Drugstores fear burden of Medicare discounts
When Brookline pharmacist Steven Grossman digs into the details of the Medicare prescription benefit, he worries.
Starting next spring, Grossman's elderly customers will be eligible to sign up for a Medicare discount card -- a stopgap that is supposed to carry them over until the full Medicare drug benefit is set up in 2006. Grossman says pharmacists like him may be forced to carry the biggest burden when the cards are unveiled.
"The discount card is just reducing the margin of community pharmacies," said Grossman, owner of J.E. Pierce Apothecary.
The cards are scheduled to be introduced by the Bush administration next May. The Medicare law approved by Congress last week spells out the basics: Private insurance companies and nonprofit organizations will bid on the right to issue cards for an annual fee paid by seniors of up to $30. The cards, which will have varying features and coverage limits, will entitle elderly patients to discounts estimated at 15 to 25 percent.
But the exact details of the card program are yet to be written, especially those that will guide who pays the most for the discounts -- drug sellers or drug makers. Drugstores have sought protections from revenue losses. Manufacturers say they are willing to provide discounts but do not want to shoulder the burden alone.
The forces threatening the drugstores' revenues are clear. Uninsured seniors represent the last big block of the US population paying full retail prescription prices. Discounts could have a significant bottom-line impact.
"The uninsured Medicare beneficiaries were the last bastion of unbridled markup for the pharmacies," said Dan Mendelson, president of Health Strategies Consultancy in Washington. "There was no one protecting them."
Medicare discounts could particularly affect independent pharmacies that lack the bargaining clout of the big chains, like CVS and Walgreens. Drugstore industry associations representing independent stores and chains successfully sued the government over the past two years to block similar government discount card plans floated by the Bush administration. They contended that the government lacked statutory authority to offer the plans. Now, with congressional approval of the Medicare bill, the government's authority is unquestioned.
Timothy Trysla, policy adviser at the federal agency that administers Medicare, the Centers for Medicare and Medicaid Services, said the fears of drugstore operators like Grossman are overblown. Whatever money they lose from discounts will be offset in new money from having a large government program encouraging more people to buy drugs, Trysla said.
"I think they're crying crocodile tears," he said.
Private-sector discount cards are already offered by a variety of interests, including drug companies, drugstores, and nonprofits such as the AARP, a powerful lobbying group for seniors. By rolling out its own version, the government is providing a test case, an opportunity to collect data during the 18 months leading up to the 2006 rollout of the full benefit.
Critics and industry observers say interest in the discount cards may not be that high and that potential benefits and changes in the marketplace will be minor.
"There will be a number of different cards, different programs, different values for different people," said Robert Hayes, president of the Medicare Rights Center. "The crapshoot nature of what kind of card to sign up for will not change."
"A dramatic change is not going to happen," said Dennis Lyons, executive director of the Center for Continuing Professional Development at the Massachusetts College of Pharmacy and Health Sciences. The discount cards represent "feel-good legislation," a precursor to the real benefit, he said.
"It's going to take a while until this sets in."
A major goal of the Medicare discount card will be the use of lists of approved drugs, called formularies, which will encourage drug manufacturers to lower prices, proponents say. Medicare beneficiaries will be limited to signing up for just one government-issued card a year, ensuring that the insurer issuing the card maximizes its bargaining leverage with drug makers.
Jeffrey Trewhitt, a spokesman for the Pharmaceutical Research and Manufacturers of America, said the insurance companies and benefit managers have a good track record of negotiating lower prices with manufacturers.
But some consumers see reliance on private markets to provide discounts and the prescription benefit as troublesome.
"Sometimes it breaks my heart to see the elderly people who are in the stores choosing between food and drugs," said Phyllis Baker, a Medicare recipient who lives in Brookline.
"I think it's going to get worse. I don't think the Medicare bill is going to do a good job for the average citizen."
Christopher Rowland can be reached at crowland@globe.com.
