Medicare revises discount plan as retail stores fight mail order

A newly-revised drug discount card program for the elderly has been developed by the Center for Medicare and Medicaid Services (CMS) which it hopes will meet court approval in a pending case brought by chain drug stores.

Under the revised plan, Medicare enrollees would buy a drug discount card

for $25 from pharmacy benefit managers (PBMs) and other private companies. Those entities would negotiate discounts from pharmaceutical companies based on the purchasing power of their enrollees. CMS estimates that seniors spend an average of $1,350 annually on prescription drugs and would save about $170 each a year under the card plan.

President Bush originally proposed a federal drug discount card program last summer. The National Association of Chain Drug Stores (NACDS) and the National Community Pharmacists Association filed suit in U.S. district court opposing the original program and a subsequent revised plan in March. (See "Drug Discount Programs" Medical Marketing & Media, May 2002, page 78.)

The administration hopes to counter the court ruling that congressional approval is needed for a Medicare card program. The pharmacy groups contend that the program would harm small stores. Specifically, they feel that PBMs will take away retail customers by promoting mail order drug purchases.

Mail order drug sales have been growing at an annual rate of about 25 percent, according to NACDS. Last year, mail sales reached $27.6 billion, or 15.8 percent of the $161 billion retail pharmacy market, while the previous year, mail orders had a 15.2 percent market share with $22 billion in sales.