<DOC>
[108th Congress House Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:93975.wais]
MEDICARE PRESCRIPTION DRUG DISCOUNT CARDS: IMMEDIATE SAVINGS FOR
SENIORS
=======================================================================
HEARING
before the
SUBCOMMITTEE ON HEALTH
of the
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTH CONGRESS
SECOND SESSION
__________
MAY 20, 2004
__________
Serial No. 108-130
__________
Printed for the use of the Committee on Energy and Commerce
Available via the World Wide Web: http://www.access.gpo.gov/congress/
house
__________
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COMMITTEE ON ENERGY AND COMMERCE
JOE BARTON, Texas, Chairman
W.J. ``BILLY'' TAUZIN, Louisiana JOHN D. DINGELL, Michigan
RALPH M. HALL, Texas Ranking Member
MICHAEL BILIRAKIS, Florida HENRY A. WAXMAN, California
FRED UPTON, Michigan EDWARD J. MARKEY, Massachusetts
CLIFF STEARNS, Florida RICK BOUCHER, Virginia
PAUL E. GILLMOR, Ohio EDOLPHUS TOWNS, New York
JAMES C. GREENWOOD, Pennsylvania FRANK PALLONE, Jr., New Jersey
CHRISTOPHER COX, California SHERROD BROWN, Ohio
NATHAN DEAL, Georgia BART GORDON, Tennessee
RICHARD BURR, North Carolina PETER DEUTSCH, Florida
ED WHITFIELD, Kentucky BOBBY L. RUSH, Illinois
CHARLIE NORWOOD, Georgia ANNA G. ESHOO, California
BARBARA CUBIN, Wyoming BART STUPAK, Michigan
JOHN SHIMKUS, Illinois ELIOT L. ENGEL, New York
HEATHER WILSON, New Mexico ALBERT R. WYNN, Maryland
JOHN B. SHADEGG, Arizona GENE GREEN, Texas
CHARLES W. ``CHIP'' PICKERING, KAREN McCARTHY, Missouri
Mississippi, Vice Chairman TED STRICKLAND, Ohio
VITO FOSSELLA, New York DIANA DeGETTE, Colorado
STEVE BUYER, Indiana LOIS CAPPS, California
GEORGE RADANOVICH, California MICHAEL F. DOYLE, Pennsylvania
CHARLES F. BASS, New Hampshire CHRISTOPHER JOHN, Louisiana
JOSEPH R. PITTS, Pennsylvania TOM ALLEN, Maine
MARY BONO, California JIM DAVIS, Florida
GREG WALDEN, Oregon JANICE D. SCHAKOWSKY, Illinois
LEE TERRY, Nebraska HILDA L. SOLIS, California
MIKE FERGUSON, New Jersey CHARLES A. GONZALEZ, Texas
MIKE ROGERS, Michigan
DARRELL E. ISSA, California
C.L. ``BUTCH'' OTTER, Idaho
JOHN SULLIVAN, Oklahoma
Bud Albright, Staff Director
James D. Barnette, General Counsel
Reid P.F. Stuntz, Minority Staff Director and Chief Counsel
______
Subcommittee on Health
MICHAEL BILIRAKIS, Florida, Chairman
RALPH M. HALL, Texas SHERROD BROWN, Ohio
FRED UPTON, Michigan Ranking Member
JAMES C. GREENWOOD, Pennsylvania HENRY A. WAXMAN, California
NATHAN DEAL, Georgia EDOLPHUS TOWNS, New York
RICHARD BURR, North Carolina FRANK PALLONE, Jr., New Jersey
ED WHITFIELD, Kentucky BART GORDON, Tennessee
CHARLIE NORWOOD, Georgia ANNA G. ESHOO, California
Vice Chairman BART STUPAK, Michigan
BARBARA CUBIN, Wyoming ELIOT L. ENGEL, New York
JOHN SHIMKUS, Illinois GENE GREEN, Texas
HEATHER WILSON, New Mexico TED STRICKLAND, Ohio
JOHN B. SHADEGG, Arizona DIANA DeGETTE, Colorado
CHARLES W. ``CHIP'' PICKERING, LOIS CAPPS, California
Mississippi CHRIS JOHN, Louisiana
STEVE BUYER, Indiana BOBBY L. RUSH, Illinois
JOSEPH R. PITTS, Pennsylvania JOHN D. DINGELL, Michigan,
MIKE FERGUSON, New Jersey (Ex Officio)
MIKE ROGERS, Michigan
JOE BARTON, Texas,
(Ex Officio)
(ii)
C O N T E N T S
__________
Page
Testimony of:
Baumhofer, Stan, Medicare Beneficiary........................ 101
Fuller, Craig L., President and Chief Executive Officer,
National Association of Chain Drug Stores.................. 68
Grealy, Mary R., President, Healthcare Leadership Council.... 85
Hayes, Robert M., CEO, Medicare Rights Center................ 97
McClellan, Mark B., Administrator, Centers for Medicare and
Medicaid Services.......................................... 30
Pollack, Ronald F., Executive Director, Families USA......... 76
Material submitted for the record by:
McClellan, Mark B., Administrator, Centers for Medicare and
Medicaid Services, response for the record................. 125
(iii)
MEDICARE PRESCRIPTION DRUG DISCOUNT CARDS: IMMEDIATE SAVINGS FOR
SENIORS
----------
THURSDAY, MAY 20, 2004
House of Representatives,
Committee on Energy and Commerce,
Subcommittee on Health,
Washington, DC.
The subcommittee met, pursuant to notice, at 10 a.m., in
room 2123, Rayburn House Office Building, Hon. Michael
Bilirakis (chairman) presiding.
Members present: Representatives Bilirakis, Hall, Upton,
Greenwood, Deal, Burr, Whitfield, Shimkus, Wilson, Shadegg,
Buyer, Ferguson, Rogers, Barton (ex officio), Brown, Waxman,
Pallone, Eshoo, Stupak, Engel, Green, Strickland, Capps, Rush,
and Dingell (ex officio).
Also present: Representatives Wu and Walden.
Staff present: Chuck Clapton, majority counsel; Ryan Long,
majority professional staff; Jeremy Allen, health policy
coordinator; Bill O'Brien, projects assistant; Eugenia Edwards,
legislative clerk; Amy Hall, minority professional staff;
Bridgett Taylor, minority professional staff; Purvee Kempf,
minority professional staff; and Turney Hall, minority staff
assistant.
Mr. Bilirakis. The hearing will come to order. Today, the
Health Subcommittee will be focusing on a very important issue
and that is the new Medicare Prescription Drug Discount Card
Program. This is the first time most seniors will realize a
tangible benefit from the recently enacted Medicare
Modernization Act. Since Medicare beneficiaries will be able to
use these new cards beginning June 1, I felt it was critical
that the subcommittee explore the implementation of this
program and its benefit.
I'd like to thank all of our witnesses for joining us today
including and especially Dr. Mark McClellan, the Administrator
of the Centers for Medicare and Medicaid Services. This is Dr.
McClellan's first appearance before the subcommittee and this
is a new role, God knows he's been here a few times before in
other roles and we do welcome him and his always valuable
insight.
I won't spend a lot of time discussing the details of the
Medicare Prescription Drug Discount Card Program. Suffice it to
say it will provide millions of seniors, particularly those
with low incomes with much needed help in purchasing their
prescription medications. While this is certainly not a
panacea, it is an important first step.
I know that we will hear a good deal of criticism from
certain members today about many aspects of this new law,
including the Prescription Drug Discount Card Program. Some
will say, as they will, that the savings aren't large enough.
To that I would say that the savings available through these
cards and more importantly, the $600 per individual
transitional assistance are a heck of a lot better than what
many seniors were getting before this Congress and its
President enacted to provide Medicare beneficiaries with
prescription drug coverage.
I've always maintained that since we have limited resources
available to us, we should target our resources to those who
need help the most, the poorest and the sickest. The
Transitional Assistance available under these cards will
provide a lot of help to an awful lot of people.
I'm aware that other members will argue that the high
number of drug discount card sponsors will needlessly confuse
seniors. I know that the system still has a few kinks that need
to be worked out and I agree that some beneficiaries will need
extra assistance in choosing the card that's right for them.
However, the Medicare Modernization Act is based on the
principle that choice and free market competition will lower
prices and continue to foster innovation.
As we will no doubt discuss today, this principle is
already resulting, it's not really in effect yet, in discounted
prices that continue to drop. In fact, CMS recently found that
the average discounted price declined by approximately 11.5
percent from brand name drugs and 12.5 percent for generic
drugs over a 1-week period.
It's clear to me that this new benefit is headed in the
right direction and will provide seniors with real help. And
that's why I continue to be so disappointed that some continue
to demagogue this issue. When I learn of a partisan analysis,
if you will, how the Prescription Drug Discount Card benefit
that concludes that the program is a failure before a single
beneficiary uses the card, well, let's just say it makes me
wonder, although I guess I don't really wonder any more.
Scare tactics designed to frighten and confuse seniors will
only ensure that some beneficiaries will choose not to access a
benefit that could save them hundreds, if not thousands of
dollars annually. I, along with many Members of this Congress,
certainly members of this committee have fought for years to
add a prescription drug benefit to Medicare. Finally, 39 years
after the program was first created, Medicare will help seniors
with the cost of their prescription medications.
I intend to diligently oversee the implementation of this
benefit and I hope that we have the cooperation of everybody on
both sides of the aisle to oversee the implementation so that
every senior saves the greatest amount possible.
I again would like to thank our witnesses for joining us
and I now yield to the ranking member, the gentleman from Ohio,
Mr. Brown for an opening statement.
Mr. Brown. Thank you Mr. Chairman. Year after year, surveys
show that Medicare is more popular than private insurance.
Medicare is reliable, it works, it's a single program with a
single mission, to ensure that seniors and disabled Americans
have access to the health care that they need. In fee for
service Medicare, seniors don't face endless choices. They face
only the important ones, choice of doctor, choice of
specialist, choice of hospital. The new Medicare Drug Discount
Card Program begins to erase that legacy. It replaces the
uniformity and clarity of Medicare with mountains of glossy
brochures and government sponsored advertisements, some of them
illegal, it turns out, conflicting claims about prices and
coverage and a system that can change fundamentally week to
week, all, Mr. Chairman, in the name of choice.
One constituent wrote to me, ``I find everything related to
the new Medicare law totally confusing. I have two master's
degrees and it's beyond me. I don't know how most people are
going to cope with this. What's wrong with these cards? There's
no guarantee first that your plan covers your drugs at the
rates they advertise. The real rates are often different from
those catalogued on the Medicare website. The prices listed in
the website are often different from those given out over the
hotline, that is, if you can get someone on the hotline.''
My constituents report to me that trying to get the help of
a human being at 1-800-MEDICARE is nearly impossible. I hope
that senior and disabled Americans benefit from these discount
cards.
I'm pleased to joint Mr. Dingell and other members of this
committee on legislation to automatically enroll low income
beneficiaries into the program so they do, in fact, get the
$600 subsidy. But this discount program should teach us a
lesson. More is not always better. Multiple choice is not
always the right answer. The mess of the discount cards, the
confusion that seniors are experiencing, the clamor of
competing drug companies and insurance companies, it's all a
pretty good indicator, unfortunately, of what we can expect
when the full drug benefit goes into effect in 2006.
Medicare, as we know, is now spending millions of dollars
and hiring thousands trying to make this card less confusing.
As we also know, in the papers today they've been doing this
illegally. Those dollars could have instead been used to
deliver real drug benefits to seniors, benefits that don't
feature the huge donut hole, the huge gap in coverage.
I find it ironic that my colleagues on the other side of
the aisle who for 38 years since the great majority of them
opposed the creation of Medicare, attack Medicare as the
pinnacle of big government. I find it ironic that they created
what must be the big--might be the biggest bureaucratic
nightmare in the Nation's history.
We could have a simple Medicare discount card where the
government has negotiated the price on behalf of 40 million
beneficiaries and get Canada or France or Germany or Japan or
England-type drug prices instead of one simple card that a
senior could go in and show. We have these. This card could be
a discount for Fosamax. This card might be a discount for
Vioxx. This card might be a discount for Lipitor. This card
might be a discount for Zocor. This card might be a discount
for Zoloft. This card might be a 22 percent discount, but then
next week it becomes 12 percent. This discount card for Lipitor
might be 15 percent and 2 weeks later drop to 12 percent.
We could have used instead, Mr. Chairman, the combined
purchasing power of 39 million Medicare beneficiaries to secure
real discounts, but the President and my Republican colleagues
again showing their allegiance to the prescription drug
industry which will benefit $150 billion in additional profits
from this bill, decided that instead of using the clout we
could have to get real drug discounts, 50, 60, 70 percent, the
way they do in Canada, instead of using that clout, we have
surrendered it to the drug industry.
Republicans sheltered their friends in the drug industry at
the expense of seniors and they capitalized on the desperate
need for prescription drug relief in order to privatize
Medicare. First, the choice of multiple private discount cards
which feeds into the choice of multiple private prescription
drug plans, after all, what better drug plan than the one
associated with your discount card which bleeds into the choice
of multiple private HMOs. After all, isn't it more convenient
to consolidate all your coverage with an HMO than to have
Medicare, plus Medigap, plus stand alone prescription drug
coverage.
Mr. Chairman, we could have one discount where government
could ensure that seniors would get a 40, 50, 60 percent
discount. Instead, our friends in the drug industry, the
President of the United States and the Republican leadership in
this House has given us this confusing choice of discount cards
which at best might give us 10 or 15 or 20 percent if, in fact,
you qualify.
I yield back my time.
Mr. Bilirakis. I thank the gentleman for his discourse. I
find it ironic, even though the gentleman himself was not here,
that during the what two--better than two decades that his
party controlled the House and controlled the White House at
the same time during much of that time, no efforts were made to
do what needed to be done for our senior citizens and it was
this party that decided to take the bull by the horns, know it
was not perfect, but we were going to--attempting to help some
people, not all of the people, but some of the people, some of
the time.
The Chair now would yield to the chairman of the full
committee, Mr. Barton, for an opening statement.
Chairman Barton. Thank you, Mr. Chairman, and I would ask
unanimous consent that my formal statement be put into the
record in its entirety.
Without objection, hopefully.
Mr. Bilirakis. You choose not to make a----
Chairman Barton. I'm going to make an extemporaneous
statement.
Mr. Bilirakis. By all means, the opening statement of all
members of the subcommittee will be made a part of the record,
without objection.
Chairman Barton. All right, thank you, Mr. Chairman. I want
to welcome Dr. McClellan to the full committee, former full-
blooded Texan and I know his mother very well and worked with
him at FDA and we're glad to have him at CMS.
I hope this hearing today will show the American people
that the Medicare Prescription Drug Card Benefit Program is
several things. No. 1, it's voluntary. If there are senior
citizens out there that think it's too confusing or too complex
or they don't feel that they need to participate or they just
feel that they don't want to participate, they don't have to.
It's totally voluntary, No. 1.
No. 2, if they do want to participate, I don't apologize
for helping to create a program that gives seniors choices.
That is a good thing, not a bad thing. Now admittedly in this
beginning period with the various groups and companies
scrambling to create the drug cards and I think we're somewhere
in the neighborhood of 40 to 60 drug cards that out there on
the national level, there's some glitches. It's a startup
program. But I would point out that if the seniors want to wait
a month or 2 and pick a card in July or August, they can do
that. They don't have to pick a card right now and if they pick
a card and they don't like it, they can change next year.
They're not stuck for life with it. And how in the world it is
a bad thing to create a new prescription drug benefit program
that gives seniors choices on a voluntary basis is beyond me. I
think it is a good thing. I'm going to sit down with my mother
who lives in Waco, Texas next week and she's got a stack of
mail on her desk and she's going to go through it with me and
we're going to help try to sort out what's the best
prescription drug benefit card for her, if any. She's got a
pharmacist that's about two blocks from her house and we think
they have some cards and we'll see.
So I know there's going to be a lot of rhetoric today at
this hearing and various folks are going to engage in gnashing
of teeth and all of this, but I don't want to forget the bottom
line. We have a new prescription drug benefit for seniors. That
is a good thing. It is voluntary. That is a good thing. There
are lots of choices. Those choices may be confusing, but the
fact that we give seniors choices is a good thing.
And if you're a low income senior, you get the benefits of
the prescription drug discount, plus you get $600 to help
defray the cost of your drugs. And for a fair number of
seniors, that will mean they don't have to pay much of anything
out of pocket, other than what ever the small co-pay is for the
particular drug that they're using.
I look forward to the hearing. I look forward to a good
dialog and debate on it, but I encourage all seniors that are
thinking about participating to seriously look at the various
number of cards that they have available to them and decide
what's best for them.
Mr. Chairman, with that, I would yield back the balance of
my time.
Mr. Bilirakis. The Chair thanks the gentleman and yields to
Mr. Dingell for an opening statement.
Mr. Dingell. Mr. Chairman, thank you. I commend you for
holding this hearing and Dr. McClellan, welcome to the
committee. I am anxious to hear your testimony explaining how
these cards are going to work. I've been concerned about these
cards and the private companies that run them since the Bush
Administration first proposed them 2 years ago.
Thus far, I've seen little to allay my concerns. I want to
be clear. I do not find these cards bad. I do find them,
however, often misleading, consistently confusing and of
dubious workability. I also find the efforts of the
administration to publicize them and to explain them to be of
questionable character.
I would note that if they don't work, all of this is going
to have serious implications for Medicare and the seniors who
depend upon it and many seniors will be hurt. The confusion and
difficulty produced thus far could well undermine the long-
standing trust that seniors have in Medicare.
First, there's 73 cards to choose from, each one offering
something different that changes constantly, while at the same
time the seniors who are dependent upon these are chained to
one card for a period of 1 year, regardless of whether they had
made a mistake in choosing it or whether or not they are
properly treated under it.
Second, I have yet to see convincing evidence that the
savings from these cards would justify the difficulty and
confusion for seniors and the expense to Medicare and the
taxpayers. The amount of discount seniors are getting with
these cards doesn't appear to be any better than what is
available in the market today. The majority of pharmacies
already give cash-paying seniors a 10 percent discount at the
register. Places like drugstore.com or Costco have better or
comparable discounts. And the Veterans' Administration has the
best prices around.
I would direct your attention to a CMS chart which I will
be showing you later which has since been recalled. I'm
interested as to why it has been recalled, but I have both the
original and the following one and after I think we have
explored this, we will find why it has been recalled.
This chart shows how prices under various discount cards
compare to Canadian prices and prices that the Veterans'
Administration gets bear the test of reality. Prices in the
supply schedule by the Federal Government were $300 lower than
the most generous card listed on the CMS table for general
basket of drugs commonly used by the elderly. This
administration has fought bitterly, however, to prevent seniors
from getting similar discounts.
Confusion and bureaucratic reluctance are hindering the one
bright spot, the $600 for low income seniors. Unfortunately,
the people eligible for this money are the most likely persons
to be intimidated by the confusing process. CMS has not done
what is needed to assure that all eligible beneficiaries
receive this subsidy. In fact, there are predictions now that
only 65 percent of those eligible will enroll in this subsidy
and will be eligible to receive it by reason of that
enrollment.
I don't think that you can justify the acceptability of
this circumstance. CMS could automatically enroll low income
seniors who are currently in the Medicare savings program in
the discount card subsidy. It is doing so for seniors in the
State Drug Assistant Programs. CMS has the information to
enroll these other low income seniors who are also eligible for
the $600. But you have for reasons suitable to yourself,
declined to do so. I and other Democratic Members will be
introducing a bill today to automatically enroll all low income
seniors. It is the least we can do. It is strange that we must
introduce legislation to assist you to do that which you could
do without legislative authority because you already have that
authority.
I look forward to your testimony and that of other
witnesses and perhaps some explanations of the curious,
confusing and difficult situation that seniors face in
addressing the question of which card they may take and how
they may avoid being skinned in the process.
Thank you, Mr. Chairman.
Mr. Bilirakis. The Chair thanks the gentleman. Mr.
Whitfield, for an opening statement.
Mr. Whitfield. Mr. Chairman, thank you very much and I also
want to welcome Dr. McClellan and to also commend him for the
tremendous job that CMS has done in trying to implement this
program. I'm sure it has been quite difficult and I know that
the volumes of phone calls coming asking for assistance has
been overwhelming, so although there are still a lot of problem
areas out there, I think overall, you all have done a
tremendous job and I want to thank you for that.
Those of us who supported this prescription drug benefit, I
think we have a lot to be quite proud of. We have 6 months now
before the election and I don't think any of us are surprised
that there's a lot of criticism of this program. It's very easy
to be critical of a program, particularly one that's getting
started that is complicated. But one of the things that I am
most proud of is that each one of us in our Districts represent
a lot of people who are at the Federal poverty level or below
and under this plan for the first time ever, under Medicare,
people who are 135 percent of the poverty level and below, not
only are they going to get a $600 credit this year and then
also next year, but they're also going to be paying only a
small co-pay for generic drugs and name brand drugs.
So the question about drug reimportation are all those
things for those people, really does not make any difference at
all because they basically are going to be getting free
prescription drugs, a benefit that they've never had before.
So I don't think this Congress needs to apologize for
anything in our efforts to look out for those people who need
it most and this program is particularly effective at doing
that. In addition to that, all of our seniors are going to
benefit from this program.
I want to make one other comment. We hear a lot about price
controls in Canada and in Europe and elsewhere. And we hear a
lot on the other side about how we caved into the drug
industry. I would just make this comment. That the drug
industry, the pharmaceutical industry in the United States has
been most effective, more so than any other drug industry in
the world of coming up with new medicines to treat diseases and
prolong the lives of people in America.
Unfortunately, the Europeans, the Canadians and others have
been instituting price controls and they're making Americans
pay for their low prices to benefit, so that their citizens can
benefit from the research and development that our drug
companies do in America. So from my perspective, they're really
engaged in unfair trading practices and I think that is
something that we need to explore on our side of the aisle
because there's no reason that the Europeans and others will be
benefiting from the research and development that our drug
companies do.
And Mr. Chairman, I look forward to this hearing and
commend you for your leadership.
Mr. Bilirakis. The Chair thanks the gentleman. Mr. Waxman
for an opening statement.
Mr. Waxman. Thank you, Mr. Chairman. We can all agree on
one goal for the discount cards. They should save as many
seniors as possible as much money as possible in the simplest
fashion possible. Unfortunately, after 3 weeks, it's pretty
clear that the cards are failing that test for most Medicare
beneficiaries. Seniors are confused, frustrated and angry and
with good reason. They can't get enough accurate information
about the discount cards. The 1-800-MEDICARE number is either
busy or doesn't seem to be of much help when seniors can get
through to it. And the Medicare.gov website is all but useless
for most seniors. It is slow, confusing, and according to
complaints from people who manage benefits from seniors and
pharmacists, doesn't even provide accurate prices.
According to the Washington Post, seniors can't even get
any accurate information on pricing for drugs that just come in
pill or tablet form. According to the Wall Street Journal,
posted prices are going up and down like a yo yo with no
apparent rhyme or reason and seniors can't even get good
information from their local pharmacists because the local
pharmacists don't know which cards they will be accepting and
don't have any sense of what prices they will be charging on
June 1.
Well, this aggravation is worth it for low income seniors
who at least get the $600 Transitional Assistance, but for
other Medicare beneficiaries, even if they are finally able to
wade through this jumble of confusion or have a son who is the
chairman of the Energy and Commerce Committee to explain it to
them, it's not at all clear that they will even see savings
from these drug cards.
I take no joy in being right about this issue. I opposed
the Medicare bill. I thought that this Medicare bill when it
was written was legislation drafted to benefit the insurance
companies and the drug manufacturers instead of the Medicare
beneficiaries and the drug benefit and the drug cards could
have been provided in a simple straight forward manner, but
that wasn't what the Republican leaders in the Congress chose
to do or what this administration told them to do.
Instead, we're faced with a situation where this
complicated, confusing and poorly planned drug card program is
undermining seniors' confidence in the entire Medicare program.
Seniors rely on Medicare. They trust it implicitly, but with
this discount card benefit they can no longer be certain that
the Medicare brand name guarantees them the affordable, quality
health care to which they have become accustomed.
We need to fix this problem and we need to fix it right
away. If we don't, I fear that it'll be a prelude to a worse
situation. My Republican colleagues seem to have lost sight of
the goal of the Medicare program. It's not about experiments
with privatization or give aways to health care providers or
insurance companies or drug companies. Medicare is suppose to
work for seniors. Let's fix this drug card program and this
drug benefit so we can make sure that happens.
Mr. Bilirakis. The Chair thanks the gentleman. His time has
expired.
Chairman Barton. Mr. Chairman, could I be recognized by
unanimous consent briefly?
Mr. Bilirakis. The gentleman is recognized.
Chairman Barton. I just want to tell my good friend from
California that we need an adjective, a caring chairman and a
caring son and I will be happy to help the gentleman from
California, if he is over 65 and needs some help determining
which card is best for him.
Mr. Waxman. I ask unanimous consent that my opening
statement be revised to include the comments of caring son and
all the other suggestions----
Mr. Bilirakis. Without objection.
Mr. Waxman. But I do take exception to the fact that you
think I'm over 65.
Chairman Barton. I didn't say that. I said if. I said if. I
did not say that.
Mr. Waxman. That's bad enough.
Mr. Bilirakis. The Chair recognizes the gentleman from
Illinois, Mr. Shimkus for an opening statement. Let's have some
order, please.
Mr. Shimkus. Thank you, Mr. Chairman. I want to welcome Dr.
McClellan and thank you for the work you're doing and trying
expeditiously to move on these cards and then the
implementation of the full plan.
I also want to welcome Mary Grealy from the Healthcare
Leadership Council who is in the second panel. She came out to
Illinois and we had a very successful educational seminar and I
would encourage other members to do that.
The ranking member of the full committee mentioned that the
discount card initiative was an executive branch initiative and
it was not. For those of us who marked up the bill in this
committee, know that it was led by five rogue members, John
Shadegg, Steve Buyer, Charlie Norwood, now the full chairman
and of course, Mike Bilirakis, working behind the scenes.
So this discount card is a House Commerce Committee at
least Republican initiative. This was not part of the executive
branch's original plan in that this whole Medicare prescription
drug debate. And I'm going to let the individuals--and Richard
Burr was another one. I'll let those folks be added but they
wanted a bridge and I think it's going to be a very successful
bridge and I really commend them for their work because they
bucked, even the House leadership to have this provision in
there. And they were successful and I want to congratulate
them.
Also, Dr. McClellan, since I have your undivided attention,
Illinois has passed a Hospital Provider Assessment which
comports to Federal law. We would hope that CMs would swiftly
evaluate and allow for this to be implemented in Illinois. I'm
taking my privilege as a member to bring that up and I thank
you, Mr. Chairman. I yield back my time.
Mr. Bilirakis. The Chair thanks the gentleman. Mr. Pallone,
for an opening statement.
Mr. Pallone. Thank you, Mr. Chairman. I was somewhat
concerned and I hope you don't take this personally with the
opening statement you made about Democrats because you said
that Democrats were demagoguing this issue and you know, we
were using scare tactics and you talked about how we needed to
marshall scarce resources and frankly, Mr. Chairman, the reason
I am upset by that is because when I read today's Washington
Post about how the GAO now says that the Department broke the
law with their Medicare video campaign, I think that we have an
obligation not only as Democrats, but as nembers of this
committee, to have some oversight about the extent to which the
Department has broken the law. It's clear now, based on the GAO
report, in my opinion, that laws were broken. My understanding
is that there's an on-going investigation by the Inspector
General about Foster and his statements and the fact that he
wasn't allowed to bring up the costs of the Medicare bill.
And as much as I appreciate the fact that we are having
this hearing today, I think that this subcommittee has an
obligation to have more oversight over to what extend the
Department has broken the law with this Medicare bill. And I
know that my colleague on the Senate side, Senator Lautenbeg,
is introducing a bill today that would require that the Bush
campaign reimburse the Federal Government for the cost of this
Medicare ad campaign and I intend to introduce a similar bill
in the House because I think there is a real problem here and
this administration and this Department continue to break the
law.
And we have an obligation, I believe, on this subcommittee
to have some sort of oversight, to have some hearings on this
issue with the ads on the Foster issue. I know with regard to
Nick Smith, the Ethics Committee is taking that up. Also the
Ethics Conflicts with some of the previous Medicare
Administrators, Scully. I think this needs to be done and I
hope at some point we will do that.
As far as the drug discount card plan, I know someone was
criticized on this side for saying it was a farce, but it is a
farce. I tried to use this 800 number. It took 30 minutes to
even get somebody to respond. My seniors are telling me they
don't have the website. They don't have a computer where they
can log in and make these comparisons and we've already been
told by some of the companies that are on the website that
there's misinformation on the site. How in the world is a
senior citizen supposed to decipher all of this information?
There's absolutely no way to do it.
I have a chart over there, if I could point to, that I
think probably would be more helpful in navigating a senior
through the discount drug card program than the HHS website.
There are 50 steps on this chart, no promises except for
massive bureaucratic confusion that quite frankly disgusts me
when I think about the seniors who are forced to play these
games with the drug and insurance industry and the stakes being
their health and their lives. That chart is easier to figure
out than the website and the other garbage that this Department
is putting forward on this issue.
Mr. Bilirakis. The gentleman's time has expired. Mr. Buyer
for an opening statement.
Mr. Buyer. I'll reserve my time.
Mr. Bilirakis. You'll reserve your time. Mr. Green for an
opening statement.
Mr. Green. Thank you, Mr. Chairman and like the chairman of
our committee, I'd like to welcome Dr. McClellan. I enjoyed
working with you at FDA and again looking forward to working
with you at CMS.
I'm glad we'll see some hopefully common sense brought to
CMS and I know, I talked earlier, what we're going to talk
about today, it's Congress' fault and the administration,
although you're part of it, but you're just new on that watch.
So you're the messenger so far and not the culprit whereas I
have enough problems with the bill we passed. I don't think
there's anyone engaging in scare tactics because like a lot of
my colleagues, I tried to on the Friday, the website was up,
tried to negotiate that website for my seniors. And again, like
a lot of seniors, particularly in a District that's 65 percent
Hispanic, they don't have access to the web.
I couldn't do it on two zip codes. Now there's new
information on it for the zip codes, but again, much less using
the phone message. My concern is and our Chairman is right,
there's no penalty for someone not joining or taking those
cards, but in 2006, if a senior does not accept or not pay that
$35 a month, they're penalized every year for not doing it. So
there is a penalty in here, but it's not based on these cards.
But I'd like to thank Chairman Bilirakis for calling this
hearing because of all the legislation in the number of years
I've been on the committee, I think this is one of the most
important in the health care area and I guess I'm disappointed
because we talked about the limitation of the $400 billion. Mr.
Chairman, if I had known we had $550 billion to expend, maybe
we could have prepared a better plan. But when Medicare
released its price comparison website, like a lot of folks, we
tried to make it fit. And you know, again our seniors aren't
typically internet savvy but even seniors who are willing to go
through the steps on the website, it's confusing as my
colleague from New Jersey has shown. Fortunately, I know
firsthand, I tried to do it on that Friday morning to prepare
information and just using compare prices for five commonly
used drugs in one zip code, we came up with 12 cards, scores of
pharmacies and a grand total of 27 pages of information. A
senior would have to have the web to be able to navigate it and
even that was difficult.
It's not only frustrating for seniors to sift through that
information, and finally decide on what card, the sponsor is
under no obligation to keep those advertised prices which is
frustrating because as the chairman said our seniors are going
to be stuck with that card for a year and yet they may find out
that the prices on their particular list of pharmaceuticals has
gone up on a weekly basis. To make matters worse, the benefits
offered on these cards are questionable at best.
I know Mr. Waxman's staff in doing some comparison with
prescription drugs, are obtained cheaper in Canada or even
under our Federal Supply Schedule which the Veterans'
Administration already uses. The Federal Supply Schedule is
much cheaper than what's available under this card. I know it's
frustrating for--and I'll go on with my questions later, Mr.
Chairman, but I appreciate your calling the hearing so we can
air our differences again on this issue.
Mr. Bilirakis. The Chair thanks the gentleman. The
gentlelady from New Mexico, Ms. Wilson, for an opening
statement.
Mrs. Wilson. Thank you, Mr. Chairman, and I thank you for
holding this hearing today and Dr. McClellan, thank you for
coming.
This is the biggest addition to Medicare in a long time and
we all expect that there's going to be some glitches in the
roll out. I was interested to see an article somebody sent me.
It's from the Washington Post in 1966 and it says ``the slow
payments represent only one of several bugs to appear in the
massive machinery of Medicare during its first 6 weeks of
operation. 'We think there's some confusion' an official
said.''
Whenever you start a new program as big as this one, there
are going to be some initial confusion as people learn what
benefits are best for them, but I think we've done the right
thing by making a voluntary benefit. And I think one of the
things my friend, the rogue from Arizona and his colleagues
did, was probably the best little idea in this bill which was
to create an open, transparent, understandable market on a
website and we've already seen the impact of competition.
My colleague from Ohio talks about how much better it would
be if we only had one card and one set of prices and the
government would negotiate what those prices were and whether
your medicine was on the list at all. In the first 2 weeks of
the cards even being posted on the website, the prices have
gone down for regular drugs by 11.5 percent and generic drugs
by even more, 12.5 percent because every one of those cards out
there knows that in order to get people to sign up for their
cards, they need to negotiate the best deal they possibly can.
I am aware of no program in the Federal Government that has
managed to reduce its prices by that much in such a short
period of time even before the program officially rolls out.
Federal Government isn't that responsive. But the market is and
that's yet another reason why I think we've probably gone in
the right way.
As a Member, I think all of us have similar stories of
helping people in our Districts to qualify, particularly those
who are low income and get them information so that they and
their families can make choices and give them help. I wish it
wasn't a big election year because we have made a major new
benefit available to America's seniors and instead of bickering
about whether we did the right thing last year, all of us
should be pulling together and helping seniors to understand a
new benefit that is demonstrably of benefit and good for them
and for their families. And it's time to stop that and get
focused on the solutions and helping people with a marvelous
new government service. And I look forward to working in that
direction.
Thank you, Mr. Chairman.
Mr. Bilirakis. The Chair thanks the gentlelady. Mr.
Strickland for an opening statement.
Mr. Strickland. Thank you, Mr. Chairman. Mr. Chairman,
America's seniors get it. They understand what's being done to
them and they understand what's not being done for them.
When I showed the Family USA video narrated by Walter
Cronkite to the seniors in my District, they audibly gasped
when learning the details of the Medicare plan we pushed
through in the middle of the night. When I talk to them about
the arm twisting, the accusations of bribery, the prohibition
against importing cheaper drugs, the prohibition against
negotiating lower prices, when I described the donut hole, when
I talk to them about the fact that we were given false
information about the true cost of this plan, they are
appalled.
Now I'm glad we're having this hearing today because I am
hearing from seniors all over my District. They're confused
about how to decide which card to choose and whether the card
they choose will continue to save them money in August or
September or December. And quite frankly, I'm confused. And
I've been giving them the White House number to call or the 1-
800-MEDICARE number to call, but now I'm going to give them
Chainman Barton's number because apparently he knows and he's
offered to help.
You know, when I explained to my seniors that the savings
can change every 7 days, that the drugs offered for discount
can change every 7 days, but when they make a decision, they're
locked into that decision for the entire year, they're upset.
My seniors are confused and they're disappointed because the
benefits they will likely receive once they choose a card and
start using it, may not provide any savings at all.
Since seniors are likely to take 6, 8, 10 and even 12
prescriptions at once, it is unlikely that all of their drugs
will be discounted by a single card. And therefore, they will
still be forced to pay undiscounted prices for the drugs that
aren't covered by the card they choose. And the card they do
choose may start out providing a 15 or 17 percent discount, but
once the drug prices rise, seniors may be left with no more
money in their pockets than they would have had otherwise.
So what if we get a discount card that provides a 10 or an
11 or a 15 percent discount and the drug prices go up 18
percent, the seniors are still going to be paying more. The
answer for this is for us to provide a comprehensive drug
benefit that is a part of traditional Medicare and get rid of
these confusing, rather outlandish deceptive and deceitful, in
my judgment efforts to hoodwink our seniors.
And I would like for my entire statement to be placed in
the record, Mr. Chairman.
Mr. Bilirakis. You've already made that point and I wonder
if the gentleman knew that Mr. Cronkite was paid an undisclosed
sum for the video that he was referring to.
Mr. Strickland. I don't think that that in any way
undercuts the validity of what he says about this ridiculous
program.
Mr. Bilirakis. For the record, he was paid for it. In any
case, who is next? Mr. Ferguson, for an opening statement.
Mr. Ferguson. Thank you, Mr. Chairman. I'd just say to my
friend, Mr. Strickland, that Families USA video is a joke. It
is a blatant, partisan, political attempt to discredit a
program which is going to make prescription drugs cheaper for
millions of American seniors and the fact that Walter Cronkite
was paid some amount for that I think absolutely undercuts his
ability to go out and bash the program.
I will say thank you to Dr. McClellan for being here. I'm
delighted with your leadership at CMS. I think there are a few
people who are going to be better able to handle the enormous
tasks of implementing this important new program and I thank
him for being here today.
We're here to discuss the immediate savings that our
Nation's seniors are going to realize due to the prescription
drug discount cards provided under the Medicare law that we
wrote last year. After years of promises, this law fulfills our
commitment to our Nation's seniors by providing the first ever
universal prescription drug benefit under Medicare and that's a
huge accomplishment.
One would think that these new benefits for seniors,
coupled with the prescription drug discount card would be a
cause for celebration. Rather than educate seniors on the
benefits of the discount cards, the other side of the aisle has
continued to simply play partisan politics with the issue and
resorted to scare tactics toward our Nation's seniors and in
some cases even suggest that our seniors are too dumb to figure
out how this could benefit them. That's simply wrong.
Some have even suggested that there are some on the other
side of the aisle who are discouraging seniors from signing up
for the benefits that these cards offer. Folks, low income
folks, will immediately get $600 of free medicine and some have
suggested that there are those on the other side of the aisle
who because perhaps they don't want a lot of seniors to sign up
for this because that would suggest somehow that the program is
a success, are discouraging seniors from taking advantage of
$600 worth of free medicine. That's not just wrong, it's
unconscionable. It's shameful and anyone who is engaged in that
kind of practice should be ashamed of themselves.
In my home State of New Jersey, we have a very generous
pharmaceutical assistance program called PAD. After working
with our Governor and CMS, New Jersey has had the opportunity
to directly enroll our low income seniors into the drug
discount program. Out of the 81,000 seniors and people, persons
with disabilities who are eligible for the Transition
Assistance provided by the drug discount card, only 220 have
opted out of the program, out of 81,000 people, 220 have opted
out of the program.
As a result of the discount card and our delegation's work
to get this card to New Jersey seniors, my home State will save
$90 million on the cost of prescription drugs. These savings
and my hope is that will be put back into the PAD program to
provide expanded coverage for additional seniors New Jersey, I
think is an example that other states hopefully will follow, by
putting partisan politics aside, our delegated worked with CMS
to provide simple process which benefits our State and our
Nation's seniors.
Now today and I'm sure in the future, defying logic, you're
going to hear members on the other side of the aisle, argue
that the cost of prescription drugs will actually increase as a
result of the discount card. For those members, I'd like to
point to a May 14, as I close, study by CMS which shows that in
the past week more cards have been offered, increased discounts
for our Nation's seniors compared with prices offered the
previous week. This is how markets work.
Mr. Bilirakis. The gentleman's time has expired.
Mr. Ferguson. I'll just finish, Mr. Chairman.
Mr. Bilirakis. I apologize to the gentleman.
Mr. Ferguson. Some on the other side of the aisle would
prefer a government-controlled----
Mr. Bilirakis. Ms. Capps for an opening statement.
Mr. Ferguson. [continuing] where the government decides who
gets what. That's not how markets work. It sounds more like the
Soviet Union to me, than America.
Mr. Bilirakis. I hope you're not referring to the chairman.
Mr. Ferguson. I ask my whole statement be made a part of
the record. Thank you, Mr. Chairman.
[The prepared statement of Hon. Mike Ferguson follows:]
Prepared Statement of Hon. Mike Ferguson, a Representative in Congress
from the State of New Jersey
Today we are here to discuss the immediate savings that our
nation's seniors realize due to the prescription drug discount cards
provided by the Medicare Law that Congress wrote last year. After years
of promises, this law fulfills our commitment to our nation's seniors
by providing the first ever universal prescription drug benefit under
Medicare.
One would think that these new benefits for seniors, coupled with
the prescription drug discount card would be a cause for celebration.
Rather than educate seniors on the benefits of the discount cards, the
other side of aisle has continued to play politics with this issue and
resorted to scare tactic towards our nation's seniors and in some cases
suggest that seniors are too stupid to make decisions for themselves.
There are even those who are discouraging seniors from signing up for
the discount card. Perhaps because if seniors sign up, the program will
be a success; that is not just wrong, it is unconscionable and
shameful, and anyone who engages in that sort of behavior should be
ashamed of themselves.
In my home state of New Jersey we have a very generous state
pharmaceutical assistance program called PAAD. After working with our
Governor and CMS, New Jersey has the opportunity to directly enroll
seniors into the discount card program. Out of the 81,000 seniors and
persons with disabilities who were eligible for the transition
assistance provided by the discount card, only 350 opted out of the
program. As a result of the discount card and our delegation's work to
get this card to New Jersey's seniors, my state will save $90 million
on the cost of prescription drugs. These savings can be put back into
the PAAD program to provide expanded covered for additional seniors.
New Jersey is one example that I encourage more states to follow. By
putting partisan politics aside, our delegation worked with CMS to
provide a simple process which benefits our state and our state's
seniors.
Defying logic, today and in the future, you will hear members on
the other side of the aisle argue that the cost of prescription drugs
will increase as a result of the discount card. For those members I
would like to point to a May 14th study by CMS which shows that in the
past week more cards have offered increase discounts for our nation's
seniors compared to prices offered the previous week. Sponsors are now
comparing their discounts to their competitors, more cards are offering
favorable prices, and CMS is working with card sponsors to make sure
that the best discounts are published for Medicare beneficiaries. This
is what happens when competition is injected into the marketplace.
That's how markets work. Some on the other side of the aisle would
prefer a government run, command and control system where bureaucrats
or politicians tell people what medicines they can have, how much they
can have and when and where they can have it. That sounds more like the
former Soviet Union to me.
Today you will also hear members who will criticize the
pharmaceutical industry for charging too much for prescription drugs.
Yet they will not mention the miracle drugs or treatments these
companies create. Representing the scientists and researchers who live
in my district of New Jersey, I would like to highlight the good work
that two of the pharmaceutical companies are doing to help seniors.
Once a low-income beneficiary has exhausted his or her annual $600
transitional assistance allowance, Merck and Johnson and Johnson will
provide its medicines free to that beneficiary's participating discount
card plan or directly to the beneficiary, through the pharmacy. Neither
company will receive any fees from these programs.
In closing, I encourage all members to put aside partisan politics
and help seniors recognize the benefits of the drug discount card. This
can be accomplished by working with CMS to clarify any questions our
seniors may have and allowing seniors to realize the discounts that are
available to all seniors through the discount card.
Mr. Bilirakis. Ms. Capps for an opening statement.
Ms. Capps. Mr. Chairman, thank you for holding this
hearing.
Dr. McClellan, welcome.
I think it is critical that we look into this discount card
program. We've heard the administration and many Members of
Congress laud the prescription drug discount cards that have
just been revealed and will go into effect soon. I don't see
where there's much to crow about. The President created the
card in order to hide the fact that his Medicare prescription
drug benefit plan is a sham. The Medicare bill signed into law
last year does nothing to actually lower the cost of
prescription drugs. It prohibits Medicare from using the
bargaining power of America's 40 million seniors to negotiate
lower prices. And it upholds the prohibition on reimportation
of American made drugs from Canada which would lower prices for
seniors. And it is very doubtful that the discount cards we've
been learning about will give seniors much more help either. If
the discount card does not work at a senior's regular pharmacy,
too bad. So far, these cards have been proven to be
exceptionally confusing to my constituents who have discovered
that many of the sponsors have even been providing inaccurate
information. To get a card, a senior will have to pay $25 to
$30. He or she will be limited to just one card, but after
buying a card, a senior has no guarantee of anything. The cards
do not give discounts for all drugs, nor do they provide a
discount at all pharmacies. The discount itself is not
guaranteed and once they sign up, seniors cannot change cards
until the end of the year.
But the insurance company or drug company providing the
card can change the cost of the medications at any time, really
making the discount meaningless. And they can even change the
drugs they cover on a weekly basis. If a senior needs a new
medication that is not covered, too bad. The senior can't get a
new card and thus won't get a discount. If the card sponsor
stops covering the medication the senior is on a week after
signing up, again, too bad. The senior can't get a new card and
doesn't get a discount. If it doesn't work at their regular
pharmacy, as I said, too bad. The senior can't get a new card
and therefore has to go to a new pharmacist and if a senior has
more than one medication and no card that covers them all, the
senior has to choose which medication they want a discount on.
Seniors deserve better than this. They deserve real
discounts and real drug coverage. So I hope this committee will
work hard to correct the mistakes that the Congress made last
year and give seniors the help they need and finally, I'd like
to enter into the record, Mr. Chairman, an article from the
Washington Post May 18, the byline, Lisa Barrett Mann, with the
headline ``She Thought Choosing Mom's Medicare Drug Card Would
Be An Easy Trick, It Turned Into a Real Stumper.'' This is a
personal narrative which I highly recommend to the committee.
Mr. Bilirakis. Without objection, that will be placed into
the record, along with the article dated August 31, 1966 of the
Washington Post entitled ``Thousands Failed to Pay Premiums.''
[The articles follows:]
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Ms. Capps. Thank you, and I would just want to recommend to
our Chairman, Mr. Barton, that this is a similar kind of
narrative that he's suggesting he embark upon with choosing his
mother's, her Medicare card and those of us who he's also going
to help.
Thank you and I now yield back.
Mr. Bilirakis. Thank you. Mr. Upton for an opening
statement.
Mr. Upton. Well, thank you, Mr. Chairman, I'm going to put
my full statement into the record.
Dr. McClellan, I welcome you before this hearing today and
I thank my Chairman for it. This is, I think, going to end up
being a very good program. We look forward to having a
constructive relationship with you and I'm going to relay just
a little story.
I was at my son's Little League game and a woman came up to
me and sadly her mom had had a stroke. And they didn't know how
they were going to pay for an extra $600 a month in
prescription drug costs in addition to the other things that
she had. She said, ``Mr. Upton,'' she said, ``is the bill that
you all passed, is that going to help?'' And my guess is that
it's going to help in a big way. My guess is that it's probably
going to cover at the end of the day, probably about half of
the cost that she would otherwise have to pay without this
bill.
This next week I'm going to be in Michigan like most of our
Members back in their home states. They're going to be talking
to literally hundreds of seniors, talking to them in terms of
how they can participate in this new program and I've got to
tell you, as I have done that earlier this year, I was most
alarmed, in fact, I was more than alarmed, I was visibly angry
with the Families USA videotape that I'm told has been sent to
all of my senior centers, all the way across the country. And
as I sat and watched that, I said to myself, you know, if this
was true, I would have voted against the bill. I would have
taken time and spoken against the bill, because it is just flat
out wrong.
And I think about this woman who has suffered with a
stroke, the Little League grandma from the son and I see these
stories that are in the papers today. They talk about these
scam artists that are going out already. I guess some firms
have been identified as sending information, trying to get
people to hook up and it's just rip them off. It's just awful
stories. You see this stuff now that the senior centers are
beginning to witness and seniors are confused. My Dad is 80
years old, but there's a lot of folks in their 80's and 90's,
they don't perhaps know how to use that computer as well as you
and I can use it. They think that there's a program out there,
there really is a benefit, but when they see this stuff, the
wrong stories, the bait and switch stories that are out there,
you can understand how they get confused. And that's why I'm
glad you're there and I look forward to working with you. I
look forward to working with my Chairman Bilirakis and Chairman
Barton to tell the real story, for us to sit down with our
seniors and show them how they can benefit from this program,
rather than resort to partisan politics which sadly seems to be
taking center stage.
I yield back the balance of my time.
[The prepared statement of Hon. Fred Upton follows:]
Prepared Statement of Hon. Fred Upton, a Representative in Congress
from the State of Michigan
Dr. McClellan, I want to start today by commending you and your
staff in the strongest possible way for the great job you have done in
a scant five months to get the new Medicare drug discount card program
up and going. I know it's been a Herculean task. Sure, there have been
a few glitches--with an undertaking of this magnitude, that is bound to
happen. But more importantly, you've found them and moved swiftly to
correct them. Our nation's seniors and persons with disabilities are
being well-served by you and will be well-served by this new Medicare
drug discount card program.
Mr. Chairman, I am very glad we are holding this hearing today. I
hope a lot of seniors and their loved ones are listening today. There
are organizations out there claiming to represent the best interests of
seniors--and especially low-income seniors--who want this new
prescription drug plan to fail. If the new Medicare Modernization Act
were as terrible as is being portrayed on the video tapes Families USA
paid Walter Cronkite to make or in the dire emergency alert mailings
going out from the National Committee to Preserve Social Security and
Medicare, I wouldn't have spent over three years working on the law,
and I sure wouldn't have voted for it.
I am concerned that because of these negative campaigns, seniors
across the nation and in particular low-income seniors who will benefit
the most from the drug discount cards may be discouraged from signing
up. Let me set the record straight:
Right now, unless you already have prescription drug coverage under
the Medicaid program, you are eligible to voluntarily sign up for a
Medicare-certified prescription drug discount card. Card holders can
expect discounts on brand name drugs of 10 to 20 percent or more and on
generic drugs of 20 to 35 percent, with some drug card sponsors
reporting discounts as high as 40 to 50 percent. There is an enrollment
fee which will vary by card sponsors but cannot be more than $30 per
year.
Importantly, if you are a beneficiary with an income at or below
$12,569 ($16,852 for couples), your card will come with a $600 credit
to be used for the purchase of your prescription drugs. Another $600
credit will be provided in 2005. Medicare will pay the enrollment fee.
For more information or to sign up for a card, you can call 1-800-
MEDICARE (1-800-633-4277). The phone lines are open 24 hours a day. Or
you can go on the Internet at www.medicare.gov and select
``Prescription Drug and Other Assistance Programs.'' This is a very
helpful website. It will allow you to enter your prescriptions, compare
prices on the discount cards available in your area, and see which
pharmacies in your neighborhood are participating.
Check it out, seniors. This is a solid program that will provide
real assistance with your prescription drug costs. I am proud to have
helped write it and pass it, and I stand by it.
Mr. Bilirakis. The gentleman's time has expired. Mr. Rush
for an opening statement.
Mr. Rush. Thank you, Mr. Chairman, and I also want to
welcome Mr. McClellan.
Mr. Chairman, I sincerely hope that this hearing will be an
informative hearing and I want to just make a comment on the
statements that--one of the statements made by my colleague, my
colleague and my friend from New Mexico. She said that this
program has some glitches in it. Well, Mr. Chairman, I want you
to know that in my estimation this program has some gaps, some
extraordinary gaps in it. And while I have a lot of problems
with this prescription drug discount program, basically for
some of the same reasons that my colleagues have voiced.
I still remain hopeful that we can salvage some good out of
this, in my estimation, ill-conceived discount card program and
give the seniors in our nation some real relief, particularly
some seniors from my State and from my District. And in this
regard, I want to touch on the $600 Transitional Assistance to
low income seniors. This subsidy is one of the few aspects of
the discount program that supposedly offers beneficiaries
guaranteed savings.
However, at a closer look, the program does virtually
nothing for many low income senior citizens and proponents of
this program greatly over-estimate the generosity of the yearly
subsidy. In my home State of Illinois, CMS and the Illinois
Department of Public Aid have estimated that 348,000 seniors
could benefit from the $600 yearly subsidy. However, Mr.
Chairman, they also concluded that the vast majority of these
seniors are ineligible for the subsidy because Illinois already
provides a Medicaid prescription drug benefit known as Senior
Care for beneficiaries 200 percent above the poverty level.
Illinois' threshold is far greater than the 135 percent
threshold under the discount program. Moreover, Illinois
already offers a state prescription drug discount card which
offers Illinois seniors an average of 21 percent in savings,
far, far better than the estimate 10 to 25 percent in savings
CMS estimates for its faulty discount card. As such, this
discount card program does virtually nothing for the seniors in
my State.
Mr. Chairman, with that, I'd like to submit for the record
a letter from the Illinois Department of Public Aid----
Mr. Bilirakis. Please finish up.
Mr. Rush. Dated May 20, 2004 and I would like, Mr.
Chairman, at the time of the questions to the panelists to
explain how this discount program, this hyped up program is
going to help my senior constituents in Illinois.
[The letter follows:]
Illinois Department of Public Aid
Springfield, Illinois 62763-0001
May 20, 2004
Rep. Bobby Rush
2416 Rayburn House Office Building
Washington, D.C. 20515
Dear Rep. Rush: Your staff recently inquired about the number of
Illinoisans who are currently covered by the existing Illinois drug
programs and who are, therefore, excluded from the Medicare Discount
Card Transitional Assistance. This letter responds to that inquiry and
lays out the programs available to Illinoisans today.
Residents of Illinois benefit from a wide range of state programs
providing them with increased access to affordable drugs. These
programs include Medicaid, SeniorCare, Illinois Pharmaceutical
Assistance Program and the Save Rx--the Illinois Discount Card.
The State of Illinois provides coverage through the Medicaid
program for individuals who are Aged Blind or Disabled (AABD) whose
income is below 100 percent of the Federal Poverty Level (FPL). As of
April 30, 2004 , there were 372,262 Illinoisans enrolled in the AABD
program. These enrollees receive a comprehensive drug benefit with
minimal copays ($3 for brand name drugs and no copay for generic
drugs).
The State of Illinois also provides comprehensive drug coverage for
Illinois seniors whose income is less than 200 percent of FPL through
the SeniorCare program, which is a Medicaid waiver. As of April 30,
2004, 173,726 Illinoisans were enrolled in this program. IDPA has
previously estimated that the total population of seniors eligible for
SeniorCare at approximately 360,000. There is no enrollment fee for
SeniorCare. Copays are minimal ($4 for brand name drugs and $1 for
generic drugs).
You asked whether seniors in Illinois would benefit from the $600
temporary assistance (TA) available through the Medicare discount card.
Neither of the above mentioned populations, AABD or SeniorCare are
eligible for the $600 temporary assistance as part of the Medicare
discount card. TA is only available to individuals with incomes below
135 percent of FPL. Income eligibility for SeniorCare extends beyond
the income eligibility for TA. Therefore, seniors who are eligible for
TA would generally already be covered or eligible for the more
comprehensive programs AABD or SeniorCare.
The only individuals in Illinois that would benefit from TA who are
not eligible for the more comprehensive SeniorCare program are those
under 65 years old who are disabled, whose income is between 100
percent of FPL and 135 percent of FPL and who are on Medicare but not
enrolled in Medicaid. We anticipate that many of these individuals with
drug need will currently be enrolled in the Illinois Pharmaceutical
Assistance Program (IPAP), as described below.
IPAP is a drug program funded by the State of Illinois. It offers
both seniors and disabled individuals access to a limited formulary of
drugs for Alzheimer's disease, heart and blood pressure problems,
arthritis, cancer, osteoporosis, diabetes, glaucoma, lung disease and
smoking-related illnesses, multiple sclerosis and Parkinson's disease.
This program is available to those whose income is up to approximately
240 percent of FPL. We estimate that a maximum of 9,237 of these
individuals will be eligible for TA through the Medicare discount
program.
I hope this information will be helpful to you.
Sincerely,
Anne Marie Murphy, Ph.D.
Medicaid Director for the State of Illinois
Mr. Bilirakis. Mr. Deal for an opening statement.
Mr. Deal. Thank you, Mr. Chairman. I want to also welcome
Dr. McClellan here and I thank him for undertaking a very huge
job and for his dedication to that. I thank him also for
meeting with me on a constituent matter that we've had and look
forward to concluding that successfully.
The enormity of this job, I think is certainly one that we
all have difficulty comprehending and I thank you for your
efforts.
Mr. Chairman, we have heard a lot of talk today and I think
there's one thing that my senior citizens in North Georgia
understand and that's the difference between somebody who tries
to do something and somebody who simply talks about it. The 10
years preceding, for a decade, Congress has simply talked about
prescription drugs. My senior citizens understand that talking
about it doesn't help them one bit. Doing something is what
begins to help them.
We have taken that step. It may not be perfect and
certainly I'm sure it's not perfect, but first of all, we can't
even agree on what the definition of perfect is. So let's deal
with what we have. Let's try to make it work.
Now if they think the discount card is confusing my 97-
year-old mother who lives with me is a retired school teacher.
She's under the public retirement system of the State of
Georgia as a school teacher, which provides pharmaceutical
benefits. They've just now put out a new proposal for the
different plans that are available to them which include
pharmaceutical benefits. Now if you think this is confusing,
you ought to see those choices and try to select the plan
that's going to cover the medicines that she takes.
Nothing is perfect. Let's take the issue that we have dealt
with. Let's try to make it work to the best way possible, and
if it needs perfecting, we can work on that in the days to
come.
Thank you, Dr. McClellan, for being here.
Mr. Bilirakis. The Chair thanks the gentleman. Ms. Eshoo
for an opening statement.
Ms. Eshoo. Good morning, Mr. Chairman, and good morning,
Dr. McClellan. Thank you for being here today and it's a
pleasure to see you.
Mr. Chairman, thank you for holding the hearing. I think
this is an important one.
As we move from one side to the other, there is a great
deal of passion about this and it's understandable on the
Democratic side, this is not the way the Democrats would have
liked to have reformed Medicare and added this benefit and
that's eminently clear and we really, I don't think, need to go
after each other on it. This is really a major difference
between the two major political parties in our country.
My Republican friends are proud of what they have
constructed and now that the law is passed, we're here, we're
here to talk about how this thing is working. And so that's
what I'd like to make my comments about and that we concentrate
on what is on the table and what's out there in terms of our
constituents.
I have a town hall meeting coming up. Each one of us in our
own way is responsible for putting this information out to the
people we represent. Whether we vote for something or not, we
still represent everyone and we have to explain it to them. So
I think today I'd like to hear more about how we're going to
move over some of the early very apparent bumps in the road
which is not a surprise. Plus, this is complicated. It's not
really the simplest thing to carry out.
What I want all of us, I think, to keep in mind is that
over four decades Medicare has been the gold standard for
seniors. They always want more things to be a part of it.
They've never wanted it scrapped. They like what they have, but
they have, with legitimacy wanted benefits added. So it's a
trusted program. And I think that where we are right now, we
have to be sure that that trust is not damaged and that's what
I'm concerned about because I think the discount card is, well,
the Republicans made fun of the Clinton health plan and said
that it was a Rube Goldberg plan. I think that sometimes when
you complain about something so much, that maybe it's a catchy
disease. There's something that kind of smells and tastes and
looks like that Rube Goldberg plan right now, because it is
enormously complex.
Yesterday, the Wall Street Journal reported that there were
wild fluctuations in the cost of drugs from 1 week to the next
and no one could explain why. And the woman that wrote the
article is someone that--oh, from the Washington Post, is the
health writer. So this is a knowledgeable individual.
So today, Dr. McClellan, you know and it's been said by
others, what the problems are right now. You know my District
and there are a lot of people that are plugged in and make use
of the internet, so they're going to be able to navigate.
What about the rest? And what about the things that have
now surfaced? How are they going to be addressed?
I want to throw one more thing in, Mr. Chairman----
Mr. Bilirakis. Quickly.
Ms. Eshoo. The full chairman of the committee chaired INO
here and I think that for the transparency and the importance
of the Congress leaning in, we should have an INO hearing on
the ruling that the GAO came out with. We are big enough, tall
enough, mature enough and American enough to review those
things and learn from them. Thank you very much.
Mr. Bilirakis. The gentlelady's time has expired. Mr.
Shadegg for an opening statement.
Mr. Shadegg. Thank you, Mr. Chairman, and I want to thank
you for holding this hearing. I guess I want to begin by noting
the title of the hearing, ``Medicare Prescription Drug Discount
Cards: Immediate Savings for Seniors.''
There has been a great deal of criticism, but none of the
criticism claims that we aren't doing something about the
problem. And I want to kind of hue the line followed by my
colleague, Mr. Deal, in talking about the difference between
criticism and action.
I'd like to begin by thanking my colleague, Mr. Shimkus,
for pointing out that under the leadership of Chairman Barton
of this committee, Mr. Burr, Mr. Buyer, Mr. Norwood, and
myself, it was this committee's so-called rogue group that
produced the idea for a drug card and it became a part of this
program.
I think it is not, of course, perfect. But I think that the
vitriolic criticism of some people, which has gone so far as to
discourage seniors to even try to make the card work for them,
is inappropriate. I simply want to quote a rather famous quote
from Theodore Roosevelt on the difference between criticism and
action. Theodore Roosevelt once said, ``it is not the critic
who counts, not the one who points out how the strong man
stumbled or where the doer of deeds could have done them
better. The credit belongs to the one who is actually in the
arena, whose face is marred by dust and sweat and blood, who
strives valiantly, who errs and comes up short again and again
because there is no effort without error and shortcomings, but
who does actually strive to do the deeds, who knows the great
enthusiasms, the great devotions, whose spends himself in a
worthy cause, who at best knows in the end the triumph of high
achievement and who at worst, if he fails, at least fails while
daring greatly so that his place shall never be with those cold
and timid souls who know neither victory nor defeat.''
We enacted a drug discount card last year. It is the law of
the Nation. We need to work to make it the best we can for the
American people and I commend you, Mr. Chairman, and I think
this hearing is a step in that direction.
Mr. Brown. Mr. Shadegg, will the gentleman yield for a
moment?
Mr. Bilirakis. Will the gentleman yield?
Mr. Brown. Just for 30 seconds.
Mr. Shadegg. Certainly.
Mr. Brown. A lot of us wanted to be in the arena during the
Medicare debate. We weren't allowed to offer floor amendments.
We were pretty much locked out of the conference----
Mr. Shadegg. Reclaim my time.
Mr. Brown. I love that quote and I appreciate your bringing
it up.
Mr. Bilirakis. Thank you. The gentleman's time has expired.
Mr. Stupak for an opening statement.
Mr. Stupak. Thank you, Mr. Chairman, and thanks for holding
this hearing. For almost 40 years, our seniors have counted on
Medicare to be dependable, simple and affordable. These cards
do not meet the Medicare standards. Our seniors need a
prescription drug plan that they can understand and that will
offer a real discount they can count on.
This drug card fiasco is not what seniors want or what they
deserve. I think it will become very clear today that there's
an infinite amount of confusion and frustration surrounding
these cards.
Even though HHS is spending $18 million, now we understand
the $18 million was illegally spent according to GAO, but
they'll spend $18 million to tell of the savings generated by
these cards, telling seniors to wait to enroll. Are seniors
supposed to wait or not wait?
HHS says seniors should monitor the website for a week
before choosing a card because prices will change. But there's
evidence that the prices on the Medicare websites aren't always
correct.
Many of the prescription drug card companies have said that
the prices on the Medicare websites are wrong. HHS is still
taking new applications for cards. And the drug prices and
drugs covered can change weekly.
How can a senior, how can anyone, make good decisions when
the administration is giving them bad information and
information which is changing every week? The bottom line is
that these discount cards do not have to be this confusing and
we could have provided a real drug benefit.
Had we leveraged the bargaining power of the Federal
Government as many of us have advocated, seniors would be
receiving real savings. Instead, seniors under this plan are
going to pay 75 percent more than what the VA pays for their
drugs.
Why can't we have one card instead of 73, with a real
benefit leveraging the purchasing power of all seniors? That's
the question seniors across my District are asking me and
that's the question I put to my colleagues and the
administration.
I wish to thank Families USA and Walter Cronkite for their
efforts to put forth accurate information in the videos that we
have seen. Not only have they pointed out the pitfalls of the
discount cards, but they have really looked at and examined how
an individual applies, what are the qualifications, and put
forth questions that I think we all need to ask, not just
simply disregard the questions that are out there.
There are some complex issues with this card. I don't think
it had to be that difficult and so with unanimous consent, Mr.
Chairman, I'd like to put in my whole statement and also the
Washington Post article of Tuesday, May 18, entitled ``Pick a
Card!#?$!''. I believe you already said it would be accepted,
but I just want to make sure it's part of my whole statement
and part of my statement here this morning.
I yield back and I look forward to listening to Dr.
McClellan and other panelists here today.
Mr. Bilirakis. Without objection. Mr. Hall for an opening
statement.
Mr. Hall. Mr. Chairman, I'll not make an opening statement.
I just want to put it in the record. I just commend you and Dr.
McClellan and all on both sides of the aisle that are
participating and have put some input into it. I just think
it's great that Americans have a wide range of needs, and a
one-size-fits-all program is not good. That's not what this is.
I think of 39 cards to choose from in Texas alone, seniors can
surely find one. The beauty of it is if they don't want or need
a discount card and because of the voluntary nature of the
program, they don't have to buy one. There's going to be bumps
along the road, but I think that the Center has done a good job
and I'm looking forward to this hearing today and listening to
how they will be improving their service to the public in the
coming weeks and months.
And I yield back my time.
Mr. Bilirakis. The Chair thanks the gentleman. Mr. Rogers
for an opening statement.
Mr. Rogers. I'll waive.
Mr. Bilirakis. Mr. Greenwood for an opening statement. That
completes all of our opening statements. Let's move right into
the first panel. We appreciate your patience, Dr. McClellan.
Mr. McClellan. Thank you, Mr. Chairman.
Mr. Bilirakis. The first panel consists of Dr. Mark
McClellan, Administrator for the Centers for Medicare and
Medicaid Services, in case any of you out there didn't already
know that.
You have 10 minutes, sir. Please proceed.
STATEMENT OF MARK B. McCLELLAN, ADMINISTRATOR, CENTERS FOR
MEDICARE AND MEDICAID SERVICES
Mr. McClellan. Okay, Chairman Bilirakis, Representative
Brown, all of the distinguished committee members here today,
thank you for your strong interest in the Medicare-Approved
Drug Discount Card and the $600 credit. As you know, Mr.
Chairman, we are going to have a few extra minutes as part of
my presentation to show you exactly how to get the benefits
from this program.
As you all also know in the 5 brief months since the
Medicare Modernization Act was signed into law, CMS has created
and implemented the first major drug assistance program to be
offered through Medicare. As we speak, Medicare beneficiaries
who choose to do so are enrolling in the voluntary Medicare-
approved drug discount cards to get some immediate relief from
prescription drug costs. And they are. Studies of the card
prices show significant savings of 11 to 18 percent off the
average retail prices paid by all Americans; 16 to 30 percent
off of the usual retail prices for brand name drugs and even
greater discounts of 30 to 60 percent or more on generic drugs.
Prices are also generally significantly lower for mail order
drugs on Medicare-approved drug discount cards and are
available on the internet. And many cards have open
formularies, meaning discounts across the board on drugs.
An especially important feature of the cards, especially
important, is the substantial help that has been mentioned
before that's coming right now for the more than 7 million
Medicare beneficiaries with incomes below 135 percent of the
poverty level who don't have good drug coverage. Just this week
CMS completed an analysis that shows low income Medicare
beneficiaries will be able to see big savings of between 30 and
77 percent on bundles of brand name drugs that they commonly
use and up to 92 percent on individual generic and brand name
drugs when they combine the lower prices they'll be paying with
the $1200 in credit available to them over the next year and a
half. And these large savings don't include the low prices that
many drug manufacturers are providing in working with us to the
low income beneficiaries who use up their $600 credit.
As an example, one beneficiary's savings in this study
increased from about 59 percent with the drug card alone, to 88
percent off their drug costs with the additional manufacturer
offerings. Counting these special pricing arrangements, the
significant discounts and the $1200 credit, the new sources of
savings mean thousands of dollars in savings this year and next
for low income beneficiaries, ahead of the comprehensive drug
benefit. Starting next month, it's no longer talk about
Medicare providing help with drug costs. And that overdue help
is especially important for our beneficiaries who have been
struggling between the costs of drugs and other basic
necessities of life.
Of course, one of the cornerstones of the discount card
program is the new Medicare price compare tool which we're
going to demonstrate for you today. Through this feature on
both our website and our 1-800-MEDICARE number, we're providing
beneficiaries with information they've never before been able
to access and we're using it to fundamentally change the way
that Medicare helps people in this country to buy drugs. With
the new ability for seniors to band together to negotiate lower
prices from drug manufacturers, combined with an unprecedented
ability to find out about drug prices at more than 50,000
retail and mail order pharmacies all over the country, it's
also our responsibility to provide beneficiaries with the help
they need to get the most out of this new program, based on
their individual and diverse drug needs.
To get the most out of the program, you need to remember
three things: your zip code, your medicines and their doses,
and your total monthly income, if you think you may qualify for
the drug credit. Zip code, medicines, income. With this
information you can call 1-800-MEDICARE and talk to a trained
customer service representative to find out about your best
options. And we can also help you with special preferences
about particular pharmacies or cards including low fee cards
and free cards. Our customer service operators will even send a
personalized brochure which many of you have an example of
sitting at your table, with information on the best cards based
on that individual beneficiary's drug needs and the simple two-
page standard enrollment form. And we can typically do all of
this in 15 minutes or less. Or you can get all of this
personalized help by visiting our website at Medicare.gov. It's
that simple.
We're committed to getting beneficiaries the information
they need to get the most from this program, so we have
expanded our phone and website support to ensure timely
assistance 24/7 to respond to truly unprecedented call volume,
averaging 400,000 calls per day during the beginning of May. We
quadrupled the number of 1-800-MEDICARE customer service
operators from more than 400 to more than 1600 and we've added
more in the past week. We will be adding as many more as are
needed. We've added voice messages to help callers be better
prepared to speak to customer service representatives. We are
providing self-service information in our voice response system
and we developed best practices to help customer service
representatives reduce call times. We're also making many
improvements in our website which I'll be happy to talk about
as well in response to some very constructive feedback from
consumers, from advocates, including some that are testifying
today, and from reporters and others.
As a result of these improvements, we're getting to meet
the demand. Waits are usually no more than a few minutes at our
call centers this week and no more than 15 minutes even at the
peak times. Moreover, we work with card sponsors to ensure that
the prices they have submitted to us for posting on the website
are prices that they can assure the beneficiaries when they go
to the participating pharmacies. We believe the information now
in the website reflects just that, the best assured price.
We've also taken new steps to make sure that we can take
effective action against cards that don't live up to their
promises.
Now at this point I'd like to turn over this presentation
to Mary Agnes Laureno from CMS' Center for Beneficiary Choices,
who is going to walk us through a quick demonstration of the
price compare tool.
Mary Agnes. I think you'll be able to see this on your
viewers.
Ms. Laureno. Thank you, Dr. McClellan. What you're seeing
here----
Mr. Bilirakis. You'll have to pull that mic closer, please.
Ms. Laureno. Thank you. What you're seeing here is the home
page of the Medicare.gov website and you'll see that the first
link under the features tool is our prescription drug and other
assistance tool program. Now at the very beginning, the first
thing that we tell them is what you need to get started and we
explain it as Dr. McClellan mentioned. You need the name of
your drug, the dose, the pill size, etcetera, so that they can
be fully prepared to go through this tool.
We have a quick search feature for those individuals with
higher incomes who aren't interested in learning about other
assistance programs or the $600 Transitional Assistance. And
then we have our screening questions for the rest of the
individuals. And our first question is ``do you currently have
Medicare?''
We ask other screening questions that help us determine
eligibility for the $600 credit and for the drug card such as
``Are you currently receiving Medicare? Do you use TriCare,
FEHBP or other insurance coverage?''
I'm going to demonstrate a low income beneficiary from
Clearwater, Florida, so I'm going to enter her zip code. We ask
screening questions about whether the individual is an American
Indian using Indian Health Service pharmacies or in a long-term
care facility because that helps us to determine whether they
might be interested in one of the specialized drug cards. We
ask whether the individual is married or single because that
affects the income levels. And as I said, I'm going to enter a
low income beneficiary with minimal resources.
We then simply click the continue button. The next bit of
information that we ask the user for is for the drugs that they
are currently taking. And this individual is taking Celebrex,
so I type in the first few letters and Celebrex will come up.
And she's taking Zocor to lower her cholesterol. And she's
taking Paxil. And she's taking Norvasc. So those are the four
drugs that she's taking and then again I'll click the continue
button.
Now we're screening individuals based on the information
they gave us, not only for eligibility for the discount card or
for the $600 Transitional Assistance, but also for any other
programs that might be a good fit for their individual
situations. So in this particular example, this person would
qualify or appears to qualify for Medicaid for the State of
Florida. So we put information about the Medicaid program, the
eligibility criteria, who is eligible, where to apply and any
important notes about that program.
We also have information about other sources that she may
be eligible for, but again, we put the one that looks like, the
best fit for her in the first page so we have information about
State pharmacy assistance programs, both the Prescription
Discount Program in Florida as well as the Pharmacy Plus Silver
Saver program that's available in Florida. Again, we put
contact information, eligibility criteria, who has to apply,
where to apply and how to contact them.
Similarly, we put information about pharmacy assistance
programs that are available, again geared toward the specific
drugs that this individual is taking. So for example, the
GlaxoSmithKline program covers Paxil and again, we give all the
information about eligibility and how this individual can go
about applying and contacting Glaxo for that program.
We also want to make sure that individuals have all the
information that they need about all the ways that they can
save on their drugs. So on our More Ways to Save program, we
also provide some educational information about generic
alternatives and mail order. And again, we customize this to
the individual drugs. So we list the drugs that she's taking
and explain that there is a generic available for Paxil where
she can save additional money.
For individuals who are interested in one of the Medicare
managed care plan options or are currently enrolled in a
Medicare managed care plan and want to see whether they offer a
discount card, we have the simple tab there. We list all of the
Medicare Plus Choice organizations available in the
individual's zip code, the monthly plan premium. We provide
information about whether that plan currently has a benefit
that offers prescription drugs. If so, the co-pay information
and then we tell them whether they currently offer a Medicare-
approved discount card, yes or no, and whether there's a charge
for that card. If the individual was interested in more
information about the Humana Plan, they would simply click on
that and pull up a full screen of all the benefits.
With that, I'm going to go ahead and go into the actual
compare prices for the drug discount card. We have a simple
link here called Compare Prices that will take you into the
tool. We do have a user agreement to explain that we do not
want unauthorized use of this for people to take the
information and then sell it, for example. The user just simply
clicks ``agree.''
We're now on the page where you enter the dosage and the
frequency with which you're taking the particular drug. And
this information, we do need in order to be able to accurately
price it. So for this individual, she's taking 5 milligrams of
Norvasc. She's taking 20 milligrams of Paxil. She's taking 40
milligrams of Zocor. And she's taking 200 milligrams of
Celebrex. If I had forgotten to add one of my drugs, I could
simply use this ``add another drug'' button here. She does take
these once a day, so she takes them 30 pills a month.
I have a choice if am I interested in looking for cards and
pharmacies close to my zip code or do I want to go farther out
and I'm going to just keep it close to my zip code. And I can
have a choice of, am I interested in getting information on the
mail order pricing and generic alternatives, which I'm going to
say yes.
This is the summary information for the discount cards. It
has a listing of all of the discount cards that are available
that cover all of her drugs. You can see it's a nice list. We
tell them how many pharmacies are available in the zip code
radius. In this instance, one and a quarter miles around her
zip code. We list the information by lowest to highest price,
so Argus does have the best price for retail drugs for her area
at $298.75 to $375. And we also offer the pricing information
for the generic alternatives. Argus doesn't happen to have a
mail order pharmacy, but U Share does, so where there is a mail
order pharmacy available, we also offer information on that
pricing.
And I'm going to say that I'm interested in information on
the five drug cards that have the best retail pricing for this
individual. I can then drill down to our pharmacy by pharmacy,
drug by drug pricing information. So now I can see that I have,
for example, the Argus drug card program that had three
pharmacies in their area. And I can see Eckerd, Publix pharmacy
and Walgreens. Walgreens seems to have the best pricing for the
drugs that this individual currently offers. And I can go drug
by drug to see exactly what the pricing is for Celebrex,
Vorvasc, Paxil and Zocor. Since this individual was eligible
for the $600 credit at the 5 percent co-share, we also list
information on the co-share amount that they would currently
pay. Again, I can go down card by card for the five drugs that
I picked and look at each of the pharmacies that are in that
drug card's network as well as the pricing that's available.
Thank you.
Mr. McClellan. Thank you, Mary Agnes. Mary Agnes is an
example of the talent and hard work at the Agency that's
enabled us in just the 5 months since the law was passed to
begin to help Medicare beneficiaries, especially the millions
of beneficiaries with low income and no coverage. On this
example, if the person had called up, we would have gone
through this with them. They would be mailed a personalized
brochure with their name on it. I think you have copies of the
kind of brochure that we send out in this case, which is a
personalized booklet about prescription drug and other
assistance programs including all those additional assistance
programs that Mary Agnes mentioned, Medicaid, other public and
private sources of drug savings, all designed for that
individual beneficiary's needs. Very personalized service.
By combining this kind of unprecedented transparency in
prescription drug pricing and the negotiating power of our
beneficiaries, with this new level of personalized assistance,
and also by listening to the constructive suggestions that
we're getting in these early days about how we can do even
better, Medicare is beginning to provide real help for
beneficiaries with lower drug costs and that's definitely the
case in this example where for her basket of drugs, the lowest
price offered at retail pharmacy right in her neighborhood was
about $300. That was a savings of 18 percent off the national
average retail prices of those drugs and many seniors can't
even get those average prices because they don't get the same
kind of discounts that people with public or private insurance
are allowed to get. So this translates into savings of over the
next 7 months, the rest of this year, totaling almost $500 for
the discounts and if you include the $600 credit, the savings
are well over $1000 or 41 percent of this beneficiary's
medications' cost.
So thank you for the opportunity to testify today. Thank
you for that opportunity to go through an example of how this
program works and how beneficiaries can get the most out of it
and I look forward to answering all of your questions.
[The prepared statement of Mark B. McClellan follows:]
Prepared Statement of Mark McClellan, Administrator, Centers for
Medicare and Medicaid Services
Chairman Bilirakis, Representative Brown, distinguished Committee
members, thank you for inviting me to discuss the Medicare-Approved
Drug Discount Card and the Transitional Assistance Program, which were
enacted into law on December 8, 2003, as part of the Medicare
Prescription Drug, Improvement, and Modernization Act of 2003 (MMA).
This May, we reached the five-month mark since the legislation was
enacted. CMS worked diligently to meet this aggressive deadline to
implement the drug card and transitional assistance program--and we
succeeded. In that time, we issued an interim final regulation and
guidance, set up the new drug discount card program with new
information and outreach systems to support them. Drug card sponsors
began marketing and enrollment efforts on May 3 as scheduled.
As we speak, Medicare beneficiaries are enrolling in Medicare-
approved drug cards that will give them immediate assistance with high
prescription drug costs. We are already seeing evidence of significant
savings between 10-17 percent off the retail prices that the average
American pays, and even greater discounts of 30-60 percent or more on
generics. These cards will offer real help to those Medicare
beneficiaries struggling with their drug costs. And many cards have a
low annual fee (or no fee at all) so many beneficiaries can recoup the
cost of enrollment in their first purchase. In addition to the real
savings, low-income beneficiaries may get even more help in the form of
a $600 annual credit on the discount card, nominal cost sharing, and
other price reductions from manufacturers.
BENEFICIARY ACCESS IMPROVEMENTS
In spite of substantial progress we have made thus far and the fact
that beneficiaries are seeing savings, we recognize there have been
some operational problems. However, we are identifying and correcting
these problems and, with each passing day, improving the efficiency of
this program. As you all know, in the brief five months since MMA was
signed into law, CMS took the drug card program--the first of its kind
to be offered through Medicare--from conceptual idea to reality.
Implementing the drug card in such a short period of time presented
many challenges for the Agency, including developing the technical
platforms to support public display of unprecedented amounts of drug
pricing information.
The initial phase of a major new program is clearly a time of
learning, and what we have seen is that millions of seniors and people
with disabilities are very interested in learning about the best ways
to save on their drugs. During the first few days of May, we averaged
400,000 calls to 1-800-MEDICARE each day. This is an extraordinary call
volume for one week, particularly when you consider that we had 6
million calls in all of 2003. Responding to this volume of calls was a
significant challenge to our high customer service standards in
Medicare. Even with this unprecedented level of interest, we are
committed at 1-800-MEDICARE to provide service that reliably gets
customers the help they need in a matter of minutes.
We have worked quickly to improve the program and we will continue
to do so as we identify problems. At 1-800-MEDICARE, we tripled the
number of customer service operators from 400 to more than 1400
available by last week. In recent days, we added another 600 customer
service staff, and we expect to add many more trained representatives
in the next couple of weeks to handle the unprecedented number of
callers in a timely and effective manner. We've also taken steps to
reduce the time that our customers have to take when they call, by
adding voice messages that can help callers to be better prepared when
they reach a customer service representative. We have also provided
self-service information in our interactive voice response system so
that callers can get information to address their questions without
needing to speak with a customer service representative. And, we have
also developed additional tools to help our customer service
representatives use ``best practices' to work more efficiently--
reducing our call handle time significantly and allowing our
representatives to serve more callers more quickly. As a result, we are
achieving much better support results--the kind of results our
beneficiaries deserve and expect. We are tracking our call center wait
times and call times, and we are reaching the balance we want between
calls and caller support. This week, during our busiest times of the
day, the wait times were from 4 to 15 minutes (and we are advising
beneficiaries about approximate wait times), and at many times the
waits have been even less.
We are committed to getting people with Medicare the information
they need to get the most out of the drug cards, and that starts with
personalized facts now available in just a few minutes through 1-800-
MEDICARE or Medicare.gov. To help callers and web visitors who have
trouble matching up their medicines with the discount information, we
have added a ``drug lookup'' feature to assist with the spelling of
their drug names and we are expanding our drug entry list--a large and
growing ``dictionary'' of drug names. In the interim, we have also
provided instructions to users that they can ``add another drug'' if
they do not find their drug on our initial drug entry screens. Further
improvements to the drug and dosage entry screens will be in place in
the next few weeks. We are committed to continuing improvements to the
site navigation and functionality features based on feedback from all
of our users.
We appreciate the unprecedented level of interest and feedback we
are receiving from beneficiaries and others in the first days of this
new program. We will continue to refine and improve our 800 number and
our web site by using feedback from all interested parties, including
the suggestions we have received from Members of Congress. By following
a few simple steps--especially by being ready with zip code, drugs and
doses, and income information--beneficiaries can get the personalized
information they need quickly. And beneficiaries should remember that
the drug card is voluntary--there's no deadline and no late enrollment
penalty, although signing up by June 1 means that they will start
seeing the discounts right away. We also know that beneficiaries have
diverse needs and are waiting to get information to help make the
choice that is best for them.
It's also important to remember that despite the challenges we face
in implementing this brand new program, we are providing beneficiaries
with information they have never before been able to access. Further,
the drug card is a fundamental change in how Medicare helps
beneficiaries buy drugs. Beneficiaries will get lower prices for their
drug purchases because they will be able to band together to use their
purchasing clout through the power of large purchasing pools to
leverage discounts from drug makers. By combining unprecedented
transparency of prescription drug prices with individualized assistance
and educational resources, we are working with card sponsors to use
modern technology to provide the medicines Medicare beneficiaries need
at a lower cost. Transparent prices for Medicare-approved cards gives
beneficiaries important information to help them choose the best card
for their needs.
BENEFICIARY ELIGIBILITY FOR LOW-INCOME CREDIT
One of the most important messages I can convey today is the
tremendous help the drug card will provide for low-income
beneficiaries. Medicare beneficiaries are eligible to enroll in the
drug card of their choosing, unless they have drug coverage through
Medicaid. If beneficiaries receive help with prescription drug costs
through other sources--retiree insurance, Medigap coverage, or health
plan benefits, they don't have to enroll if they don't want to--the
program is completely voluntary. However, beneficiaries with limited
incomes who are struggling with prescription drug costs unquestionably
can get much needed financial assistance. More than7 million
beneficiaries with incomes below $1,047 a month ($12,569 a year) for
single people or less than $1,405 a month ($16,862 a year) for couples
who do not have drug coverage may qualify for the $600 drug credit as
early as next month and an additional $600 again in January of next
year. The discounts from the cards combined with the $600 credit
available in June and again in January, and substantial additional
manufacturer and pharmacy discounts specifically targeted at low-income
individuals make this an exceptional program for low-income people with
Medicare--our most vulnerable beneficiaries. We want to make sure that
everyone who qualifies for the $600 credits get it. So, we have worked
closely with our partners at the Social Security Administration (SSA)
to send letters to millions of low-income beneficiaries that are
eligible for the $600 credit. We are also working closely with
community organizations to make sure these beneficiaries are aware of
the substantial savings and assistance now available to them through
the drug card program.
PRICE COMPARE
We are doing everything we can to ease the drug card enrollment
process for Medicare beneficiaries, and a big part of enrollment is
selecting the best card for an individual's needs. Today, beneficiaries
comparison-shop for many decisions in their daily lives comparing the
price and quality of a product or a service. Medicare beneficiaries
with and without prescription drug coverage often find it difficult to
find the best prices on prescription drugs, especially at neighborhood
pharmacies. That's changing with our new Medicare Price Compare tool,
which we will demonstrate for you today. This is a feature on our
website, www.Medicare.gov, that beneficiaries can use directly, or that
they can have a representative from 1-800-MEDICARE helpline walk them
through the same process. In addition, beneficiaries can consult with
beneficiary advocates, such as the thousands of local trained State
Health Insurance Assistance Program (SHIPS) volunteers, or consumer
groups to find the best deal. And beneficiaries need only three key
pieces of information: their zip code, the medicines they use, and
their income.
The Medicare Price Compare feature--the website and the assistance
available through 1-800-MEDICARE--is designed to help people with
Medicare lower their drug costs by selecting the best discount card.
Price Compare is a unique tool that allows users to customize their
search to get the best prices available for that drug or mix of drugs.
Making price comparisons on a drug-by-drug basis is difficult for many
beneficiaries who take multiple medications, and Price Compare permits
comparisons involving multiple drugs. Price Compare provides this
information for the retail pharmacy setting--where most Medicare
beneficiaries purchase their drugs. Moreover, card sponsors must assure
beneficiaries that they will pay no more than the discounted prices
listed on Price Compare. The price the beneficiary ultimately pays may
be even lower due to the increased visibility of prices and ongoing
competition among card sponsors.
Through the new website, beneficiaries for the first time in the
Medicare program will have access to prices for approximately 60,000
products sold at nearly 75,000 pharmacies around the country--all
turned into information they can use to get the best bargains on the
drugs they need. Using the website's therapeutic alternative function,
a person can look up a clinical condition like high cholesterol, and
see average prices for Lipitor as well as for other cholesterol-
lowering agents like Zocor and Crestor--options that may be worth
discussing with their doctor if they are less expensive and clinically
appropriate. In addition, patients can also get information on generic
alternatives, which are just as safe and effective as the brand-name
versions when approved by the FDA.
We are working with card sponsors to ensure that the prices they
have submitted to us for posting on the website are prices they can
guarantee to beneficiaries at the included participating pharmacies. We
believe the information now on the website reflects just that, and we
have also taken new steps to make sure that Medicare and the HHS Office
of the Inspector General can take effective enforcement actions against
cards that don't live up to their promises. Over the coming weeks, we
will continue to work with the card sponsors to help consumers get
consistent information whether they visit medicare.gov or the sponsor
websites. But in the meantime, we remain committed to our requirement
that beneficiaries must pay no more than the discounted price listed by
Medicare.
With the unprecedented amount of information now available on drug
prices through Price Compare, CMS has put comprehensive systems in
place to help beneficiaries use this information to find the best deal
on their prescription drugs. The 1-800 MEDICARE customer service
representatives will provide detailed information over the phone and
then follow up by sending out a personalized report that includes
information on how the drug card program works and detailed information
on the best cards for that beneficiary. Beneficiaries can even
designate the number of cards they want to review--2, 3, or as many as
they want. The Price Compare search can also turn up cards that get the
lowest prices on certain drugs, cards with low or no fee, networks that
include specific neighborhood pharmacies, and/or cards from specific
sponsors familiar to beneficiaries. We'll also include information on
total drug costs, and additional ways to save, such as purchasing
generic drugs. The brochure also includes information on how to sign up
for the card the beneficiary chooses--including the 1-800 numbers for
the card sponsor choices for with the best prices for that beneficiary
and our standard 2-page enrollment form. After enrolling, beneficiaries
will get their cards in a matter of days.
But we're reminding beneficiaries that they don't need to sign up
yet--this is a good time for beneficiaries to shop around to consider
their options for Medicare-approved drug discount cards. They can
window shop now on the website to see how cards compare on price, and
visit again whenever they choose. For those individuals who sign up by
the end of May, they will get the benefits of the discount program when
it starts on June 1. Beneficiaries, however, are not required to choose
a card in May; they can choose a card whenever they wish, with no
penalty for enrolling later. However, we are encouraging beneficiaries
with limited incomes to look into the program now, so they can start
saving immediately on their prescription drug costs. Best of all, it
doesn't cost low-income beneficiaries anything to enroll in a drug card
of their choosing. The $600 credit this year and the $600 credit next
year, plus additional discounts that a growing number of major drug
manufacturers are offering to wrap around the discount cards and
existing state-sponsored drug programs all translate into literally
thousands of dollars in additional assistance for low-income
beneficiaries.
AUTOENROLL AND STANDARDIZED FORMS
Twenty states currently have programs that already provide drug
benefits to low-income beneficiaries, many of whom will be eligible for
the $600 credit. Since most of these Medicare beneficiaries may enroll
in both the state program and the Medicare program at the same time,
CMS recently announced that low-income Medicare beneficiaries enrolled
in State Pharmacy Assistance Programs (SPAP) that provide discounts on
prescriptions drugs and who act as the beneficiary's authorized
representative in accordance with state law, may, at the state's
option, be automatically enrolled for the $600 credit on a Medicare-
approved drug discount card. Auto-enrollment benefits both Medicare
beneficiaries and the states. Medicare and the states want low-income
beneficiaries to get the additional $600 credit, and auto-enrollment is
one way to maximize the number of people who enroll for transitional
assistance. In addition, the states would be exempt from paying the
first $600 for each of these beneficiaries, thus freeing up additional
money to finance their own drug assistance programs.
We are going to work with states to automatically enroll their SPAP
members into a Medicare-approved drug card and obtain the $600 credit
so there is no loss in coverage or confusion for the beneficiaries.
However, the auto-enrollment process must allow a beneficiary the
choice to decline being enrolled in a Medicare-approved card before the
actual automatic enrollment takes place. States that have agreed to
automatically enroll Medicare beneficiaries include Connecticut, Maine,
Michigan, New Jersey, New York, Pennsylvania and Massachusetts, as long
as they are able to meet the CMS requirements. A number of other states
are also considering auto-enrollment, and we will continue to work with
states to facilitate this process.
While Medicare is providing price comparison information and
assistance with enrollment, beneficiaries must enroll directly with the
card sponsor they choose. CMS has established a standard enrollment
form that all card sponsors must accept to make it even easier to sign
up for a discount drug card as well as the $600 credit. This form will
also be used by State Health Insurance Assistance Programs (SHIPs), and
other partners and community-based organizations that assist
beneficiaries with their health care decisions. CMS has made this model
form available on the Internet at http://www.cms.hhs.gov/discountdrugs/
forms/, and has included instructions for its use as well as access to
the information needed to complete it.
SAVINGS REPORT--FINDINGS SO FAR
While we have long been confident that the drug card program will
give beneficiaries real savings on their prescriptions, we are excited
to have some data to reflect such savings. According to a recent CMS
study, Medicare beneficiaries can, for the first time, get
significantly lower prices through the Medicare-approved drug discount
cards at their local retail pharmacies. This preliminary analysis,
released May 6, compares the best Medicare-approved card prices from
the Price Compare website using randomly selected zip codes to data on
national average retail pharmacy prices actually paid by Americans. The
findings indicate that savings of at least 10 to 17 percent compared
with the average market prices actually paid by Americans for brand
name drugs that can be obtained from Medicare drug discount cards.
Potential savings from generics are even greater--30 to 60 percent. A
recent Food and Drug Administration (FDA) analysis underscores the
savings available through generic substitution. For mail-order
prescriptions, which are generally less expensive because they are
available less quickly, in higher volumes, and without face-to-face
assistance and advice from a pharmacist, Medicare-approved drug
discount cards also compare favorably to mail-order prices available
from such sources as drugstore.com and costco.com.
CMS has also recently completed analysis of the savings low-income
beneficiaries (incomes below 135 percent of the federal poverty line,
or FPL) who are eligible for $600 in transitional assistance and, in
many cases, additional manufacturer discounts on drug prices, can
expect to see under the drug card program. Our results indicate that
our illustrative low-income beneficiaries can save 29-77 percent over
the next 7-month period through the end of 2004 compared to national
average retail prices for ``baskets'' of commonly used brand name drugs
when both discounts and $600 in transitional assistance are taken into
account. In addition, our analysis indicates that low-income
beneficiaries can save 39 percent to over 96 percent on individual
brand name drugs that are commonly used by the Medicare population when
both the discount and transitional assistance are taken into account.
Five of the nine brand name drugs we examined had savings of over 90
percent when including the transitional assistance.
The combination of the discounts and the $600 in transitional
assistance result in a more than 92 percent savings for the random
sample of drugs and geographic areas in the analysis. Furthermore, our
analysis does not reflect the special pricing arrangements some
manufacturers have with certain discount cards after the $600 in
transitional assistance is spent. If all of these lower pricing
arrangements could be captured, these new sources of savings may lead
to thousands of dollars in savings this year and next through the
Medicare-approved drug card program for low-income beneficiaries. For
example, based on our analysis, one sample beneficiary's savings
increased from 58.4 percent with the drug card alone to 88 percent with
the added special manufacturer offerings.
The best way to illustrate the level of potential savings for low-
income beneficiaries is through some case study examples. CMS analysts
used the data from the FDA analysis to illustrate potential savings for
low-income Medicare beneficiaries in a number of geographic areas. In
all of these cases, Medicare would pay the annual enrollment fee, if
any. For example:
<bullet> A typical person taking Celebrex (osteoarthritis), Zocor (high
cholesterol), Paxil (depression), and Norvasc (hypertension)
might expect to pay $2,545.20 without the discount card over
the 7-month period. A low-income Medicare beneficiary residing
in Pittsburgh, Pennsylvania could enroll in a Medicare-approved
drug discount card and save about 42 percent between June 2004
and December 2004 (7 months). The savings include a discount of
about 19 percent and $600 in transitional assistance.
<bullet> A person taking Prinivil (hypertension), Glucophage (diabetes) and
Lasix (congestive heart failure) would expect to pay $913.50
over a 7-month period. A low-income Medicare beneficiary in
Orange County, California could enroll in a Medicare-approved
drug discount card and save 77 percent over the 7 months. The
savings include a discount of 11.3 percent and $600 of
transitional assistance.
<bullet> A typical person taking enalapril, a generic medication for
hypertension, might expect to pay $170.10 over 7 months for
this medicine. A beneficiary residing in Louisville, Kentucky
with income over 100 percent FPL but no more than 135 percent
FPL could enroll in a Medicare-approved discount drug card and
save about 95 percent over 7 months, including savings from the
discount and the transitional assistance. The beneficiary would
have several hundred dollars to roll over for use, if
necessary, in 2005.
<bullet> An individual taking Celebrex for osteoarthritis might expect to pay
$636.30 over a 7-month period. A beneficiary with income at or
below 100 percent FPL residing in Portland, Oregon could enroll
in a Medicare-approved drug discount card and save over 95
percent over 7 months, a savings of over $609.
We are continuing to analyze the data on Price Compare, and are
seeing drug prices continue to fall as more sponsors come online.
According to our analysis, many Medicare-approved drug discounts cards
are providing significantly lower drug prices and savings to
beneficiaries over what they receive in retail pharmacies today. These
initial price comparisons demonstrate that the Medicare-approved drug
discount card program will help assure that beneficiaries without
prescription drug insurance will no longer have to pay the highest
prices of any American for their drugs.
CARD MONITORING
While the drug card is proving to be a success thus far, CMS
remains vigilant in overseeing the program and working with outside
groups to protect beneficiaries from cards that try to ``bait and
switch.'' CMS also is monitoring changes in overall drug prices and
identifying programs that stray from the expected changes in prices.
Drug card sponsors have to report to CMS if prices increase in an
amount that exceeds the corresponding increase in average wholesale
price (AWP) and such increases must be based on a change in the
sponsors' costs, such as changes in the discounts, rebates, or other
price concessions received from a drug maker or pharmacy. We'll also
engage in other activities to ensure that card sponsors are charging
the advertised enrollment fees and following other Federal guidelines.
We expect that by making the prices of the 200 most commonly
prescribed drugs used by Medicare beneficiaries available to the
public, the prices will actually drop due to competition. And since the
Price Compare site began operation on April 29th, we have been working
with the card sponsors to ensure that we change our Price Compare
database in a timely manner when they lower the prices even more. We
stand by our policy of listing the best discount that beneficiaries can
be assured to get on a card, but it is true that some card sponsors may
be able to provide significantly better discounts on many prescriptions
than the ``assured'' prices currently listed on Price Compare.
The discount card programs must get rebates from the drug
manufacturers--along with other discounts--to help keep prices low.
Those sponsors with the most Medicare enrollees will be able to
negotiate the best prices. Because the Medicare-approved programs are
competing for beneficiaries, the card programs have a real incentive to
pass on the savings in the form of the lowest possible prices. The
cards need to offer savings and service, and we're going to be taking
steps to make sure beneficiaries get both. The simple fact is that if a
drug card wants to succeed in holding onto its beneficiaries, and in
building up its client base for when their drug benefit becomes
available in 2006, the only way to do so is to offer consistently good
deals and consistently reliable service to beneficiaries.
CONTINUED EDUCATION AND OUTREACH
In addition to Price Compare and the personalized drug card
information services provided through 1-800-MEDICARE, CMS has a number
of education and outreach efforts underway. In particular, CMS has
prepared customer service representatives at 1-800-MEDICARE with up-to-
date information on the drug card, as well as other CMS programs, and
training on using the Price Compare website. As I mentioned earlier in
my testimony, we are getting unprecedented volume at our 800 number and
on the website. Our latest call volume statistics show that 1-800-
MEDICARE received nearly 407,000 calls on May 3, the day drug card
enrollment commenced--quadruple the last highest call record--and
another 328,000 on the subsequent day. And during the first week of
May, CMS received more than 10 times the regular call volume, with 1.6
million calls to 1-800-MEDICARE and more than 7 million internet
visits. Based on our analysis, we estimate 1-800-MEDICARE will receive
12.8 million calls in FY2004. This compares to an FY2003 call volume of
approximately 5.6 million calls. To handle this increased volume and
attend to beneficiaries in a timely manner, we are in the process of
increasing the number of customer service representatives at the
Medicare call centers, bringing the total to close to 2,000. We are
getting the additional help from trained customer service
representatives from some Medicare contractors, including the private
companies that process and pay Medicare Part B claims. Enhancements are
also being implemented in Medicare's Price Compare services based on
feedback from beneficiaries, customer service operators, and advocates.
For example, www.medicare.gov now has a new, easily visible link making
the Price Compare database easier to find, and the ``drug dictionary''
of drugs included on Price Compare is being expanded. We will continue
to take user feedback to improve and refine these systems to assure
beneficiaries get the most up-to-date and easy-to-use information as
possible.
CMS also has a number of publications designed for beneficiaries
that explain changes in the Medicare program. For example, CMS has
published a small pamphlet with an overview of the drug card program
and an introduction to the discount cards and the $600 low-income
assistance, as well as a larger booklet with more detailed information
about eligibility and enrollment. This larger booklet, the Guide to
Choosing A Medicare-Approved Drug Discount Card, also includes a sample
enrollment form and a step-by-step guide to comparing and choosing a
discount card. The ``Guide'' is currently available in English, Braille
and audio-tape (English). A Spanish-language copy is on the web, and
Spanish copies are to be printed and available in late May.
In addition, a brief document that introduces beneficiaries to the
discount cards and the Medicare-approved seal has been mailed directly
to beneficiary households. CMS has already launched print, radio, and
television advertisements to highlight the upcoming changes to the
Medicare program, including the addition of the drug discount card.
CMS has produced a variety of products geared toward educating
physicians, pharmacists, and providers who often have one-on-one
relationship with beneficiaries, to help them assist their patients in
drug card enrollment decisions. The products include brochures,
articles, and journal ads in major medical publications including the
New England Journal of Medicine and the Journal of the American
Pharmacists Association. For states, territories, the District of
Columbia, and stakeholders, CMS will sponsor a variety of listening
sessions and open door forums to make the latest drug card developments
available nationwide. For example, we hosted in-person trainings at the
Drug Card Kickoff Conference on April 7-8 and intend to host the
National SHIP Conference on May 24-25, where CMS staff will provide
technical assistance and support. In addition, we recently announced
unprecedented new funding for the SHIPs. Last year we awarded $12.5
million in grants to the SHIPs. This year, we are increasing that
amount by 69 percent, to $21.1 million. And next year we are proposing
an even larger increase, to $31.7 million. We will continue to work
with our partners on the challenge of getting information to
beneficiaries so that they can make an informed decision about drug
card enrollment, and begin lowering their drug bills now.
CONCLUSION
For the past thirty years, May has been recognized as ``Older
Americans Month''--a time to acknowledge the many contributions made by
our nation's seniors. One of the best things we can do to thank them is
to make sure they have access to affordable prescription drugs. The
Medicare-approved drug discount card provides an unprecedented
opportunity for beneficiaries to band together to get lower negotiated
prices, along with large-scale public reporting of prescription drug
prices. Starting June 1, 2004, this voluntary card program will provide
immediate assistance by lowering prescription drug costs for Medicare
beneficiaries until the new Medicare drug benefit takes effect on
January 1, 2006. We recognize the importance of the discount cards and
the low-income credit to Medicare beneficiaries, many of whom, for too
long, have gone without outpatient prescription drug coverage. Medicare
beneficiaries will soon have the kind of health care coverage that
actually delivers on meeting their needs. Thank you again for this
opportunity. Please allow me to turn the presentation over to Mary
Agnes Laureno from CMS' Center for Beneficiary Choice, who will walk us
through a demonstration of the Price Compare tool. After the
demonstration, I look forward to answering any questions you might
have.
Mr. Bilirakis. Thank you, Doctor. For these low income
beneficiaries, I understand some of the manufacturers have
indicated that when their $600 credit has expired, that they
would still not charge them any more than that? Is that
correct?
Mr. McClellan. That's right. A large number of major drug
manufacturers are going to work with our program to allow
beneficiaries on all of these cards to get access to very low
prices, usually for just the cost of a dispensing fee or a
little bit above it, $5 to $15 per prescription and that's why
the savings for many low-income beneficiaries can be truly
tremendous.
And some additional manufacturers have worked out
additional discounts with particular cards that we can tell
seniors about----
Mr. Bilirakis. How long after this do they start to receive
these cards, how long after the first of June shall we say will
we know how that is working in terms of that particular portion
of it?
Mr. McClellan. Our plan is to have those wrap around
discounts integrated into the cards themselves so that seniors
can automatically get these additional discounts when they use
their cards. Now they first use their $600 and for many seniors
that will last them perhaps for the whole year, or at least for
part of the year, so we may not be seeing the wrap arounds
kicking in on a large scale basis for a few more months, but
it's definitely our intent to make sure it works smoothly for
the low-income beneficiaries so they get that extra help.
Mr. McClellan. Good. Well now, this particular beneficiary
from Clearwater, Florida, it's just a coincidence, was she a
low income?
Mr. McClellan. She was a low income beneficiary.
Mr. Bilirakis. And yet she had a computer? She had a
computer and knew how to go to the website, etcetera?
Mr. McClellan. If she didn't have a computer and many low
income seniors don't, they can get help from local State Health
Insurance Assistance Plan Offices. We have one in Clearwater
and we're in the process of doubling their funding right now.
In addition, they can call us up at 1-800-MEDICARE and as I
mentioned, because of all of the additional customer service
representatives that we've added and the improvements that
we're continuing to make in the way our phone assistance works,
if she called us up, even at a peak time her wait this week
would be at most 15 minutes to get to a customer service
representative and then that representative who is trained
would go through exactly the same process that Mary Agnes did
in this demonstration, except she would be asking the
beneficiary for this information, help her quickly get to the
specific information she needs on how to get the most out of
this program.
Mr. Bilirakis. How long would that conversation have taken?
Mr. McClellan. For beneficiaries that are primed and know
if they come ready with their zip code and their pill bottles
in front of them so we can find out quickly about their
medicines and the doses that they want help with, their monthly
income and any additional preferences they have about a
particular pharmacy or a card with no fee or maybe about a
pharmacy that's got an open formulary that provides the broad
based discounts, typically, they can get through a call in 10
to 15 minutes.
Mr. Bilirakis. Ten or 15 minutes.
Mr. McClellan. And we'll send them that personalized
brochure.
Mr. Bilirakis. Would that vary though? What if this lady
did not have available computer, in one way or another, and it
was strictly over the telephone?
Mr. McClellan. Well, over the telephone, our customer
service representatives are there 24/7 and they'll stay on the
line as long as is necessary to answer any questions a
beneficiary has or after they get their personalized brochure
and a lot of seniors like to look at the specific facts in
front of them on paper, so they can go through it at their
leisure. They can call us back with further questions, even
after they've gotten that personalized information. So we'll
work with them for as long as it takes, but we're trying to
build as many features into this program as possible to keep
that time down, the senior's time down and to enable our
representatives to serve even more beneficiaries more quickly.
Mr. Bilirakis. But in every case, would that beneficiary
have made a decision after that conversation?
Mr. Greenwood. Would the gentleman yield for 1 second? I
just dialed 1-800-MEDICARE and I was instantly connected to a
service representative.
Mr. McClellan. We've really been expanding our customer
service representative connections. I'm glad to hear you got
through.
She could sign up--we could tell her how to sign up at the
end of that conversation, but what I think is probably more
typical is that she get the personalized brochure from us,
she'd have it in the mail the next day.
Mr. Bilirakis. What we're saying is that whether it be
through the computer, the website or whether it be through just
plain telephone, there would be a follow-up brochure that would
be mailed to that individual?
Mr. McClellan. That's right, as you see in the brochure,
there's a simple two-page form here, front and back, this is
it, very large type for enrolling in the card, just this
information, her enrolling--she qualifies for the low income
credit, the automatic $600 as well and that's just this two-
page form. So she could send that back in to any of the card
sponsors that she chose or she could call up the card sponsor
on the phone, they have 1-800 numbers too and enroll that way.
So it's just a few minutes to fill out----
Mr. Bilirakis. My time has expired. I am concerned about
the bait and switch potential here. We'll go into that
particular area. I will now yield to Mr. Brown.
Mr. Brown. Thank you, Mr. Chairman. Dr. McClellan, nice to
see you again. Thank you for being here.
Mr. McClellan. Nice to see you.
Mr. Brown. I appreciate very much Mary Agnes' presentation,
your presentation. I know that you're sincere and genuine about
this. I just sit here and think we could have this card which
would have brought real discount where we get 40, 50, 60
percent discount----
Mr. McClellan. what's that card?
Mr. Brown. Just a Medicare card that we could take, that
every senior could take to a drug store, where they would get a
discount based on a negotiated price on behalf of 40 million
beneficiaries. Instead, we have the presentation of Mary Agnes,
which is a good presentation, if you have internet access and
if you understand how to do it, or you can go to the State
Health Insurance Program and go through this whole bureaucracy.
It just sort of puzzles me that that was the choice that this
Congress made.
I want to ask about the cost analysis, Dr. McClellan. I
understand that CMS putout two versions of the cost analysis
within a week of each other. The first contained a table
comparing card prices to prices available in Canada and to
prices obtained by the Federal Government through the Federal
Supply Schedule for Veterans. It's a chart that Congressman
Dingell highlighted earlier in the hearing. This comparison was
removed from the second chart. Can you tell me why the
comparison was removed?
Mr. McClellan. I think you're referring to a study that CMS
did. I think that was a week or so ago looking at savings on
the discount cards and what we saw then, as I mentioned before,
savings at 11 to 18 percent off average retail prices and even
larger savings on typical retail prices and savings on internet
prices for U.S. pharmacies that are generally available to our
seniors.
The additional information on Canadian prices and the VA
price information was removed from the subsequent table for two
reasons. One is that we couldn't verify the Canadian prices.
Those prices have been changing a lot. The pharmacies often
can't assure that drugs are going to be delivered in a timely
and for those reasons, what we're trying to do with this
program is give beneficiaries actual prices that they can count
on. And that's not the case with the Canadian internet pharmacy
prices.
With respect to the VA prices, as you know, those prices
are not generally available. They're only available to
beneficiaries who are getting government-run health care in the
VA's government-run hospitals and health care facilities on the
VA's formulary. And it is true that VA negotiates a low price
for their formulary drugs, but it's also true that not all of
our beneficiaries prefer that particular kind of formulary,
even if they could get it. So we focused in the revised report
on the choices that are actually available widely to
beneficiaries in this country where we could assure and report
the prices correctly. I think assured prices are very important
for seniors in making decisions about comparing the cards to
other sources that they might use.
Mr. Brown. I accept what you said about Canadian prices,
that they move, although one of the reasons they move,
apparently, is because some of the drug industry and my
understanding is the White House has had some role in this,
putting pressure about supply, a question of supply on
Canadian--on behalf of the drug industry with Canadian
pharmacists so that--because so many Americans are doing what
some of my constituents are, taking buses to Canada.
But back to the Federal Supply Schedule. I mean the point
here is not just that some information has been denied to the
public, some information about drug prices, understanding of
course that many seniors don't have access to those drug prices
because they're not in the VA system. But it just begs the
question that why are we doing it this way when the FSS prices
are almost, I won't say they're in every single case, lower
than the discount cards, but they clearly have much deeper
discounts than the discount cards. It just seems there's this
ideological, political slant to sort of everything in this
legislation, everything your Agency does because privatization
always works better than government. Well, privatization
doesn't work better than government.
Medicare has a 2 or 3 percent administrative cost. Private
insurance is much higher. But particularly on this, it's clear
that every other country in the world uses the power of
government to get lower drug prices. Our own government through
Federal Supply Schedule uses the power of government on behalf
of a large number of Veterans to get lower prices. I just ask
again, why did your agency and the President push so hard to
prohibit, literally prohibit your agency from negotiating lower
drug prices?
Mr. McClellan. Well, again first, we're focused on getting
the lowest prices for seniors that we can today and we are
getting significantly lower prices because seniors through
these cards are able to negotiate discounts from manufacturers
and that was not present before. The cards require manufacturer
rebates and they require them to be passed on to beneficiaries
and we also are giving seniors a broad choice of formularies.
As you mentioned in one of your earlier statements, you
want seniors in the Medicare program. We've got a great
tradition of people being able to have choices about what they
want, about what kind of providers to use, doctors and what
kind of medicines to use. The VA has one specific formulary and
I'm not ready at this point to say that the best thing for
Medicare is one single formulary for all of our beneficiaries.
Many people might be interested in using drugs and do use drugs
today that are not on the VA formulary and I want to provide
that option as well, and I want to do it in a way that lets
them get lower prices for the drugs and the types of formulary,
maybe an open formulary that includes everything, that they
want to use. That's not what the VA does. That kind of option
may be good for some seniors and we want to encourage them to
get it.
Mr. Brown. I believe any drug is available in the Federal
Supply Schedule, so that's not a restrictive formulary. Thank
you.
Mr. Bilirakis. The gentleman's time has expired. The Chair
recognizes the gentleman, the chairman of the full committee,
the gentleman from Texas, Mr. Barton.
Chairman Barton. We thank the chairman. Dr. McClellan, I
just want to make one editorial comment. You've had to sit here
for about an hour and a half before you got to make your
presentation and we're a big family on this committee and we're
a little cranky this morning. We want to go home. Memorial
Weekend. Those of us that are World War II Veterans and we have
Mr. Hall, Mr. Dingell both are World War II Veterans. They're
being honored later this afternoon in the Statuary Hall in a
special ceremony. So we're not disrespectful of you, we're just
as in anybody when you're here together a long time, sometimes
you get a little bit cranky, but we're going to work through
it.
I want to ask the first question. There's been some concern
about these drug prices that are posted on these websites that
they're changing. Now I take that as a good sign if the general
change is to continue to have lower prices. Is there any
evidence that all these changing prices, that the prices are
going up or is there evidence that as these various providers
of the cards find out what the competition is doing they're
actually lowering their prices? Which way does the trend seem
to be, higher drug prices or lower drug prices?
Mr. McClellan. Mr. Chairman, what we've seen over these
first 2 weeks are some big changes overall toward lower prices.
Chairman Barton. Lower prices.
Mr. McClellan. We're seeing the cards that had higher
prices initially coming way down. That happened again, 11 to 13
percent declines on average in the first week, a couple more
percent this past week. That's not to say there will never be a
price increase anywhere in the drug discount program. There are
price increases all the time in every part of our economy, but
there are some additional assurances built into the cards to
make sure that prices don't go up for some kind of bait and
switch tactic.
Chairman Barton. Do you think the average senior citizen
that sees that trend, they may be confused by the price being
changed, but do you think most seniors will think drug prices
trending downward is a good thing or a bad thing?
Mr. McClellan. I think they'll generally support that and
hopefully they'll call us up and get right through at 1-800-
MEDICARE and see exactly what lower prices they can get for
their own drugs.
Chairman Barton. I want to say that my friends on the other
side do have a point about being able to get through. We've had
several occasions we tried to get staff people through and you
get a busy signal or you get this if you're calling and really
in a hurry press 1 and if you're really not in a hurry press 2
and if you really don't care press 3. All of that. So I think
that's valid. I mean any program this massive, you're going to
have some startup problems. Do you all have a program in an
effort to try to add additional numbers, additional help,
whatever it is so that we can handle the demand of the seniors
that are trying to get information?
Mr. McClellan. We do, Mr. Chairman. The first day of this
program we had over 400,000 calls. That is unprecedented, not
only in this program, but I think in any kind of telephone type
of campaign. We exceeded the capacity of the phone system to
support us and there were, unfortunately, callers who were
dropped that day and people who couldn't get through. That's
why we've taken steps like adding lots of additional customer
service representatives.
Chairman Barton. My point, you are doing that, you're not
just sitting there with tough luck, call back in 3 months.
You're adding capacity so that as people continue to call in--
--
Mr. McClellan. That's right, and we're tracking very
closely how we're doing because our beneficiaries deserve
prompt attention and that's the customer service standard that
we want to maintain. At the peak times this week, the longest
waits have been about 15 minutes and at most times the waits
are not significantly longer than only a few minutes. We want
to----
Chairman Barton. You mean less than that.
Mr. McClellan. We want to get back into balance and we want
to keep getting those times down.
Chairman Barton. Now I also think it's a valid point, a lot
of senior citizens, my mother does have a personal computer and
she knows how to use it and all that, but there are a lot of
seniors that either don't have the computer or they depend on
somebody else to use them. How efficient is the system if you
don't have a computer? How easy is it to get assistance if
you're not computer literate?
Mr. McClellan. That's why we want you to call us and if
you're ready with your zip code and your medicines in front of
you, you know your income level and any other special
preferences you have, we'll have a trained representative go
through this process with you. You don't have to look at a
computer at all. We'll ask you the questions. We'll help you
along to make sure you're getting what is best for your
particular needs and we'll follow up with a personalized
brochure like this one that you can look at in front of you and
make sure that you're seeing exactly what you want to get into
before you sign up.
Chairman Barton. Do you have any documentation of how many
seniors have gone through the process and have chosen a card?
Can you give us any----
Mr. McClellan. We've had hundreds of thousands of seniors
go through this process successfully on the phone, get the
personalized information and the brochures that they need. I
don't have counts today of how many people have enrolled. As
many of you have pointed out, there's no deadline for this
program. People can enroll if and when they're ready to and
they should do that based on good, personalized information
relevant to them. A lot of seniors have already signed up. Many
thousands.
Chairman Barton. But you can document that of the people
that are touching base, we are getting seniors to sign up?
Mr. McClellan. That's right, many are signing up and we are
also monitoring how well we're doing on getting the right
information out to them. That's our customer service.
Chairman Barton. Would you commit to continue to work with
the committee to give us information?
Mr. McClellan. Absolutely. We want to keep a close eye on
that and we appreciate the oversight in this area. It's very
important.
Chairman Barton. We are going to continue to oversee the
implementation.
Mr. McClellan. I'm sure you will, Mr. Chairman.
Mr. Bilirakis. Thank you, Mr. Chairman. Mr. Dingell, is he
there? Yes. Mr. Dingell to inquire?
Mr. Dingell. Welcome, Doctor.
Mr. McClellan. Thank you.
Mr. Dingell. I have before you two charts down there which
are identical in all particulars save one, that one particular
is that we do not, that the most recent one does not show the
same drugs or programs under the FSS program which is a Federal
Civil Service program or Canada's program. And I would note
that the FSS plan which is an American plan is cheaper even
than Canada.
There is one unique difference in those matters and that is
that in the FSS plan, the entire negotiating power of the
Federal Government is brought to play to get the lowest cost
for the consumer and for the Federal Government. I would note
that it is cheaper even than the Canadian plan.
I would note that the first plan which you chronicalled in
the original release of your agency showed the FSS plan and the
Canadian plan. I would note that the perfected plan which you
have since issued does not show those things. Is there any
reason other than that you did not want the American people to
know how much better the FSS plan and the Canadian plans are
than the discount plan which you have at this Department have
worked out with the issuers of these cards? Is there any other
reason other than the fact that you were denying the people the
information on this?
Mr. McClellan. There's two reasons. First of all, we don't
want to deny Americans any information and many members of this
committee----
Mr. Dingell. You excised the important information.
Mr. McClellan. [continuing] have made available this kind
of information, so I think many people are aware of it, thanks
to everyone's efforts. The purpose of this table was to provide
information that's generally available to beneficiaries on the
prices for drugs that are generally available----
Mr. Dingell. I have limited amount of time. You've not told
me that there's any other reason.
Mr. McClellan. The reason for the----
Mr. Dingell. Now let's go to these other questions here
because my time is very limited. These cards are Medicare
approved, are they not?
Mr. McClellan. Yes sir.
Mr. Dingell. Are there rules and regulations with regard to
the issuance of these cards?
Mr. McClellan. Absolutely.
Mr. Dingell. Would you please submit them to the record?
Mr. McClellan. We have issued regulations----
Mr. Dingell. I ask unanimous consent that those regulations
be inserted in the record.
Mr. McClellan. And we recently, the Office of Inspector
General also just issued new consumer protection regulations
for this program this week.
Mr. Dingell. If you don't mind----
Mr. Bilirakis. Without objection----
Mr. Dingell. [continuing] if you would hold yourself to the
answer to the question.
Now having said that, what sanctions are imposed for
disregard of those regulations?
Mr. Bilirakis. We have a broad range of sanctions
available. They start with imposing marketing and other types
of restrictions on the cards and we've done that in a few cases
where cards don't provide the complete, reliable information
that we require. We can also impose civil monetary penalties on
the cards, not just us, but the Office of the Inspector
General. We can remove a card from the program.
Mr. Dingell. What will you impose civil monetary penalties
for?
Mr. McClellan. For a range of consumer protection
violations or violations of the terms of our contract.
Mr. Dingell. What will the consumer protection violations
be----
Mr. McClellan. Violations might include patterns of not
providing accurate information about prices, not having
discounts that people can actually get when they go to their
drug stores. It might include patterns of inaccurate
information about pharmacies that are participating----
Mr. Dingell. How will that work since the issuer of the
card may change the prices weekly?
Mr. McClellan. Well, if they change the prices downward,
that's just fine. We're not going to bring an action for that.
Mr. Dingell. And if they change them up, what sanctions----
Mr. McClellan. If they change them up, they have t provide
documentation to us that their costs actually increased. They
can't just increase the prices because they got somebody
enrolled in their plan and they want to jack it up. They have
to have a cost-based reason for the increase and we'll be
monitoring that.
Mr. Dingell. Now you have 73 cards issued. You are going to
be supervising 73 cards. How many people are going to be doing
the supervision? How many people do you have assigned to that
responsibility?
Mr. McClellan. We have a large number.
Mr. Dingell. How many?
Mr. McClellan. I can't give you an exact number now, but
I'll send it to you.
Mr. Dingell. Please submit for the record how many----
Mr. McClellan. It includes staff of the Office of Inspector
General, staff at our national office, staff at our regional
office.
Mr. Dingell. I don't want an obfuscating--I just want you
to tell me an answer to my question.
Now you have to follow the regular process with regard to
opportunity for the Federal Government to impose sanctions and
also you have to afford opportunity for the sponsor to appeal
where there is wrong doing that is found. You could not, in a
few words, describe the wrong doing for the changing of the
drug or drug price on the card which may change weekly without
any sanctions by the Federal Government.
How many people are you going to have enforcing this? Do
you know?
Mr. McClellan. We're going to have individuals----
Mr. Dingell. Just tell me number.
Mr. McClellan. We have very many staff. I don't have the
exact number today, but I'd say dozens if not hundreds of staff
involved, hundreds of staff in the Medicare program.
Mr. Dingell. A hundred people you're going to have doing
this for 73 cards that are going to be issued for how many
million Americans?
Mr. McClellan. The cards are all Medicare beneficiaries
that want to sign up and aren't enrolled in Medicaid.
Mr. Dingell. I note my time has expired, Mr. Chairman. I
would ask unanimous consent that I be permitted to write a
letter to the good Doctor to allow him to explain these matters
in greater detail.
Mr. McClellan. And I'd be delighted to respond to that.
Mr. Dingell. If you please, Doctor. And that be inserted
into the record.
Mr. Bilirakis. All right. I don't know that you need
unanimous consent to write a letter, but as is customary after
our witnesses testify, we always tell them that we will have
written questions to them and we request timely responses, but
by all means if that's what the gentleman wants unanimous
consent for, we'll give it to him.
The gentleman's time has expired. Mr. Whitfield to insure.
Mr. Whitfield. Dr. McClellan, frequently those people who
are opposed to this legislation refer to the fact that the
Veterans' Administration negotiate lower prices and I notice
even in Mr. Pollack's testimony that he said one of the
shortcomings in this legislation and of our prescription drug
plan is that they were unable to negotiate lower prices like
the Veterans' Administration.
It's my understanding that the Federal Supply Schedule
which regulates the VA's process, that the VA does not
negotiate. Is that correct?
Mr. McClellan. They have a set schedule. They also have a
single formulary. They don't allow beneficiaries in that
program to choose what kind of formulary they want as well, so
those are two kinds of important restrictions.
Mr. Whitfield. But it's all set by regulation and statutes
so there's no negotiation.
Mr. McClellan. It is a statutory program, that's right.
Mr. Whitfield. So I think all this reference all the time
to the VA negotiating, negotiating that that absolutely is not
the case. And it's also my understanding that in the 1990's
Congress took steps to allow Medicaid to have access to the VA
system and as a result of that the VA prescription drug costs
increased by in some instances by 100 percent and that Congress
had to go back and address that issue and reverse itself. Is
that correct?
Mr. McClellan. That's correct. Part of the problem there is
that if everybody's on this same schedule that's supposed to
get a discount, then nobody is really getting a discount when
more and more people come into it, the prices do tend to go up.
Mr. Whitfield. Mr. Chairman, I've got to go out and take
one phone call, but I would at this time like to yield to Mr.
Buyer, if he would like to make some comments because I know he
has some real familiarity with the----
Mr. Bilirakis. He has 8 minutes of his own time coming, but
if you want to yield your remaining 3 minutes to him, you're
free to do so.
Mr. Whitfield. Thank you.
Mr. Buyer. I just want to add, the point that you brought
up, we deal with this on the Veterans' Affairs Committee all
the time and I'm just going to concur that you're absolutely
correct. And it is a falsehood for anybody to put into the
public domain that somehow that these are prices that are
negotiated between the VA and the manufacturers, when in fact,
Congress set the procedures in statute.
So anybody that says this, anybody that gives testimony,
please you better start correcting your testimony because it's
not correct at all. And the then Democrat-controlled Congress
learned a very difficult lesson when they opened up the VA and
the Medicaid, they immediately, immediately, had to come back
in and say we've made a terrific mistake here and they made the
right judgment in correcting it and then protecting the VA
pricing.
Even when I was a subcommittee chairman on the personnel
committee dealing with the military health delivery system,
i.e., pharmaceutical benefit, we then tried to examine the
difference between our pricing with regard to military drugs
and the VA and discovered that well, even if we tried to gain
access to that schedule, the same thing was going to happen.
Those prices were going to increase within the VA.
So those of us in Congress who serve on the Veterans'
Affairs committee of both parties, jealousy guard what has been
said, rightfully so, by then the Democrat-controlled Congress.
And we'll continue to jealously guard that schedule from those
of whom had this belief that somehow if we only open up that
access, that everybody can gain those lower costs. That, in
fact, is a fallacy. Because you're correct, Dr. McClellan, all
prices will increase.
I yield back to the gentleman.
Mr. Bilirakis. Mr. Waxman to inquire.
Mr. Waxman. Dr. McClellan, I've wondered if you had a
chance to read the article in the Health Section of the
Washington Post this week written by Lisa Barrett Mann, an
experienced health reporter, on the difficulty she had trying
to pick a good discount card for her mother and it presented a
very different picture of how easy it is to get any
information, let alone any accurate information. It took her
over 9 hours. She couldn't figure out how to get information on
eye drops because the site doesn't help with liquid dose. She
couldn't get through the Medicare phone number, getting advice
to call before 6 in the morning and after 9 at night. Now I
know seniors are up at night worrying about drug prices, but
that seems to be the time they're told maybe they can get
through.
She called the card companies directly and they gave her
completely different price information, asking the pharmacy
what calls they'd honor, showed they had no idea what card they
would be participating in.
So in other words, what she presented, and I'm hearing it
from people all over the country, this is a mess. And the best
advice people seem to get is to try again in a few weeks and
see if the information is better. Now I really--my question was
whether you read that article? If you have, do you understand
what she had to say and if you haven't, I recommend it.
But the point that I want to make is I'm just stunned by
the fact that I've been in politics for many, many decades and
it used to be Republicans who were against deficit spending and
bureaucracy. And now we've got Republicans supporting huge
deficits and creating a monstrous bureaucracy in just discount
cards that are made available to seniors for them to compare
and choose and try to figure it all out. In Medicare, people
don't have to do that for doctors, do they? They don't have to
do it for hospitals? They don't have to go out and price the
doctors and figure out which hospital or physician services
they should go to. Medicare simply negotiates on behalf of
seniors, sets a price and any doctor that participates in the
Medicare program gets paid by Medicare and the seniors don't
have to go through all this. Isn't that right?
Mr. McClellan. That is correct and I don't want to take up
much of your time, but I do have a statement. I read that
article with a lot of concern. It turned out the reporter
contacted us on those very initial days of the program when we
were getting an awful lot of calls in when we had not yet had a
chance to respond to the constructive criticism we received on
how to make the website work----
Mr. Waxman. I want to put that in the record.
Mr. McClellan. We've got that available.
Mr. Waxman. Good. I think we ought to have that in the
record. But I'm going to ask you some specific questions.
Now I think we should have a negotiated price where the
government represents seniors and everything is covered and
they get a better price. Now we're told get a card and you'll
get a discount. Can you tell us how the rebates under the drug
program compare to the prices under the VA system?
Mr. McClellan. The rebates under the drug program compare
very favorably, in fact, better than any choice that's
generally available to seniors today. The VA program as
Representative Buyer just noted, is not generally available to
seniors today. For those seniors who are in VA, that's a good
source of drugs.
Mr. Waxman. They get a better price if they're in the VA
system, don't they?
Mr. McClellan. It's a special program. It's a drug
insurance program.
Mr. Waxman. It's a drug insurance program run by the
government.
Mr. McClellan. With a particular formulary.
Mr. Waxman. As I understand, a chart released by your
office earlier this month showed that the VA has considerably
better prices, for example, than the lowest card charging $119
for Aricept, but the VA price was $76. Just to correct the
record for Mr. Buyer, and others, the VA system has a statutory
schedule for all FDA-approved drugs and that statutory schedule
makes sure that the prices that the VA pays for their members,
their beneficiaries, is no more than the lowest price that the
drug company charges any private insurance company.
And then second, on top of that, after they get the lowest
price that any insurance company pays for it, the VA goes
further to negotiate a formulary for thousands of drugs for
even a better price. Am I wrong in how the VA operates?
Mr. McClellan. The statute says lowest price for an
insurance company, but if you make that statute apply to
basically every one in the country or every heavy user of drugs
in this country, then nobody is going to end up with a
discount. They're all going to be required to pay the same
price and that's why the prices go up.
Mr. Waxman. I think the seniors are pretty annoyed that
they're not getting the discount. Everybody else gets a
discount. People in Canada get discounts. People in the VA get
discounts. People on Medicaid get discounts. And they're told
go call us on this bureaucratic website and phone line and see
if you can sort through hundreds or 75 cards to figure it all
out. That pushes the burden all on them and that sounds to me
like the worst Kafkaesque nightmare of bureaucracy that the
Republicans used to be against and I would hope you would still
be against.
My time has expired. I have a lot of other questions and
maybe we'll get back to you later.
Mr. Bilirakis. Mr. Shimkus to inquire.
Mr. Shimkus. Thank you, Mr. Chairman. I'll try to go quick.
I want to give Dr. McClellan some time too, but what was the
projection of the amount of call volume before we started? What
did you think you'd get?
Mr. McClellan. We were expecting and had prepared for
100,000 to 200,000 calls per day.
Mr. Shimkus. And you moved up to 400,000. Let me go quickly
so we can give you plenty of time. So you moved to 400,000. We
have that same problem in our office. When there is a hot
legislative item, the phones ring off the hook and there can't
be a member here that's answering their phone every time.
I did what Congressman Greenwood did. I just called. I want
to give you more time, but I challenge anybody, call it now. I
just got answered. But I do have a problem in this booklet when
you say 1-800-MEDICARE spell it right. M-E-D-I-C-A-R. Don't put
the E on there because you're going to confuse people. I mean
if you're going to dial 1-800-MEDICARE, don't put the full
MEDICARE name there because it's longer than would be allowed
on the telephone. So that might be a change.
Mr. McClellan. We do have a 7-digit number and we have
increased the callers in, so when people call in, they can get
through. Our beneficiaries deserve prompt service.
Mr. Shimkus. It's not criticism, but in the literature just
put dial 1-800-MEDICAR, drop the E.
Mr. McClellan. Drop the E. Thank you. We're getting a lot
of constructive suggestions on how we can do this as well as
possible. I appreciate that one too.
Mr. Shimkus. What I liked about the plan was it directs
people to if they have a State program that's beneficial, as my
colleague Bobby Rush said. We have a great program. One of the
parts of the Medicare prescription drug benefit was, in this
bill was, addressing the dual eligibles which is going to bring
millions of dollars back to Illinois because what we do on
Medicaid. What we do. Illinois is benefiting in other venues
because of this bill.
It will also, the pharmaceutical companies, when consumers
had called us previously for help, which they do to the Members
of Congress, we would go through the state-supported plan, we
would work with them through Medicare. And Members of Congress
know, we have like Big Five constituent service type problems
dealing with a one system, large Federal bureaucracy. Medicare
has a tremendous problem getting reimbursed from fees and
coverage. Social Security, INS, IRS, VA, yeah, they do great
benefits and they're very helpful, but to say that a one
government-run plan is simplistic and clear, when I go out in
my District, one of the best things we do is we help our
constituents work through the Federal bureaucracy.
So make sure we understand the criticism as a whole. A
large Federal bureaucracy, we fight against that all the time
in all those other arenas. So a marketplace bureaucracy, I'm
not that upset with respect to the other battles.
The 24/7, that means if you called at 2 a.m. on Sunday
morning someone is going to answer the phone?
Mr. McClellan. Any time, day or night.
Mr. Shimkus. Eleven p.m. tonight?
Mr. McClellan. Any time.
Mr. Shimkus. Five fifty on Monday morning?
Mr. McClellan. Any time.
Mr. Shimkus. 24/7.
Mr. McClellan. That's right.
Mr. Shimkus. We'll give that a try, but I think that's
noted that there's people going to be answering the phone.
I have a minute left, why don't you address some of the
concerns that my colleague, Mr. Waxman, brought up with the
Washington Post article?
Mr. McClellan. Those are good examples of why we're not
trying to crate a bureaucracy here. What we're doing is giving
seniors the assistance they need to get the most out of a
program and since the time that that member of the press
called, we have vastly increased our customer service support.
We've improved our phone service system so that people can get
through it quicker and as a result, when you call in, as you
just did right now, there are no waits. You can get right to a
person who can help you get the information that you need for
finding out how to get the most out of this program. And if
this person had been able to get through, she would have found
out that there were cards available, a number of cards that
covered every single one of the nine medications that her
mother was taking and that her mother would have been able to
get 30 percent savings off of what she's paying now, more than
$100 a month for in some cases cards that had no fees at all.
Mr. Shimkus. I have 5 seconds left. Let me just finish by
saying maybe this reporter with all due respect to the fourth
estate, maybe she should have allowed her mother to call and
maybe her mom should call now. Maybe the story would be
different.
Mr. McClellan. We'd certainly like to help her right now
because our goal is to make sure that all of these patients who
have very complex medication needs, including non-oral
medicines, eye drops, and inhalers; that we can handle what
they need quickly. We're making the improvements to make sure
we do that reliably and it does mean real savings as it would
in the case of this reporter's mother.
Mr. Bilirakis. The gentleman's time has expired. Mr.
Pallone to inquire.
Mr. Pallone. Thank you, Mr. Chairman. Dr. McClellan, I
wanted to go back to these illegal actions on the part of the
agency with regard to the ads. My understanding is that the
White House has spent $18 million on these illegal ads
promoting the drug cards and another $20 million on illegal ads
about the new so-called Medicare benefit. Now these funds were
secured from taxpayers and I would contrast that with you know,
there's been a lot of talk here today about the Walter Cronkike
Families USA ads which were paid for by a nonprofit
organization as opposed to the Republican Bush Administration
ads that are paid for by the taxpayers.
Now the GAO said in its decision yesterday, it's in today's
paper, that the Medicare tv video news releases or ads were
false, misleading, in violation of the law. They've made
several suggestions. One is that they determined that the
agency should report the misuse of funds to Congress and the
President.
Is the Department going to do that?
Mr. McClellan. First, just a clarification. The ad
campaigns have not been found to be illegal. In fact, the
advertisement we do is a proven, effective way to----
Mr. Pallone. What have they found to be illegal?
Mr. McClellan. The point that you were talking about is for
one aspect of this video news release. That's not the ad
campaign.
Mr. Pallone. No, the video news release.
Mr. McClellan. Right. But be clear, the spinning on the
advertising is to reach beneficiaries and inform them.
Mr. Pallone. Are they going to comply with the GAO's
determination and report the misuse of funds to Congress and
the President?
Mr. McClellan. Well, we certainly are looking closely at
the opinion. I'm absolutely committed to making sure that we
take actions within the law.
Mr. Pallone. So you're not sure. You're not sure if you're
going to do it yet.
Mr. McClellan. What I am sure of is that there's some
concerns about the findings here. VNRs have been widely used.
Mr. Pallone. I just wanted to know if you were going to
report the misuse of funds and you said you're not sure yet,
you're going to make a decision.
Mr. McClellan. We're going to comply with the law.
Mr. Pallone. Okay, second. Do you agree that these funds
should be returned? In other words, do you agree that, as I
said, I'm going to introduce a bill that the Bush
Administration should take, should reimburse the government for
these illegal activities with their own campaign funds. Would
you agree with that?
Mr. McClellan. First, again, it's not the advertising
campaign.
Mr. Pallone. But whatever it is illegal, should they
reimburse the government?
Mr. McClellan. We're going to look at this opinion. We're
going to make sure we comply with the law.
Mr. Pallone. Okay, so you're still thinking about it.
Mr. McClellan. Well, we just got this view yesterday. VNRs
have been widely used by government entities.
Mr. Pallone. Well, get back to us.
Mr. McClellan. And this one particular aspect of it----
Mr. Pallone. How many more ads are going to be run? I know
you spent $18 on the drug cards. $20 million on the so-called
new benefit. How much more money is going to be spent?
Mr. McClellan. We are going to spend more education funding
where we find that it has an effective impact.
Mr. Pallone. Can you give us the amount?
Mr. McClellan. I can't tell you the amount because we
design our campaign----
Mr. Pallone. Through the chairman, could I ask that you get
back to us with the specific amount?
Mr. McClellan. Absolutely. As we continue to plan our
education effort----
Mr. Pallone. All right, I appreciate----
Mr. McClellan. I absolutely will consult with you about it.
Mr. Pallone. All right, now, can you tell me who at HHS or
CMS authorized these video news releases that were found to be
in violation of the law?
Mr. McClellan. I'm sure they were authorized and reviewed
through standard procedures since these have been done----
Mr. Pallone. What I'm trying to find out is whether there
were specific people at the White House who were involved. For
example, was Karl Rove involved or was Andy Card involved in
putting these together?
Mr. McClellan. I really don't think so. I think there's a
standard procedure in the Agency in the Department for doing
VNRs. The Department has done them before. They did----
Mr. Pallone. If you can get back to us again with the
permission of the Chair.
Mr. McClellan. [continuing] the last administration.
Mr. Pallone. And tell us who specifically authorized them
and whether there was anybody at the White House involved?
Mr. McClellan. I'll be happy to do that as well.
Mr. Pallone. All right. You know, I have to say I'm kind of
shocked when I hear you say that you still haven't made a
decision about what you're going to do about it.
One of the things that bothers me also is that I've heard
all this talk today about all the money that's going to be
spent to hire people to explain this with the hotline and the
website.
Don't you think it would make more sense, maybe to just
take all the money that's involved in this and just use it
maybe to plug up the donut hole of provide the seniors with
more of a benefit? Have you given us any figures about how much
it's going to cost to produce this website, to hire these
people who are going to run the 800 number? Do you have any
figures about that?
Mr. McClellan. I can give you the ballpark. We're talking
about several thousand customer service representatives total
for this program. That brings the cost with the advertising and
everything else into tens of millions of dollar range. In
return, seniors are going to get access to many billions of
dollars in discounts and----
Mr. Pallone. I only have a couple minutes. With the
permission of the chairman, you're going to get back to me
about the cost of the ad campaign and who was involved with it?
Mr. McClellan. Yes.
Mr. Pallone. If you could also get back with us about the
actual cost of running this website, the amount of money for
the people that are hired for the 800 number, the website, the
cost of all that.
Mr. McClellan. And we'll also get you information on the
many billions of dollars in new savings that seniors are going
to be able to get through the discount----
Mr. Pallone. I would appreciate that too.
Mr. Bilirakis. The gentleman's time has expired. As you get
back with us, Doctor, would you also let us know whether it
might have been common practice over the years to use this type
of release and when in your opinion it's been used in the past?
Mr. McClellan. It's absolutely been a common practice.
That's right.
Mr. Bilirakis. Will you do that?
Mr. McClellan. Yes. And this one particular aspect of the
VNR, not the VNR itself. VNRs are legal and most aspects of
this VNR we have no problem with.
Mr. Bilirakis. The aspects that I believe the gentleman is
referring to, let's see now--Mr. Buyer for 8 minutes.
Mr. Buyer. I think this is a pretty exciting day. It's an
exciting day for those of us, five of us, along with our staffs
that work together on creating a new idea, taking a vision,
molding it into a concept, working with great minds, applying
our analytical skills, putting it on paper based on principle,
let people take shots at it, move it into the public domain and
then get shoved into the ditch like a big bus. That's kind of
what happened to us.
We wanted the drug discount card to be, in fact, the
prescription drug benefit under Medicare. It didn't happen. We
find ourselves in the minority position. The Democrat Party
leadership completely different in their ideology on the issue
wanting government control versus the benefit of the
marketplace and individual choices. One size fits all versus
individual choices.
So what do we do? We end up utilizing this as the
transitional benefit. This is an exciting day for those of us
who designed this because real people are going to get real
savings based upon individual choices. Isn't what this is
about, Dr. McClellan?
Mr. McClellan. Yes, that's right.
Mr. Buyer. Real people, not the rhetoric you get out of
this town. What I'm listening here this morning reminds me of
the story, Robert Fulton, invented the steamboat, 1807. There's
a great story about it. Three thousand people were on the banks
of the Hudson. The Clermont is there. He's had difficulty
getting it started. So a little group in the crowd began to
chant and then soon everybody starting chanting. Do you know
what they were chanting, Dr. McClellan? ``It will never start.
It will never start. It will never start.'' Finally, they got
the steamboat going. Breaks away from and it's headed right up
the Hudson against the fast currents. It stunned the crowd into
silence. Then what did the crowd start to do? ``It will never
stop. It will never stop. It will never stop.''
It's a classic example of the critic has one role. They are
the critic. So what have I heard here today? The drug discount
card program, even though it's not even been introduced to the
public, we're trying to get individual choices, making it
right, what do they say, ``it's confusing. It's complicated.''
You now make an effort to educate people. How dare you
educate people. If you educate people, they'll understand the
program. They'll receive the benefits. ``Oh no. If you educate
people, you must be misusing government funds. How wrong that
is for you to educate people, Dr. McClellan.'' You see, it's
the critic. They've got their face on two sides of the coin so
they'll always win. It's sort of cheating the process.
The critic also here today said ``You can't get through on
the hotline. It can't be done. Try calling. My mom couldn't get
through.'' Really. So you go out and you hire additional
people. You hire additional people, ``oh my gosh, how dare you
hire additional people. Do you know what the cost of that is?
Give me the cost. Put it down in writing. We could use those
funds to cover up the donut hole. How dare you put additional
people.'' The critic is the critic.
You see it will never start, it will never start. It will
never stop. It will never stop. It's the critic.
So I compliment you because what you've done here is you've
taken the reins of a new program that's going to have real
effect in the real lives of people. If the critic wants to
confuse the American people about this transitional benefit
that is a voluntary program that's going to affect them in a
measured way, fine. Make your noise. Make your clamor. But
please, don't confuse people of whom want to gain access to
this benefit.
So I really, what I want to do here is praise you. I want
to compliment you. I want to compliment your staff. You're
working very hard with us. You've been in touch. You're saying
is this your intent, is this how you want it to work, is this
how it's supposed to happen? There can be some bumps along the
way. There also can be true constructive criticisms. The
constructive critic is the best critic. The critic is a pain in
the--pain.
Let me ask this, taking a drug discount card program that
is tailored to an individual's own health needs from a Federal
Government standpoint in a country of almost 300 million
people, quite a task, isn't it?
Mr. McClellan. It is. We've got 42 million beneficiaries,
15 million----
Mr. Buyer. When you narrow that to the eligible population,
that is one task.
Mr. McClellan. That's right.
Mr. Buyer. So of the eligible population, it's what?
Mr. McClellan. Forty-two million beneficiaries over all,
and many millions, about 15 million who don't have coverage now
that helps them get their drug prices down, and 7 million low
income beneficiaries who really are struggling between drugs
and other basic necessities of life that we're trying to reach.
Mr. Buyer. When somebody makes a call and you have maybe
Privacy Act concerns or problems, let's say I make a call on
behalf of my mother. Do you cooperate on behalf of children who
are helping out with their moms or dads. They've got the drugs
in front of them. We're not pulling any--how are you working
with them?
Mr. McClellan. We welcome those calls from children, from
advocates, from reports, you name it. We want them to find out
about the program and get the help or the information they
need.
Mr. Buyer. So every community has individuals who are
community leaders who help seniors in many capacities in a
volunteer basis, is that correct?
Mr. McClellan. That's right and that's an area where we are
increasing funding. We want more face to face individualized
assistance for our very diverse population to help them get the
most out of this program and all of the many public and private
programs out there.
Mr. Buyer. And of course, the critic would say how dare
you, you mean you're actually using government funds to help
educate people so that people can actually help each other in a
voluntary fashion to improve the quality of their life? I think
that's pretty bizarre. Because you know what? That's the
strength of our country is people helping people, really and
truly volunteerism. So again, let me compliment you.
Getting that education function to the grass roots level
into those volunteer organizations who are doing it because of
their compassion for each other, it may even be a teacher that
they had as a young student, or who was a mentor at some point
in their lives. I think that's extremely important and I want
to compliment you.
Mr. McClellan. Thank you. I came to this job from the FDA
and one of the things that we see coming there is much more
individualized medicine, genetically based treatments, based on
our understanding of genomics and proteomics mean that
hopefully 1 day soon we're going to know a lot more about
exactly what works and what doesn't in individual patients. So
it's not just some chance that you might get a 10 or 20 percent
increase in survival, but we'll be able to tailor your medical
care much more to your individual needs based on better
information, better science.
We need to personalize Medicare programs to go along with
that, that takes advantage of people in the community who care
about our beneficiaries. It takes advantage of the volunteer
programs that are supported by our State health insurance
assistance plans. It takes advantage of the knowledge that
doctors, pharmacists and other health professionals can bring
to bear to make sure that an individual, an individual patient
gets the best treatment. So that's definitely the goal here.
Mr. Buyer. Thank you, Mr. Chairman.
Mr. Bilirakis. I thank the gentleman. We have three votes
on the floor.
Dr. McClellan, what does your schedule look like?
Mr. McClellan. For you, Mr. Chairman, I make time.
Mr. Bilirakis. Well, the problem that I have is we're going
to have to break because of those three votes.
Mr. McClellan. I do have a 1 o'clock----
Mr. Bilirakis. You do have a 1 o'clock. Even for me, you
have a 1 o'clock.
Mr. McClellan. Sorry.
Mr. Bilirakis. Darn it. I don't know what to do. Gene, I
know you're up next, Gene.
Mr. Green. Mr. Chairman, I think I can do my 5 minutes very
quickly and then----
Mr. Bilirakis. If you can do your 5 minutes within maybe 3
minutes so we can break and I guess we'll try to be back----
Mr. Green. I'll do my 5 minutes, Mr. Chairman, and we
should have 5 minutes.
Mr. Bilirakis. I don't want to miss the votes.
Mr. Green. Neither do I.
Mr. Bilirakis. I'll let him go, but the trouble is with Dr.
McClellan, he's going to go too.
Mr. Green. Okay.
Mr. Bilirakis. Can you come back?
Mr. McClellan. I'm sure we'll be dealing with this issue,
Mr. Chairman. I hope we'll have these continuing hearings, so
as we learn more about it--
Mr. Bilirakis. Mr. Green, see if you can finish up in 3
minutes.
Mr. Green. I'll do the best I can.
Mr. Bilirakis. I'm sorry, I don't know what to say.
Mr. McClellan. We'll answer any additional questions you
have in writing.
Mr. Bilirakis. In writing, right.
Mr. McClellan. I'll try to be as responsive--
Mr. Bilirakis. And we'll just get back about one or just as
soon as we can after that third vote and I guess we will not be
able to question Dr. McClellan, except in writing. C'est la
vie.
Mr. Green. Let me go ahead and get started. First, let me
talk about some of the discussion from all my colleagues,
first, and I know Illinois has a great program for their
citizens, but I point out that the legislation that the
Congress passed and the President signed prohibits imports and
I understand Illinois is actually benefiting from the Canadian
import, lower cost.
My colleague from Indiana, the steamboat analogy, I can
understand that, but I don't know if I want to experiment with
the boilers blowing up before we have a lot of people hurt by
it. And I think we have a duty to make sure that whatever plan
is put out there is that something we don't have a lot of our
seniors who think they're going to get a benefit, maybe drop
their current employer or retiree coverage and pick this up and
find out that boiler exploded before we had the success of a
Fulton. So let's talk about analogies.
Let me point out and ask you, we'll consider the
demonstration you gave in Medicare.gov. We saw that the
particular beneficiary would pay $298 per month for these four
drugs. Once the prescription drug plan comes on line, this
discount card program is completely scrapped, is that correct?
Mr. McClellan. Well, I'd like to build on the best features
of this program, giving people accurate price information,
giving them the ability to negotiate--
Mr. Green. Under the law, in 2006 this card program will go
away?
Mr. McClellan. We want to take the best features--
Mr. Green. Let me finish my question because I'm cutting 5
minutes to 3 and you know us Texans talk pretty slow.
Is it fair to say that with $300 a month in drug costs or
more, this beneficiary will hit that $2250 threshold in 7
months and will basically have to pay the remaining costs out
of pocket because of that donut hole? That analogy you gave,
$298 per month, we would hit that, that particular person would
hit that before. It's just the math. I'm glad you used that
analogy.
Mr. McClellan. First, you get discounts on the prices as
she does here. Second, it's a higher level of spending where
that possible gap will kick in. Third, since she's a low income
beneficiary, she'd be paying no more than a few bucks for all
these prescriptions anyway.
Mr. Green. But on average, some are not eligible for the
low income would still fall in that donut hole.
And Mr. Chairman, I know I don't have enough time, but I'd
like to submit a question and I'll read it because it will take
a good while for the question.
We have a study that was done by the American Institute of
Research found that Medicare did a better job of cost
containment than private plans. The Congressional Budget Office
also calculated that payments to private plans would add $14
billion in costs. In a study recently released today by the
Common Wealth Fund indicates that Medicare and private plans
are being paid an average of $552 more than each beneficiary
than the fee for service plan. And in fact, their own estimates
from the department in 2003 will show that the program that has
the design like we have is wasteful in taxpayer dollars and I
have a document from September 2003 from CMS actually stating
greater number of PPOs yields greater cost and lower number of
PPOs participating yields lower costs. And isn't it true that
this competition level isn't necessarily cost beneficial? And
is it fair to conclude that the rush to privatize Medicare
isn't necessarily the best use of taxpayers' dollars during a
time of our record-setting deficits? And I'll submit all of the
copies of the letters and wouldn't it be logical to conclude
that traditional Medicare offers a better program from a cost
benefit perspective? Again, Mr. Chairman, we'll put this in
writing with the supporting documents.
Mr. Bilirakis. Respond in writing, in other words?
Mr. McClellan. If I could just say very quickly that one of
my main goals for evaluating our program is what beneficiaries
pay and the most recent studies that we've done show a
difference of about $800 in what beneficiaries pay out of
pocket in the Medicare Advantage plan versus traditional
Medicare for people who don't have access to good,
comprehensive employer coverage and that's an important
consideration too, but I'll be happy to answer these questions
more--
Mr. Green. And the concern I have is I agree that benefits
for the person, but also if the goal is to reduce Medicare over
the next 10 years, if we're paying more to the private sector,
and it's not cost competitive for the taxpayers.
Mr. Chairman, I'll submit this and thank you, Dr.
McClellan.
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Mr. Bilirakis. Dr. McClellan, your dedication is amazing. I
know over the years we've worked together on health care
matters for the American people and you are a dedicated servant
and I've heard many members on this side of the aisle said the
same thing. So I want you to know that and appreciate so much
your coming here. And again, there will be a series of
questions, as you know, and hopefully, you'll respond to them
and we're going to have oversight, whether it be the Oversight
and Investigations Subommittee or probably maybe a joint thing
with the Health Subcommittee, but we'll have oversight over a
period of time to see how things are working.
Mr. Green. Mr. Chairman, I'd just like to associate and
since I'm the only one left on our side, say that we feel the
same way. We obviously have a contentious issue, but again, I
can't think of a better person to have there.
Mr. Bilirakis. Those good comments came from your side of
the aisle. I wanted to make that clear. We're going to break
until 1:15. I think it will give you all an opportunity to
maybe do what you might have to do over that period of time.
Mr. McClellan. And I would just say in concluding, we will
answer all of your additional questions. We look forward to
additional close oversight and working with you to make sure
we're doing all we can. We are getting beneficiaries lower
prices and drug savings right now, especially low income
beneficiaries and we need to do that effective.
Mr. Bilirakis. We need to follow up on the history of all
that because it's continuing, is it not?
Mr. McClellan. That's right and I especially want to thank
the staff.
Mr. Bilirakis. Thank you very much, Doctor.
[Off the record.]
Mr. Bilirakis. Let's have order, please. As you know, we've
just completed three votes on the floor, so members, I trust,
will be streaming in slowly. We've gotten the okay from the
minority to get started and in the interest of time, we will.
Do we have all of our witnesses here? Panel 2 consists of
Mr. Craig Fuller, President and Chief Executive Officer of the
National Association of Chain Drug Stores; Mr. Ron Pollack,
Executive Director of Families USA; Ms. Mary Grealy who was
here, but stepped out. She'll be back, president, Healthcare
Leadership Council; Mr. Robert M. Hayes, CEO, Medicare Rights
Center, and Mr. Stan Baumhofer from Portland, Oregon.
Mr. Baumhofer, you have a couple of Oregon Members of
Congress who wanted to be here to introduce you to us, so as
they come in and as your turn arises, we'll have them do that.
But I want you to know you have a lot of respect with those
people.
All right, that being the case, we're going to start off
with Mr. Fuller. Your written statement is a part of the
record. We would hope that you would sort of complement,
supplement that written statement. Five minutes. We try not to
cut you off, but we really run pretty late, as you know, so
hopefully, you can stay within that as much as you can.
That being the case, we'll start off with Mr. Fuller.
Craig, please proceed.
STATEMENTS OF CRAIG L. FULLER, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, NATIONAL ASSOCIATION OF CHAIN DRUG STORES; RONALD F.
POLLACK, EXECUTIVE DIRECTOR, FAMILIES USA; MARY R. GREALY,
PRESIDENT, HEALTHCARE LEADERSHIP COUNCIL; ROBERT M. HAYES, CEO,
MEDICARE RIGHTS CENTER; AND STAN BAUMHOFER, MEDICARE
BENEFICIARY
Mr. Fuller. Thank you very much. It's a pleasure to be
before you and your committee. As you said, I do represent the
National Association of Chain Drug Stores. We have some 200
retailers with 120,000 pharmacists in nearly 35,000 stores
across the country. Virtually all of them will participate in
the Medicare-endorsed senior prescription drug discount card.
I wear another hat because along with Express Scripts,
NACDS formed the Pharmacy Care Alliance. Pharmacy Care Alliance
has sought and won Medicare endorsement for the Pharmacy Care
Alliance card, and so I want to talk a little bit about that as
well today.
I really wanted to just touch upon three items that are
discussed more completely, perhaps, in my testimony. First, I
wanted to just comment a little bit on the path that the retail
community pharmacy industry has been on. As you know, when the
administration first raised the idea of a discount card, we
were opposed to it. We were opposed to it because it did not
have a grounding in law. It did not have the benefit of this
committee's deliberations and other committees within Congress.
And we felt that in order to have a meaningful drug benefit for
seniors, you had to have a program that brought both
concessions from both, the pharmaceutical manufacturers as well
as retail pharmacy.
The card program, of course, that was announced in 2001,
while not enacted, it did spark manufacturing card programs and
those programs have been embraced by retail pharmacy and in
fact, our first efforts with the Pharmacy Care Alliance concept
were to support that program.
We actively participated, as you know, in the discussions
and deliberations last year. We felt very strongly about four
or five significant points. We felt that anybody that--any
pharmacy that wanted to participate in a drug discount card
program should be able to. We felt that the program should
provide a meaningful benefit to seniors. We felt that, in fact,
there should be rules of transparency and assurance that
rebates provided by the manufacturers flowed through to those
seniors.
Those elements were all part of the legislation that was
passed and that debate was one that ended with the passage of
the law. With the passage of the law last year, the retail
pharmacy community, at least the National Association of Chain
Drug Stores, decided to work to do everything we could to make
this law a reality. And so last December, with the authority of
my board, we formed the Pharmacy Care Alliance.
We needed somebody to partner with, an organization that
had experience running national card programs. Express Scripts
is one of the three largest pharmacy benefit managers in the
country with considerable experience in that area. And the
first set of questions we asked were whether the principles on
which we would run a program if we were to join forces would be
consistent with those principles that I just mentioned and that
we articulated throughout the debate last year.
The leadership of Express Scripts assured us that they were
in full alignment with those ideals and would run a program as
we described it. With that, we went forward. The time lines
were tight. I commend the Centers for Medicare and Medicaid
Services, Mark McClellan and a very able staff for driving this
process as effectively as they have, answering hundreds of our
questions and those of the other sponsors.
With the endorsement, we began a process of education. And
I wanted to just show, as I talk, a few of the slides that
represent part of that process. First, we wanted to let people
out in the community know that these cards were coming, that
the marketing would begin on May 3. So with Medicare-approved
materials, and I know the wording is too small to perhaps see,
we began a process of making available in our stores not only
the Medicare information, but our information as well, to begin
that education process.
Next, it was very important to make sure that pharmacists
began to better understand how the program would work. We have
a pharmacy practice memo that goes to all pharmacists across
the country, not just chain drug store pharmacists, the
120,000, but the 150,000 or 160,000 throughout retail pharmacy
because we firmly believe that where most seniors are going to
go for information about this program is, in fact, to their
pharmacy and they will consult with their pharmacist and with
pharmacy personnel. So that was an important element of that
program.
Next the promotional materials began to tell people that
they were going to be able to sign up for the Pharmacy Care
Alliance card. This material began appearing in the stores,
again, Medicare-endorsed material.
Go to the next slide. We have been actively engaged in
running programs to reach seniors who could take advantage of
this program. Some 260 educational and enrollment events have
taken place and are scheduled across the country in 44
different markets nationwide. This is by no means the limit of
activity because individual retailers may be doing their own
work, but the Pharmacy Care Alliance and staff and personnel
working with us and with Express Scripts are involved in these
events. Indeed, our President of the Pharmacy Care Alliance who
would be with me here today, but for the fact that she is out
across the country for the next few weeks, meeting with seniors
in community centers and pharmacies, talking to the local
media, all designed to help people better understand the
Medicare-endorsed prescription discount card. She's really
leading that effort.
I also wanted to give you just a sense of sort of the early
days and it's only been 2 weeks, but I hope in doing so, that I
might share a little bit of the reality, as we see it, not
theory, but the reality as we see it. First of all, Pharmacy
Care Alliance has a website, 1-800-PCA 7015. We'll get you an
answer in probably less than 30 seconds. For a while we were
running it under 5 seconds. We have had hundreds and hundreds
and hundreds of thousands of calls. We've had millions of hits
on our website. We have seen twice the number of applications
come in the second week as we did the first week. And I think
we are seeing really a steady growth every day. Interestingly,
42 percent of the applications we receive, we receive by mail.
Thirty-seven percent are faxed to us. Thirteen percent come
off of our website, so to answer do seniors actually use the
website, my answer is 13 percent are actually, not only using
it, but they're submitting their applications to us that way.
And 8 percent come in by phone.
Now the call center has been very active. I don't claim the
same numbers that Dr. McClellan has by any means, but it has
been a very, very active place and every time we get a call, we
seek to better understand just where those callers learned
about the Pharmacy Care Alliance Medicare Drug Discount Card
Program. Perhaps not surprisingly because we're behind it, but
45 percent tell us they've learned about it from their
pharmacy. And I think that is instructive. Again, we really
believe seniors have a lot of information they can get at their
local pharmacy. Thirteen percent heard about it from the
Medicare website or the call center; 12 percent from
television, 9 percent from newspapers and then others at less
than 5 percent, family, friends and the like.
Mr. Bilirakis. Will you try to summarize?
Mr. Fuller. I sure will. Because the key here is probably
best captured in this next slide. This is a real couple.
Somebody wrote to me a letter indicating that they were very
concerned about how this would affect their parents. Simply
put, ``we took the drugs, we were given permission and the
drugs they were taking, we took the drugs they were taking, we
applied the PCA card. The PCA card produced 24 percent savings
all by itself, or $260 per month.'' They also had two drugs
that together RX card would give them an additional $56 of
savings. ``It totaled $316 of savings for this couple every
month, but then we also did what a pharmacist would do and we
explained to them that there were some generic substitutions
that would save them additional money which would total $341 or
a 32 percent savings.''
This is not hypothetical. It's an actual example. It's what
people are doing on our website every day, helping seniors
learn how they can save money. I think we have a competitive
card out there. I actually think competition is a good thing. I
know transparency is a good thing. We remain very determined to
make this program work and we look forward to your questions.
[The prepared statement of Craig L. Fuller follows:]
Prepared Statement of Craig L. Fuller, President and Chief Executive
Officer, National Association of Chain Drug Stores
Mr.Chairman and Members of the Health Subcommittee. I am Craig L.
Fuller, President and CEO of the National Association of Chain Drug
Stores (NACDS). NACDS is pleased to be here today to talk with you
about our industry's views regarding the Medicare-approved prescription
drug discount card program. In addition to today's discussion, we would
like to invite all members of the Health Subcommittee, as well as your
House colleagues, to visit a community pharmacy over the next few
months to see first hand how the Medicare prescription drug discount
program is being implemented.
NACDS represents more than 200 companies that operate more than
32,000 community retail chain pharmacies. Our members include
traditional chain pharmacies, supermarket pharmacies and mass
merchandisers that operate pharmacies. We represent large and small
chain-operated pharmacies from all over the United States. Our industry
employs more than 120,000 pharmacists, and almost 3 million total
individuals, providing more than 70 percent of all outpatient
prescriptions in the United States. We believe that our industry plays
a critical role in implementing the discount card program that will be
utilized in less than two weeks, as well as the full Part D
prescription drug coverage program in 2006. We appreciate the
opportunity to express our views today.
There are three areas I would like to discuss in my presentation:
<bullet> First, a review of the path the National Association of Chain Drug
Stores traveled during the past few years to reach our current
alliance with Express Scripts, one of the nation's three
largest pharmacy benefit managers (PBMs), in the sponsorship of
a Medicare-approved drug discount card through the Pharmacy
Care Alliance (PCA);
<bullet> Second, a review of our experience with the Pharmacy Care Alliance
program and its implementation to date working with the Centers
for Medicare and Medicaid Services (CMS);
<bullet> Finally, our experience in the early days of enrolling seniors in the
PCA program.
COMMUNITY RETAIL PHARMACY: WORKING TO IMPLEMENT MMA
The enactment last year of the Medicare Modernization Act (MMA,
P.L. 108-173) created the most significant expansion of Medicare
benefits in the nearly 40-year history of the program. While NACDS
participated in a healthy debate last year, there is only one view
among NACDS members today. We must and will do everything possible to
make this program work. We know you expect nothing less and America's
seniors certainly deserve nothing less.
Of the nations nearly 45 million Medicare eligible seniors, about
25 percent have no prescription drug coverage, while others only have
partial coverage. For those seniors who pay for their prescriptions out
of pocket, they all too often cannot afford the medication they need or
they pay for only some of what they need. Significantly, this card
program can help millions of low income seniors by paying for $1200 in
medications over the next 18 months. In addition, the card program can
provide an additional safety check in detecting medication related
problems, such as drug interactions, for seniors who might obtain their
prescriptions from multiple pharmacies.
In our view, MMA took several important steps to improve the
situation for our seniors. The Act also developed a framework for the
structure of a meaningful discount card program. The structure
addresses some of the most important elements we discussed last year
during the formulation of the legislation. We said then, and we
continue to believe that:
<bullet> Patients Should Choose Pharmacy: The patient should be the one to
choose who should serve their medication needs. That is,
choices among retail pharmacies and mail order pharmacies
should be left to the patient;
<bullet> Financial Incentives Should be Transparent: There should be rules of
transparency so that policymakers, the Administration, and
seniors can see how the dollars flow to different interested
parties in the management of any kind of Medicare related drug
benefit;
<bullet> Seniors Should Realize Savings: The savings for the senior should
come both from the pharmaceutical manufacturers--with rebates
flowing through to the senior at the point of purchase--and
from concessions made by retail pharmacy; and,
<bullet> Pharmacies Should be Allowed to Participate: Those pharmacies
desiring to participate in a card sponsor's network should be
able to do so. All these elements are all a part of the
Pharmacy Care Alliance program which will be described in more
detail later in this statement.
We had serious reservations about a card program regulatory
initiative announced by the Department of Health and Human Services in
July, 2001. Our concern was that, without deliberations by this
committee and others, and without a law on the books, there was no
framework for a meaningful senior drug discount card program. While we
did oppose this Administration's effort, it did serve as the catalyst
for the development of discount cards offered by pharmaceutical
manufacturers. These included the TogetherRx Card, the Lilly Answers
Card and the Pfizer Share card. For all practical purposes, these
manufacturer-sponsored discount card programs were embraced by retail
pharmacy, and in our view many seniors benefited by the discounts that
were being offered by manufacturers to seniors through participating
pharmacies.
NACDS initially formed the Pharmacy Care Alliance to help
pharmacists and patients understand the value of these cards. We
coordinated events with the sponsors and communicated regularly on the
importance of these programs. Some of these cards will remain in the
marketplace as the new Medicare card program is rolled out, and we
applaud those manufacturers who are working with card sponsors to make
their programs seamless with the various CMS approved card sponsors.
THE PHARMACY CARE ALLIANCE (PCA)
Once MMA was enacted, the Board of NACDS expressed a commitment to
do all we could do to make the program work for our patients and
customers. Last year, we concluded that the best way for our industry
to assure that we were full participants in the new law, as well as to
protect the important principles we fought for, was to develop our own
discount card program. Knowing that there were likely to be many
competing cards in the marketplace, we wanted to work with a partner
who had a proven ability to implement a national discount card program.
We spoke with several potential partners, but found Express Scripts
to be an organization committed to our principles--as described
previously. They have a leadership team that is committed to making the
MMA work.
Our card program is structured around simple principles, which we
believe are resonating with seniors. Namely, that seniors should have
the right to choose the retail pharmacy from which they want to obtain
their pharmacy services, and that seniors should have the ability to
obtain their maintenance medications through their local retail
pharmacy or mail order. That is, the card that we are offering will
include a mail order component, but will not drive patients away from
retail pharmacy by requiring them, or creating financial incentives for
them, to use mail order. We believe that mail order should be an option
for seniors under the PCA card program as well as the 2006 voluntary
drug benefit, but seniors should not be economically coerced into using
mail order.
THE CHALLENGES IN IMPLEMENTING PCA
Early this year, all prospective card sponsors had a challenge. By
the end of January we were required to have our organization plans set
for running a discount card program. We had materials designed for
review by the Centers for Medicare and Medicaid Services, and we had to
agree on a business model for going forward with a completely different
kind of discount card program. Finally, we had to interact with and
seek approval from CMS on all of these matters.
CMS Administrator Mark McClellan and his team at CMS have done an
extraordinary job in driving forward the implementation of complex and
historic legislation enacted only late last year. The outreach to us
and other card sponsors has been constant. Literally thousands of
questions have been fielded from sponsors, and currently CMS is dealing
with millions of consumer inquiries. While everyone is hearing about
bumps in the road, it is unrealistic to think that a program of this
scope and magnitude could run without flaws in the initial ramp up.
We believe that challenges will continue to exist as the program
moves forward, but we should all be committed to making this program
work for seniors.
What specific tasks did PCA, as well as other card sponsors, have
to perform to make this card program a reality? First, as part of the
discount card program, Express Scripts, on behalf of the Pharmacy Care
Alliance, built a network of retail pharmacies from across the country.
Any retail pharmacy that wants to participate in the PCA network is
able. This network currently consists of almost 44,000 retail
pharmacies, including chain drug stores, independent drug stores,
supermarket pharmacies, and mass retailers. By the start of the
program, we believe that 50,000 retail pharmacies will be enrolled or
almost 90 percent of all pharmacies. That is a very sizeable network--
providing significant access for seniors to the local pharmacy of their
choice.
At the same time the pharmacy network was being built, Express
Scripts entered into negotiations with the pharmaceutical manufacturers
to obtain concessions on their prices in the form of rebates that will
be passed directly to the consumer at the point of purchase. Passing
through manufacturer price concessions at the pharmacy counter is a
relatively new phenomenon in discount card programs. To date, most of
the price concessions that seniors have realized for prescriptions
through commercially-available prescription drug discount card programs
have come from price concessions made by retail pharmacies. We believe
that the ultimate success of this program will depend on the desire of
manufacturers to provide, and of card sponsors to pass through, the
price concessions that they obtain from manufacturers.
NACDS AND PCA EDUCATIONAL INITIATIVES
We knew from the beginning of this discount card initiative that
millions of seniors that currently come to our pharmacies to obtain
their prescription medications would continue to do so after the
discount card program was launched. As we said earlier, our industry
employs 120,000 pharmacists that interact with millions of individuals,
including Medicare beneficiaries, each and every day. We also knew that
many of them would seek our advice and counsel on how to choose among
card programs, based on the medications they were taking.
NACDS has created several general educational materials for our
pharmacists and seniors about the card program. For example, NACDS
created a special continuing education program for our pharmacists to
help them learn about the card, as well as a special edition of our
regular ``Practice Memo,'' which is a unique communications vehicle our
industry uses to provide information to practicing pharmacists. We
prepared two ``Top 10'' facts about the Medicare discount card and the
transitional assistance benefit program.
The Pharmacy Care Alliance and its marketing partners have also
created materials that are being used in retail pharmacies across the
United States. PCA is expending considerable resources to conduct
education and training programs. We have provided materials to
participating pharmacies to use if they desire. We have provided
booklets and information to the pharmacies to give to patients that
will explain the program. All of these materials are reviewed and
approved by CMS. In addition, we have trained hundreds of individuals
who have in turn trained thousands of pharmacists.
Let me say that no one underestimates the tremendous task that lies
ahead to educate Medicare beneficiaries about the card program in
general, and their multiple options in particular. But, we believe that
seniors, their caregivers, and the various public and private sector
agencies representing the interests of seniors will help them sort
through many options to make the best selection possible. Like any new
program, there will be a learning curve and bumps ahead. However, we
view this as an important trial run for the new Part D drug benefit
that will ramp up late next year, and we all have a vested interest in
taking lessons learned from the discount card program and applying them
to the Part D program.
card program enrollment: experiences from the first two weeks
Let me now discuss our experiences in the first two weeks of
marketing the PCA card to seniors and enrolling seniors in the program.
Through phone and personal conversations as well as website
contact, we have seen growing interest among patients and caregivers
seeking information about the card program. During the second week of
promotions, we processed more enrollment applications than the first
week--we continue to see growth daily.
While we cannot provide specific information for proprietary
reasons, we can share with you some interesting statistics to give you
a feel for how seniors are accessing information about the Pharmacy
Care Alliance program. For example, as of May 18, 2004:
<bullet> We received twice as many applications the second week as we did the
first week.
<bullet> Applications came to us by mail (42 percent), by phone to our call
center (8 percent), by FAX (37 percent) and via the web (13
percent);
<bullet> Of the applications we received, 42 percent were for cards with
``transitional assistance'' and 58 percent were for regular
discount cards;
<bullet> Our PCA call center is actively engaged in counseling Medicare
beneficiaries, with the average length of a counseling call
running about six and a half minutes;
<bullet> When we ask where a caller reaching our call center heard about the
Pharmacy Care Alliance program, 45 percent say from their
pharmacy; 13 percent say from the Medicare website, call center
or materials; 12 percent say from television; 9 percent say
newspaper, and there are a number of other sources below 5
percent ranging from family and friends to physicians and
community groups.
At the heart of this program, of course, are not statistics, but
rather savings for seniors. Below is an actual example of the savings
that a senior couple in California would realize using the PCA card.
The couple's son contacted NACDS personally, skeptical about the
benefits of the card program for his parents, who take multiple
medications. We sought permission to review his parent's medication
needs and then to suggested how they may benefit from the discount card
program.
<bullet> Based on the medications they were taking, we found substantial
potential savings for the California couple, over 24 percent
savings, or about $260 each month using the PCA discount card.
<bullet> In addition to PCA discount card savings, the couple is also eligible
for the Together Rx discount card, and can save an additional
$56 per month using both cards.
<bullet> Last but not least, many patients can realize additional savings each
month simply by asking their community pharmacist if lower-
priced generic alternatives or a lower-priced drug in the same
therapeutic category exist for any of their medications. In
this case, we were able to find an additional $25 in potential
savings each month, allowing our couple in California to
potentially save a grand total of $341 each month, or 32
percent of what they are currently paying.
To conclude, our experiences thus far have been as expected.
Patients with medication needs interact with their physician and their
pharmacist. However, the pharmacist is available 24 hours a day, 7 days
a week in many locations, and is available without an appointment or
charge. So, it is not surprising that millions of seniors will consult
their pharmacist about the availability of the Medicare approved
discount cards. They seem to be doing this not all at once, but rather
when they come in to fill prescriptions. This shows the application
process will be spread out over more weeks, thus providing for more
interaction in the pharmacy and in our call center.
Today, pharmacists around the country have choices in what they can
recommend. The Pharmacy Care Alliance is but one choice. We have worked
hard to make certain that is a good, competitive and trusted choice for
both the patient and the pharmacist. By doing so we are convinced we
are doing everything we can to help make this important program work.
SENIORS HAVE POSITIVE PERCEPTIONS OF DRUG CARD PROGRAM
As we launch this historic initiative, we thought it would be
instructive to know what seniors really believed about the value of the
card program. We asked Wirthlin Worldwide Research to study the
perceptions toward the drug card program of Medicare-eligible seniors
that do not have any other form of insurance that covers prescription
drugs. Among those without any drug coverage, a slight majority (54
percent) have heard at least some information about recent Medicare
changes. The results of this survey should demonstrate the importance
of this card program to policymakers.
<bullet> First, most of this population favors the basic concept of these
discount cards. Based on the simplest description of the cards,
a majority (70 percent) say that the cards sound like a good
idea. After hearing a number of more specific pieces of
information about how the cards will work, 76 percent say the
discount cards sound like a good idea (six percentage point
increase), including 28 percent who say they sound like a very
good idea, and another 48 percent who think they are a fairly
good idea.
<bullet> In addition, a large majority (76 percent) believe the cards will be
helpful to those without drug coverage, and more than four out
of ten (43 percent) think the cards will be very helpful to
others like themselves.
<bullet> A majority (58 percent) of those without coverage say they are likely
to get a discount card. Among those who take any prescription
drugs, 61 percent are likely to get a card, and among those who
take three or more drugs, almost two-thirds (64 percent) are
likely to get a card.
<bullet> When the Transitional Assistance program is described, more than four
out of five (84 percent) believe the program will be helpful to
low income Medicare recipients, including two-thirds (68
percent) who believe it will be very helpful. Two-thirds (67
percent) say they would probably apply for the Transitional
Assistance if they qualified for it.
Thus, it appears that, while we are about 18 months away from the
Part D coverage program, seniors find that this interim card program is
a good first step toward helping them obtain their prescription drugs.
IMPLEMENTATION ISSUES FOR BENEFICIARIES AND PHARMACIES
Now we would like to provide additional detail about some of the
issues relating to what seniors, pharmacies and the marketplace can
expect as the discount card program is implemented on June 1st. First
and foremost, pharmacies will be responsible for managing
beneficiaries' expectations regarding the discount card program. This
may be just as important in helping them manage their drug benefits or
drug therapy. Pharmacies will have an important role in helping to
explain to seniors the nature of the discount card program, that the
discount card is not drug coverage, and that they still need to pay for
their prescriptions out-of-pocket, minus their discount.
Price and Discount Expectations: It is clear that seniors will
measure the success of this program by whether or not they are paying
less for their medications at the pharmacy counter. Already, we are
seeing dueling reports and studies trying to document the extent to
which the various card programs are (or are not) saving money, and
whether prescription prices have fallen since the CMS pricing website
went live.
NACDS wants to offer some observations about the issues relating to
prescription pricing, and how we should measure whether seniors are
actually saving money through the card program.
<bullet> First, we should all recognize that every senior has different
prescription drug needs, and that actual retail prescription
drug prices do vary from pharmacy to pharmacy. Thus, studies on
savings from the card program based on reduction from ``average
prescription prices'' fails to recognize prescription prices
variances, and that many seniors can already obtain a 10
percent discount on their medication by simply telling the
pharmacist they are a senior citizen.
<bullet> We also have to recognize that part of the goal of this discount card
program is to help seniors better manage their prescription
drug spending by encouraging them to use more cost effective
drugs, including generics. Thus, we should focus on helping
seniors choose the best card for them, and assist them in
reviewing their whole drug regimen to determine where their
physician might prescribe more cost effective drugs.
<bullet> We can never forget, however, that at the end of the day, this effort
cannot and should not be all about price. We should attempt to
get seniors the best drugs, to treat their medical condition.
And, assure they take the medications appropriately.
Because many discount cards existed before the Medicare-approved
cards, many successes of the new Medicare-approved discount card
program will depend on whether card sponsors are able to obtain
significant rebates and discounts from manufacturers, and the extent to
which they are passed along to beneficiaries. In that regard, we
believe that the PCA card has been able to obtain significant discounts
from manufacturers and will be passing those through to beneficiaries
at the point of service. We also believe that the transparency brought
to the market by the pricing website has also resulted in further price
concessions by manufacturers to various card sponsors to make their
prescription products attractive to an important and cost-conscious
group of purchasers--seniors.
Pricing Website: While we support transparency in medication
pricing at all levels, we believe that this discount card website will
create some challenges to seniors and pharmacies. After some initial
start up issues with the website, we believe that it contains accurate
pricing information, at least for the PCA card, and think it will be a
valuable tool for seniors. That is not to say that this pricing website
does not have several issues which we would like to bring to your
attention.
For example, once the program gets started, prices for prescription
drugs under the card programs will be allowed to change weekly on this
website, consistent with changes in manufacturers' charges for
medications, as well as other changes in the market such as a change in
discounts that are available from manufacturers or pharmacies. We
believe that, consistent with free market principles, prescription
prices under these card programs must be allowed to change since prices
of pharmaceuticals increase, as does the cost of doing business.
Anything less would be price controls on pharmacies.
But, by the time the beneficiary arrives at the pharmacy to
purchase their prescription, those prices may have changed, and the
beneficiary may have to pay a higher price than the one that was on the
website. CMS must be diligent in all its educational materials--as
should all card sponsors--to make clear to beneficiaries that card
sponsor prescription drug prices will likely not remain the same during
the year, and in fact, that there may be frequent price changes, and
that drugs covered on the formulary might change as well.
Transparency in Rebates and Discounts: We think it is key for
seniors, Medicare and Members of Congress to know whether card sponsors
are obtaining significant price reductions from manufacturers and
pharmacies, and whether these are being passed through to beneficiaries
in the form of lower prices. The discount card law requires that this
type of information be reported to CMS, which cannot make it public. We
think it is important, however, to ensure that any PBM or other private
health plan involved in the Medicare program be required to disclose
any relevant financial data so that federal officials can monitor
whether money is spent wisely, and savings are passed on to seniors.
In fact, we think this issue is so important that the PCA program
will go beyond what is required by statute and have our own clear and
rigorous rules regarding transparency, verified by an independent
auditor, who will have the right to review proprietary information to
ensure compliance. Congress, CMS, and Medicare beneficiaries should
expect the same from every card program receiving CMS endorsement.
Transitional Assistance Issues: Pharmacies will also work with low-
income seniors that are eligible for the $600 in annual transitional
assistance to help them make the most of this dollar amount. We can do
this by offering generic drugs where possible, and working with a
beneficiary's physicians to assure they are taking the most cost-
effective brand drugs possible.
In other words, pharmacies can make the $600 stretch further if we
can work with the beneficiary and their physician on assuring
appropriate prescription drug use. Because we often know our patients'
financial ability (or inability) to obtain their medications,
pharmacies are also in an excellent position of identifying low-income
seniors that might be eligible for transitional assistance so we can
encourage them to enroll in a card program.
Automatic Enrollment in Card Programs: Many states with individuals
enrolled in state pharmaceutical assistance programs are taking
advantage of CMS' recent decision to allow them to automatically enroll
these individuals in the Medicare discount card program. Some states
are requiring these individuals to enroll in only one card program,
while some states are providing choices. We believe that automatic
enrollment of these individuals in the card program--as well as
individuals in the Medicare Savings Program--will enhance participation
in the card program. This is particularly important for Medicare
beneficiaries below 135 percent of poverty who qualify for the $600
annual transitional assistance. We believe, however, that automatic
enrollment programs should give seniors a choice of card programs so
they can select the one that best meets their needs for the drugs that
they are taking, and the pharmacies that they want to use, before they
are defaulted into one specific card program.
Administrative Issues Relating to Card Programs: We envision some
potential administrative issues with the card program, especially in
cases where state Medicaid or state pharmaceutical assistance programs
decide to ``wrap around'' the benefit, and pay the copays or any
additional coverage, for transitional assistance individuals. This
information about ``wrap around'' benefits must be provided to
pharmacies at the point of care in a real-time manner by the card
sponsor to coordinate these benefits, without any charge by the card
sponsor to the pharmacy for providing this necessary information. This
information will help pharmacies determine who is responsible for
paying for the prescription, and the pharmacist can bill the
appropriate and liable third party.
We also see potential issues where beneficiaries have both a CMS-
approved prescription drug discount card and multiple non-approved
prescription drug discount cards, which is a very real possibility.
Beneficiaries may ask pharmacies to determine which card provides them
a better price for their medication, an approved card or a non-approved
card.
Finally, consistent with current industry practices, CMS must also
allow card sponsors to adjudicate claims transactions for drugs and
supplies covered under the discount card program in an on-line, real
time manner. CMS cannot require that any part of the transactions for
this program be conducted in any form of batch transaction standards.
CONCLUSION
In conclusion, we believe that there will be many challenges for
all stakeholders in implementing this Medicare-approved prescription
drug discount card program. The next eighteen months will go a long way
in helping us prepare for the prescription drug coverage program that
will begin in 2006. Medicare beneficiaries will continue to rely on
pharmacists--as they have done in the past--to help them understand how
to use the new Medicare-approved discount card programs. We continue to
meet this challenge.
We think that these card programs can be a success. Seniors will
ultimately judge these programs on the discounts they offer--if they
offer a wide range of choices for obtaining medications, and the level
of customer service provided. We welcome the opportunity to provide
additional information on any of the issues we discussed here. Thank
you, Mr. Chairman and members of the Subcommittee for asking us to
present our views here today.
Mr. Bilirakis. Thank you very much, sir, and you will get
an opportunity, I trust, with the questioning to expand on what
you have said.
Mr. Pollack, please proceed. You've done this before.
STATEMENT OF RONALD F. POLLACK
Mr. Pollack. I have once or twice. And I want to thank you
for your perseverance for holding the hearing.
First, I want to just say very briefly there are a couple
of things that I'm pleased about with respect to the program,
but then I want to get into the heart of the testimony. I'm
pleased that there's a $600 transition benefit for low income
people. It's crucially important. I wish it were more. I
certainly hope that as many people eligible sign up and we're
certainly helping with that. I'm also pleased that we're taking
some steps, not enough, toward transparency. I think that's a
step in the right direction.
Now let me summarize what I believe about this drug
discount card program and I can best--
Mr. Bilirakis. Mr. Pollack, excuse me, sir. Are you aware
or do you know or do you agree that there are some
manufacturers who are basically expanding that $600 figure?
Mr. Pollack. I've actually talked to them directly.
Mr. Bilirakis. You have? So you are aware that that is
taking place.
Mr. Pollack. I am.
Mr. Bilirakis. Good. You know, we hear these things, but it
hasn't gone into effect yet and I just wondered, you agree that
it is going to take place?
Mr. Pollack. Well, the drug companies, they like people to
know about it. They've let us know.
Mr. Bilirakis. Okay, good. Please proceed.
Mr. Pollack. I guess I would summarize this whole drug
discount card effort as much ado about very little. And let me
tell you why I have that summary conclusion. First of all, if
you take the administration's numbers at face value, which I
think is the best we can do at this juncture, they tell us that
they project that 7.4 million people are going to enroll in
these discount cards. Another way of saying that is one out of
six Medicare beneficiaries will get these discount cards, only
18 percent according to the administration's projections. And
what that means is that the remaining five out of six seniors
who are in the Medicare program will not receive direct relief
from this program and they will bear the full brunt of cost
increases that have been going on for each year over the past
decade that I'll talk about in a moment.
Second, when somebody tells me, irrespective of what the
product is, that I'm going to get a discount, whether it's a
car or a television, I don't jump up and down right away. I
normally ask discount off of what price? Because if the base
price keeps on increasing, then surely I may be getting a
discount, but I may not be getting any cost relief. And that
indeed is a significant problem here because there is nothing
in this regimen that deals with the base price. We have been
looking at the base price for each year over the past decade.
Last year, the base price rose 3.4 times the rate of inflation.
We are about to issue another report that will show the latest
year and we will do that soon and I will tell you that base
price increase is unabated.
And so if nothing is done about the base price, sure,
people are getting a discount, whether it's 10 percent, 11
percent, 17 percent, but in terms of what they're spending, if
the base price goes up, it really doesn't help with respect to
the discount.
Third point. If we were serious about trying to provide
some real relief for the beneficiaries of Medicare, we had
choices that we could have made and unfortunately, the Congress
rejected those choices.
Now there was discussion earlier this morning concerning
the Veterans' Administration versus the discounts. Now in my
testimony I took a look at the eight most prescribed drugs for
seniors and we looked at what the prices are in some Districts
and we looked at for you, Mr. Chairman, and for ranking member,
so let me turn to Tampa, Florida so that we could see what
really we could have done here. Lipitor. The lowest price under
the discount card program in your area, Mr. Chairman, is $65.
The highest price under these discount cards is $72. In
contrast, the Veterans' Administration gets $41 and you can get
the same drugs in Canada for $35.
Fosamax. In your community, the lowest price, $57 to $54;
highest price, $71. VA gets $43. And Canada, it's $28. You'll
see, we've listed it for all eight of the top drugs and in no
place does it come close in terms of what the discount cards
yield as opposed to what we could have done if we would have
enabled the Medicare program to bargain on behalf of seniors.
Fourth point I guess I'd want to make is that one of the
things we had recommended to CMS was that they explicitly place
into the regulations rules governing the potential of bait and
switch. And here, by that I mean in specific terms each of
these card sponsors are saying which drugs are subject to a
discount, what the size of the discount and yet even forgetting
changes in the price, they can switch what drugs are subject to
a discount. And now we hear the administration saying well,
we're going to monitor this, but they refuse to put that in
their regulations so that up front it would have been said to
the discount card sponsors, you can't engage in these specific
practices. We've lured people in based on certain drugs being
subject to a discount and then they no longer are.
I must say, I feel that Mark McClellan is a wonderful
Administrator. I think very highly of the man. I shared the
comments you made at the end of the testimony. So this is not a
personal observation. But can you imagine if 100,000 people
sign up for a card and then all o fa sudden that card sponsor
perpetrates these bait and switch practices and it knocks off a
whole bunch of drugs that lured people onto that card. Are you
going to tell people, the 100,000 people who have signed up for
that card they no longer can benefit from that card or that
they now have to re-enroll? I don't think that's likely to
happen and it would have been much better if the administration
would have said up front, these practices shall not be allowed.
Those drugs that you advertise as being subject to a discount
must stay as a discount throughout the course of the year.
Enough has been said about the administrative morass. I
will just tell you in terms of our own efforts with respect to
that, when we heard complaints about people trying to get
through on the 1-800 number, we made calls ourselves. We made
over 70 calls. And what we found is that almost half of those
calls you did not speak to a live person. In a very high
percentage you got cutoff, just cutoff. In other instances, we
did the prompts, all these different prompts that take a whole
bunch of minutes and after we did all the prompts, we went back
to the very first prompt, never speaking to a live person.
Now I believe that with the increase in the number of
people answering the phones, hopefully it will be better. I
will say, however, I want to say something complimentary. Once
you get through and those instances where you did get through
people were courteous and most of the time they answered
questions accurately. And so I think that was--
Mr. Bilirakis. Can you summarize, please, sir? I kind of
like what you're saying right now.
Mr. Pollack. Selectively. I guess I would conclude, Mr.
Chairman, that we're not telling people don't sign up for
discount cards and particularly low income people we're not
saying that. Quite the contrary. We're telling them to sign up.
But if we were truly serious about doing something for
America's seniors to get prices down, we had alternatives and
unfortunately those alternatives were rejected and this is a
pale substitute, a pale substitute that only one out of six
seniors will even participate in and even that one out of six
will get a relatively small benefit.
[The prepared statement of Ronald F. Pollack follows:]
Prepared Statement of Ronald F. Pollack, Executive Director, Families
USA
Mr. Chairman, Members of the Committee: Thank you very much for
this opportunity to testify on the Medicare prescription drug discount
card program.
DISCOUNT CARDS: MUCH ADO ABOUT VERY LITTLE
The new drug discount card that goes into effect on June 1, 2004 is
much ado about very little. This new card program, which the Department
of Health and Human Services projects will enroll only 7.4 million
Medicare beneficiaries--merely one out of every six people (18 percent)
in the program--will be of no consequence for the vast majority of
seniors. Those seniors will continue to face the brunt of ever-
increasing prices that have risen at multiples of inflation for every
year over the past decade.
Perhaps most important, this drug discount program is an extremely
weak substitute for what should have been in the recent legislation--
namely, enabling Medicare to bargain for lower prices with the drug
companies, similar to what the Veterans' Administration does for
veterans. This alternative would have helped all seniors, not simply
the one out of six that receive discount cards. Moreover, for the one
out of six seniors who enroll in the discount card program, it would
have provided considerably larger savings.
Before I describe in greater detail why this discount card program
is much ado about very little, I do want to make clear that we support
the transitional assistance program that provides $600 per year for
those under 135 percent of the federal poverty level. This benefit will
be particularly useful, especially when it can be combined with state
and pharmaceutical assistance programs, and we all must do all we can
to help enroll eligible beneficiaries in this program.
Having said that, we feel that beneficiaries should be warned to
approach the program with low expectations, so that they are not
disappointed.
We do not know how much discount card prices may increase in coming
months, but as Families USA's research work has repeatedly
shown, brand name drug prices consistently inflate at
approximately three or more times the underlying rate of
inflation. Last year, we found that the cost of the 50 drugs
most used by seniors increased at 3.4 times the rate of
inflation in 2002. We will be releasing a new report on the
rate of inflation of the most popular brand name drugs used by
seniors soon. Thus a discount card may provide some much-needed
relief, but the relief erodes--rapidly--as drug prices keep
rising much faster than inflation.
Many of the companies involved in these discount cards have an inherent
conflict of interest: they are likely to make more money by
encouraging the use of more expensive prescriptions and keeping
a portion of the larger absolute dollar discounts and rebates
they receive from manufacturers of those more expensive drugs.
The just-announced Federal Court Order settlement with Merck-
Medco is an example of the kind of anti-consumer practice
``bait and switch'' that needs to be guarded against if
consumers are to obtain true savings.
The information available on the Medicare website may not be accurate
and should be double-checked. At least one major news report
notes major discrepancies between what's reported on the
Internet and what local drugstores are actually willing to do
(see Washington Post story cited below).
A MISSED OPPORTUNITY
In looking at the discount card prices, one is continually reminded
of the missed opportunity: If the United States had the type of cost
containment that other nations had, or if the purchasing power of the
Department of Veterans Affairs had been used, huge savings could have
been obtained, not only in discount cards, but for Medicare and
Medicaid. These savings would have allowed Congress to provide a
comprehensive benefit that would truly excite Medicare beneficiaries
and that would have helped the states deal with their Medicaid budget
crises.
In attachment #1, we have listed the high and low Medicare-endorsed
discount card prices of the 8 most common prescription drugs used by
Medicare beneficiaries. We then listed the VA price and the Canadian
Ontario government prices for those same drugs in late April. We have
picked six comparison zip codes corresponding to the three most senior
Majority and Minority Members of this Subcommittee.
The data make it clear that the drug discount cards are a pale
benefit compared to Medicare bargaining or re-importation of drugs from
Canada. It shows savings are possible. And it shows those savings pale
compared to the prices available when a government uses truly effective
purchasing power.
NEED TO DO MORE TO CONTROL DRUG PRICES FOR SAKE OF MEDICARE AND
TAXPAYERS
The failure of the new law to obtain any meaningful drug cost
containment is a disaster for beneficiaries, Medicare, and taxpayers.
Using the CBO's own data, because of drug inflation, the amount
beneficiaries will pay will change as follows:
------------------------------------------------------------------------
2013, at
2006, end of
Benefit when CBO
program budget
starts window
------------------------------------------------------------------------
Estimated premium................................. $420 $696
Deductible........................................ $250 $445
Initial coverage limit where beneficiary pays 25% $2,250 $4,000
between deductible and start of ``donut''........
Donut............................................. $2,850 $5,066
Catastrophic threshold starts when your out-of- $3600 $6,400
pocket expense equals............................
------------------------------------------------------------------------
Families USA believes that a ``donut'' of $5,066 is ridiculous.
Beneficiary disappointment at a $2,850 gap in coverage will turn to
anger at the thought of a yearly $5,066 gap.
If these inflation changes coincided with changes in income, it
would not be as much of a problem. But drug inflation far exceeds
seniors' income gains. Again using CBO numbers and Census estimates,
the following is what a typical senior at median income and average
drug use will experience between 2006 and 2013:
------------------------------------------------------------------------
2006 2013
(est.) (est)
------------------------------------------------------------------------
Average drug expense.............................. $3,167 $5,425
What you would pay with those drug expenses (+ $2,087 $3,455
premium).........................................
Income............................................ $23,708 $28,181
Percent of your income spent on drugs and premiums 8.8% 12.3%
------------------------------------------------------------------------
Because of the failure to obtain true cost containment, despite the
expenditure of $400 or $534 billion over ten years, beneficiaries will
still see more and more of their income consumed in drug expenses.
The recent 2004 Medicare Trustees' report makes the point even more
starkly: the addition of the prescription drug benefit means that the
combined premium/copay/deductible burden of Medicare Part B in 2010
rises from 16.6% of Social Security <SUP>1</SUP> income before the
addition of Part D to 36% of income after Part D is added. Obviously
the new drug benefit saves beneficiaries significant amounts, but the
Trustees' report example shows how burdensome the gaps in the new
program will be to those who live only on Social Security.
---------------------------------------------------------------------------
\1\ Note, this is Social Security income only. The previous
paragraph referred to median total income, thus the different
percentages.
---------------------------------------------------------------------------
The failure to obtain cost containment is a major reason, of
course, that the next Congress is likely to see the new law's 45%
trigger reached <SUP>2</SUP>, and that your Subcommittee will be faced
with making major changes in the program just two years from now. Many
of those changes could hurt beneficiaries.
---------------------------------------------------------------------------
\2\ MMA, Sections 801-804
---------------------------------------------------------------------------
THE NEW LAW IS TOO COMPLEX: THAT'S WHAT WE ARE HEARING FROM ALL OVER
THE NATION FROM BENEFICIARIES
The new law, including the new discount card program, is much too
complicated. That's what we are hearing from seniors all over the
nation. If there were a single negotiated price, like the VA obtains,
that would be simple, understandable, and popular.
We would like to include for the Record a piece from the Washington
Post of May 18, 2004 entitled, ``Pick a Card! #?$!'' by Lisa Barrett
Mann, a younger person who describes spending nine hours trying to help
her 82-year-old mother get the best card. It is an excellent
description, with perhaps one error: the writer says that ``changes
aren't allowed until open season at the end of the year.'' Actually,
according to CMS, changes can occur at any time, both in price and the
specific drug covered. Ms. Mann's article makes a good recommendation
at the end:
``We'll wait a few weeks. There's no deadline for enrolling
and, as far as I can tell, the savings aren't going to be so
great (if there are any at all) that deferring the decision
could cost Mom much . . . So I'll give Mom's pharmacy time to
sort out which programs it participates in and then get a list
from Medicare.
``In the meantime, maybe Medicare will clear up some of the
Web site glitches. Maybe the discount card programs will work
out their customer service and database issues and update some
of those 1997 prices. Maybe the PBMs will let the pharmacies
know which programs they are working with. Maybe Medicare will
spring for a few more phone operators [note: they did!] and cut
back on the TV commercials . . .
``I figure that, in a few months, helping Mom pick a discount
card will be easy. It should take about an hour.''
Waiting until the data becomes more available and accurate is good
advice, but for millions of seniors without help, it will still take
much more than an hour. Most seniors are not internet comfortable. And
most of all, we need to remember that about 20 percent of Medicare
beneficiaries, about 9 million people, have some form of cognitive or
mental illness. For these people, it is not a joy to shop among 40+
different plans--it is a nightmare--a task so daunting many will not
even try.
THE $600 BENEFIT IS IMPORTANT FOR LOW INCOME INDIVIDUALS, BUT MANY
WON'T GET IT BECAUSE OF CONFUSION: BENEFICIARIES IN MEDICARE SAVINGS
PROGRAM SHOULD BE PRESUMPTIVELY ENROLLED.
Not only is the program confusing, when you add it to existing
state programs of assistance, it becomes even more baffling. In an
event in Illinois, a member of Families USA staff started to recommend
the $600 card to lower-income seniors, but was corrected by local
experts, who noted that such people should be advised to join the much
better Illinois program. We note recent press reports that the Speaker
of the House of Representatives, in an Illinois town meeting event
attended by the Medicare Administrator, made the same ``join Medicare
discount'' recommendation without mentioning the better Illinois
program, but unfortunately was not corrected. I cite this just to
indicate how terribly complicated the new program is, especially when
it interfaces with local programs.
Historically, it has been very difficult to reach out to lower-
income individuals and enroll them in key means-tested programs of
assistance. Despite nearly 15 years of work enrolling Medicare
beneficiaries in the Medicare Savings Programs (MSP),<SUP>3</SUP> only
about half the eligibles have enrolled. Add the complexity of the new,
temporary 19-month discount card program, and Families USA is very
concerned that CMS will be unable to achieve its goal of enrolling 4.7
million out of a total of 7.2 million eligible low-income
beneficiaries.
---------------------------------------------------------------------------
\3\ QMB, SLMB, and QI-1, which pay Part B premiums and, in the case
of QMB, deductibles and copays.
---------------------------------------------------------------------------
We hope we are wrong, and that the full 4.7 million and more are
enrolled--but Congress should demand to know what the enrollment
figures are early in June. If the enrollment levels are below CMS's
predictions, it is not too late to act. Individuals who are enrolled in
the MSP programs could be presumptively enrolled in the discount card
program.<SUP>4</SUP> Senators Bingaman and Lincoln have just introduced
legislation (S. 2413) that would provide for such a presumptive
enrollment program, and we urge you to consider such legislation. It is
certainly the type of legislation that could be passed on the
suspension calendar--and probably the consent calendar. Enrolling these
individuals would free up a tremendous amount of time and energy for
outreach to other eligible individuals.
---------------------------------------------------------------------------
\4\ The $600 benefit is not available to those in TRICARE, FEHBP,
or who have other health insurance with any outpatient prescription
drug coverage (except a M+C plan or a Medigap policy), but those under
135% of poverty are very, very unlikely to be eligible for or enrolled
in such programs, and this provision should be presumed met.
---------------------------------------------------------------------------
THE 1-800-MEDICARE NUMBER: CALL 911
The 1-800-Medicare number was overwhelmed in its first two weeks.
It is certain to get better, but the initial experience has been a real
turn-off--or one could say, disconnect. The Washington Post reporter
cited above tried to get through seven times on one day and never did.
Families USA decided to try a few calls last week to judge the accuracy
of responses to some fairly simple test questions. We had better luck.
On 70 calls, we were ``only'' disconnected 36 percent of the time,
sometimes on purpose and with the warning ``call back later,'' and
other times abruptly and without warning. On another 9 percent of
calls, we were told to punch various numbers on the phone, and found
that after a circuitous route, we were eventually re-directed to call
1-800-MEDICARE! There was no way to get to a human. When we did get
through--the longest we were on hold was 17 minutes--I am pleased to
report that the answers were 86 percent accurate, and the staff
courteous, helpful, and willing to ``walk the second mile.''
There are clearly mechanical problems with the 1-800 number and
some of its routing codes. They need to be fixed, ASAP. Unannounced
disconnects are infuriating, and must be stopped.
Most importantly, CMS needs to learn from this experience and be
better prepared for the fall of 2005, when the entire Medicare
population will be trying to make sense of the new choices. Call volume
is likely to be much higher than it is this May. The choices will,
frankly, be much more important for people to understand. We need to do
a better job. Disconnects at the 36 percent level are not acceptable.
Congress needs to make sure that CMS has the resources to meet this
future, larger tsunami of calls. The new law provided an extra $1
billion for CMS in FY 2004 and 2005 for administrative start-up costs.
This is money available outside the regular appropriations process. But
that extra money runs out on September 30, 2005, 46 days before the new
Part D enrollment period begins and three months before the new law
starts. The following chart shows the very difficult budget situation
facing CMS. The chart shows total administrative spending. As you can
see, there is an increase of funding pre-FY 2006 largely due to the
extra $1 billion, but then there is a dramatic reduction of half a
billion dollars in FY 2006--before the new law starts! This is a train
wreck coming! It will make this May's telephone and counseling
situation seem efficient.
CMS ADMINISTRATIVE BUDGET ONLY, DRAWN FROM 2004 TRUSTEES REPORT
(numbers in billions of dollars)
------------------------------------------------------------------------
Fiscal Year HI SMI Rx D Total
------------------------------------------------------------------------
2002.................................... 2.5 1.8 N/A 4.3
2003.................................... 2.5 2.4 N/A 4.9
2004.................................... 2.8 3.0 0.3 6.1
2005.................................... 2.8 3.1 0.8 6.7
2006.................................... 2.8 2.7 0.7 6.2
2007.................................... 2.8 2.8 0.8 6.4
2008.................................... 2.8 2.9 0.8 6.5
2009.................................... 2.9 3.0 0.8 6.7
2010.................................... 2.9 3.1 0.9 6.9
------------------------------------------------------------------------
Source: From 2004 Medicare Trustees' Report, prepared by Families USA
To avoid another rocky 1-800-Medicare start-up to the permanent
program, Congress needs to ask tough questions about the resources
available to CMS and prevent the huge fall-off in resources on October
1, 2005.
MORE RESOURCES NEEDED FOR STATE HEALTH INSURANCE ASSISTANCE PROGRAMS
(SHIPS)
We also urge Congress to provide more money for the State Health
Insurance Assistance Programs (SHIPs), the largely volunteer-run,
state-based counseling services offered in each of the states. These
programs provide one-on-one counseling to seniors and specialize in
small meetings in local neighborhoods to help Medicare beneficiaries
navigate the insurance system. Polling of seniors shows that they like
the type of one-on-one, face-to-face assistance provided by SHIPs. The
Internet and 1-800 numbers are not as useful. Providing more money for
SHIP computers, training and recruitment would be one of the most
effective ways to ensure a smoother launch of the permanent Medicare
drug program.
Prices on 8 drugs commonly used by seniors, 30 day supply
Zip Code: 33618 Tampa, Florida
--------------------------------------------------------------------------------------------------------------------------------------------------------
CMS-endorsed retail CMS-endorsed retail
Drug Quantity VA Canada discount card low discount card high
price price
--------------------------------------------------------------------------------------------------------------------------------------------------------
Liptor............................. 10 mg................. $41................... $35.................. $65.................. $72
Plavix............................. 75 mg................. $100.................. $53.................. $113................. $123
Fosamax............................ 70 mg, 4 tabs/month... $43................... $28.................. $57-$64*............. $71
Norvasc............................ 5 mg.................. $25................... $28.................. $42.................. $48
Celebrex........................... 200 mg................ $63................... $28.................. $77-$84.............. $88-$178 \5\
Zocor.............................. 20 mg................. $69................... $49.................. $101-$105............ $129
Prevacid........................... 30 mg................. $71................... $44.................. $111-$114............ $131
Protonix........................... 40 mg................. $27................... $42.................. $86--$89............. $104
Price for all 8, in one card (i.e., $439.................. $307................. $657-$691............ $765
the CMS column does not add
cumulatively).
--------------------------------------------------------------------------------------------------------------------------------------------------------
** Where a range of prices are listed, it means that the price available using that low (or high) cost discount card varies by the amount of that range
among different pharmacies within the zip code. So one can pick a ``low'' card, but one will still need to be careful which drugstore one uses.
\5\ These $178 high numbers, listed for two cards, may be an error. It is hard to imagine that much difference between drugstores that have an agreement
with the same card company.
Prices on 8 drugs commonly used by seniors, 30 day supply
Zip Code 75087, Rockwall, Texas
--------------------------------------------------------------------------------------------------------------------------------------------------------
CMS-endorsed retail CMS-endorsed retail
Drug Quantity VA Canada discount card low discount card high
price price
--------------------------------------------------------------------------------------------------------------------------------------------------------
Liptor............................. 10 mg................. $41................... $35.................. $65.................. $72
Plavix............................. 75 mg................. $100.................. $53.................. $106................. $124
Fosamax............................ 70 mg, 4 tabs/month... $43................... $28.................. $61.................. $71
Norvasc............................ 5 mg.................. $25................... $28.................. $43.................. $48
Celebrex........................... 200 mg................ $63................... $28.................. $78.................. $88
Zocor.............................. 20 mg................. $69................... $49.................. $101................. $129
Prevacid........................... 30 mg................. $71................... $44.................. $112................. $131
Protonix........................... 40 mg................. $27................... $42.................. $87.................. $104
Price for all 8, in one card (i.e., $439.................. $307................. $671................. $765
the CMS column does not add
cumulatively).
--------------------------------------------------------------------------------------------------------------------------------------------------------
Prices on 8 drugs commonly used by seniors, 30 day supply
Zip Code 49007, Kalamazoo, Michigan
--------------------------------------------------------------------------------------------------------------------------------------------------------
CMS-endorsed retail CMS-endorsed retail
Drug Quantity VA Canada discount card low discount card high
price price
--------------------------------------------------------------------------------------------------------------------------------------------------------
Liptor............................. 10 mg................. $41................... $35.................. $65.................. $65
Plavix............................. 75 mg................. $100.................. $53.................. $113-$114 *.......... $128
Fosamax............................ 70 mg, 4 tabs/month... $43................... $28.................. $57-$64.............. $74
Norvasc............................ 5 mg.................. $25................... $28.................. $43-$44.............. $49
Celebrex........................... 200 mg................ $63................... $28.................. $77-$84.............. $89
Zocor.............................. 20 mg................. $69................... $49.................. $101-$105............ $134
Prevacid........................... 30 mg................. $71................... $44.................. $111-$114............ $136
Protonix40 mg...................... $27................... $42................... $86-$89.............. $108.................
Price for all 8, in one card (i.e., $439.................. $307................. $657-$691............ $792
the CMS column does not add
cumulatively).
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Where a range of prices are listed, it means that the price available using that low (or high) cost discount card varies by the amount of that range
among different pharmacies within the zip code. So one can pick a ``low'' card, but one will still need to be careful which drugstore one uses.
Prices on 8 drugs commonly used by seniors, 30 day supply
Zip Code 44052, Lorain, Ohio
--------------------------------------------------------------------------------------------------------------------------------------------------------
CMS-endorsed retail CMS-endorsed retail
Drug Quantity VA Canada discount card low discount card high
price price
--------------------------------------------------------------------------------------------------------------------------------------------------------
Liptor............................. 10 mg................. $41................... $35.................. $65.................. $72
Plavix............................. 75 mg................. $100.................. $53.................. $113................. $123
Fosamax............................ 70 mg, 4 tabs/month... $43................... $28.................. $57-$64 *............ $71
Norvasc............................ 5 mg.................. $25................... $28.................. $43.................. $48
Celebrex........................... 200 mg................ $63................... $28.................. $77-$84.............. $93
Zocor.............................. 20 mg................. $69................... $49.................. $101-$105............ $129
Prevacid........................... 30 mg................. $71................... $44.................. $111-$114............ $145
Protonix........................... 40 mg................. $27................... $42.................. $86-$89.............. $104
Price for all 8, in one card (i.e., $439.................. $307................. $657-$691............ $765
the CMS column does not add
cumulatively).
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Where a range of prices are listed, it means that the price available using that low (or high) cost discount card varies by the amount of that range
among different pharmacies within the zip code. So one can pick a ``low'' card, but one will still need to be careful which drugstore one uses.
Prices on 8 drugs commonly used by seniors, 30 day supply
Zip Code: 90048 Los Angeles, California
--------------------------------------------------------------------------------------------------------------------------------------------------------
CMS-endorsed retail CMS-endorsed retail
Drug Quantity VA Canada discount card low discount card high
price price
--------------------------------------------------------------------------------------------------------------------------------------------------------
Liptor............................. 10 mg................. $41................... $35.................. $65.................. $72
Plavix............................. 75 mg................. $100.................. $53.................. $106................. $123
Fosamax............................ 70 mg, 4 tabs/month... $43................... $28.................. $61.................. $71
Norvasc............................ 5 mg.................. $25................... $28.................. $43.................. $48
Celebrex........................... 200 mg................ $63................... $28.................. $78.................. $88
Zocor.............................. 20 mg................. $69................... $49.................. $101................. $129
Prevacid........................... 30 mg................. $71................... $44.................. $112................. $131
Protonix........................... 40 mg................. $27................... $42.................. $86.................. $104.33
Price for all 8, in one card (i.e., $439.................. $307................. $667-$679 *.......... $765
the CMS column does not add
cumulatively).
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Where a range of prices are listed, it means that the price available using that low (or high) cost discount card varies by the amount of that range
among different pharmacies within the zip code. So one can pick a ``low'' card, but one will still need to be careful which drugstore one uses.
Prices on 8 drugs commonly used by seniors, 30 day supply
Zip Code 11241 Brooklyn, New York
--------------------------------------------------------------------------------------------------------------------------------------------------------
CMS-endorsed retail CMS-endorsed retail
Drug Quantity VA Canada discount card low discount card high
price price
--------------------------------------------------------------------------------------------------------------------------------------------------------
Liptor............................. 10 mg................. $41................... $35.................. $65.................. $74
Plavix............................. 75 mg................. $100.................. $53.................. $113................. $127
Fosamax............................ 70 mg, 4 tabs/month... $43................... $28.................. $63.................. $74
Norvasc............................ 5 mg.................. $25................... $28.................. $43.................. $49
Celebrex........................... 200 mg................ $63................... $28.................. $78.................. $89
Zocor.............................. 20 mg................. $69................... $49.................. $102................. $134
Prevacid........................... 30 mg................. $71................... $44.................. $112................. $136
Protonix........................... 40 mg................. $27................... $42.................. $87.................. $108
Price for all 8, in one card (i.e., $439.................. $307................. $671-$674............ $790
the CMS column does not add
cumulatively).
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Where a range of prices are listed, it means that the price available using that low (or high) cost discount card varies by the amount of that range
among different pharmacies within the zip code. So one can pick a ``low'' card, but one will still need to be careful which drugstore one uses.
Mr. Bilirakis. Thank you, sir.
Ms. Grealy.
STATEMENT OF MARY R. GREALY
Ms. Grealy. Good afternoon, Mr. Chairman, and members of
the subcommittee. On behalf of the members of the Healthcare
Leadership Council, I want to thank you for inviting me to
testify today and convey to you that HLC's views on the
Medicare prescription drug discount card program.
I will devote my time today discussing a study that the
Healthcare Leadership Council has commissioned to fully
understand the impact of the Medicare discount cards. Let me
preface my remarks though by saying that the members of the
Healthcare Leadership Council, an organization that represents
the full spectrum of American health care believes that it is
important for Medicare beneficiaries to have information about
the discount card program. The drug discount card is an
extremely important interim step, one that will provide
financial assistance to millions of seniors who need that
helping hand until the full prescription drug benefit takes
effect on January 1, 2006.
How much money can Medicare beneficiaries save on their
prescriptions by using the drug discount cards? That is the
most relevant and important question on the minds of
beneficiaries, particularly the millions who currently have no
form of prescription drug coverage. And it's a question that
the Healthcare Leadership Council is seeking to answer.
We have commissioned the Lewin Group, a nationally
respected economic analysis firm to take a critical look at all
of the discount cards that have price comparison information on
the Medicare website.
We've approached this study in a way to make it relevant to
the every day lives of the Medicare beneficiaries who will be
using those cards. To do that, we have focused on 150 drugs
that are most frequently used by senior citizens. We are
looking at the difference between what a cash purchaser would
pay for those drugs at a retail pharmacy, compared to a buyer
using the Medicare discount card.
We are also looking at the impact of the discount card for
beneficiaries with chronic health conditions who take multiple
medications.
I want to stress that these results are preliminary. we
anticipate releasing a final version of the study next month. I
also want to emphasize that we have taken a very conservative
approach to these estimates.
If anything, I think we have underestimated rather than
overestimated the average savings for discount card users.
Well, here is what we have learned about these savings so far.
Looking at these 150 most frequently used drugs, we are finding
that the best available prices on those drugs, using the
discount cards represent a weighted average savings of more
than 20 percent in many states. Specifically, to list a few
examples, we are seeing average savings of 27 percent in
Florida; 26 percent in Louisiana; 25 percent in Illinois; and
23 percent in New York.
We are also finding very little geographic disparity in the
drug discounts. The best price offered for a single drug rarely
varies across markets. For example, the lowest available price
for a best-selling brand new hypertension drug varies by less
than $1 across 20 zip codes.
We're very pleased to see that the discount card users will
receive significant savings regardless of the State or region
in which they live.
Finally, we have found that there are considerable savings
for beneficiaries who have chronic disease conditions and are
using multiple drugs. These savings are even greater for low
income beneficiaries who use the $600 low income credit
available to them.
Let me cite one example. A beneficiary taking the most
common combination of drugs for diabetes would spend on average
almost $3,100 during the year if paying retail prices. The
Medicare discount card that provides the best price on those
drugs will save the individual over $753, a 24 percent savings.
With the low income credit included, those savings increase to
$1,353 or a 44 percent savings.
Low income seniors should also be aware that several of the
major pharmaceutical companies have already announced that they
will make drugs available at minimal or no cost to those
beneficiaries who exhaust their $600 Transitional Assistance
before the year is out.
Mr. Chairman, because our time is limited today, I won't go
into more detail about this study, but we've provided
information and would be happy to answer questions about it.
But let me just add that the Healthcare Leadership Council will
be continuing its effort to work with seniors like Mr.
Baumhofer that we have here today, throughout the country to
provide information and assistance on this program.
We look forward to working with this committee and to
continue ensuring that Medicare beneficiaries receive the very
best possible health care.
Thank you.
[The prepared statement of Mary R. Grealy follows:]
Prepared Statement of Mary R. Grealy, President, Healthcare Leadership
Council
Good morning Chairman Bilirakis, Congressman Brown, and members of
the subcommittee. Thank you for your invitation to appear here today to
convey the views of the Healthcare Leadership Council on the Medicare
prescription drug discount card program. I want to commend this
committee for conducting this hearing and, in so doing, enabling the
nation's seniors to learn more about this extremely important
initiative. Along the same lines, I want to thank the committee for
your leadership over the past several years in building a stronger
Medicare program.
The Healthcare Leadership Council (HLC) represents providers and
innovators from all sectors of American health care. Our membership is
comprised of chief executives of leading companies and institutions
from across the health spectrum.
Since its inception, the HLC has been dedicated to advancing a
health care system that provides affordable, high-quality care in a
patient-centered environment. We are committed to accessible medicines,
technologies and treatments that can help people lead longer, more
active and fulfilling lives. Consistent with this philosophy, we have
long supported improvements to the Medicare program to give
beneficiaries greater access to the high-quality preventive care that
can bring greater health and enrichment for the disabled and the
elderly.
The Medicare prescription drug discount card program is the first
step--an important interim step--toward that goal. The Healthcare
Leadership Council is involved in helping seniors to better understand
the discount cards and the application process, and we have also
undertaken research to fully comprehend what the discount cards will
mean to Medicare beneficiaries in terms of cost savings. As part of my
testimony, I will be very pleased to share the preliminary results of
that research with you today.
BACKGROUND
When Congress passed, and President Bush signed into law, the
Medicare Modernization Act of 2003, it represented a major advancement
on behalf of millions of older and disabled Americans. With this
legislation, Medicare is beginning to make a critical transformation
into a 21st century health care program that makes prescription drugs,
preventive care and diagnostic care more accessible to its
beneficiaries.
In 2006, Medicare will, for the first time, offer a prescription
drug benefit, a benefit that will substantially reduce beneficiaries'
out-of-pocket costs. Realizing, though, that it will take time to put
this benefit into effect, and that Medicare beneficiaries should begin
to reap savings immediately, Congress wisely created the discount drug
card program. This is an important interim step intended to give
beneficiaries assistance right now, lasting until the full prescription
drug benefit takes effect on January 1, 2006.
The structure of the discount card program enables participating
seniors to have the power of consumer choice and the fruits of
competition. With 73 vendors involved in the discount card program,
beneficiaries have the opportunity to select the card that gives them
the greatest savings on the specific prescription drugs they are using.
And with the card vendors able to see, on the Centers for Medicare and
Medicaid Services website, the discounted prices their competitors are
offering, we have an environment in which market competition can bring
lower prices and greater value to Medicare beneficiaries.
Seniors and disabled Americans are currently applying for their
drug discount cards. Some media attention has been focused on the
difficulties some seniors are having in negotiating the CMS website to
gather comparative data on cards and prices. We support Administrator
McClellan's efforts to correct problems on the site and to make it as
user-friendly as possible. It should be pointed out, though, that
individuals who are having difficulty with the CMS website or are
simply not comfortable with the Internet can and should call 1-800-
MEDICARE to receive personalized assistance with their discount drug
card inquiries. I note that CMS has recently added even more customer
service representatives to their 800 line, which should make it easier
for callers to get through.
As well, there are numerous public and private organizations, such
as State Health Insurance Assistance Programs, that are working with
seniors to provide guidance and to ensure that they are able to
register for the right discount card.
In fact, our own organization, the Healthcare Leadership Council,
is working with senior centers throughout the country to provide
information about the discount cards, and we're making a special effort
to reach those low-income seniors who qualify for the $600 annual
subsidy in addition to their drug discount cards.
THE LEWIN GROUP STUDY ON DISCOUNT CARD SAVINGS
How much money can Medicare beneficiaries save on their
prescriptions by using the drug discount cards? That is a question the
Healthcare Leadership Council is seeking to answer and, in so doing,
give seniors a comprehensive sense of how the discount cards can affect
their personal finances and their health care.
To answer this question, we have worked with The Lewin Group, a
nationally-respected economic analysis firm that specializes in health
and human services research and consulting. In structuring the Lewin
study, we wanted to make it as relevant as possible to the everyday
lives of the Medicare beneficiaries who will be using the discount
cards. So, our analysis is focused upon 150 of the drugs that are most
frequently used by senior citizens. We looked at the difference between
what a cash purchaser would pay for those drugs and what someone would
pay when using the Medicare discount card. We also took a look at the
impact of the drug card for beneficiaries with chronic health
conditions, using multiple medications. In this case, Lewin analyzed
the total cost for the drug regimen for beneficiaries using the
discount card and also for those using the discount card plus the $600
low-income credit.
Before I discuss what we have learned, thus far, from this study, I
would like to make a couple of prefacing remarks. First, I would note
that our retail price data is based on a national database of
prescription drug utilization data compiled by Verispan. Verispan is
considered one of the 12 months of price data, running through March of
this year, to establish the average retail price for a customer without
any insurance or discounts. I want to emphasize that, in conducting
this research, we have chosen to err on the conservative side. If
anything, this study underestimates, rather than overestimates, the
average savings for discount card users. Our estimates are for people
who do not currently benefit from an existing discount card or state
pharmaceutical assistance program.
Second, I want to stress that the results I am sharing with you
today are preliminary in nature. Our study is ongoing. And, in fact,
just as Dr. McClellan has noted publicly that the discount card prices
are moving downward as a result of price transparency and competition,
our finalized study, to be released next month, may show even greater
average savings than we are witnessing thus far.
With those points in mind, let me turn to the early findings of the
Lewin study. These findings, by the way, can be found on the Healthcare
Leadership Council website, www.hlc.org. Answering the question
regarding how much a beneficiary can save overall, we worked from the
premise that beneficiaries are likely to choose a discount card based
upon the best savings for the drugs they take today. Looking at the 150
most frequently used drugs, we are finding that the best available
prices on those drugs represent a weighted average savings of more than
20 percent in many states. (See attachment, Table 1)
Let's look at some specific examples. We're finding a weighted
average savings of 27 percent in Florida, 26 percent in Louisiana, 25
percent in Illinois, 23 percent in New York, 21 percent in California
and 19 percent in Michigan. We believe these estimates of savings are
representative and that many beneficiaries will receive savings of
similar magnitude.
In fact, it should also be pointed out that we are seeing very
little in the way of geographic disparities in the discounted prices.
The best price offered for a single drug rarely varies across markets.
For example, the lowest available price for a best-selling brand name
hypertension drug varies by less than one dollar across 20 zip codes
and was offered by the same card sponsor in 18 of the 20 zip codes.
This is a very positive finding. We're seeing that, regardless of the
state or region in which a beneficiary lives, they will still receive
the best price available nationally from the discount drug cards. (See
attachment, Figure 1)
We have found, as well, that the savings are considerable for
beneficiaries who have chronic disease conditions and are utilizing
multiple drugs. Those savings are then significantly increased in cases
in which the beneficiary is also using the $600 low-income credit for
prescription purchases.
Again, allow me to provide some examples from our findings. A
senior citizen taking the most frequently used combination of drugs for
hypertension--a calcium blocker, an ACE inhibitor and thiazides--would
pay an average retail price of $956.78 over the course of a year. With
the drug card, that beneficiary will save $243.50, a savings of 25
percent. Add in the low-income credit, and the total savings increases
to $843.50, or 88 percent off of the retail price.
In another hypothetical example, a beneficiary taking the most
common combination of drugs for diabetes would spend $3,099.23 during
the year if paying retail prices. With the discount card that provides
the best price on those drugs, that person will save $753.59--a 24
percent savings. With the low income credit included, the savings
increase to $1,353.59, a 44 percent total discount from the retail
price. Savings for each of the drug regimens identified in our study
were estimated by collecting prices for the specific prescribed drugs
using a single card at a single pharmacy. (See attachment, Table 3)
On the subject of low-income seniors, there is another fact that
needs to be discussed that doesn't receive the visibility that it
should. Several of the major pharmaceutical companies have already
announced that they will make drugs available at minimal or no cost to
those beneficiaries who exhaust their $600 transitional assistance
before the year is out. That is in addition to the many company-
sponsored patient assistance programs that are already providing
medicines at no cost to people of limited means.
As I mentioned earlier, Mr. Chairman, this study is a work in
progress. We are going to continue to monitor and analyze the prices
that are available on the CMS website with the intent of producing a
final report next month that gives a complete, accurate and
comprehensive view of the savings Medicare beneficiaries can experience
by using the Medicare drug discount cards.
And, in the meantime, the Healthcare Leadership Council will be
continuing its efforts, working with seniors throughout the country to
provide information and assistance so that all of those who can benefit
from this program are able to do so.
We believe strongly that the Medicare drug discount card program is
an important interim step, prior to the implementation of the
prescription drug benefit in 2006. We believe, as well, that private
organizations like ours and public institutions and officials should be
working together to educate seniors on this interim assistance, to urge
them to contact CMS for comparative information on the discount cards,
and to encourage them to apply for a financial benefit that can bring
considerable relief to those who need it the most. Thank you for your
leadership on this issue, and we look forward to working with you to
continue to improve America's Medicare program.
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Mr. Bilirakis. Thank you very much, Ms. Grealy.
Mr. Hayes.
STATEMENT OF ROBERT M. HAYES
Mr. Hayes. Thank you, Mr. Chairman, and committee members.
Joining me this afternoon is Gene Smith. Ms. Smith is a retired
school teacher from Charlottesville, Virginia and she works
throughout the Commonwealth of Virginia on behalf of people
with Medicare who have been struggling to find ways to pay for
their prescription drugs. Ms. Smith is a member of the Medical
Rights Center Consumer Action Board and she, among others,
filters information into our policy work.
I'd like Ms. Smith to just explain briefly some of her
efforts on behalf of folks in Virginia in recent days.
Mr. Bilirakis. Within your 5 minutes' period, Ms. Smith can
do so. Go ahead, please proceed.
Ms. Smith. Thank you. I'm an unpaid volunteer and I'm
trying to help a neighbor who is a retired broadcaster. He has
severe arthritis, hemochromatosis and other health problems and
I tried to help him by calling 1-800-MEDICARE because he has
hundreds of dollars in prescription drug costs and he's in
severe pain without those drugs.
So I called 1-800-MEDICARE and after a few attempts on a
day that was recommended to me, I got through to a human voice.
Unfortunately, the voice, the woman said that she could not
help me because not only did I not know his monthly gross
income, but I did not know his total financial assets and I
needed to know his total financial assets with exception of a
car, home and burial plot.
Mr. Bilirakis. You know that the asset test does not apply.
Go ahead.
Ms. Smith. That's what she told.
Mr. Bilirakis. That's what she told you. Yes, I understand.
Ms. Smith. So she said she couldn't help me. This week,
early this week I went to a statewide video conference for
training which was sponsored by the Department of Health in
Virginia and the people who were training were members of CMS.
We had the PDAP internet program and we had another slide
presentation program and afterwards people who were there,
social service people, substance abuse people, community health
people asked questions and they couldn't get answers. The
answers were always ``we don't know, we will get back to you,
just fill out the form and ask your question.'' So I left very
frustrated and couldn't help my friend and I can't help anybody
in my community because I can't get the answers.
Mr. Hayes. Let me say that we at the Medical Rights Center
have been feeding this information into the folks at CMS. Dr.
McClellan mentioned this morning that he was getting that and
we have found receptivity, whether or not any human enterprise
will be able to untangle these problems in the foreseeable
future remains something for the committee to oversee.
Mr. Chairman, let me just take a couple of minutes to give
some perspective from the trenches, in a sense, that we work
in. We are as was discussed this morning, folks who are in the
arena with people with Medicare. We've got a lot of blood, a
lot of sweat and a lot of tears these days in our office. We
are striving mightily to try to help people work through the
opportunities or the challenges that this discount program is
presenting.
No. 1, Mr. Chairman, it's no exaggeration to say that the
men and women who turn to us for help are indeed in a state of
high anxiety. They're confused. They're angry. They're
perplexed.
No. 2, and I don't think this needs to be seen as a
partisan critique, it is no exaggeration to say that people
with Medicare, most people with Medicare will receive little,
if any benefit, from the discount cards.
But No. 3, there's also no exaggeration to say that some
people, largely those without any drug coverage and unaware of
existing discounts will be able to afford some medicine thanks
to the Medicare discount card. And let me underscore, that is
too important a point to lose. Because we do come today, Mr.
Chairman, as critics of what is, in many ways, a tragically
wasteful program, yet people will have better health, better
access to medication by enrolling into this discount card and
we consider it our responsibility day in and day out to help
people enroll in the program and further to push the
administration to make enrollment as feasible as possible.
So how can that be done? First, websites, voice automated
phone systems will not be more than a small piece of the
solution. Two well known facts: one in five people with
Medicare has internet access. Sixty-two percent of people with
Medicare, according to a recent poll, were unaware that there
is a discount card out there. The angry, confused people are
really a minority. The silent majority are unaware of the
program.
We think the most way to assist people access, what is
indeed, we all agree the most useful part of the benefit, the
Transitional Assistance benefit, is to require automatic
enrollment of anyone who can establish eligibility through some
existing program, principally the Medicare Savings Programs,
Medicare Buy-In programs.
Now we've heard from folks in the administration that this
kind of auto-enrollment would undermine the voluntary nature of
the drug benefit. Come on. Neither the White House, nor the
Internal Revenue Service requires Americans to jump through
hoops two summers ago to receive tax refunds. They were just
mailed. People with Medicare, eligible for the $600
Transitional Assistance should be treated similarly.
I was happy to hear this morning, Mr. Ferguson of New
Jersey, talk with praise about the auto-enrollment of people
from his State who are enrolled in a State pharmaceutical
assistance program. I think this is one area where people can
come together from both sides of the aisle to help both access
the Transitional Assistance which across the board we agree is
a good thing.
[The prepared statement of Robert M. Hayes follows:]
Prepared Statement of Robert M. Hayes, President, Medicare Rights
Center
Good afternoon, Mr. Chairman, Committee members. My name is Robert
M. Hayes, and I am the President of the Medicare Rights Center. Joining
me is Ms. Gene Smith, a retired school teacher from Charlottesville,
Virginia. Mrs. Smith works throughout the Commonwealth of Virginia on
behalf of people with Medicare struggling to find a way to pay for the
medicines their doctors prescribe. She is a member of our Consumer
Action Board, and filters her day to day experiences into MRC's policy
work.
Without doubt, the greatest and gravest unmet need of older and
disabled Americans is the unavailability of affordable prescription
medicine. From the trenches in which we work, Mr. Chairman, the
unaffordability of prescription medicine is a national emergency. It is
within that reality that we approach the Medicare discount card
program, and it is the faces of men and women who cannot afford needed
medicine that we bring to you.
The Medicare Rights Center
The Medicare Rights Center (``MRC'') is the largest independent
source of Medicare information and assistance in the United States.
Founded in 1989, MRC helps older adults and people with disabilities
get good affordable health care. Day in and day out we work to assist
people with Medicare access needed health care. Tens of thousands of
callers use our help-lines annually, and we reach out to assist people
with Medicare enroll in programs that can assist them.
The Medicare Rights Center is a not-for-profit consumer service
organization, with offices in New York, Washington and Baltimore. It is
supported by foundation grants, individual donations and contracts with
both the public and private sectors. We are consumer driven and
independent. We are not supported by the pharmaceutical industry, drug
companies, insurance companies or any other special interest group.
Through national and state telephone hotlines, casework and both
professional and public education programs, MRC provides direct
assistance to people with Medicare from coast to coast. By way of
example, MRC currently is providing, in partnership with the American
Society on Aging, a series of web-based tele-trainings on the Medicare
discount cards to social workers and other professionals across the
country. You can access that training at www.asaging.org/medicare.
We are also bringing to counselors and consumers across the country
Medicare Interactive, a web-based counseling tool that assists people
with Medicare access the health care they need. Invitation: every
Congressional district office that requests it will be provided a
password to access Medicare Interactive to assist constituents with
Medicare problems or questions.
MRC also gathers data on the health care needs of the elderly and
disabled Americans that we serve. We share that data with researchers,
policy makers and the media. Just one of MRC's services, its New York
State Health Insurance Assistance Program (SHIP), offers counseling
support to one out of every 14 Medicare recipients in the nation. Each
year, the Medicare Rights Center receives some 70,000 calls for
assistance from people with Medicare. By far, the greatest numbers of
callers are seeking help in finding ways to pay for medicines that
their doctors have prescribed.
For many, many years this Committee, this Congress, our nation have
been numbed by the overwhelming data that has documented the human
hardship, the needless pain, the lost lives caused by the
unaffordability of prescription medicine. I cannot shake from my memory
the elderly woman who tearfully told me that she lies to her husband
whenever her doctor gives her a prescription. If she told him about the
prescription, she said, her husband would insist that she fill it. She
wants him to keep taking his heart medicine, and she knows they could
not afford another prescription. That is an obscenity in America in the
21st Century, and I know that is why we are here today.
Ms. Smith faces these painful images routinely in her work in
Virginia.
The most typical problem she reports is the question: ``How can I
afford my prescription drugs?'' Heartened by the news that Medicare
would be covering prescription drugs, many people turn to Ms. Smith for
advice. As she puts it, ``I have kept my ears to the ground to stay
informed so that I could be of help to others.''
Like many other people of good will, Ms. Smith had done all she
could to learn more about the Medicare-approved drug discount cards. At
a meeting earlier this week sponsored by the Virginia Department of
Health, representatives of the Centers for Medicaid and Medicare
Services came to train counselors on the new cards. Ms. Smith can
report to you her own feelings: she left the meeting feeling confused,
frustrated and angry--the experts were unable to answer many questions
that Ms. Smith and her colleagues raised. The CMS representatives asked
the counselors to write down questions, saying they would get back with
answers.
Ms. Smith asks the obvious: How can she explain this to one of her
neighbors who holds out hope that she can help him at last secure
affordable drugs. He is a retired broadcaster, has no drug coverage and
suffers from severe arthritis. His medications cost hundreds of dollars
a month but without them he would live in constant pain. Here's what
Ms. Smith reported to me:
``To try and help him find a Medicare-approved drug discount card,
I called 1-800-MEDICARE. After a number of attempts--including on a day
that the recording recommended I call--I finally got through. It was a
shock to hear the representative say she could not help me, because I
did not know my neighbor's monthly income or have any information about
his assets. I explained the one thing I did know was that he was not
eligible for a card that came with low-income assistance, so I could
not understand why this information was necessary. Additionally, I
didn't feel comfortable asking my neighbor about this. The customer
representative said that there was absolutely nothing she could do to
help me until I had all of his financial information. She suggested I
get the information and call again. Despite my efforts to arm myself
with information about the cards at a CMS training program and my
attempts to get help from 1-800-MEDICARE, I now feel even more
frustrated and less equipped to assist people with Medicare who knock
on my door because they need help to pay for their prescription
drugs.''
I will take just a couple minutes to outline what consumers are
experiencing in the wake of the Medicare discount card roll out.
One, it is no exaggeration to say that the men and women who turn
to us for help are in a state of high anxiety, feeling both confused
and angry.
Two, it is no exaggeration to say that most people with Medicare
will receive little if any benefit from the Medicare discount card
program.
Three, it is no exaggeration to say that some people--largely those
without any drug coverage and unaware of existing discounts--will be
able to afford some medicine thanks to the Medicare discount program.
This is far too important a point to lose.
We are indeed critics of this tragically wasteful program. Yet some
people will have improved health and a better life if they enroll in
the discount program, especially transitional assistance. We consider
it our responsibility to help enroll these people, and to push this
Administration into making enrollment of them as feasible as possible.
How can that be done?
First, recognize that web sites and voice automated phone systems
are--even if they worked--a sliver of a solution. Two well known
points: one in five people with Medicare currently have internet
access. More basic: the most recent Kaiser Family Foundation poll
showed that 62 percent of older Americans did not even know that
Medicare discount drug cards would be available. This indeed is the
silent majority--the angry, confused people are among the best
informed.
The most useful step to assist people access the $1200 transitional
benefit--as it is now designed--is to require automatic enrollment of
anyone who has established eligibility through some existing program,
principally the Medicare Savings or Medicare buy-in programs. We have
heard from some in the Administration that auto-enrollment would
undermine the voluntary nature of the drug benefit. Come on. Neither
the White House nor the Administration forced Americans to jump through
hoops to claim their tax refunds two summers ago. It was just mailed to
you. People with Medicare eligible for the $600 transitional assistance
should be treated similarly.
I won't speak about the difficulties of the CMS web site or the
800-MEDICARE phone line now; we have provided CMS with a good deal of
feedback since late last month. We recognize that CMS is trying, but it
is also true that not just consumers, but CMS as well, has been dealt a
cruel hand by the structure of the discount card program. At the end of
the day, a reasonably informed choice for most people with Medicare
will be impossible. Congress should not allow the spending of millions
of tax dollars in futile attempts to explain nuanced choices involving
scores of plans offering hundreds of medical products and services.
Rather than providing multiple choices with scant benefits, provide a
few well vetted options that provide meaningful benefit. The structure
of the discount program, and we expect the 2006 benefit as currently
designed, does not work and no magic by a CMS webmaster can change
that.
Scores of choices of discount cards allow no real choice. The chaos
and pain of this crazed market should send a plain lesson to the next
Congress on one three-word remedy for the 2006 drug benefit: simplify,
simplify, simplify.
And at the end of the day, the obligation to drive the prices of
prescription drugs down remains the great lost opportunity of the 2003
Medicare legislation. The sound and fury of the discount cards, and of
the 2006 benefit, cannot obscure that.
The discount cards will do some people some important good, but the
discount cards are leaving the overwhelming majority of people with
Medicare without help and angry. Look ahead, use the government's
market power to drive down drug prices for all Americans, and then
create a benefit with three words in mind: simplify, simplify,
simplify.
Mr. Bilirakis. Thank you, Mr. Hayes. If only we would stop
sniping at each other and almost expressing hate at times
toward one another we could probably accomplish a heck of a lot
more than we do, but unfortunately that's the nature of the
beast, I guess. The Founders, I suppose, I hate to keep saying
it, the Founders, I suppose, intended it this way. I'd like to
think they did not intend it to be with the animosity that we
now have.
Mr. Stupak. Will the chairman yield on that point?
Mr. Bilirakis. I don't have time, but go ahead.
Mr. Stupak. We don't mean to snipe, we just want to be
included in the discussions and help draft the legislation. We
were totally excluded and never even offered a chance to offer
an amendment. You're sort of excluding us. We don't mean to
snipe. We just want to be part of the process. We represent 49
percent of the country.
Mr. Bilirakis. Mr. Baumhofer, Mr. Walden from your State
and Mr. Wu from your State both wanted to be here to introduce
you and I guess because of the delays in the votes that we had
and what not, we got all mixed up. If they walk in, we'll give
them an opportunity to say a thing or two.
In the meantime, please proceed.
STATEMENT OF STAN BAUMHOFER
Mr. Baumhofer. As you've mentioned to the committee, my
name is Stan Baumhofer. I live in Portland, Oregon where I've
lived for the last 55 years. I feel a little unique here today
because I may be one of the few or maybe the only one in the
room that's going to benefit from this program, a real user of
the discount card.
You may wonder why did a retiree, 75 years old, come all
the way across the country here to appear before you. The
reason is very simple. I came here to thank you for helping
save my life. My written testimony explains that I have a
friendship in our local Toastmasters Club and his wife is a
volunteer that helps senior citizens. She encouraged me to pay
attention to the mailings I was getting from Social Security
and to inquire about the discount card. She even made some
estimates and said it looks like you should really inquire,
Stan.
Well, I called the 800 number and in less than 10 minutes I
was talking to a very pleasant, knowledgeable lady. She to my
surprise, calculated the benefits to the medications that I am
using. She clarified my eligibility. And the most surprising
thing to me was that she made comparisons with five drug stores
that are within walking distance of my apartment. It was local
information, two of which I had been buying drugs from already.
You can also see from my written testimony that I live only
on my Social Security. This amounts to just a little over
$16,000 a year. My daily medications cost over $400 a month.
And with the use of this card I will be reducing that cost by
$150, a little over 35 percent of my medication costs. Now my
health story is also quite simple. I have enjoyed good health
all of my life until a year ago. I required a stent implant for
a clogged artery. My cardiologist prescribed five medications
that I take daily to cover the body's reaction to this stent
and to keep my blood flowing properly. So naturally, when I
heard of this Medicare discount card program, I was one of the,
maybe one of the 400,000 that the Doctor alluded to this
morning that called.
Now not only will it help me, but it's going to help many
people who are applying for this discount card. I live in an
apartment building of over 250 senior citizens and many of them
are low income and will benefit from the $600 credit which I
will not be eligible for. I also volunteer about 20 hours a
week at a hospital and meet many people in the predicament of
having prescriptions prescribed for them and they're unable to
pay for them.
Well, I'm here to testify that Congress did a very, very
good thing for senior citizens and I congratulate you.
My last point, I think, would be to try to dismiss a couple
of comments that had been made earlier concerning the negative
side of this program. Now it is completely untrue in my
experience and from others that I've talked to that it's
difficult to get through or to get a calculation made. And when
there's a savings to me of over a third of my drug costs,
that's a Godsend to me. You referred that it may not be a
panacea this morning, but to me, it certainly is close to that.
And the matter of choices. Shopping is recreation for
senior citizens. It has to be, not only for recreation, but for
survival in many cases. So we enjoy the fact that there are
recreations and it gives us a chance to do some shopping. So
Mr. Chairman, you and your colleagues have done a great service
to seniors and I for one am here to say thank you in helping me
to avoid ever having to take this nitroglycerin that I carry
with me constantly. Thank you.
[The prepared statement of Stan Baumhofer follows:]
Prepared Statement of Stan Baumhofer
Mr. Chairman and members of the committee, my name is Stan
Baumhofer. I live in Portland, Oregon, and I appreciate you making the
time for me to say a few words this morning about the new Medicare
discount drug cards.
I should probably begin by telling you what brings me here to tell
my story. I'm involved in the Toastmasters organization in Portland,
and I got to know someone in my local chapter who is involved in
helping senior citizens understand how these discount drug cards work
and how to apply for them.
Well, I'm a senior citizen, 75 years young. I live in subsidized
housing in Portland and make do on my fixed Social Security income of
$16,000 per year. I was eager to pick her brain and find out if this
discount card program could make a difference in my life.
To cut right to the chase, this card is going to mean a lot to me
in terms of helping pay for my prescriptions. So, I volunteered to come
to Washington and tell my story in the hope that other seniors on
Medicare will hear what I have to say and go take advantage of this
program themselves.
My story is this. I received a stent implant last June to alleviate
a clogged artery. In order to offset my body's reaction to the stent,
and to keep my blood flowing, my cardiologist has me on four
prescription medications. Once each day, I take 20 milligrams of
Lipitor, 30 milligrams of Lisinipril, 75 milligrams of Plavix and 50
milligrams of Toprol. So, naturally, when I heard about this Medicare
discount program, I was ready to be one of the first in line to see if
it would work for me.
I called the Medicare 800 number, 1-800-MEDICARE, and I had the
pleasure of speaking with someone on the other end of the line who was
very pleasant, very knowledgeable and very helpful. She took down the
information about where I live and what types of prescription drugs I'm
taking. I could hear her punching the information into her computer as
we talked. Not long after I finished giving her my information, she
told me which discount card would work best for me and how much money I
would be able to save on my prescriptions.
Well, let me tell you, for someone who has lived a frugal life and
who does not have much in the way of excess funds, this came as very
welcome news.
The drugs that have been costing me $403.31 each month will now
cost $250.60. monthly. That's a more than 30 percent decrease in my
monthly medicine bill. My savings will add up to over $1,750 for the
year. Maybe, to some people, that amount of money doesn't seem like a
lot, but it means a lot to me and also to many of my friends in
Portland who are also on fixed incomes and also finding out that these
cards are going to save them money at the pharmacy counter.
Let me make another point, Mr. Chairman. A number of people I know
are not only going to apply for the discount drug card, but they also
qualify for the $600 credit for low-income seniors. With the discount
card and that $600, they are going to be able to buy their medicines
without having to make difficult sacrifices in other parts of their
lives. Congress did the right thing in passing this law, and you should
all be proud of how you've helped people.
I want to say one last thing before I finish. You know, I read the
newspapers and I see some people picking this discount card program to
pieces. They say it's too complicated, or that it doesn't offer enough
help. I have to shake my head at these criticisms, because my
experience, and the experiences of people I know, is completely
different. It's easy to get information over the Medicare 800 number.
With the discount card, I'm going to be paying less for my
prescriptions in June than I am today--quite a bit less, for that
matter. So, all I can say is, what's not to like?
Mr. Chairman, you and your colleagues did a good thing for seniors
in passing this law, and this is one senior who is pleased to be here
to say thank you.
Mr. Bilirakis. Thank you very much. First, let me commend
Ms. Smith, Mr. Baumhofer and the volunteer that Mr. Hayes or
somebody referred to earlier and all the volunteers out there
who take time. Mr. Baumhofer, you're not exactly in the best of
shape and yet here you are donating 20 hours of your week
volunteering to help others and I think that's just a terrific
thing. We probably would have more of that were it not for the
fact that we've all gotten accustomed to sort of looking to
government or to others for what we need.
The bait and switch, Mr. Pollack. You have heard me refer
to that a couple of times before you even testified. I think we
all feel very strongly about that and hopefully we're going to
fulfill our obligation as far as following up on oversight and
what not to keep that sort of thing from happening. The Doctor
did refer to the fact that there are established rules and
established punishments and what not. He couldn't go into any
details regarding the workings of the entire process which
would include, of course, the bait and switch. So we feel very
strongly about it, about as much as you do.
Mr. Pollack. Mr. Chairman, I just want to say that there
are regulations concerning changes in prices. They're not
regulations about changing what drugs are subject to a
discount. So to the extent that you are--you're going to focus
on this issue, I would urge that you focus on both facets.
Mr. Bilirakis. Basically, what you've said, what others
have said, in terms of the discount card program being complex,
God knows it is. Is there confusion there? Certainly there is.
Now I referred to an article which we put into the record,
the Washington Post article dated August 1966, right after the
Medicare program was put into effect. And it talked about the
same things. It talked about the complexities. It talked about
the confusion. I said to Mr. Brown earlier that when my Dad,
God rest his soul, passed away in the mid-1980's and I tried to
help my mom with the paperwork and things of that nature, I
threw up my hands in disgust saying it was just too complex.
And I guess we gave it to a professional or whatever to try to
do whatever they could. So we're still talking about
complexities and maybe even confusions in the program.
But certainly and who knows, going back at that time what
the rhetoric was. There were Members of Congress who were
against it. I was not in Congress at the time, but I was very
supportive of the program. And if we had given up or if they
had given up at that time because there were so many nay sayers
out there and said it's confusing and it's complex and will
never work and that sort of thing. Mr. Buyer put it pretty darn
well, we certainly would not have Medicaid as we know it today
and we've all acknowledged the fact that it's a Godsend of a
program.
So there we are and something was done. Something was
accomplished. Is it perfect? Is it a panacea. Mr. Baumhofer
says it was in his eyes. I think it probably could have been
better. There are a lot of glitches. There are a lot of
mistakes. As time goes on, hopefully, we're going to be able to
improve upon those. But we had a group of people here who took
a lot of courage to basically say hey, it's time to quick
talking about and to try to do something about it.
The discount card program came in late in the game. It was
not part, as was stated earlier, part of the administration's
process. It came later in the game as a transitional kind of a
thing. Could it have been better? I suppose so.
But it is the law and I think what we are trying to do here
today is to help our constituents out there understand that it
does exist and it's going to be helpful to an awful lot of
people and we should be encouraged. I'm very pleased to hear
Mr. Pollack say and Mr. Hayes and others say and Mr. Brown said
it probably too, he said he was encouraging people to take
advantage of the card as many of them would be able to get some
advantage, good advantage out of it. So that's really where we
are. There are a series of questions here. I'm not going to go
into them in the interest of time. You all have been very
patient and waited for an awfully long time for your time, your
turn to come up.
Mr. Pollack. Mr. Chairman, when you recounted the history
going back to 1965 and 1966--
Mr. Bilirakis. I was not here then, but go ahead.
Mr. Pollack. You were in elementary school.
Mr. Bilirakis. Go ahead.
Mr. Pollack. One of the things that we've learned, I think
in examining the history of the Medicare program is that even
when changes get made, they get changed again and they get
modified and they get perfected. And I suggest to you we're
going to be doing that again with this legislation. I don't
believe----
Mr. Bilirakis. I think you're right.
Mr. Pollack. I don't think that this Congress, I don't
believe that ultimately whoever is in the White House, is going
to stand for the enormous costs of this program that are going
to be borne (a) by seniors and (b) by the taxpayers. And I
suggest that what happened earlier with the Medicare program,
with respect to in-patient care and out-patient care, where the
political price to pay in order to get those benefits included
was a lack of meaningful cost containment. That ultimately got
corrected. And I suggest to you that we're going to have to do
that with respect to prescription drugs and it's not going to
be through the palliative of a discount card. It's going to
have to be to take a look at what we have been able to achieve
in other contexts, like with Veterans, and try to do the same
thing, both for the benefit of seniors and for the benefit of
the taxpayer. And so I think it's important--
Mr. Bilirakis. You've made that clear, Mr. Pollack, and
told it very, very well.
Let's see who do we have over there? Mr. Brown, just in
time.
You're going to waive.
Ms. Smith. Mr. Chairman, Mr. Chairman. Could I just ask a
question? When I was speaking and telling you that the CMS said
total financial assets, you said that wasn't true.
Mr. Bilirakis. No, no, I didn't say that. What I said is
the asset test has nothing to do with the discount card, but
they are asking that question for other purposes. In other
words, there are State programs, you know, State programs that
exist that are available, depending on certain asset tests and
things of that nature. So they have reasons for asking that,
but not directly associated with the discount card.
Ms. Smith. It was supposed to be with that and then--
Mr. Bilirakis. That's why they're asking the question. Let
me go on here because my time has long expired.
Mr. Stupak.
Mr. Stupak. Thank you, Mr. Chairman. Ma'am, you said when
you were at the Virginia Training Center there were some
questions CMS didn't know the answers to?
Ms. Smith. Yes.
Mr. Stupak. Could you tell us what those questions were?
Ms. Smith. One was because people in rural areas are often
elderly, often illiterate and how can you have illiterate
access this program and then also how do people without
computers access this program? And then also the Social
Services people and the substance abuse people and the
community health clinic people and the rural health outreach
people are not getting any additional funding to help them when
they answer these questions. The only funding is going to the
Virginia insurance, what's called VICAP, Virginia Insurance
Counseling and Advocacy Program or SHIP. All these other people
will be helping others and this is just more or less like an
unfunded mandate to these professional people.
Mr. Stupak. Thank you. Mr. Pollack, we've had testimony
that there are 73 different cards out there right now being
offered under this program and I'm concerned that seniors
really aren't going to get the best discounts they otherwise
could have because of many cards being offered. As I understand
it, a manufacturer or pharmacy will give a greater discount to
a card sponsor, if the card sponsor can guarantee them a
greater volume of business. Do you think having fewer cards or
one card would have gotten Medicare beneficiaries just as good,
if not a greater, discount?
Mr. Pollack. I think that when you have the benefit of a
big pool of people, you obviously have far greater bargaining
power. That's why it would have been far better if Medicare
were doing this bargaining, rather than 73 different cards.
But you know you raised a very important issue here that I
just want to touch upon and that is the card sponsors are going
to be bargaining to try to get some kind of discount or rebate
and the regulations in no way say that those rebates need to be
passed on to the consumer. And that creates a potential for
conflict of interest because if the card sponsor is making a
significant portion of their money from those rebates and
they're holding on to those rebates, and under the regulations
they can retain and untold percentage of it, they're more
likely to place on their list of those drugs that are subject
to a discount the more expensive drugs for which they're going
to get a higher rebate.
Mr. Stupak. Sure.
Mr. Pollack. And so I think it creates an inherent conflict
of interest.
Mr. Stupak. Thank you. Ms. Grealy, you indicated a study
that's on-going right now and you hope to have the results next
month. I want to ask a couple of questions about the
methodology, if I can, in the report that you cited. Is it true
that the report compared drug card prices to a nominal retail
average price or the usual and customary price that's reported
by the pharmacies?
Ms. Grealy. I have the Lewin researcher here. I'll describe
it as best as I can.
Mr. Stupak. Sure.
Ms. Grealy. The firm that collects the data is called
Verispan and on a State by State basis, collected the prices
for the 150 drugs that we have listed there at the retail
pharmacy level.
Mr. Stupak. Right.
Ms. Grealy. So in other words, what a cash customer,
someone with no insurance coverage.
Mr. Stupak. No insurance. So you're going to base this
discount on the highest possible price that a non-insured
senior is going to pay?
Ms. Grealy. Retail, cash paying customers. Because you're
going to have a whole variety of prices if you're trying to
figure out the discounts that have been negotiated for those
seniors that have coverage.
Mr. Stupak. Sure, but don't you think the seniors should
get the largest possible discount and not compare it to that
cash and over-the-counter sale?
Ms. Grealy. Well, this goes to a point, I think that Ron
mentioned, the fact that not all Medicare beneficiaries in his
view are going to be helped by this. I look at it another way.
What we found as we were beginning this debate on Medicare
prescription drug coverage, that there are many seniors
probably around 70 percent that already have someone
negotiating lower prices on their behalf.
Mr. Stupak. Sure.
Ms. Grealy. And I think the challenge for Congress was to
try and develop coverage and discounts for those that don't
currently have the benefit of that coverage and someone
negotiating for them.
Mr. Stupak. And isn't it true, even the retail person who
is paying cash who has nothing behind him to back him up, no
insurance, won't they get 10 percent just by paying cash? Don't
they get 10 percent discount rate on cash?
Ms. Grealy. One, if shopping can probably do it. What I
think we see as an advantage here is you can go to the pharmacy
that you want to go to in your neighborhood. The card is doing
the shopping on your behalf and getting you a larger discount
than you can.
Craig might be able to address that a little better.
Mr. Stupak. Your study is really not factoring in things
about the 10 percent discount that they would pick up, what
other people paid based upon average wholesale price, a big
insurance company, the Federal Supply Schedule. You're not
taking those comparisons, right?
Ms. Grealy. To make it consistent, we were looking at those
seniors that have no coverage and are going in and paying cash
for their drugs. And we think also that it's a conservative
estimate as well, that the base that we're using--
Mr. Bilirakis. The gentleman's time has expired. Mr.
Shimkus, please.
Mr. Shimkus. Thank you, Mr. Chairman. The first two
questions, I'd like a yes or no answer. Starting with Mr.
Fuller, do you qualify for Medicare?
Mr. Fuller. No.
Mr. Shimkus. Mr. Pollack, do you personally qualify for
Medicare?
Mr. Pollack. I aspire for it, but not yet.
Mr. Shimkus. Okay, great. So that's a no.
Mr. Pollack. I think so.
Mr. Shimkus. Ms. Grealy?
Ms. Grealy. No.
Mr. Shimkus. Mr. Hayes?
Mr. Hayes. No sir.
Mr. Shimkus. Mr. Baumhofer?
Mr. Baumhofer. Yes sir.
Mr. Shimkus. Thank you. Ms. Smith?
Mr. Hayes. Ms. Smith?
Mr. Shimkus. No, I said you, members of the panel.
Second question. Who has tried on this panel, who has tried
to access the Medicare information for themselves.
Have you, Mr. Fuller, for yourself?
Mr. Fuller. No.
Mr. Shimkus. No, because you don't qualify for it.
Mr. Pollack?
Mr. Pollack. I think the answer is rhetorical.
Mr. Shimkus. That's probably correct. So I will take that
as a no?
Mr. Pollack. You may.
Mr. Shimkus. Ms. Grealy?
Ms. Grealy. Not for myself.
Mr. Shimkus. Great, thank you. Mr. Hayes?
Mr. Hayes. We help hundreds of people every day.
Mr. Shimkus. The question is for yourself, sir?
Mr. Hayes. I'm trying to be responsive and helpful, sir.
Mr. Shimkus. You'll be helpful by answering the question.
Mr. Hayes. I'm not going to answer that question.
Mr. Shimkus. You're not going to answer the question?
The question is one, do you qualify for Medicare. You
answered no.
The second question is have you tried to access the
Medicare prescription drug information for yourself and I asked
for a yes or no answer.
Have you tried to access it for yourself?
Mr. Bilirakis. Let's move on here. Mr. Hayes, I'm sure your
answer is no?
Mr. Hayes. Of course, it's no.
Mr. Shimkus. Thank you, thank you. Mr. Baumhofer?
Mr. Baumhofer. Yes sir.
Mr. Shimkus. So you're the only one on the panel who
qualifies for Medicare and tried to see if this is the benefit
to yourself?
Mr. Baumhofer. Evidently.
Mr. Shimkus. And your testimony is clear that you have
received a lot of benefit from it, is it not?
Mr. Baumhofer. Yes.
Mr. Shimkus. I think you testified $360 a month?
Mr. Baumhofer. It will save about $150 a month.
Mr. Shimkus. So over a year that's?
Mr. Baumhofer. $1,800.
Mr. Shimkus. And you think that's helpful?
Mr. Baumhofer. You bet it is.
Mr. Shimkus. Thank you, sir. You also do not fall into the
poverty categories of this benefit, is that correct?
Mr. Baumhofer. That's correct.
Mr. Shimkus. But you know people who do?
Mr. Baumhofer. Very many.
Mr. Shimkus. Are they receiving a benefit from this card?
Mr. Baumhofer. They will be.
Mr. Shimkus. Have you attempted to assist any of these
folks in knowledge of the opportunity to access these cards?
Mr. Baumhofer. Approximately half a dozen to date.
Mr. Shimkus. Have you had any problems in doing so?
Mr. Baumhofer. Not any insurmountable ones, no.
Mr. Shimkus. I appreciate that. This hearing is on whether
we agree with the public policy or not, the legislation has
been passed to offer a bridge, a prescription drug benefit card
until the full plan comes forward. And I just think it should
be noted that of the two panels, we have one Medicare
recipient, one person who's accessed the plan and one person
who has testified that they're receiving benefits.
I know there's also been talk about getting information
about and a lot of things are saying well, not now, it's one
out of five, who are accessing now. The best form of
advertising in this world is also the cheapest and that's word
of mouth. You do it for your barber, you do it for
hairdressers, best grocery stores, local pharmacists.
Mr. Baumhofer, have you told people about your benefit
other than the committee here?
Mr. Baumhofer. Very few. I'm fearful that I'd be deluged
with requests for help, frankly.
Mr. Shimkus. But since you have a positive benefit, that
would be a good story to have out there, would it not?
Mr. Baumhofer. Certainly.
Mr. Shimkus. Would it encourage more seniors to take a look
at what's offered by CMS and take--should we not as a country,
if we have a defined benefit, albeit not perfect, that we
should do all in our power to make sure that we fully provide
information for our seniors to have access to a program that
could be, I'll qualify it, could be helpful to them?
Mr. Baumhofer. Absolutely.
Mr. Shimkus. Mr. Baumhofer, I'm a little biased, I'll have
to admit, although David Wu and Mr. Walden is not here. My wife
is a graduate of Concordia, Portland, a Lutheran college,
university now, in downtown Portland and I visited it a couple
of times. We're glad to have you. Thank you for your testimony.
I yield back the balance of my time.
Mr. Bilirakis. The Chair thanks the gentleman. Mr. Brown to
inquire.
Mr. Brown. Thank you, Mr. Chairman. I apologize for having
to leave and I've looked at your testimony. I have come comment
on Mr. Baumhofer's testimony and I'm glad to see the discount
card is I guess you--your testimony you mentioned RX Plus and
you get your drugs now, you're taking four drugs and according
to your testimony you were originally paying $403.31 each
month. Now you'll pay $250.60, correct?
Mr. Baumhofer. That's correct.
Mr. Brown. That's good. That's obviously great for you, but
if you could qualify for VA or more to the point if Congress
would have passed something that you would not have had to go
through all this bureaucracy and you simply would have had one
Medicare card and it would be equivalent to the VA negotiated
price, something we've been talking about here, you would be
paying $188 per month for your drugs, for those four drugs.
So I guess I'm not asking a question, I'm just pointing out
that as I said earlier today, we have this choice of seniors
have in my state, 50 some cards to choose from, 73 overall,
around the country. But this drug may take care of Lipitor,
this one may take care of Fosamax and this one might be 12
percent this week, but only 10 percent next, instead of one
card with a negotiated price where we really could save 40, 50,
60, 70 percent, similar to what the Canadians pay or similar in
our own country to what the VA has negotiated.
Mr. Pollack, I would like to hear your comments about,
would you speak to the types of discounts seniors can get or
negotiate outside of Medicare today? You had said in your
testimony that the discount cards are not significant compared
to prices that seniors may be getting in the market already,
not that the cards are all bad, by a long shot, but we could
have done so much better. Tell us, sort of the lay of the land
now that prior to these cards before these cards go into
effect, what kind of discounts can people get, AAA senior
discounts, other non-Medicare approved card discounts?
Mr. Pollack. Well, as you know, Congressman Brown, there
are a host of different discount cards that were in effect
prior to this program going into effect. Some of the drug
manufacturers were offering discount cards. AARP was offering
discount cards. Some of the retail companies were offering
discount cards. And when you take a look at the CMS website,
some of them are below, some of them are above. But when you
take a look at what you could have gotten prior to this time,
in the commercial world, it's not a significant savings at all,
but I think the more important point is the point that you were
making a moment ago.
In my testimony, I showed for each of the top drugs, in six
Districts, including yours, what the savings would have been
for each of the drugs had we done what you had suggested,
namely, had a single discount system where Medicare did the
bargaining, the savings would have been extraordinarily
different. And that's what we should have tried to do.
Mr. Brown. Ms. Grealy, who funds the Healthcare Leadership
Council?
Ms. Grealy. We're a dues based organization with very
diverse membership, as I mentioned. We do have pharmaceutical
manufacturers as part of our membership, along with hospitals,
medical device manufacturers, health plans, hospital----
Mr. Brown. Insurance companies too?
Ms. Grealy. Insurance companies.
Mr. Brown. What percent of your dues come from insurance
companies and drug makers?
Ms. Grealy. All together totaled, 27 percent.
Mr. Brown. It just seems, and I appreciate Mr. Baumhofer
for coming in. It just seems to me the only senior sitting here
other than Ms. Smith who is not allowed to answer, I guess, Mr.
Bilirakis, the chairman was very good about it. Mr. Shimkus did
not seem to want to hear from her on a question earlier as one
of the seniors. But the only senior here comes from the
Healthcare Leadership Council which sort of makes sense on this
piece of legislation when you consider that this legislation
was written for the drug companies, the insurance companies
with seniors coming in a distant third and I guess I should
expect the make up of the panel to be somewhat similar to that.
Ms. Grealy. Well, Congressman Brown, we have many members
that are very interested in keeping drug prices as low as
possible.
Mr. Brown. That must cause a conflict in your group, huh?
Ms. Grealy. They're all very interested in making the
marketplace work and if that is the better way to drive down
prices, we're already beginning to see that with the new
transparency.
Mr. Brown. We're beginning to see it?
Ms. Grealy. Rather than----
Mr. Brown. You know, Ms. Grealy, we're beginning to see
drug prices, we're beginning to see prices come down. I've
heard this all--I'm sorry, I stepped out for an hour, but I've
heard this all morning from the Director of CMS and now to this
panel that drug prices are coming down. Drug costs in this
country have gone up 17 percent a year in the last 6 years.
We're going to give a discount at 12 percent and then we're
going to dislocate our arms by patting ourselves on the back
and saying boy, we're bringing drug prices down because of
competition.
If we want to bring drug prices down, forget all these
cards, forget this bureaucracy that my friends want to set up,
get a discount on behalf of 39 million Medicare beneficiaries
and do it like every other country in the world that knows how
to bring prices down so seniors don't have to choose between
their food and their medicine or in my part of the country,
their heat and their medicine. It just doesn't make sense.
Mr. Chairman, thank you.
Mr. Shimkus [presiding]. I suppose, Mr. Brown, if you
wanted America to have socialized medicine, then it would make
sense. At this point I yield to the chairman of the full
committee, Mr. Barton, you're recognized for 5 minutes.
Chairman Barton. Thank you, Mr. Chairman. I want to welcome
this panel. I'm sorry I wasn't here to hear your testimony but
I have scanned it in its written format.
In the interest of full disclosure, I'm for the
prescription drug benefit. I was one of the group that offered
the prescription drug discount card as an alternative to the
full-blown insurance program. I was one of the more adamant
ones that if we're going to have a prescription drug benefit,
some of that benefit ought to be available this year, not 2 or
3 years from now. So I make no apologies that we have it in the
program and that we're offering it to seniors now.
My good friend from Ohio, Mr. Brown, is opposed to the
benefit program and he's got every right to do that and have an
alternative and that's what democracy is all about, but before
I ask my questions, I want the world to know that I'm for this
program.
Now when we were preparing for this hearing, we got
witnesses that the Majority wanted and we got some witnesses
that the Minority wanted, so we should have a diverse panel in
terms of pros or cons. So my first question is a general
question, do any of this panel believe that this voluntary
program is going to be harmful to seniors?
Mr. Baumhofer. I would speak to that. In no way, do I see
it harmful at all. In fact, if I might speak to our third place
role here as alluded to, being in the race is better than not
at all.
Chairman Barton. It's a voluntary program and I think you
can argue plausibly that it might be neutral and obviously a
senior is not going to be forced to participate in the
prescription drug discount benefit card, but I see no way it
can be harmful. Are we all in agreement on that, at best, at
worst, it's neutral, that no way is it harmful?
Mr. Pollack. Mr. Chairman, I certainly don't think this is
a harmful program. Quite the contrary and in terms of low
income people, I want them to get the $600 in Transitional
Assistance. I do say it's a very disappointing program and it's
much ado about very little, but it's not a harmful thing.
Mr. Fuller. Mr. Chairman? If I may, I would add that it's
not only not harmful, it is very beneficial to those seniors
who have the greatest need. As has been pointed out 42 million
seniors are eligible for Medicare; 15 million lack any coverage
whatsoever and they pay cash. They pay the highest prices
today. That's why the comparisons are done against cash prices.
Not only is there great benefit in terms of price, there's also
for the first time for many of these people a real opportunity
to have the medications they're taking reviewed by a pharmacist
because they're going to be captured in the system. There is
enormous benefit. There's also enormous benefit to all of us
and I think I'm the only up here who's offering or involved in
offering as a sponsor of a card. It's enormous benefit to us as
we prepare to understand how to better serve the entire
Medicare population as we move toward 2006.
Chairman Barton. Well, Mr. Fuller, you represent the retail
pharmacies, I think, is that correct?
Mr. Fuller. Correct.
Chairman Barton. What's been the general reaction of your
constituency, your association, the pharmacists, the corner
drug store, literally. Do they tend to think this is something
they are ecstatic over or they think it's a good idea, it's got
some flaws or they just not rather be bothered with it or----
Mr. Fuller. That's an excellent question. Let me answer it
in a few ways. First of all, I also indicated at the outset
that I'm here because the National Association of Chain Drug
Stores, along with Express Scripps formed the Pharmacy Care
Alliance and we actively went into the marketplace, sought and
won Medicare endorsement for our card program.
We have now over 43,000 individual pharmacies in our
network. I fully expect in June when the program is up and
live, we're still adding more to have 50,000. Fifty thousand
individual pharmacies participating in the network. By the way,
my membership is comprised of 35,000 individual pharmacies.
Obviously, we not only have chain pharmacies, we have
independent pharmacies participating as well.
Chairman Barton. Now we've documented in the first panel,
with Dr. McClellan, like any large program that's getting
started, there's some glitches, inability to get through on
these hotlines and the webpages and the usual misinformation
because it's a new program. Would it be fair to say that as the
program matures that those are going to work their way through
the system and that in a reasonable future, we're going to have
a program that seniors can access and make intelligent
decisions on.
Mr. Fuller. First, I want to publicly indicate that Dr.
McClellan and his staff have been extraordinarily good to work
with. We have had issues as one would expect in something like
this. They are worked on and resolved quickly. Hundreds and
hundreds of questions have been dealt with. We have our own
call center for the Pharmacy Care Alliance. The response times
were less than 5 seconds. Initially, I think today if you call
1-800-PCA1075, I think you'll get a response in well under 15
seconds. In fact, if Ms. Smith has time available, one of my
colleagues here is a pharmacist. In 15 minutes, I think we can
walk through, if she has medication information available, walk
through and get an answer to the kinds of questions she has.
All of this is improving. The prices have come into, I
think conformity on our site and their site as well as other
sponsors. I can't speak for them, but I think all of those
kinds of issues are beginning to get resolved. One of the
reasons that our call times are about 6 minutes when we talk
with a senior on the phone which is much less than we
anticipated, I am convinced is because people are getting
through to the Medicare site. They are reading the materials in
the stores. They are reading the materials that's been mailed
to them. They are seeing the television advertising. So they're
coming as a better informed consumer.
I honestly do not think any of you should beat yourself up
about the law that was passed last year. We're working with the
law. We'll be happy to discuss policy alternatives as we go
forward, but the law today is one that is going to bring a real
benefit to seniors and they're coming to us better and better
informed as we go forward and we think, you ask how the stores
are doing. We're seeing a steady climb in the number of
applications that we are receiving day after day after day.
We're only into the second week. We actually think this will
simply keep rising into June when the actual benefits are being
received in the store.
Chairman Barton. My time is expired. I would encourage all
of these panelists as the program actually begins if you were
to let problems, opportunities for corrections, anything at all
about how to improve the administration of the program and if
you think there's some technical things that need to be done to
change the law to make it an improvement in terms of just
applicability, we would be happy to receive those comments from
you?
Mr. Pollack. Mr. Chairman, may I just take that invitation
and just second something that was said earlier. I don't know
whether you were in the hearing room at the time and that
pertains to this low income population. Mr. Hayes testified to
something that I think is extraordinarily important and it's
something I would hope can be done on a bipartisan basis and
that is that the very poor who we think could get help through
this thing, there are a whole bunch of poor folks who have been
getting the benefit of a variety of Medicare/Medicaid
subsidization programs. We call them the Qualified Medicare
Beneficiary, QMB, SLMB. All of those people by virtue of their
being eligible for those programs are below the income levels
of 135 percent of poverty.
I think it would behoove us to say anybody who has gone
through that process and has been certified for low income
assistance should automatically be enrolled in terms of getting
this Transitional Assistance. This is something I know Mr.
McClellan is taking under consideration.
I would urge on a bipartisan basis do that. If we want to
make this program work as best as possible, putting aside the
differences that we may have about bigger policies, that's
something that can be done. You can do it on the suspension
calendar and do it real quickly and you will enroll many, many
more people than you will if we fail to do----
Chairman Barton. We'll take everything under advisement. I
reserve the right to look at the details and all that, but we
certainly want to encourage constructive participation and
implementation of the program.
I yield back. Thank each of you.
Mr. Shimkus. Mr. Engel, you're recognized for 5 minutes.
Mr. Engel. Thank you, Mr. Chairman. First of all, I want to
take issue with my colleague from Illinois, Mr. Shimkus. I
talked to many seniors in my District. They're confused. They
believe that they might make a wrong choice and be locked in
and frankly, I think it's ridiculous to question people's ages
on the panel and imply that only someone who is a senior
citizen can understand what is being done. Obviously, the
people on the panel who are not seniors work with seniors and I
don't mean to denigrate Mr. Baumhofer's testimony, but frankly
I can get 100 seniors that will say just the opposite of what
Mr. Baumhofer said.
And you know, in relation to what my friend, the chairman,
said. I don't think this bill is harmful, but I think to some
degree it's harmful if it builds up seniors' expectations and
then they find that they're really not getting much of a
discount after all or that they cannot make clear choice
because as Mr. Brown showed when he held up all those cards,
people are just simply confused.
Also, the prices of drugs are going up every single year
way beyond the rate of inflation to simply say we're going to
give people a discount which is less than that really doesn't
give them a net balance discount at all.
Now I'm hearing from some of the pharmacies in my District
that they don't even know what prices they're going to be able
to charge come June 1. It's being said that they will be
offering it at X amount, but there have been no negotiations.
I'm also hearing from pharmacies in my District that some
pharmacies are showing up as providers for the $600 cash
discount cards, but they haven't been asked nor have they
signed any agreements. They've not agreed to any reimbursement
number and are concerned about seniors being scammed. They're
concerned that seniors will show up with cards that have no
value and also some of the pharmacies are telling me in New
York that many of the card networks have listed pharmacies that
closed down years ago and some are just vacant lots, boarded up
buildings, things like that. So I want to ask, let me start and
ask Mr. Hayes, have you heard about these horror stories? Is
this problem across the country or only in New York? What can
you tell us about it?
Mr. Hayes. Mr. Engel, it's not merely in New York. I mean
those startup points whether they're glitches or are a product,
an inevitable product of the structure of the program, I guess
remains in debate, but without question the overwhelming sense
of frustration is something we've experienced, but are trying
to do good with, frankly, because one of the lateral benefits
of the discount cards, good or bad for any particular
individual, is that there are many other opportunities that go
beyond the discount cards approved by Medicare to help a better
informed consumer.
And I'm intending to talk to Mr. Baumhofer, in fact, after
this meeting because there may well be deeper discounts that
he'll be able to find. We're hoping that the attention
consumers are paying to the Medicare discount cards may trigger
other explorations.
Sadly, a small piece of the Medicare population, however,
who aren't at the level of sophistication that Mr. Baumhofer
is.
Mr. Engel. The other piece that I'm hearing is that perhaps
some of these card networks are not acting in good faith, that
many simply want to get their foot in the door by listing
pharmacies that don't exist to boost their networks and what it
might do is coerce or force seniors to use mail order to get
their pharmaceuticals. If people like to use mail order, great
for them. I think my preference is to be able to see a
pharmacist and be able to discuss my individual needs with
those pharmacists. I don't want to see seniors being pushed
into mail order if that's not what they want.
Mr. Pollack. Mr. Engel, there's one issue that I think that
we'll have to take a look at particularly as we move closer to
2006 and that is as these discount card sponsors serve people
who enroll in their programs, they're going to have new data
concerning the drug usages of people who have enrolled in those
plans. One of the things that we're going to have to look at
very closely is whether the data that's being collected is
going to result in a clear understanding that there are people
you don't want enrolled starting in 2006 versus there are
people that you do want enrolled in 2006. In 2006, I believe
you're going to see many private plans are going to do what
they can to avoid the high users of drugs. And now, with the
data that can be and will be collected as a result of the
discount card program, they're going to know who the high and
low users are. So one of the things we're going to have to do
as we move toward 2006 is to make sure that the collection of
that data does not result in discrimination against those
people who need drug care the most.
Mr. Shimkus. Thank you. Mr. Rogers, you're now recognized
for 8 minutes. Thank you, Mr. Engel.
Mr. Rogers. Thank you, Mr. Chairman. I have to tell you I'm
confused, not about the bill, but what I find back in the
District. I have never seen a more coordinated effort by a
bunch of individuals to deny information to senior citizens in
my entire life. And I was an FBI Agent and I saw some pretty
rotten dogs out there doing some pretty bad things. I
I have talked to seniors with tears in their eyes who are
confused and they're scared, one of which happened to see your
video, Mr. Pollack, with Mr. Cronkite on it and Mr. Brown
brought up some good questions to Ms. Grealy and I want to
follow up on that. Because I'm confused. I want you to help me
understand what this is all about. The bill passes, I hear you
today say this is not bad for seniors, this is good. We're
encouraging them to do it. I saw that video and there is
nothing in there that says this is a good bill and that we
ought to encourage you to participate, and by the way, seniors
who are low income are finally for the first time in their live
going to have access to prescription drugs that may increase
the quality and their longevity. Wow, powerful stuff.
You sent out a video just after the bill passed to all of
these seniors, people who I talked to, people who I had the
chance to visit and talk about other things and this as well.
Why did you do that?
Mr. Pollack. Well, I'm very proud of that video and I'm
glad you raised it. I think it provides extraordinary
information, far more than you get from the government. If you
took a look, for example, at what HHS was circulating, they had
a 30 second commercial that provided no information, used a
fake set of people who were actors. We provided information
that all across the country when we showed that video people
felt they learned a great deal about the legislation. By the
way, if you remember from that video, I personally was quoted
in talking positively about the low income benefit. I don't
know if you remember that. But my quote is very specific with
respect to the low income benefit. I said it was a good thing.
Mr. Rogers. And you also said in your testimony it would be
no consequence to any of the other seniors. This bill will be
of no consequence, quote unquote.
Mr. Pollack. I didn't say it would be harm, but on the
other hand, I want to be clear, Mr. Rogers----
Mr. Rogers. My time is limited. I understand that you
want----
Mr. Pollack. Well, if you want to pull----
Mr. Rogers. Just a minute, you made an interesting point.
You said you used actors. Was Walter Cronkite a paid advocate
for you? Did he receive remuneration for appearing your video?
Mr. Pollack. The answer is yes, he did.
Mr. Rogers. Can I ask how much he received?
Mr. Pollack. You may ask, but Mr. Cronkite----
Mr. Rogers. Are you going to answer my question, sir? How
much was Mr. Cronkite paid?
Mr. Pollack. I'm not going to tell----
Mr. Rogers. How much was the production value of that
video? What did you pay in total costs to print the video, get
the video out and mail it to every senior home?
Mr. Pollack. It was over $100,000.
Mr. Rogers. How much over $100,000?
Mr. Pollack. I believe and I'd have to calculate, probably
about $125,000. And I have to say and I want to say very
quickly to the extent that there's any concern that you have
with respect to Mr. Cronkite being paid, by the way, at a cost
that was considerably lower than what he charges people in the
commercial field because he thought this was a very important
service.
But if you're concerned about that, I think you'd be
horribly offended that the administration used paid actors and
tried to portray them as regular individuals and use----
Mr. Rogers. But it's okay for you to use paid actors to
communicate your point, but apparently the administration
can't--next question I have--excuse me, sir, it's my time.
Mr. Pollack. [continuing] was not a----
Mr. Rogers. Excuse me, sir, it's my time. You talked about
your worry of inflation and before this card has even gotten in
the year yet, that card hasn't been on the counter yet 1 day.
Prices have dropped according to the first panel 11 percent and
we're watching the free market starting to work a little bit.
That is a very powerful thing and my friends on the other side
of the aisle seem to have ignored that point and you've ignored
the point and you've said there's nothing in here that keeps
costs down, that put pressure on costs.
Mr. Pollack. I didn't say that.
Mr. Rogers. Yes, you did, sir, in your testimony. Let me
finish my quote----
Mr. Pollack. You're misquoting me. What I did say is that
the base price keeps on going very substantially and when you
get a discount off a base price that keeps on increasing, it's
like going to used a car salesman and the used car salesman
says ``I'm going to give you a $3,000 discount'' and just
before that he increased the sticker price by $4,000.
Mr. Rogers. I appreciate that. The total disregard for the
work of the market is astounding to me and the fact that you
would take money from folks to go out and mislead the public I
say shame on you, sir. Here's a great example, happened right
in my District. Somebody got up, they wanted to have this press
conference and say boy, this is bad and it's awful. And they
had an 80-year-old woman up there, God love her, and said she
was going to have to go to Canada to save 40 percent on her
drugs and this was awful and there was nothing in the bill to
help her and this is terrible things and it's terrible that
we're doing this to our seniors. And they listed her drugs in
this particular press conference. So went back and we just--
let's say she's a higher earner. We don't have a clue if she
fits all the low income criteria. She pays $160 a month. So we
plugged it into the computer and what does this bill do for
somebody just like this, even if she's not a low income earner?
It happened just very recently, unfortunately. She was $160 per
month. Her monthly drug spending would fall between $80 and $87
for almost every card that's available in my area in Michigan.
And that's 50 percent at the lowest end over 50 percent at the
best end.
And you know what? They're U.S. safe-produced drugs that
she can get in the car and drive just a few miles away and get.
She doesn't have to get on a bus. This poor woman was never
given the information and is scared to death about this bill.
She doesn't even want to get on--she's scared of it because
folks and organizations like yours are getting out there and
saying yes, be afraid of it.
Now here you say it's really good because the cameras are
drafting away and half the audience is gone, but you're going
to go back and you're going to spend that money for people who
have, as a matter of fact, your largest contributor said his
whole goal in life is to beat George W. Bush. That doesn't
sound non-partisan to me. Doesn't sound like you're doing
something for seniors to me. It doesn't sound like you're
caring enough to try to get them the right information so that
one woman who is in her house maybe crying today, that lack of
compassion here is astounding to me, that you would appear
before this panel and try to play it off that you are this non-
partisan helpful group when you're providing deliberate
misinformation for people who are counting on us to provide
solution. It may not be perfect, but you know what, next month,
they're going to get over 50 percent off on their drugs?
Mr. Pollack. Mr. Rogers, I would suggest, tell me one
thing, either in the video or in the written materials that is
incorrect and I suggest to you, you can't do it. The reason you
can't do it is there's nothing misleading in our materials.
There's nothing misleading in the video. And by the way, if
we're really talking about doing something for America's
seniors, then we would have done the thing that----
Mr. Rogers. We would have done, we would have done--you're
deliberately misleading the point and that's my concern----
Mr. Pollack. [continuing] we would have enabled people all
across the country to get the benefit of bargained prices that
would have been considerably lower and that, I think, would
have been the more compassionate thing to do.
Mr. Rogers. Your organization in the past was supportive
of, as I understand it, and I think the New York Times quoted
you as saying as the de facto public relations manager for the
Clinton Administration's campaign for comprehensive health care
legislation.
Mr. Brown talked about cost containment. You talk about
cost containment of other countries like Canada. Just so I
understand your organization, you support rationing, limited
drug use, pharmaceutical use. Do you support those issues?
Mr. Pollack. What do you mean by rationing?
Mr. Rogers. In Canada, if you reach a certain age, you get
put on a list and if your health reaches a certain point, you
can be taken off the list for care because they have to ration
health care because of the socialized, capitated health care
provider system. They also do that for pharmaceuticals as well.
They don't have access to the wide variety of pharmaceuticals
that we do in the United States. So if I understand this
argument correctly, you're saying Canada is a good system to
go. So you support rationing health care for American citizens
and limiting the ability for them to have access to
pharmaceutical treatment in order to keep costs down. Is that
correct, sir?
Mr. Pollack. No, that's not correct.
Mr. Rogers. And so you embrace the tenets of a socialized
medicine system, but you don't want to embrace the way they use
it to keep their costs down. So you don't support a
nationalized, socialist system of health care, is that correct?
Mr. Pollack. That's correct.
Mr. Rogers. You do not?
Mr. Pollack. I do not.
Mr. Rogers. That's a wonderful thing. That's a little
different than what you just told us earlier.
Mr. Pollack. No, that's not--no sir, that is not different
than anything I've said here today or in the past.
Mr. Shimkus. The gentleman's time has expired.
Mr. Rogers. I yield back, Mr. Chairman.
Mr. Shimkus. The Chair would yield himself, oh, Mr.
Dingell.
Mr. Dingell. I appreciate your courtesy. Thank you, Mr.
Chairman.
These questions are for Mr. Pollack. Mr. Pollack, I'm
concerned about the games that drug card sponsors might play at
the expense of seniors enrolled in a drug discount card. A
number of recent lawsuits such as the Merck Medco suit in
Massachusetts have shown how pharmacy benefit managers or PBMs
are not passing along the discounts they negotiated with the
pharmaceutical manufacturers.
Can you briefly describe what in the PBM case was doing to
scam the system?
Mr. Pollack. Sure. Medco negotiated large discounts from
manufacturers that were supposed to be passed along and passed
along 95 percent of those savings. They only passed on a
portion by renaming some of the discounts that were generally
referred in the contract as formulary savings to rebates. In
fact, in this instance, the PBM passed along $9 million in
rebates, but kept $10 million in rebates for themselves.
Mr. Dingell. I believe that is stated in the complaint.
Mr. Chairman, I ask unanimous consent that the complaint be
inserted into the record at the appropriate point so we can see
what's going on here?
Mr. Shimkus. Please identify the complaint?
Mr. Dingell. Yes, I have it here and I will submit it to
the committee. And I thank you, Mr. Chairman.
Mr. Shimkus. Mr. Dingell, could you identify the complaint?
Mr. Dingell. Yes, it's entitled United States of America,
et al., versus Merck Medco Managed Care, LLC, Medco Health
Solutions, Inc. It's in United States District Court for the
Eastern District of Pennsylvania.
Mr. Shimkus. It shall be entered into the record. Thank
you.
Mr. Dingell. Thank you, Mr. Chairman, I appreciate your
courtesy.
Mr. Pollack, I'm concerned that the drug sponsors could be
doing similar things to seniors under the prescription drug
discount card by playing games that they define as discounts,
sponsors could still claim they're passing on all the
pharmaceutical manufacturers' discounts to senior when, in
fact, they're skimming off a portion for themselves. Do you see
this happening or being possible to happen under the Medicare
drug discount card and if so, to what extent?
Mr. Pollack. Well, Mr. Dingell, one of the things that we
had suggested to CMS was that any kind of rebates that would be
negotiated with the pharmaceutical companies would actually be
passed on to America's seniors. Unfortunately, the regulation--
--
Mr. Dingell. And there was the Cantwell Amendment in the
Senate which got dropped in conference.
Mr. Pollack. That's right. And instead, what the
regulations say is that the PBM can hold on to an undefined
portion of the savings they achieve. It doesn't indicate that
there's any kind of a cap on how much they retain. They have to
pass along some portion of the savings, but what portion it is
and whether it's a significant portion----
Mr. Dingell. Well, first of all, there is little
transparency in the way the matter has been dealt with. Second
of all, there is a significant weakness in the regulations to
control this kind of behavior and third of all, there's
virtually nonexistent enforcement authority on the part of HHS
and Federal Government to address these matters. Is that not
so?
Mr. Pollack. It is and we had hoped and explicitly asked
that any kind of savings achieved through this negotiation
process actually wind up to the benefit of America's senior.
Unfortunately, the regulations do not actually require that any
specific portion of those savings be passed on.
Mr. Dingell. Now this could be a problem then when the
benefit is implemented in 2006, could it not?
Mr. Pollack. Absolutely.
Mr. Dingell. And as I mentioned earlier, the Cantwell
Amendment offered by Senator Cantwell and adopted by the Senate
required transparency for both prices and rebates, but that was
dropped in conference. Isn't that right?
Mr. Pollack. That's correct.
Mr. Dingell. Is there any remaining authority on the part
of the Federal Government to address the possibility of this
kind of game being played on seniors either in connection with
the drug discount card or in connection with the actual
delivery of the prescription pharmaceuticals to the seniors
when the insurance companies are managing the matter?
Mr. Pollack. I'm not clear whether that's going to require
a statutory change or whether that could be done through
regulations. My belief is it probably needs to be done via
statute.
Mr. Dingell. Thank you. Mr. Chairman, I notice I have 19
seconds left which I gladly yield back to the Chair.
Mr. Shimkus. Thank you, Mr. Dingell. The Chair yields
himself 8 minutes.
And I continue my enthusiasm. Mr. Hayes, I was out of the
room when you expressed your pride in being a critic. I've
never claimed to be a critic because I believe people discount
them pretty quick. Being constructive to the process, being a
constructive critic is probably what you should really pride
yourself in.
Mr. Hayes. Sir, maybe being out of the room you missed what
I said which was two things. One, with regard to constructive
criticism that CMS has indeed been quite welcoming of the on-
going information we've given them with regard to the so-called
glitches in the project. And second, with regard to the quote
from President Roosevelt----
Mr. Shimkus. I don't care about that--President Roosevelt?
I don't care about that.
Mr. Hayes. Your colleague was interested.
Mr. Shimkus. I don't care about that. Mr. Fuller, I have a
question and I'm going to go down the line. In the designing of
this program and thinking about individuals and their health
care needs, even to the two critics who are here at the table,
place ourselves in how we best want to help people. We want to
help people by saying what are your individual health needs and
requirements, right? And how do we then keep them in the
comfort of being able to obtain their drugs from their local
pharmacy and so as we design the drug discount card, we felt
that it was a very, very positive thing to do, a very positive
element to have a card whereby seniors have the ability to
choose a card that best fits their individual health needs and
then be served by their individual pharmacists. Isn't that not
yet a positive element of this program?
Mr. Fuller, yes or no?
Mr. Fuller. Yes sir, it's a very positive element.
Mr. Shimkus. Mr. Pollack? Yes or no?
Mr. Pollack. Yes, and it would have been a whole lot
better----
Mr. Shimkus. Thank you. Ms. Grealy, yes or no.
Mr. Pollack. It would have been a whole lot better----
Mr. Shimkus. Ms. Grealy, yes or no?
Ms. Grealy. Yes.
Mr. Shimkus. Mr. Hayes, yes or no?
Mr. Hayes. I can't honestly answer that yes or no, sir. I'm
sorry.
Mr. Shimkus. Then you are being the critic. Mr. Baumhofer?
Mr. Baumhofer. Yes.
Mr. Shimkus. Yes, it is. Thank you. It does dumbfound me
though, Mr. Hayes. I choose not to quibble with you. You have a
role for which you've chosen to play here today.
Mr. Hayes. I regret you've neither read nor heard our
testimony, sir, because you basically have mischaracterized----
Mr. Shimkus. Mr. Hayes, excuse me. I'm not going to quibble
here. I have a question with Ms. Grealy regarding Mr. Waxman's
report from the Government Reform Committee, released a report
only hours when this program came on line.
Can you tell me, have you conducted a study or analysis of
what Mr. Waxman had done, the Healthcare Leadership Council?
Ms. Grealy. No.
Mr. Shimkus. Can you comment with regard to what has
happened with regard to drug price since the Waxman report
first came out?
Ms. Grealy. What we had seen, even in the first 2 weeks
that the prices have been available and were more transparent
than ever before, that there has been a lowering of the prices.
Mr. Shimkus. Mr. Fuller?
Mr. Fuller. We did check our website against the prices
listed that Mr. Waxman provided and Pharmacy Care Alliance
prices are now about $140 less than what was represented and
actually takes us to the lowest of all of the price listings he
offered which does at least suggest for whatever reason may be
out there with our card, anyway, that using the prices on April
29 versus using the prices today, you'll get a distinctly lower
answer today than you did on April 29.
Mr. Shimkus. I'll go personal for a second. Being one of
the five authors of this program, I had an interesting
discussion with Mom. My mother is a diabetic. Uses insulin
every day, and so I asked Mom has she called 1-800-MEDICARE and
she had not. And I said Mom, why? And she said well, I have the
American Legion drug discount card and I can obtain my drugs
through my insurance company and I don't think it's going to
benefit me. And I said well, Mom, I'll tell you what. Why don't
you just do me a favor. Why don't you call 1-800-MEDICARE and
do this for me. Why don't you tell me how long it took you to
get on line, document everything, how you were treated, what
questions they asked, the whole thing. So I took my notes from
the conversation. She called me back and she said you know, I
couldn't get on between 11:22 and 11:25, then finally I was
answered at 11:25. There was a computer that assisted me,
answered my questions. The whole entire process took 10
minutes. Only one of her drugs was not covered and that she was
excited to learn that she would save $407 and she goes I didn't
think this was going to save me anything. $407. And she got
excited at the fact that yes, this is really going to save me.
I said well, get Dad's medications together, please call on
behalf of Dad and maybe you can find you may even save $800 or
$1,000. And so your testimony, Mr. Baumhofer?
Mr. Baumhofer. Stan.
Mr. Shimkus. Stan, your testimony, Stan, when I listened to
you, I just had to smile because you sounded just like my
mother. And so there are individuals of whom have chosen to say
it means nothing. Well, it means something to you. And I assure
you listening to my mother on the other end of the phone, being
able to obtain those types of savings, when in fact, she
believes she wasn't going to be able to obtain any savings at
all. She said she's really anxious to get the report from CMS
and this is a Mom making the phone calls.
So I don't want to really get into the politics of this.
Mr. Fuller, Mr. Hayes, you have your ideology, you have your
ideals about what you want to do. I just want you to know that
there are five of us wanting to make a difference in the lives
of people and that you may, you obviously disagree with what
we've done, but what I would ask is that you can be helpful in
the process to the seniors, rather than--well, you can be
helpful to the process. That's why we made the system
voluntary.
I noticed from your testimony, you'd even disagree with the
volunteer aspects of the program, but I just wanted to let you
know from an author, from an author, I believe in a country
that is about freedom and individual liberties and how do we
get people more interested in their own health care and taking
care of their bodies and this is--when one of you testified
about the intangible benefits of the program, getting people
more actively involved and price conscious, I think it's an
exciting intangible.
Mr. Fuller?
Mr. Fuller. I would just add to that point that one of the
things we absolutely know as a certainty is that when the price
of medication is more affordable, these seniors will actually
take the medication as it's prescribed and therefore and
thereby improve the outcome of using medication. All too often,
seniors are forced to choose in our stores, between food and
medicine. By having the medication more affordable, a great
many, thousands of seniors will actually be able to use the
medication as it's prescribed and not take it every other day
which in many cases renders it almost ineffective.
Mr. Shimkus. Thank you. At this time, I'll yield to Mr.
Green. You're recognized for 5 minutes.
Mr. Green. Thank you, Mr. Chairman. I appreciate our panel
being here. It seems like every time I turn to ask questions we
have votes. That's what you get for not having seniority.
Because then I hope--I didn't vote for the plan. I spoke
against it. We spent all night here in this subcommittee on our
committee drafting up this plan and I hope it works. I just
know that there's been a lot of problems in the last 2 weeks
and maybe CMS has corrected it in the last 10 days, but let me
just ask Mr. Baumhofer, did you actually call the pharmacies in
Portland, Oregon and get these drug prices?
Mr. Baumhofer. Yes sir, I did.
Mr. Green. Since everybody was going out and calling CMS,
our office tried to call the pharmacies in Portland, Oregon and
the pharmacists wouldn't confirm any of the drug prices that
you had. And perhaps the discounts are being shown in CMS
website, but there was no guarantee that they were actually
available in Portland, Oregon. Again, we just called to see
because I've been frustrated trying to serve my own
constituents and my senior citizens in dealing with it.
And again, the voluntary plan is correct. You don't have to
go out and choose one of these cards now, but in 2006, if you
don't choose it, a card, for every year you don't you will be
penalized, so that's not very voluntary to me. And so for 2
years may be a card, but once you select it, I think the
structure of the legislation, hopefully we'll revisit that and
some of these hearings we're going to have in oversight on our
committee, the full committee or the Health Subcommittee, will
be able to look at that and say we are creating a problem. It's
effective in 2006.
Mr. Pollack, regarding your enrollment in the program,
well, for one thing, I heard from Mr. Rogers that the video
cost about $100,000, maybe CMS should have probably contracted
with whoever you did to provide it because it would have saved
a lot of taxpayers' dollars, but HHS projects that only 7.4
million Medicare beneficiaries will enroll in this program.
First, do you think that's a reasonable figure of their
projection?
Mr. Pollack. I don't know what a reasonable figure is, but
I must say I find myself amused hearing people talk about
Walter Cronkite being paid money which he was. We've been very
open about that. But then the same people are saying there's
nothing wrong with the government paying actors to portray real
people and to mislead the public with respect to what that is
designed to portray and there's no concern about that
whatsoever.
We usee the most respected narrator in America and he
provided information that is not misleading or wrong in any way
and so I'm very proud of it.
Mr. Green. Well, I viewed both of the tapes and again,
maybe if we want to question Walter Cronkike, we could bring
him in. In your testimony, you state that the drug card is very
little or no consequence, that five out of six of the Medicare
beneficiaries will probably not select one of these drug cards.
Is that correct?
Mr. Pollack. I can just go by what CMS is telling us. CMS
is telling us that at most, there are going to be 7.4 million
people who will enroll in this program. That's 18 percent of
those in the Medicare program, 1 out of 6. that means that 5
out of 6 seniors will not participate in this program. Where in
the alternative that you and others had wished to offer that
would enable Medicare to bargain on behalf of everyone, it
would have helped everybody.
Mr. Green. I've got a whole bunch of questions. One of them
is, and I'll ask anyone on the panel. Has there been any focus
groups, you know in the last 2 weeks or something that you
could share with us the problems that or the factors that are
dissuading beneficiaries from signing up?
Mr. Fuller. Actually, we've done a considerable amount of
research because we're a card sponsor. We need to know how
people feel. It's very important to remember of the 42 million
seniors, almost three quarters of them have coverage to date.
Not all of it's good, but they have coverage. You've got to
look at the 15 million without coverage. Sixty percent, almost
60 percent of those people when we surveyed that population,
the population that pays cash today, almost 60 percent said
they thought the card was a good idea and they would sign up
for it. When they got a little more information those
percentages went up to about three quarters. And 84 percent----
Mr. Green. I'm asking the questions and I'll let you answer
when I get a chance.
When you said that you provided more information, I hope it
wasn't provided by someone who maybe was trying to give them
maybe questionable information because when I have a witness
that tells me that, whether it's you or Mr. Pollack, I want to
know what was your criteria.
Mr. Green. Sir, I represent 120,000 pharmacists who deal
with seniors millions of them every day and 35,000 stores
across the country. We treat them honestly and with respect. We
don't mislead them. On top of that, the information presented
to them is the information that Medicare approves and has
official condoned to educate seniors with. The only point I was
making is if they have more information, they're interested in
signing up for the card and the TA population tells us at a
rate of about 84 percent that they want to sign up.
Now the information, the marketing information that's
approved by Medicare wasn't even made available by regulation
until May 3. We've only had a couple of weeks to make the
information available. It is being made available by 120,000 of
our pharmacists, another 30,000 or 40,000 independent
pharmacists who counsel with patients every day.
I just urge you let this program work. We'll be back here
in a couple of months with metrics to explain----
Mr. Green. We're not going to stop it from going forward.
It's going forward, but again, these oversight hearings are
trying to correct the problems that we see may happen and
hopefully, they won't happen.
Mr. Shimkus. The gentleman's time has expired. Mr. Walden,
you are now recognized.
Mr. Walden. Thank you, Mr. Chairman. Stan, welcome, we're
delighted to have you here and I'm delighted you found that
this card can be very helpful to you. How much do you think you
can save a year on your drugs?
Mr. Baumhofer. Approximately $150 a month or $1800 over the
year which is substantial in my condition.
Mr. Walden. You know, I think you hit it on the head here.
Is changing Medicare sometimes confusing for some? Of course,
it is. When it was rolled out in the 1960's, there were front
page stores all across America about the confusion about the
new program. But what's the benefit? That's what we have to
look at.
Mr. Chairman, I'm delighted your parents are going to
receive the savings that you've outlined. Unfortunately, mine
both passed away waiting for this Congress and the last
Congresses to act in this area as did a lot of seniors. They
died waiting for Medicare to be modernized.
We have taken a giant step forward, I think, to provide
assistance to those most in need.
Now did you find it confusing?
Mr. Baumhofer. Not at all. In my written testimony, I
explained how simple it had been to get the information and how
quickly the comparison of prices and I feel complimented that
the chairman compared me to his mother.
Mr. Walden. By voice, not appearance.
Mr. Baumhofer. Thank you. I feel a little bit like a piece
of rope here in this tug of war today, but the rope's life is
dull and being in the game is better than not at all. In my
case, my medical incident cost over $22,000. Medicare paid
$14,000 of that. I hope that this discount card allows me to
not have a similar incident and saves that $14,000 for
Medicare.
Mr. Walden. That's been one of our--certainly my concerns
and I think a driving force behind what this committee and this
Congress has done. Because if we can allow for seniors and I
think Mr. Fuller, you spoke to this. If they take their
prescriptions as requested by their physicians because they can
now afford and have accesss to them, maybe we prevent a heart
attack. If you can get them on Lipitor for $67 a month, maybe
you avoid a $20,000 bypass surgery which I think is very
important.
I know Mr. Dingell in the conference was supportive of this
drug card benefit and sure, there are going to be some bumps in
the road. We all recognize that. And we're going to work to fix
it. We're going to watch it closely. And as I've gone out and
met with seniors, they start out having heard sort of the
Mediscare rhetoric from some and they're a little confused and
I walk them through how it works. I invite them to work with
CMS to make the call to 1-800-MEDICARE or to go to the website.
One of the most important things I think we've done is
encouraged the harnessing of the internet power to comparison
price shop so you don't have to make the phone calls.
Have you found that to be helpful? Have you gone on and
used the web?
Mr. Baumhofer. I have, yes, and I made the phone call also
and they both were helpful.
Mr. Walden. I ran into a senior out in Ontario, Oregon
where I did a Medicare workshop and he said I'm not sure I'm
going to do the card because I call around, my wife and I do
every month to various pharmacies in our area to find the best
price. I said well, you know, you might not have to do that
now. If that's how you want to do it, that's fair, that's fine,
that's your choice, it's voluntary. And I'm being given the cue
card here that we're out of time because the votes on, but I
wanted to thank you for coming from Oregon and the other
panelists for your participation today. Thank you, Mr.
Chairman.
Mr. Shimkus. I thank all the panelists for coming. This
hearing is now concluded. Mr. Brown, I appreciate your
contribution.
[Whereupon, at 3:10 p.m., the hearing was concluded.]
[Additional material submitted for the record follows:]
Responses for the Record by Mark McClellan, Administrator, Centers for
Medicare and Medicaid Services
QUESTIONS BY REP. PALLONE
Question: What is the specific amount to be spent on educational
efforts connected to the drug card?
Answer: CMS has spent $18 million on media buys for TV ads
informing the public about the drug card program. This number includes
ads about the general card program and one on the availability of the
$600 in transitional assistance.
We spent $10 million for a mailing to all beneficiary households
containing a short fact sheet on the card program. We will also include
information on the drug card in the regularly mailed handbook that goes
out in the fall of each year.
We also spent money on print ads, with costs running under
$500,000. The Social Security Administration also mailed information
concerning the card program to low-income beneficiaries, but CMS did
not bear that costs.
Spending on outreach and education in the future will depend on
response to the card program and what CMS believes needs to be done in
order to ensure that people who can benefit from the cards are
enrolling in them.
We are tentatively planning additional ads for August. Costs for
these new ads are not well known at this time, because we are waiting
to see where the need for this information is greatest before
proceeding. It is likely that any future media buys will not be as
costly as our initial efforts.
In FY 2004, SHIP funding will total $21,062,500. This amount
consists of $13.5 million in basic funding, $1,562,500 additional
funding to help the SHIPs prepare for activity related to the Medicare-
approved Prescription Drug Card, and $6 million additional funding to
help them prepare for activities related to the Drug Card and the
upcoming Part D Prescription Drug Benefit.
In FY 2005, SHIP funding will be $31,675,000. This will include
$14,175,000 in basic funding, $2,500,000 to assist SHIPs with
Prescription Drug Card related activity, and $15,000,000 for activities
related to the Part D Prescription Drug benefit.
CMS has also awarded a $4.16 million task order to Ogilvy PR
Worldwide for the purpose of supporting the work of community-based
organizations (CBOs) to help low-income Medicare beneficiaries learn
about Medicare-approved discount drug cards and how to enroll in the
program. With the support of the Administration on Aging the funding
for this task has been increased by another 1.75 million. The focus of
this effort is to identify at least 200 CBOs that can conduct outreach
activities in the top 30 markets; these top 30 markets target the
locations where approximately 70 percent of the low-income
beneficiaries reside. The activities of these CBOs will complement and
extend other outreach efforts of the National Medicare & You Education
Program (NMEP). The task order includes monies that will be used to
fund the grassroots, community-based organizations; the remaining funds
will be used to obtain the support of national organizations who have
been engaged to help coordinate the outreach effort and contractual
overhead and management fees.
In addition, CMS is in the process of engaging in several other
Federal Agency partnerships to provide additional resources to
organizations/efforts that inform low-income, diverse populations about
the drug card and to assist them in enrolling. Examples include an
Interagency Agreement (IA) with the Indian Health Service and an IA
with USDA to provide training to their Extension Services to educate
rural and urban low-income audiences about MMA and the discount drug
card.
Moreover, these outreach efforts under the drug card will be useful
for more than just the drug card. By reaching out to the drug card
population now we are starting to be able to reach out to beneficiaries
for the drug benefit as well. This is particularly important for the
low-income populations who have frequently been hard to reach--so the
payoff on outreach will extend way beyond the drug card to the drug
benefit.
Question: Who, specifically, within HHS, authorized the release of
the VNR that has recently attracted criticism and were specific people
in the White House, such as Karl Rove, or Andy Card, involved in
putting together that VNR?
Answer: The release of the VNR was authorized by Kevin Keane,
Assistant Secretary for Public Affairs in HHS. The VNR was done in a
professional manner by a recognized public relations firm, and it meets
the highest standards for production of VNRs, which are a common and
accepted public relations tool used by the private sector, the
government and members of Congress. There was absolutely no involvement
by anyone from the White House
Question: What is the actual cost of running the www.medicare.gov
site, and the cost for the CSRs at 1-800-MEDICARE?
Answer: Please find the total investment from December 8, 2003
until June 21, 2004 by month, on the 1-800 MEDICARE call centers,
including data on incoming calls and average length of call:
1-800 Monthly Call Volume
12/2003 = 684,450
01/2004 = 763,393
02/2004 = 681,409
03/2004 = 946,306
04/2004 = 1,261,908
05/2004 = 3,811,455
06/2004 = 446,897 (as of 06/19/2004)
On the average, the unit cost is about $1.00 per minute. This is a
fully loaded cost. The cost does fluctuate based on the introduction of
new initiatives. Sometimes these new initiatives require mass hiring
and ramping up of staff such as in the case of MMA. Traditionally, our
average length of call for 1-800 MEDICARE is 7.5 minutes but a longer
length of call can occur due to special campaigns and new Department or
CMS initiatives. Based on the call volume from 12/2003 through 06/19/
2004 and an average call length of 7.5 minutes, the overall average
cost is $64.4 million.
How much did the additional CSRs cost?
As of June 2004, we have about 3,000 Customer Service
Representatives (CSRs) on duty at 1-800 MEDICARE. In January 2004 we
had approximately 738 CSRs. The average cost of a 1-800 MEDICARE CSR is
about $35,000 per year. This is a fully loaded amount that includes
health and benefit packages, training, etc. The costs for the CSRs are
included in the fully loaded $1.00 per minute cost. Traditionally,
labor costs account for a significant amount of the overall 1-800
MEDICARE operating budget.
www.medicare.gov website
Please find below how much it cost CMS to add the additional
features and resources to the drug compare website (include contracts,
etc.). Also, included is the total cost of the contract (beyond
implementing, running it too) in 2004 and 2005:
The costs of the changes and enhancements to PDAP are incremental.
Current and projected costs are:
Jan-June 2004--$3.2M
June-Sept 2004--$700,000
FY05--$1.5M
CMS chose to incorporate the drug pricing information for the
Medicare-approved drug discount card programs into the existing
Prescription Drug and Other Assistance Programs database on
www.medicare.gov. This decision provided people with Medicare with the
ability to access the new drug pricing information through a tool that
was familiar to many people and that had been enhanced based on
consumer research. Prescription pricing information is provided for
both brand and generic drugs offered through retail pharmacies and mail
order pharmacies.
CMS is currently exploring a means to use similar technology to
provide similar prescription drug pricing information to people with
Medicare when the actual drug benefit is implemented in 2006. CMS will
utilize a ``lessons learned'' approach when developing a Web based tool
for the drug benefit. A thorough analysis of information received from
people with Medicare, consumer research, and other sources will be used
to provide people with Medicare with an accurate and easy to use tool
to access information about the Medicare drug benefit.
Volunteered information on the many billions of dollars in new
savings available to seniors as a result of the discount cards:
<bullet> CMS studies indicate that any Medicare beneficiary in America today
can save 11 to 18 percent, or much more compared to average
market prices, on their drug costs with a drug discount card.
These average market prices include discounts available through
private health insurance, Medicaid plans, and other discount
sources like manufacturer drug cards. Before the Medicare-
approved prescription drug cards, beneficiaries without drug
coverage paid the highest prices in the nation for their
prescriptions. Savings of 11 to 18 percent beyond private
health insurance levels is a significant improvement for
America's seniors. This base level of savings is expected to
grow as market competition drives discounts even lower.\1\
---------------------------------------------------------------------------
\1\ Medicare Approved Drug Discount Cards Provide Drug Prices
Significantly Below, Average Paid by Americans. Centers for Medicare
and Medicaid Services. May 6, 2004.
---------------------------------------------------------------------------
<bullet> A June 4, 2004 study by CMS showed that beneficiaries could save even
more than 11 to 17 percent by substituting generic drugs--which
are chemically equivalent and just as safe and effective as
their brand name counterparts--for branded drugs. The study
indicates that beneficiaries who switch to generics can save
between 46 and 92 percent off the prices of branded drugs. This
savings is the result of two factors: generic drugs are cheaper
than brand-name drugs and card sponsors are negotiating
extremely low prices with generic manufacturers. In fact,
generics purchased with Medicare-approved drug discount cards
cost 37 to 65 percent less than the national average price for
generics. In the study, 7 out of 10 generic drugs paid for the
$30 enrollment fee in less than two months--and that is with
savings on only one drug. Generic substitution combines with
the Medicare-approved drug discount card to afford
beneficiaries huge savings on the order of 46 to 92 percent,
without any additional subsidy.\2\
---------------------------------------------------------------------------
\2\ Medicare-approved Drug Discount Cards Provide Substantial
Savings with Generic Drugs. Centers for Medicare and Medicaid Services.
June 4, 2004.
---------------------------------------------------------------------------
<bullet> CMS studies indicate that our illustrative low-income beneficiaries
can save 32 to 86 percent over a 7-month period compared to
national average retail prices for ``baskets'' of commonly used
brand name drugs when both discounts and $600 in transitional
assistance are taken into account.
<bullet> The drug discount cards can be especially helpful to eligible low-
income beneficiaries who do not have drug coverage through
Medicaid by:
<bullet> Offering additional discounts off retail prices that are, in some
instances, more than the 11-18 percent for brand name drugs
and 3 0-60 percent off generic drugs being offered to non
low-income beneficiaries;
<bullet> Providing $600 in each of 2004 and 2005 for the purchase of
prescription drugs;
<bullet> Having the annual enrollment fee, if any, paid by Medicare;
<bullet> Offering free or low-cost prescription drugs from several
manufacturers including Abbott, Astra Zeneca, Eli Lilly and
Company, Merck, Novartis, Pfizer and Wyeth for
beneficiaries enrolling in certain Medicare-approved drug
discount cards who exhaust their $600 credit;
<bullet> Therefore, when multiplying the savings by 7 million beneficiaries
expected to enroll in the drug discount card only or the drug
discount card with the $600 transitional assistance, it is
clear that Medicare beneficiaries will see billions of dollars
in savings. With more than 4 million people already in a drug
card program, the savings have already greatly exceeded the
administrative costs of establishing the program.
QUESTIONS BY REP. DINGELL
Question: How many people will be working on oversight of the 73
approved cards? Specifically, how many people will be working on issues
of consumer protection and ``bait and switch'' ?
Answer: A broad array of government and contractor personnel will
ensure the integrity of the drug card program. CMS personnel have been
conducting statistical analysis of pricing data submitted by card
sponsors since they began providing us with that data. We have recently
signed an agreement with a contractor who will focus specifically on
analyzing data provided by card sponsors to ensure that price
fluctuations are justified and appropriate. Certain CMS employees, in
their role as card managers, are overseeing our communications with
each card sponsor and examining and investigating beneficiary
complaints about card sponsor programs. CMS program integrity employees
have hired an additional contractor to look at price changes and to
ensure consumer protection against ``bait and switch.'' as well.
Another contractor will conduct ``mystery shopping'' with the drug card
sponsors to ensure that pharmacies that are supposed to be
participating in a given card sponsor's network do in fact participate
in that card sponsor's pharmacy network. Any inappropriate activities
will be reported to CMS and in some instances, the HHS Inspector
General's office. We will also work with the resources of the
Department of Justice, should we need to do so. In addition, each of
the ten CMS regional offices maintains a fraud unit that can be used to
assist any efforts to reduce fraud and abuse. We believe that the array
of personnel we have looking at these issues will ensure a high degree
of integrity within the program and make it possible for beneficiaries
to take advantage of this very beneficial program.
Question: Pharmaceutical discounts or rebates come from two
different areas: (1) volume--having a lot of people who will buy your
particular drug, and (2) moving market share--that is the ability to
move people to a certain drug or brand. The more people a card has
enrolled, the better discounts or rebates for beneficiaries. Let me
cite two examples:
a. A CMS document dated September 25, 2003, states, ``If a PPO can
anticipate a large number of enrollees, and therefore a large
VOLUME of services, it can negotiate favorable prices . . .''
The document also notes, ``The cost per beneficiary would be .
. . lowest with three plans.'' CMS advocated for fewer PPOs in
order to get better prices and lower costs per beneficiary.
b. The State of Michigan expects to realize $8 million in savings on
their Medicaid program this year by banding together with
Vermont to purchase drugs. They expect to get even greater
savings next year when they aggregate their purchasing power
with other states--they will have $2 billion in purchasing
power--the VA system is $3 billion and they are getting some of
the lowest prices around, even lower than Canada. Again,
greater numbers of people give better leverage in negotiating
discounts.
CMS, however, set up the drug discount card program to have 73
different cards, greatly diffusing any negotiating leverage
that seniors and individuals with disabilities could expect to
achieve by banding together.
When CMS implemented the drug discount cards, why did you set up a
program that ran counter to your own recognition that the smaller
number of entities providing the service, the better the prices for
seniors? How does protecting drug manufacturers from stronger
negotiation help seniors?
Answer: The Medicare-approved drug card sponsors are competing for
beneficiaries and have a real incentive to negotiate and pass on
savings in the form of the lowest possible prices for the drugs that
their beneficiaries need. To obtain these discounts, the card sponsors
negotiate prices on the drugs that are included on their formularies.
In a discount program like this one, the only way that cards can
generate any revenues is by providing attractive prices on the drugs
that beneficiaries want, so that beneficiaries use the cards to fill
their prescriptions. However, no one formulary possibly could meet the
diverse needs of the Medicare population. To best serve Medicare
beneficiaries, the program is designed to allow a number of card
programs to participate, enabling beneficiaries to have choices based
on the drugs they need and the pharmacies that are closest to them. The
cards need to offer savings and service, and we will be monitoring card
programs to make sure beneficiaries get both. Thus, to succeed in
holding onto its beneficiaries, and in building up its client base for
when their drug benefit becomes available in 2006, a card must offer
consistently good deals and consistently reliable service to
beneficiaries.
Question: Will CMS limit the number of private prescription drug
plans in order to help seniors get better discounts? Or will you again
allow so many choices that seniors are paralyzed, and discounts are
diffused?
Answer: As required by the statute, CMS will ensure that at least
two drug plans are available in each region of the country, although we
are not limited to just two plans and seniors may well have the
opportunity to select a plan that best fits their needs from among a
range of plans. The plans will compete with each other directly, and
this competition will work to lower prices for seniors who voluntarily
select such coverage. Our experience with the drug card program has
conclusively demonstrated that when drug programs compete, prices drop.
As we have done with the drug card, CMS will provide educational
information and personal assistance to beneficiaries to help them
select a drug program that best fits their needs and saves them the
most money. CMS will provide assistance in determining which plan best
suits a particular beneficiary's needs.
Question: What level of rebate are drug cards getting from the
drug manufacturers? (Not the discount at the register but the actual
amount of rebate that manufacturers are providing)? How do the rebates
compare with what people would get under the Medicaid best price rule?
How do the rebates under the drug card program compare to prices under
the VA system? According to representatives of the Pennsylvania PACE
program drug card, that program is only receiving a four percent
discount from manufacturers. Are there any cards that are getting
manufacturer rebates of less than four percent? Are there any cards
getting manufacturer rebates that are greater than 15 percent?
Answer: We're still looking at the data, and the information may
change over the coming weeks as more sponsors come online, but so far
we are seeing that many Medicare-approved drug discounts cards will
provide significant discounts to beneficiaries:
<bullet> For brand name prescription drugs, sponsors are reporting discounts
off AWP that are generally 15%, with some discounts of 20% or
more--(we plan to have information on drug card sponsors'
rebate level as this is a reporting requirement);
<bullet> Larger discounts are available on some cards for mail-order drugs;
<bullet> For generic prescription drugs, sponsors are reporting average
discounts off AWP in the 20-35% range, with some as high as 40-
50%
As for comparing prices under the drug card program to those under
the VA, in October 2000, GAO issued a report that examined the
possibility of expanding the VA pharmacy benefit to Medicare. The
report discovered that such a scenario would result in negative
ramifications for the entire health care system. In addition, any
Medicare savings would be short-lived.
It is difficult to make comparison between the drug card program
and the VA system, because the VA system is a drug insurance program
with a particular formulary. While the VA system is a good source for
seniors who qualify for coverage, it is typically not available to
seniors. In addition, statute dictates how prices are determined for
drugs that are included on the VA's formulary. If that statute applied
to practically everyone in the country, competition would be hampered
and prices would increase for everyone.
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