May 6, 2002
Tommy Thompson, Secretary
Department of Health and Human Services
Hubert H. Humphrey Building
200 Independence Avenue, SW
Room 443-G
Washington, DC 20201
Re: CMS-4027-P
Dear Secretary Thompson:
Families USA is pleased to submit these comments on the proposed Medicare-Endorsed Prescription Drug Card and Drug Discount Card Assistance Initiative published in the Federal Register on March 6, 2002. Families USA is a national consumer health care advocacy organization. Our mission is the achievement of high-quality, affordable health and long-term care for all Americans. Expanding consumers' access to prescription drugs is an important part of that mission; supporting and furthering policies and programs that will give Medicare beneficiaries access to affordable prescription drugs is a major focus of our efforts.
Families USA represents consumers' interests only. We have no financial interest in any PBMs, we will not participate in any discount card program as a card sponsor, and we do not stand to benefit in any way from the proposed discount program. As a leading group representing only the interests of health care consumers, our comments deserve, at the least, the same attention as given to comments from PBMs, other card vendors, and other organizations that might receive a direct financial benefit from the proposed program.
The critical question that frames our comments is whether the proposed discount card program will give Medicare beneficiaries substantial cost savings off the prices they currently pay for prescription drugs. While the program will probably give Medicare beneficiaries some level of price reduction for some drugs, we have several concerns about the program as proposed: Will the program ensure that beneficiaries receive the greatest discount possible? Will there be adequate safeguards to ensure that the program as proposed benefits beneficiaries, rather than program administrators and pharmaceutical manufacturers? Will there be adequate efforts to encourage the use of more cost-effective generic drugs? Will there be sufficient stability and constancy in the discounts to protect beneficiaries who rely on discounts?
" Level of Discounts-Ensuring Maximum Discounts for Beneficiaries. The proposed rule is vague regarding the level of manufacturer rebates and discounts that discount card sponsors must pass along to Medicare beneficiaries.
We understand that the price discount for a specific drug will be a function of several factors and that it is difficult to guarantee a specific discount percent across all drugs or classes of drugs. However, the program should be structured to ensure that Medicare beneficiaries will receive the greatest price reduction possible. §403.806(d)(2) of the proposed rule deals with a key source of potential consumer discounts: the rebates that pharmaceutical manufacturers will pay to discount card sponsors. That section of the proposed rule states that a discount card sponsor must "[o]btain substantial pharmaceutical manufacturer drug rebates or discounts on brand name drugs, and ensure that a substantial share is provided to beneficiaries either directly or indirectly through pharmacies."
This requirement is a significant improvement over the initiative that the President announced in July 2001, which did not require card sponsors to pass manufacturer rebates or discounts on to beneficiaries. The proposed approach should result in greater savings for consumers. Nevertheless, by not defining "substantial share," the proposed rule leaves a great deal to the interpretation of the discount card sponsor.
The "Background" section of the proposed rule states that card sponsors will "be required to have contractual arrangements with drug manufacturers for rebates or discounts and a contractual mechanism for passing on the bulk of rebates or discounts that are not required to fund operating costs to beneficiaries or pharmacies." Again, the language is vague and open to wide interpretation. With such vague language, discount card sponsors could account for program administrative costs in such a way that they retain most of the manufacturer rebates and discounts. Without greater specificity in §403.806(d)(2), the potential for the Medicare-endorsed prescription drug card to use rebates to provide real savings to beneficiaries-and to ensure that manufacturer rebates and discounts are passed along to consumers-may not be realized. The final rule should require that card sponsors guarantee a certain discount level. For example, card sponsors could be required to offer prices comparable to those available through the Medicaid program or the Federal Supply Schedule.
" Safeguards to Ensure that the Program Primarily Benefits Beneficiaries. The proposed rule does not incorporate information-sharing, reporting, and auditing requirements that could ensure that discount card sponsors pass rebates on to Medicare beneficiaries.
The program should incorporate administrative safeguards to ensure that manufacturer rebates are passed on to Medicare beneficiaries. It should require that discount card sponsors disclose to CMS the terms of their contracts with pharmaceutical manufacturers that relate to the Medicare-endorsed discount card program. Discount card sponsors should also be required to provide CMS with detailed financial reports on their Medicare-endorsed prescription drug card operations. Neither §403.810, "Administrative consortium responsibilities," nor §403.820, "Oversight and beneficiary education," of the proposed rule requires that discount card sponsors provide the program with the information necessary to verify that manufacturer rebates and discounts are, in fact, passed along to Medicare beneficiaries. The final rule should include disclosure and reporting requirements that would allow CMS to monitor discount card sponsors to be certain that manufacturer rebates are used to benefit Medicare beneficiaries.
" Incentives to Encourage Use of Generic Drugs. The proposed rule does not require that discount card sponsors encourage use of generics.
The "Background" to the proposed rule notes the savings that can be achieved through the use of generics and states that it is intended that the program will accelerate the use of generics. Yet there is nothing in the proposed rule that requires discount card sponsors to undertake activities that would result in greater use of generics. The proposed rule requires discount card sponsors to obtain "substantial" rebates from manufacturers, which will be used to cover discount card sponsors' administrative costs. Rebates are generally greater for brand-name drugs than for less expensive generics, with the amount of the rebate often tied to increased drug sales. Discount card sponsors have an incentive to focus their efforts on obtaining manufacturer rebates, particularly for higher-priced brand-name drugs, and attempting to shift market share to those drugs, rather than on encouraging appropriate use of generics.
It is imperative that the final rule require discount card sponsors to take specific steps to encourage use of generics. §403.806(c) of the proposed rule, "Requirements for eligibility for endorsement," should require discount card sponsors to have a program to educate Medicare beneficiaries about the availability of generics and to encourage use of generics when appropriate. In operation, this should include requiring that discount card sponsors (1) include information on generic substitution in enrollment materials sent to Medicare beneficiaries and in other periodic communications, (2) inform Medicare-endorsed discount card subscribers when there is a generic option for a brand-drug on the discounted drug list, and (3) require that their participating pharmacies inform Medicare beneficiaries when a generic could be substituted for a brand. The administrative consortium's printed and Web-based information that lists discounted drugs should also indicate whether a generic is available. As part of its oversight of discount card sponsors, CMS should establish target generic utilization rates and it should evaluate sponsors' performance against those targets.
" Stability and Constancy in the Discounts - Avoiding Beneficiary Confusion and Supporting Comparison Between Cards. The proposed rule locks Medicare beneficiaries into a single card for six months, yet does not require that discount card sponsors provide Medicare beneficiaries with any stability in formularies, drug prices, and discounts available.
A recent study of prescription drug discount programs noted that drug prices may change frequently. Any increases in a drug's price, changes in the discount that a card will provide, or changes in a discount card sponsor's formulary, will affect Medicare beneficiaries' ability to afford the medicines they need. To give discount card sponsors a stable enrolled population, the proposed rule locks Medicare beneficiaries into a single card for six months, yet it does not offer beneficiaries any stability in card sponsors' formularies, drug prices, or discount levels. The card that might give a beneficiary the lowest prices on medications one month may not be the card that gives that beneficiary the lowest prices the next month. The program should do more to protect Medicare beneficiaries. To afford the prescription drugs they need, beneficiaries may rely on the discounts posted when they enroll with a card sponsor. The final rule should either require discount card sponsors to guarantee stable formularies, prices, and discounts for each six-month enrollment period; allow beneficiaries to switch cards more frequently; or allow beneficiaries to enroll in more than one program at a time. The final rule should give Medicare beneficiaries at least the same level of certainty it gives discount card sponsors.
The President has stated that Medicare beneficiaries should have access to affordable prescription drugs. A well-structured discount program could move many Medicare beneficiaries further towards that goal. It is, however, a far cry from achieving that goal and is no substitute for an outpatient prescription drug benefit in Medicare. Medicare beneficiaries-particularly low-income beneficiaries-who cannot afford their prescription drugs now will likely still not be able afford their prescription drugs with a Medicare-endorsed drug discount.
We appreciate your attention to our comments and hope that they help form the basis for improvement in the proposal. We also hope that a Medicare-endorsed drug discount card program does not in any way lessen the Administration's resolve about the critical need for a real drug benefit in Medicare.
Sincerely,
Ron Pollack
Executive Director
