the extra mile, not just advertisement. 

What really works is partnering with grassroots organizations that 

Medicare beneficiaries truly trust. We work with a network of over 

25,000 local community-based organizations. This is necessary to 

ensure that nobody is left out and to reach across language and 

cultural boundaries. 

The interim Medicare discount card is an integral and important 

piece of the new Medicare bill. Like the Pfizer Share Card, it is designed to provide immediate assistance to those most in need. 

While CMS goes about the challenging task of implementing the 

new and universal prescription drug benefit in 2006, we will be 

here. 

Let me emphasize that Pfizer is committing to making both programs a success, both the Medicare discount card and the permanent Medicare prescription drug benefit. To that end, we are actively working with leading health care organizations to create a 

new cooperative program that will offer Medicare beneficiaries imVerDate 0ct 09 2002 13:52 Jun 03, 2004 Jkt 000000 PO 00000 Frm 00056 Fmt 6633 Sfmt 6633 C:\DOCS\93394.TXT SAGING1 PsN: JOYCE
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mediate assistance through the new Medicare discount card. We 

believe that this cooperative program currently under discussion 

could be one of the most comprehensive discount cards currently 

under consideration by CMS. 

The proposed program envisions a broad coalition of health care 

companies aligned around common goals. Our first goal is to assure 

continuity of care for our current Pfizer Share Card members. Second, we want to provide patients in need with even broader access 

to the prescription medicines that can help them better manage 

their health. We are also committed to preserving the integrity of 

the physician and pharmacist patient relationship, as Craig mentioned earlier, that is at the heart of the health care delivery system. 

Let me also emphasize that Pfizer’s commitment to patients in 

need did not start with and certainly will not stop with the Pfizer 

Share Card or the coming Medicare discount card. For more than 

30 years in which I am proud to say 22 of those years I have personally witnessed, Pfizer has been reaching out to people in need. 

We donate over $1 million each day in medicines throughout our 

U.S. outreach programs. In 2003 alone we donated $500 million in medicines to more than 

1.2 million Americans, are our second chart points out, in our three 

different programs on access. One program is the Sharing Care 

program. The second program is our Connection to Care program, 

which is the physicians offices, and then the Pfizer Share Card program. 

Before I close I would like to share with you one of the thousands 

of success stories from a Pfizer Share Card enrollee. You know, I 

really had the privilege of personally meeting Lorraine, who is a 

74-year-old and lives in Sandy, UT. She became a Pfizer Share 

Card member in September 2002 and at that time Lorraine had no 

prescription drug coverage and a great difficulty getting the medicines she needed. 

She went looking for help and I am pleased to say found the 

Pfizer Share Card. Lorraine was an accountant before she retired 

and she did the math. She found the Share Card saved her $100 

a month and since then she has become a passionate advocate of 

the Pfizer Share Card. She has actually taken it up herself to 

speak at community events, including Aging Committee conferences like yours, Senator Craig, but this time in Utah at an 

event that Senator Hatch hosts each year in his aging conference. 

Lorraine and others like her are the reason we started the Pfizer 

Share Card and they are the reason we are committed to making 

the Medicare discount card work. We commend this committee, 

Congress and the Administration for their commitment to improving Medicare. We are pleased to be a part and do our part of this 

program. 

Pfizer is committed to discovering new medicines that improve 

health and enhance lives. We are equally committed to doing whatever we can do to ensure people receive the medicines they need 

and when they need it and how they need it. Thank you for your 

time and attention and I look forward to answering any questions 

you may have. 

[The prepared statement of Mr. Harper follows:]

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The CHAIRMAN. Forest, thank you very much for that testimony 

and for Pfizer’s involvement. 

Let me now introduce once again Karen Ignagni, president and 

CEO of a newly formed organization called America’s Health Insurance Plans or AHIP. Welcome before the committee. 

STATEMENT OF KAREN IGNAGNI, PRESIDENT AND CEO, AMERICAN ASSOCIATION OF HEALTH PLANS, WASHINGTON, DC 

Ms. IGNAGNI. Thank you, Mr. Chairman. Our members would 

like to commend you for convening this hearing and we are delighted to participate and want to thank you very much for the invitation. 

I would like to speak with you about three things this morning. 

First is to express the strong commitment on the part of our organization, AHIP. We are committed to this legislation and we are 

committed to the implementation schedule and we believe that we 

can be strong solution-providers. Second, to that end I want to discuss the value that we can bring and we are bringing to this program, and third, the results that we are achieving. 

As this hearing looks ahead and focuses on the June 1 implementation of the drug discount card, I would like to first highlight the 

progress that already has been made for beneficiaries with the passage of this legislation. CMS has reported that 95 percent of new 

funding for the Medicare Advantage program is being used in improving benefits, and we see reports of that all over the country. 

The remaining 5 percent has been saved for benefit enhancements 

in 2005. 3.7 million beneficiaries are receiving expanded benefits. 

Premiums have been reduced for 1.9 million enrollees and have declined by an average of 26 percent and co-payments have been reduced for 2 million enrollees. 

These improvements are clear evidence that the legislation 

passed 3 months ago is providing significant value for the nation’s 

seniors and I want to commend the efforts of the members of this 

committee and you, Mr. Chairman, for making sure that was part 

of this agenda. 

Two-thirds of our enrollees in Medicare Advantage get prescription drugs. This is expanding now with the additional legislation 

and the discount card will make those dollars go farther for beneficiaries. 

As we look forward to the implementation of the discount card, 

our members are participating in three ways. First, of the 106 entities that have submitted applications, approximately half are for 

Medicare Advantage and Medicare Cost plans. 

Second, a number of our member companies have submitted applications to sponsor nationwide or statewide discount drug cards 

that will be broadly available. 

Third, other health plans and medigap carriers are exploring opportunities to collaborate with general sponsors in offering the 

cards to enrollees. 

In addition to their participation, our members are developing a 

number of initiatives that go right to the questions that the committee posed in terms of how will we get the message out? First, 

we are designing innovative training programs for our customer 

service teams all over the country. We are developing other inforVerDate 0ct 09 2002 13:52 Jun 03, 2004 Jkt 000000 PO 00000 Frm 00068 Fmt 6633 Sfmt 6633 C:\DOCS\93394.TXT SAGING1 PsN: JOYCE
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mation resources to help beneficiaries, including brochures with 

frequently asked questions, e-mail access to pharmacists and others who are available to answer questions, web pages, call centers, 

and other resources to facilitate information-sharing. 

Our members are committed to increasing especially the awareness among beneficiaries about the possibility that they may be eligible to receive up to $600 over each of the next 2 years in the 

transitional assistance. We know further that a significant number 

of these individuals are already involved in Medicare Advantage 

plans and we are working especially with CMS to design innovative 

programs in coordination with CMS to get the word out and get the 

job done. 

The Medicare legislation clearly required the discount card program to be implemented very, very quickly. While entities, Mr. 

Chairman, in the private sector are often before Congress with concerns they may have with the implementation of specific bills, we 

believe that it is also important to recognize when performance exceeds expectations. 

We want to commend the agency for maintaining, first, open 

lines of communication and working very hard. This is the work 

that no one sees but they are on an almost 15-hour day cycle to 

get this job done, to provide timely responses to our members on 

the many implementation questions, and I hear from the tenor of 

the comments from my colleagues on this panel that they are doing 

the same with the other stakeholders. 

Building on our past success—the way we will increase value of 

this discount card to beneficiaries is that we will use private sector 

pharmacy benefit management tools and techniques in the discount 

card program over the next 2 years and in the prescription drug 

program beginning in 2006. These tools increase access to prescription drugs by reducing out-of-pocket costs, improving quality, an 

often skipped-over but tremendously important issue for this population, and in reducing medication errors. 

They encourage first, the use of generics when doctors say that 

they are permissible. Second, step therapy programs so we can 

begin to determine out what works well, what works fast, what 

works best. Third, negotiating discounts with pharmacies that participate in our networks. Fourth, disease management techniques 

that includes practice guidelines to encourage the use of safe and 

effective procedures and the latest in scientific information. Finally, 

the appropriate use of mail order pharmacies. 

To conclude, Mr. Chairman, we are also proud to tell the committee that a number of studies not done by our organization, but 

by external sources, have demonstrated that the use of these techniques by private sector benefit plans is beneficial not only to enrollees in private plans but to enrollees in public programs. For example, a 2003 study found that the PACE program in Pennsylvania, arguably one of the most effective prescription drug programs throughout the country, could save up to an additional 40 

percent by adopting the full range of private sector pharmacy benefit management techniques I talked about. 

Second, a Lewin study found that Medicaid managed care plans 

reduce prescription drug costs for states by 15 percent below the 

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for-service. That is significant in and of itself but when you recognize that this statistic is married with the observation by the consulting firm that did this report, we start at a 10 percent disadvantage, achieving 15 percent reduction is a major accomplishment. 

We are pleased, Mr. Chairman, to join with our colleagues in 

participating in this hearing today. We are pleased to talk about 

the value we are bringing to beneficiaries and we want to express 

our strong commitment to being full participants to make this program work effectively. Thank you. 

[The prepared statement of Ms. Ignagni follows:]

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The CHAIRMAN. Karen, thank you very much. 

Now let me turn to Mark Merritt, CEO of the Pharmaceutical 

Care Management Association. Mark, thank you very much. 

STATEMENT OF MARK MERRITT, PRESIDENT AND CEO, 

PHARMACEUTICAL CARE MANAGEMENT ASSOCIATION, 

WASHINGTON, DC 

Mr. MERRITT. Well, thank you, Mr. Chairman. 

My name is Mark Merritt. I am president of the Pharmaceutical 

Care Management Association, the trade association for PBMs, and 

we, too, are enthusiastic about the discount card program and, of 

course, the funded benefit beyond that. 

Our member companies together administer drug benefits for 

over 200 million Americans. We commend the committee for holding this hearing today to highlight the card program because often 

it is looked over as we look toward the funded benefit, but seniors 

are going to save a lot of money on this program and PBMs look 

forward to helping them do that. 

If we could leave you with two key points today it would be this. 

First, PBMs are new to people and we want to let people know that 

they work and work well. We do not brand ourselves, but this discount card gives us an opportunity to show in public programs 

what we can do for seniors. 

Second, in line with that first point is that as we go forward with 

implementation of the discount card and then later the funded benefit, it is really important to preserve the tools that PBMs use that 

have worked so successfully for seniors and others in the commercial market. The reasons that we saved money in the commercial 

market are why we are involved in the Medicare plan right now 

and we need to preserve those tools as we move forward. 

Just a quick primer on what PBMs do and how they add value 

for consumers. Basically what we do is we take regular people and 

we aggregate their buying power and then we use that to negotiate 

big discounts with manufacturers and retail pharmacy. Then, of 

course, we throw in other innovative tools, like mail service and 

other things that can save people money, add convenience, and so 

forth. 

But we also work on the quality front. We work collaboratively 

with patients, with physicians, and pharmacists to help promote 

quality, improve patient outcomes, and so forth. It is not just about 

money. The drug utilization review that we use is very helpful to 

people and helps the clinically based formularies, and so forth, 

helps to be in better compliance with regular people. 

I think according to recent projections from CMS, the rate of 

growth in drug spending, although still too high, is actually decelerating over the last couple of years, which we believe is coincidental with the fact that PBMs’ tools have been more and more 

adopted in the marketplace over the last 5 to 10 years. These tools 

are multi-tiered formularies, therapeutic interchange, increased 

competition, and a lot of independent studies and government data 

confirm that what we are doing are working. From CBO to GAO 

and others, they have documented that PBMs save significant 

amounts for people, often 18 percent on drug cards in the ones that 

have been used prior to this, and can save people hundreds of dolVerDate 0ct 09 2002 13:52 Jun 03, 2004 Jkt 000000 PO 00000 Frm 00082 Fmt 6633 Sfmt 6633 C:\DOCS\93394.TXT SAGING1 PsN: JOYCE
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lars a year. That is again not even including the examples that Jim 

showed earlier about people who can save a lot more money. 

Turning to Medicare, PBMs are pleased that the new law recognizes the role that PBMs have played to save people money and to 

provide better access to drugs. The legislation strikes the right balance by promoting more choice and competition while, at the same 

time, setting forth important beneficiary protections. The interim 

drug discount card represents beneficiaries’ first real encounter 

with the new law and we are optimistic that seniors and other 

beneficiaries will like what they see. 

PBMs have a great deal of experience in administering discount 

cards to both seniors and the under–65 population. At last count 

GAO estimates that at least 17 million Americans are enrolled in 

a PBM-administered drug card. Preliminary estimates from CMS, 

as was discussed earlier by Mr. Smith, showed that there is also 

going to be robust participation from PBMs, health plans, and others. 

We expect that seniors will see meaningful savings, on average 

10 to 25 percent in this program. For some drugs we anticipate 

even deeper discounts for beneficiaries. 

The transitional assistance program is, of course, going to be crucial. Of course, more than half the people in the discount card program will be in TA and its annual $600 in assistance will provide 

even greater relief to those who need it most. 

At the same time, since PBMs have the vast majority of the nation’s retail pharmacies in their networks, seniors and the disabled 

will have broad access to pharmacies in urban, suburban, and rural 

settings. Beneficiaries will also have access to mail service pharmacies, which provide even greater savings to those who find that 

in their interest to use. 

The discount card program represents a significant improvement 

over the status quo for millions of seniors and is an important lifeline while CMS works to implement the permanent benefit in January 2006. 

In conclusion, PBMs look forward to the opportunity to serve the 

Medicare population. We have a unique opportunity to forge a lasting partnership with both America’s seniors and the Medicare program. We look forward to working closely with CMS and others to 

implement a program that puts the needs of seniors and other 

beneficiaries front and center. 

Mr. Chairman, again thank you on behalf of the member companies of PCMA. We thank you for this opportunity to share our 

views and we look forward to any questions you might have. 

[The prepared statement of Mr. Merritt follows:]

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The CHAIRMAN. Mark, thank you very much. 

Some of the questions I will be asking may be directed at specific 

individuals here on the panel, but others who might wish to add 

to or make comment off of those questions, please do so. 

Jim, you testified that low-income seniors, those below 135 per- cent of poverty, could actually see savings well above the $600, indeed, as much as 40 to 90 percent savings on prescription drugs 

during the 2004–2005 period, and that much of this has to do with 

interaction of the new law itself, with supplemental assistance programs being volunteered by drug manufacturers like Pfizer, Merck, 

Lily and others. This is obviously very encouraging news for lowincome seniors. 

Jim and Forest, could you comment in a little more detail just 

how this will work and what benefit seniors might be able to expect? 

Mr. FIRMAN. I think all of the details on how this will work remains to be seen as the companies work out some of their relationships with the card sponsors. For example, Merck has indicated 

that once a person qualifies for transitional assistance and uses the 

$600 benefit, they will be able to get Merck drugs for free for the 

rest of that year. Now, part of what Merck needs to do is work out 

an arrangement with every single one of the card sponsors to make 

sure that this is a seamless process. 

TogetherRx has taken a different strategy. TogetherRx represents seven companies and about 170 medications and offers discounts of anywhere from 20 to 40 to 70 percent, depending on the 

medication and they are saying that you use your CMS-approved 

card and then you use the TogetherRx card and you come together 

to the pharmacy and you show them. 

I will let Forest speak to the Pfizer experience. Lily has indicated 

that people who qualify for transitional assistance will be able to 

buy medication for $12 per medication per month and you can use 

the $600 transitional assistance to pay the $12. 

So the bottom line is it is going to be complicated and people are 

going to need help sorting through it but those savings are there 

if they are able to navigate them and figure out the right combinations. 

The CHAIRMAN. Forest? 

Mr. HARPER. Yes, Senator Craig. In taking off from Jim’s comment, what we learned in our Pfizer Share Card experience over 

the last 2 years is that when you make it a meaningful benefit— that is, a $15 flat fee—the seniors can predict it. It is pretty simple. The average price—I think the GAO put out for average cost of prescription drugs of about $70.70 for a 1-month supply and if 

you pay $15, that is about a $55 out-of-pocket that goes back into 

the pocket of those seniors. 

We plan to continue that same type of meaningful benefit or 

something similar in taking forward and supporting the interim 

discount card. So our focus is to continue that same pattern of 

types of benefits that are meaningful to disabled and the Medicare 

beneficiary. 

The CHAIRMAN. Craig. 

Mr. FULLER. Mr. Chairman, if I may on this question, it is an 

important one. There are about 1.2 million seniors using the 

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TogetherRx card. There are over 500,000 on the Pfizer Share Card. 

I think it approaches that on the Lily Answers card. 

Obviously our pharmacies work with those patients now and 

they rightfully know that they are signed up and enrolled and 

qualified for those plans. We are working hard with the Pharmacy 

Care Alliance with each of these organizations to try to find ways 

to, through automation and other ways, make sure that the patient 

gets the best benefit they are entitled to. This is not only important 

for the patient; I would flag it as an issue to look at. It is very important as these programs are run in the individual pharmacies. 

I do not need to tell you pharmacists are very busy people. There 

is still a shortage of pharmacists in this country of several thousand. If every patient that comes up with multiple cards and says, 

‘‘I have multiple prescriptions and multiple cards; please help me 

sort it out,’’ that kind of interaction, one, does not really help the 

patient who needs counseling perhaps on medication, not on which 

of the cards to use. 

So we are looking for ways and we have worked very closely with 

Forest and the folks at Pfizer, as well as the other two organizations, to try to make sure that this process can be as seamless as 

it possibly can be for the senior. It is a very important question. 

The CHAIRMAN. Let us pursue that line a bit further. First of all, 

there are real benefits to be gained out there if you can understand 

the system and you are properly educated and effectively access it. 

Obviously, Craig, probably the greatest point of contact for anyone 

is the pharmacy and the informational flow that would be available 

there. 

So let me ask these questions of you all and any of you can certainly respond. Is CMS on the right track in doing what needs to 

be done to give seniors the information they need, based on what 

you now know? 

Mr. FULLER. I will just quickly say that we have applauded what 

CMS has done. They are a very good partner in the early stages 

here of implementing this program and I certainly think they will 

continue to be. 

The fact sheet that they produced, they gave it to us and we sent 

it electronically within 24 hours to all of our pharmacies and tens 

of thousands of pharmacists because it was the single best official 

document that explained exactly what the program was about. 

That sort of collaboration, not just with us but really with others 

on the panel, as well, is, I think, the spirit in which CMS has been 

operating and that is very encouraging to us. 

There is going to be an enormous need to continue, as you have 

suggested by your questions, in helping seniors and their caregivers understand the program and its benefits over the next couple of years. 

Mr. HARPER. I would like to reiterate that we have seen them out 

in the community and I think that is one of the most effective parts 

we have seen with our program. CMS has dispatched folks like 

Leslie Norwalk out. I have seen her at conferences presenting for 

the seniors and getting the information and getting the word out 

on a one-on-one basis with senior groups. The advertisements. We 

learned through our commercials that you have to repeat it over 

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and over and over as seniors and their caregivers see the message, 

as well. 

So we think CMS is off to a good start in getting the word out. 

The CHAIRMAN. Karen. 

Ms. IGNAGNI. Mr. Chairman, I wanted to echo a point that Mr. 

Harper just made. There are two parts to your question. One is 

getting to the people, and we have been engaged in very active discussions and I know my colleagues have, as well, with CMS about 

their operational systems, making sure that they are doing what 

needs to be done to actually find and locate beneficiaries. The second part of this challenge is giving people understandable information. We think we have an important role to play in that and I discussed about the ways that we are going about designing outreach 

and giving people understandable information. But the agency really needs to be commended for prioritizing these issues and being 

very aggressive about a full-court press designed to deal with these 

issues. 

Will there be bumps in the road? Probably, but I think that this 

agency is doing more than has ever been done to find, to locate, as 

well as give people information, and we intend to be full partners 

with them. 

The CHAIRMAN. Jim? 

Mr. FIRMAN. Senator, I think that CMS is certainly to be commended for what they have been able to do under a tremendously 

short timeframe, but there are limitations that we should all recognize. 

First of all, as we know, there are an estimated 7.4 million lowincome seniors estimated to be eligible for this transitional assistance and CMS’s earlier estimate is that 2.7 million of them, would 

not get them. So the best case is that we are going to get to about 

60–65 percent of the people who are eligible. 

We also have to recognize that to achieve that 65 percent enrollment penetration in 18 months is unprecedented. It has never been 

done before in the history of any low-income benefit in this country. 

There is no program that has been able to achieve that kind of success. 

So that means that we just cannot look to CMS to achieve this. 

We all have to do our part—the voluntary sector, the faith-based 

groups, and everybody else. 

The second thing is that CMS is doing an excellent job on what 

it was charged to do, which is to help people make choices and comparisons among the Medicare-approved cards. But there are larger 

decisions that people are going to have to make. In 30 states, they 

are going to have to decide should I take this card or should I take 

my state program? How should I sign up for the Pfizer card? What 

about Merck and Lily? 

So, there is a more complex set of decisions that need to be made 

beyond which card do I choose, and that is where I think we and 

other groups can help with complementary decision support tools 

because it is not one decision; it is multiple decisions that have to 

be made very quickly. 

I might make one last point as I have thought about this whole 

thing. This is a whole track meet. It is both a 50-yard dash to get 

things ready by June; it is a quarter mile for the next period of 

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time, 2004 and 2005; and then it is a marathon, looking at what 

we are going to do in 2006, 2007, and 2008. Even if you look at 

the CBO estimates for the longer-term benefit where we think 

there will be 14 million people eligible, CBO is only estimating—

7 years into it—that we will only get a 70 percent enrollment rate. 

So we are both doing it for the short term and the long-term. But 

these people we are finding now are by and large going to be people 

who will also be eligible for the Part D. So we have to approach 

this short term and long term and recognize that everything we 

learn now will contribute to the long-term success. 

The CHAIRMAN. Anyone else wish to comment on that? 

Mr. HARPER. I would just like to make one further comment. We 

published a report by Marist National Poll and we actually talked 

to the seniors and I think that that is the part that we all must 

remember. We have to talk to the seniors and the Medicare beneficiaries that are disabled. 

We did talk to them in our polling and they told us where to go 

and how to reach the hard-to-reach groups of beneficiaries and that 

also includes keeping it at the local level, working with churches. 

We just finished a project with the General Baptist Convention in 

Virginia. We trained 1,000 ministers on how to help fill out the applications. I think it is going to take that kind of grassroots efforts, 

day to day, door to door, and the Visiting Nurses Association, 

which we work with. 

So it is those kinds of organizations who live in the community 

on a day-to-day basis, Senator, that we will continue to work with 

and I know that CMS has been all ears in listening to those kinds 

of approaches. 

The CHAIRMAN. It is interesting you would say that. Here is a 

wire story out of the Tennessean newspaper this morning: ‘‘Methodists Offer Drug Discount Card.’’ There is also an interesting line 

at the end. They also, through the Methodists, might offer it to 

Baptists and Catholics, so at least they are being nondiscriminatory. It is fascinating to me that so many different organizations 

are getting in the act and in a very important way. 

Is there any one thing that you can think of now as you interface 

with CMS that they are not doing that might be recommended in 

this 50-yard dash that remains? Because Jim, I think you have assessed it well. We are not going to get to everybody now. It is a 

beginning, and what is most important is as big a beginning as is 

possible and then the continuation of working and improving as we 

do that. 

As I mentioned in passing, one of the frustrating disappointments I had, while in Idaho hosting that health care conference, 

CMS informed me that one of the networks had refused their advertising. Now I guess maybe that has been solved by now, but the 

refusal came because they thought it was too political. I thought, 

shame on that network. You know, it is a very political year, but 

this is a program that has already passed and that and is now well 

on its way toward being implemented, and I hope that bias has gotten washed out of it at this moment. To me, the network’s decision 

was a demonstration of a bias, or at least I read it that way. 

105

These CMS efforts are clearly an outreach effort, and a very open 

way to reach as many people as are eligible and truly in need of 

it. 

Yes, Craig. 

Mr. FULLER. If I could turn your question just slightly, I would 

say that one thing I hope CMS does not have to do is go back and 

make modifications to the program as a result of legislative activity, which I do not mean to be audacious in saying that. There is 

plenty of work to do probably in refining the 2006——

The CHAIRMAN. Are you telling us to leave it alone for a while? 

Mr. FULLER. Well, I think all of us who are trying to get this 

work done want a degree of certainty about what the next 18 

months will look like. 

The CHAIRMAN. That is a fair——

Mr. FULLER. I know there is concern. 

The CHAIRMAN. Sure. 

Mr. FULLER. I hope Forest Harper will agree to do this—I would 

say that report ought to be submitted into your record—I was 

pleased to participate in the press conference a few months ago in 

which it was released—because it identifies how real people actually benefit by these programs. 

I am certain we are going to deliver real benefits as a result of 

implementing these programs. The toughest thing to do would be 

to deal with sort of shifting sands as we are in the middle of doing 

it. 

Mr. MERRITT. Mr. Chairman. 

The CHAIRMAN. Yes, Mark. 

Mr. MERRITT. One other mission that the rest of us have here as 

we educate consumers is not just on what the program entails but 

I think truly everybody here at this table is making a good faith 

effort, along with CMS and the Federal Government, to do the very 

best they can to get a very big and complicated project out the door 

as quickly and well as we can. 

Ms. IGNAGNI. Mr. Chairman. 

The CHAIRMAN. Yes, Karen. 

Ms. IGNAGNI. In the spirit of Mr. Merritt’s comment, we are establishing a baseline for 2006. So I think Mr. Fuller has made a 

very important observation about the need for predictability and 

the need to plan now with consistent rules and regulations as we 

look forward to 2006. Our members want very much to participate 

in that program and intend to do so but if there are major changes, 

it becomes very difficult because you do not know what to look forward to; you do not know what world you are living in, et cetera. 

So I just want to join the points that have been made, very effectively by my colleagues. This is a very serious—we are accomplishing a lot in a short period of time. I think people can already 

see tangible benefits, which we are very proud of, in our health insurance plans in terms of what we have already contributed in 3 

months. We will be also major contributors in the discount program 

and beyond to 2006. But consistency and predictability is a very 

important part of this. 

The CHAIRMAN. Well, I hear you. I serve on the board of ‘‘Medicare, Inc’’., as do a good number of others, about 535 of us, I beVerDate 0ct 09 2002 13:52 Jun 03, 2004 Jkt 000000 PO 00000 Frm 00109 Fmt 6633 Sfmt 6633 C:\DOCS\93394.TXT SAGING1 PsN: JOYCE
106

lieve, and the message you are delivering is a very important message for the interim period as we go into implementation. 

Let me ask this question. Some of you have alluded to it; see if 

there is something you might add to it. Seniors will be choosing between cards offered by a wide variety of organizations, including 

health plans, PMBs, pharmacy organizations, consumer groups, 

and others. From the standpoint of the average senior, how will the 

products offered by these varying kinds of sponsors differ from one 

another? I.e., will a senior see a difference between a card offered 

by a pharmacy group and one offered by a health plan or a PBM? 

Mr. MERRITT. I would say first of all, assuming we can get them 

access to the right information through the web and so forth, they 

will have more information on drug pricing than they have ever 

had. So they will be able to look at the negotiated price of each 

drug before they sign up for a card and they will see which cards 

offer which drugs at which prices. Of course, health plans, some of 

them have a different, special thing that Karen can talk about. 

But overall, there is going to be a multitude of blessings of information. The question is just making sure that people get access to 

it. So the information is there; it is just a matter of people seeing 

it. 

Ms. IGNAGNI. I think, Mr. Chairman, the difference between our 

sector and some of the others, an individual who is a member or 

enrollee in a health plan would have the discount card as part of 

an integrated benefit program and we would use all the tools and 

techniques I described from a quality perspective, disease management perspective, a pricing perspective to try to leverage those dollars and make them go farther and make it part of the integrated 

benefit plan. 

Mr. HARPER. Mr. Chairman, I would just like to say I certainly 

agree with Mark. The pharmaceutical industry has already experienced that in the last 2 years. If you can imagine, companies that 

typically compete against each other on the front came together 

with one unified stance—whatever is best for that beneficiary. We 

all put our cards out on the table. Some were discounts, some were 

flat fees, some were discounts with less, but at the end of the day 

we spoke on panels together, presented to each other. I mentioned 

my competitors’ programs just as much as they mentioned mine. 

I think you are going to see that same spirit and atmosphere 

going on because of coalitions that were gathering today because it 

is all about the beneficiary and not about any of the companies at 

this point. 

The CHAIRMAN. Karen, many of your members are obviously 

looking ahead to 2006 when America’s health plans will be entering 

the new Medicare drug market and the expanded Medicare Advantage market. What effects do you think the background experience 

of 2004–2005’s transitional drug card program will have on the 

2006 enrollment of the full Medicare drug benefit? 

Ms. IGNAGNI. I think two things, Senator. One is clarity and second is confidence. Clarity in terms of understanding the rules and 

having had now a great deal of discussion with CMS about their 

views about setting up the regulations, the architecture, we are 

very clear about that and now we can lay the groundwork for 2006. 

This has been tremendously helpful. 

107

Individuals, I might say, consumers and advocates and observers, 

will be able to see results. So we are proud of that. 

Second in terms of where we go next, we are looking in an excited fashion at the clarity that has been established in the legislation with respect to providing true choices for seniors. Some of our 

members are going to be out in the market with HMOs, PPOs, 

medigap plans. Some will participate in the regional PPO structure. Others will be participating in a smaller region but more locally based. 

We will have a multiple set of plans, in addition to some consumer-directed plans that are being developed for this population, 

as well, and that is, exactly what Congress envisioned—to give people choices. Our responsibility will be to work with CMS to give 

them information and we are proud of that and will be giving people the information they need to make the choices that are appropriate for them. 

The one lesson we have learned in health care is that one size 

does not fit all, so beneficiaries appreciate the opportunity to have 

these choices and we are committed to putting a range of products 

out there so people can evaluate them. We will be working with 

partners. We work with PBMs, we are working with a variety of 

individuals represented on the pane. WE will be working with consumer advocates and senior advocates to make sure that we are 

partnering appropriately in local communities, getting the word 

and message out. 

The CHAIRMAN. Anyone else? Yes, Jim? 

Mr. FIRMAN. Senator, the Access to Benefits Coalition, which I 

chair, a public/private partnership, that is focussed on making sure 

that low-income seniors get the assistance both short-term and 

long-term. 

So the CBO estimates that by 2013, 7 years into the program, 

approximately 8.8 million of the 14 million people who are eligible 

will receive this benefit. Our coalition is taking a much more aggressive goal. We want to beat those numbers. We will let you guys 

worry about the budgetary impact. Our goal is to make sure that 

at least 8 million people are there by 2008, and 12 million by 2012. 

So we view this process of the short-term period of most of the 

people who sign up for the transitional assistance, we know they 

will qualify on the basis of income for the Part D benefit. So we 

view by capturing 5.5 or 6 million people, at least 80 percent of 

those we will have the names for, we will know who those people 

are and we can help beat those enrollment goals. 

In addition, there are people between 135 and 150 percent of 

poverty who are going to be looking for this assistance in 2004. But 

they are going to be told that they are not eligible, so we are also 

going to tell them they will be eligible for the Part D low-income 

assistance in 2006. 

So if we do our job well now in 2004 and 2005, we will beat the 

enrollment numbers. The reason the NCOA supported this legislation was primarily because of the benefits to low-income seniors 

and we and all of us collectively are going to do what we can to 

make sure that those enrollment numbers are met. So, this really 

is critical both for the short-term and for the long-term success. 

The CHAIRMAN. Yes, Craig? 

108

Mr. FULLER. I would quickly add that in addition to the comments Karen made, we too are looking at this program as a way 

to give ourselves valuable experience leading toward 2006 and one 

of the important elements that you will hear a lot of us talk about 

in the next 18 months or so has to do with risk. 

We need to understand how to help this population that has not 

had a traditional drug benefit manage their medication needs and 

reduce their costs. If we are going to be called upon to accept risk 

going forward in 2006, we need this kind of experience and I think 

this program will help give us that. 

The CHAIRMAN. I am very pleased to hear you say that. We continually hear about it. We have done some oversight on it, overmedication, and the problem of patients having a prescription filled 

out when they no longer need it, and that kind of thing, and the 

kind of counseling and observation that needs to go on. If there is 

greater access, and that is what we hope there will be, clearly what 

you have just said, Craig, is every bit the more important today 

than it was. 

Mr. FULLER. It will be very valuable, sir, to have a patient who 

may have been going from store to store purchasing medication for 

cash suddenly in a system where their drug utilization can be reviewed, where conflicting medications can be sorted out, where 

their physician can be contacted and medications changed and 

where, frankly, they can be helped through various means to find 

the medication most appropriate for them and which perhaps costs 

a little less than what they have been taking. 

Ms. IGNAGNI. Mr. Chairman, physicians in our networks often report compelling testimony about individuals presenting themselves 

in their office with a shopping bag full of prescriptions and one of 

the hallmarks of what we have been able to do in our networks is 

to coordinate the care, to assess what has been prescribed, and our 

physicians have contributed quite substantially to the learning of 

what it takes to actually accomplish that objective. 

So we would be delighted to share some of those experiences with 

the committee should that be desirable to you. 

The CHAIRMAN. I appreciate that. 

Mark, another question of you. It has been argued that the new 

Medicare drug card program could well be much more effective at 

securing discounts than current card programs because the additional $600 low-income assistance payments will give card sponsors 

added new leverage at the bargaining table. Do you agree? Why is 

this the case, if it is, and how significant might that effect be? 

Mr. MERRITT. Well, we are not sure how significant it will be. 

First of all, it kind of is the case, kind of is not. It depends what 

company you talk to. The philosophy behind it is that transition assistance is actually kind of a funded benefit, so you have cash-paying customers, uninsured, who typically when they do buy drugs 

pay more than AWP, more than the average wholesale price. 

So the problem is they underutilize drugs. They do not use the 

drugs that they need. So often the problems being monitored are 

people using too many drugs, using the wrong drugs. The problem 

with people who are poor is, of course, they do not buy them as 

much. 

109

This program, by taking $600 of the $1,400 that a typical senior 

spends, a beneficiary spends on drugs, should give pharmaceutical 

companies an incentive to offer bigger rebates because there will be 

more utilization of their drugs but in early discussions with some 

of our companies, although that is proprietary information, it is not 

clear how great that value is, although it certainly makes sense in 

theory. 

The CHAIRMAN. Before I close, one of the things that I find fascinating here today, and I sense you are all agreeing, is that I do 

not think Congress, when we looked at an immediate discount 

card, we probably did not fully understand the value of that transitional time that you are now reflecting on as it relates to getting 

it right, getting people identified toward a full-blown system coming on line in 2006. 

Obviously we knew giving attention to those who are truly needy 

now was critical. At the same time, we also knew giving time to 

get it right so that we could gain all of the advantages of what we 

wanted, plus cost containment and meeting budget goals and all of 

that, gaining access to the eligible, was all very, very necessary. 

Am I hearing from you that the discount card, beyond just improving access in its own right, is also a valuable transitional 

learning experience for all the parties involved? 

Mr. HARPER. I would certainly agree with that, Senator. What we 

learned, it is not just the discounts; it is also health information. 

Our model is built on the fact that we give the beneficiaries health 

education on diabetes, high blood pressure, and other illnesses, 

along with the information on how they can get the best discount 

and/or a flat fee. 

So in the last 2 years we have learned a lot but we are also going 

to learn even more in this interim period as we go to reach a broader group of patients out there. Our focus is to work with volunteers—Jim said it a lot but we also want to train volunteers on how 

to respond to those who are most in need. 

Ms. IGNAGNI. Mr. Chairman, this is a private/public partnership, 

so I think that two things have been accomplished. One is that 

Congress has clearly established for the private sector and all the 

stakeholders is a line of sight, which is very important and was a 

major issue in the discussion of how this legislation should be crafted. I think we are only all beginning to understand the power of 

that as we go through this process. 

Second, the allegation has been made that beneficiaries will not 

be able to sort through complicated information in 2006. We do not 

agree with that. We work with beneficiaries every day that are 

looking and evaluating our members and the products that they 

offer. But nonetheless, CMS now has time to do a dry run in terms 

of developing information, developing information to help people 

sort through multiple products. That will be tremendously valuable 

in the market that has been designed for 2006 and beyond where 

there will be a range of options for this population. 

So frankly, in our community we gave all of you a great deal of 

credit in being smart in establishing the line of sight, thinking 

about moving and phasing the benefits so that we could get the implementation worked out before the program would be fully live in 

110

2006 with a full implementation of prescription drugs. So it was a 

smart thing to do. 

Mr. FULLER. Mr. Chairman, NACDS developed a reputation back 

in 2001 for feeling fairly strongly that there should be legal authority for enacting a prescription drug card. The initial efforts of the 

administration actually deserve credit because out of that came the 

cards from the manufacturers—the Pfizer Share Card, TogetherRx 

and the Lily Answers Card—and those gave us good experience 

and we supported those programs. 

But I actually will tell you that we strongly believe that the legislative effort last year produced a card program that is much 

stronger than what was originally envisioned, that definitely leads 

us down a path that gets us to a meaningful prescription drug benefit in 2006 and, as you have heard today, gives us the experience 

we need in order to be able to understand how to best implement 

that. 

So it serves a number of purposes. It was, I know, not an easy 

issue to deal with but I think the process itself helped all of us and 

I do believe we are going to learn more as we go through this. 

Mr. MERRITT. Furthermore if I may add, Mr. Chairman, just very 

quickly, PBMs have kind of been at the center of these discussions 

on discount cards and drug benefits for almost a decade, so this is 

our first opportunity to really get our feet wet and really begin understanding this program, but also getting beyond all the politics 

of it, showing that we really can help a lot of people when things 

are done right and where PBMs’ tools are really used. 

Mr. FIRMAN. Mr. Chairman, I agree with what has been said. I 

do think this is an important dry run but I think I disagree a little 

bit with Karen Ignagni. I think the choices that people—the stakes 

are going to be a lot higher in 2006. The choices that people are 

going to make will have larger consequences. Whether you choose 

one discount card over another discount card probably will not 

make a huge difference in the quality of your life and may make 

a difference of 10 percent or 15 percent on the drugs you save. 

Choosing among the Part D plans or opting into Medicare Advantage programs and the new plans is going to be a much more significant choice with much more complexity in choosing among the 

cards. 

So it is good that we are at least going to get some of the kinks 

out, but we should not underestimate the challenge ahead. 

Ms. IGNAGNI. Mr. Chairman, clearly we understand the complexity of the choices before seniors in 2006. The point, though, 

that needs to be acknowledged is that CMS has learned a great 

deal and is learning a great deal in how to educate this population 

and we intend, along with our colleagues, to be full participants in 

that and I think that has been valuable not to have to approach 

that de novo in 2006. That was the point that I was making. 

The CHAIRMAN. Well, there is no question it is a great challenge 

for all of us. 

Let me use this as a concluding comment that you may wish to 

respond to. If I liken this to a space odyssey, this may be your last 

chance before May to talk to the mother ship and I am not it. CMS 

is. 

111

In your conclusion, and I will offer you that opportunity, are 

there any one or two additional recommendations based on your 

current experience that you might want to extend to CMS at this 

moment as we work toward the enrollment period and the introduction of the program in June? Jim? 

Mr. FIRMAN. I know CMS is trying to do this but in order to get 

to these ambitious enrollment goals, we cannot just do things the 

way we have always done them. Insanity is doing the same thing 

over and over again expecting a different result. So, it is predictable that if we use the old strategies, we will not succeed. 

I think that we need to the extent possible to look at wholesale 

strategies, meaning I know states have come in and said we want 

to enroll in the program; help us do that quickly. They recognize 

that the people eligible for transitional assistance may already be 

in some other database receiving home energy benefits or SSI or 

other kinds of programs. To the extent that CMS is able, and they 

are limited in the short term, to enable government, states or local, 

to use innovative strategies to bring people in wholesale, it will 

really help achieve the goal. 

The CHAIRMAN. Anyone else? 

Mr. FULLER. A similar thought. Maybe just that with the ‘‘marketing programs’’ kicking off on May 3, we really have a very short 

period of time to help enroll seniors. CMS has been good in looking 

at some ideas that we and others have put forward about educating 

seniors. 

When these announcements come out in March, that flag goes up 

and seniors are going to be in our stores, 55,000 stores, talking to 

130,000–140,000 pharmacists about why they cannot enroll now. 

We can explain that but we really need to be able to provide as 

much information as we can on demand, if you will. Telling them 

that ‘‘sorry, the government says we cannot share with you information until May’’ is not going to work. 

We are sharing the CMS information and it is good information 

but I think all of us who have card programs or who are contemplating them would like to get about the business of educating seniors directly just as quickly as we can. 

Mr. HARPER. Mr. Chairman, I would just like to say at the start 

of my presentation and my testimony I talked about the intent of 

the model of this program. I would like to just ensure that CMS 

works with those who have had the experience in the last 2 or 3 

years of reaching out to low-income seniors and Medicare beneficiaries, take the reports we will offer again from our Marist polling and our National Polling system to see how we reach those lowincome and tough to reach and at the end of the day the intent is 

to assure the American people, particularly those who are Medicare 

beneficiaries, this program will lower the cost of drugs and make 

accessible to those innovative things that they need to take care of 

their health. 

The CHAIRMAN. Mark. 

Mr. MERRITT. I would ask on, I guess, a nontechnical level something that CMS is probably already doing but it would be very 

helpful if they could get together with top executives of each of the 

major television networks, radio networks, and so forth, and explain not only the ins and outs of what is going on in the program, 

112

but also that now is not the time to pile onto the program. Now 

is not the time to say oh, there are going to be so many choices; 

what are seniors going to do? I mean people need to have the information that they should have about the program but it would be 

helpful if, almost as a public service, the networks could get involved in helping try to educate people, not just whether or not 

they air our ads or not, but some of the news articles I have seen 

have been almost kind of neurotic in their fear of overinformation, 

and so forth. 

I think, as Karen mentioned earlier, there are going to be some 

bumps in the road because we have such a short time line but the 

benefits we are offering are going to be numerous, they are going 

to be great for seniors, and if we can just give it a little time to 

play out, it is going to be a tremendous opportunity for them. 

The CHAIRMAN. Karen. 

Ms. IGNAGNI. Mr. Chairman, to conclude, it really involves an assessment of what happened in the past and not to repeat it. Post–

1997, post-Balanced Budget Act, we faced a regulatory framework 

that strangled the private sector. It, in addition to the funding situation, forced our members to reluctantly withdraw from this program. We did not want to do that. 

This has been such a breath of fresh air. This is a new day where 

CMS is actually going out and listening to the private sector about 

how to implement this program, how to work in a partnership and 

develop a workable structure. 

So my message would be to keep up the good work. We will continue to work with them on all issues and there are challenges, but 

I think with that spirit of cooperation, a great deal can be accomplished, and I think that is good for beneficiaries. 

The CHAIRMAN. Well, thank you all very, very much. Obviously, 

this is an extremely important issue for America’s seniors. I have 

always been frustrated by those who assume that a senior could 

not navigate his or her way through. Given access and information, 

they can and they will. It really is an information game. It is of 

the highest importance to make sure that we reach out as extensively as we can. I think the Congress has also spoken very clearly. 

This is a partnership between the private and the public sector. 

The public sector cannot afford to go this alone. But obviously, the 

need for access to these critical care components today is necessary 

for all of our citizens. 

So we thank you very much. We will stay in close contact. We 

will continue to monitor and do necessary oversight where we think 

it important to give greater exposure, and please feel free to contact us as we work our way through this, and with CMS to make 

sure that, at the end of the day, as Jim said, we have broken out 

of the old models and we have reached out and contacted and 

brought people in. 

Thank you all very much. The committee will stand adjourned. 

[Whereupon, at 11:53 a.m., the committee was adjourned.] 

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