Getting the Best Price: Lessons Learned From the Medicare Discount Card Program

The 2003 Medicare Modernization Act (MMA) created a Medicare prescription drug program that is being implemented in two phases. The first phase, a temporary discount card program, began in June 2004 and ends in January 2006 when the second phase, the drug benefit, begins. For both the discount card program and the drug benefit, the MMA bars the government from negotiating directly with drug companies to obtain discounts on prices. Instead, contending that the lowest prices would be achieved by unleashing the forces of competition, congressional architects of the MMA created a program in which private companies would negotiate directly with drug companies to obtain discounts.

The degree to which these private companies can effectively negotiate discounts and pass those discounts on to consumers' will affect how affordable the drug benefit is for those in Medicare, most of whom will still have to pay a significant portion of their drug costs. It will also affect how much the drug benefit costs Now, with the conclusion of the discount card program approaching, Families USA examined how well that program did in negotiating lower drug prices for seniors and others in Medicare. We found that, for the 50 drugs most frequently prescribed to seniors, the lowest Medicare discount card price was almost always considerably higher than the lowest price negotiated by one large government purchaser, the Department of Veterans Affairs (VA). The median difference between the lowest Medicare discount card price and the best price available from the VA was 58.2 percent. This means that, for half of the top 50 drugs prescribed to seniors, the purchase price with a discount card was at least 58.2 percent higher than for those same drugs purchased through the VA. 

Excerpt