[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]



   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:
 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.
 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.
 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.
 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:

 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);
  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);
 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:

 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;
 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;
 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,
 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:

 We received twice as many applications the second week as we did the 
        first week.
 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);
 Of the applications we received, 42 percent were for cards with 
        ``transitional assistance'' and 58 percent were for regular 
        discount cards;
 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;
 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.

 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.
 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.
 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.

 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.
 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.
 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.
 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.

 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.
 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.
 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 1 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 2, 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),3 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.4 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:

 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.
---------------------------------------------------------------------------
 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.
---------------------------------------------------------------------------
 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.
 The drug discount cards can be especially helpful to eligible low-
        income beneficiaries who do not have drug coverage through 
        Medicaid by:

     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;
     Providing $600 in each of 2004 and 2005 for the purchase of 
            prescription drugs;
     Having the annual enrollment fee, if any, paid by Medicare;
     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;
 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:

 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);
 Larger discounts are available on some cards for mail-order drugs;
 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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