[Senate Hearing 108-467]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 108-467
 
       THE NEW MEDICARE DRUG DISCOUNT CARD: AN ADVANCE PROGNOSIS

=======================================================================

                                HEARING

                               before the

                       SPECIAL COMMITTEE ON AGING
                          UNITED STATES SENATE

                      ONE HUNDRED EIGHTH CONGRESS

                             SECOND SESSION

                               __________

                             WASHINGTON, DC

                               __________

                             MARCH 9, 2004

                               __________

                           Serial No. 108-30

         Printed for the use of the Special Committee on Aging



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                       SPECIAL COMMITTEE ON AGING

                      LARRY CRAIG, Idaho, Chairman
RICHARD SHELBY, Alabama              JOHN B. BREAUX, Louisiana, Ranking 
SUSAN COLLINS, Maine                     Member
MIKE ENZI, Wyoming                   HARRY REID, Nevada
GORDON SMITH, Oregon                 HERB KOHL, Wisconsin
JAMES M. TALENT, Missouri            JAMES M. JEFFORDS, Vermont
PETER G. FITZGERALD, Illinois        RUSSELL D. FEINGOLD, Wisconsin
ORRIN G. HATCH, Utah                 RON WYDEN, Oregon
ELIZABETH DOLE, North Carolina       BLANCHE L. LINCOLN, Arkansas
TED STEVENS, Alaska                  EVAN BAYH, Indiana
RICK SANTORUM, Pennsylvania          THOMAS R. CARPER, Delaware
                                     DEBBIE STABENOW, Michigan
                      Lupe Wissel, Staff Director
             Michelle Easton, Ranking Member Staff Director

                                  (ii)

  
?

                            C O N T E N T S

                              ----------                              
                                                                   Page
Opening Statement of Senator Larry E. Craig......................     1

                                Panel I

Dennis Smith, acting administrator, Centers for Medicare and 
  Medicaid Services, Washington, DC..............................     2

                                Panel II

James Firman, president and CEO, National Council on the Aging, 
  Washington, DC.................................................    19
Craig Fuller, president and CEO, National Association of Chain 
  Drug Stores, Washington, DC....................................    37
Forest Harper, vice president, Pfizer for Living Share Card, 
  Pfizer, Inc., Washington, DC...................................    52
Karen Ignagni, president and CEO, American Association of Health 
  Plans (AAHP-HIAA), Washington, DC..............................    64
Mark Merritt, president and CEO, Pharmaceutical Care Management 
  Association, Washington, DC....................................    78

                                APPENDIX

Testimony submitted on behalf of AARP............................   113

                                 (iii)

  


     ``THE NEW MEDICARE DRUG DISCOUNT CARD: AN ADVANCE PROGNOSIS''

                              ----------                              --



                         TUESDAY, MARCH 9, 2004

                                       U.S. Senate,
                                Special Committee on Aging,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10 a.m., in room 
SD-628, Dirksen Senate Office Building, Hon. Larry Craig 
(chairman of the committee) presiding.
    Present: Senator Craig.

     OPENING STATEMENT OF SENATOR LARRY E. CRAIG, CHAIRMAN

    The Chairman. Good morning, everyone. The U.S. Senate 
Special Committee on Aging will convene.
    I want to thank you all. Less than three short months from 
today, America's seniors will get their first real taste of the 
new Medicare prescription drug relief enacted by Congress last 
fall and signed into law by President Bush. I am speaking, of 
course, of the new Medicare prescription drug discount card and 
the accompanying $600 transitional assistance for lower-income 
seniors.
    The Congress and the President felt that no senior should 
have to choose between buying food and buying drugs, and the 
new card and assistance program is a critical transition to 
help those seniors in greatest need pay for their drugs during 
the time it takes to get the rest of the Medicare drug 
legislation up and running by 2006. This program is just a 
beginning, but it is a very important one.
    Our hearing today will take a close look at how the card 
and the assistance program are shaping up so far, and more 
specifically, what seniors can expect as we near the start date 
in June. So far, progress seems to be quite encouraging. For 
example, the Centers for Medicare and Medicaid Services have 
already received more than twice the number of card sponsor 
application than they originally anticipated, over 100 
applications in all. These applications have come not just from 
traditional discount card leaders like pharmacy benefit 
managers, but also from many insurers and health plans, and I 
should add also from organizations representing America's 
pharmacists. This is a group that I know has had questions 
about the discount card approach.
    Also encouraging is the fact that several of the country's 
drug manufacturers have stepped forward to say they intend to 
participate in good faith with the new card program, and in 
many cases, to continue or even expand their own existing low-
income assistance program for seniors.
    I also want to offer very special thanks this morning to 
Dennis Smith, the acting administrator of CMS. This is the man 
whose shoulders the heavy burden of implementing this program 
have fallen and who I suspect may be eagerly awaiting the help 
of Dr. Mark McClellan, the president's new nominee to head up 
CMS. Administrator Smith will focus on CMS's ambitious plans 
for beneficiary outreach and education. One such plan is the 
agency's new Price Compare program. Under this program, seniors 
and their families will be able to use an Internet-based 
discount comparison system. Together with real-person 
assistance from toll-free operators, this system will allow 
seniors to instantly access and compare prices of drugs offered 
by card sponsors in their areas.
    As we move forward in implementing the card and assistance 
program, a few key priorities will be especially important. 
First, assuring that seniors get the information they need to 
understand and navigate the program. Second, assuring that the 
discounts are fair and straightforward. Third, seeing that CMS 
acts aggressively to combat possible fraud and to weed out card 
sponsors who are not delivering real values. Finally, it is 
also critical to assure that those seniors eligible for the 
$600 low-income help get it and get it as quickly as possible.
    The new Medicare discount cards have a tremendous potential 
and the early signals, as I said, are encouraging. However, 
much work remains to be done. We appreciate our witnesses for 
their contributions today, and I want to thank them.
    Senator Breaux, the ranking member of the committee, I 
understand will be joining me for some of the hearing, and I do 
appreciate that.
    This committee will monitor progress throughout the phases 
of implementation of this new legislation, and this is simply 
the first of a series of efforts that we will undertake to make 
sure that there is thorough, timely oversight as we move toward 
full implementation.
    As I mentioned, our first witness this morning is Dennis 
Smith, the acting administrator for the Centers for Medicare 
and Medicaid Services. Dennis has played an instrumental role 
in developing the prescription drug card program. I want to 
thank him for his hard work in a clearly complex and difficult 
process. However, it appears it is well under way and moving in 
a timely fashion.
    So Dennis, we welcome you to the committee and look forward 
to your testimony. Please proceed.

 STATEMENT OF DENNIS SMITH, ACTING ADMINISTRATOR, CENTERS FOR 
         MEDICARE AND MEDICAID SERVICES, WASHINGTON, DC

    Mr. Smith. Thank you very much, Mr. Chairman. I appreciate 
the opportunity to come before you and the committee today to 
update you on our progress for implementing the discount card. 
The drug discount card itself is good news for the millions of 
senior citizens who do not have access to purchasing through 
group plans. Twenty-four percent approximately of Medicare 
beneficiaries do not have drug coverage, so this will bring 
access to discounts for millions of our seniors and people with 
disabilities who are also eligible for Medicare.
    While the discount itself is good news, the $600 
transitional assistance is even better news. We will put $600 
for low-income senior citizens and disabled individuals toward 
the purchase of their drugs and that is $600 per year. When you 
consider that the average Medicare beneficiary without 
insurance coverage is spending approximately $1,400 annually on 
their drugs, this indeed is a significant benefit to those low-
income seniors.
    We are being diligent about implementation. I am here to 
report to you that we are on track for implementation. Our 
partners in the private sector have, as you mentioned, really 
given an outstanding response to the challenge of providing 
discounts to seniors and I am very pleased that we indeed had 
over 100 applications to offer discounts. We are currently 
reviewing those applications. By the end of the month we will 
be announcing who the drug sponsors will be.
    You asked me to focus on a number of specific parts of our 
implementation in terms of savings, the card effectiveness, 
implementation and outreach, market participation, response by 
the stakeholders, and I am happy to turn to each of them in 
turn.
    First in terms of anticipated consumer savings, the card 
sponsors themselves will provide the discounts, as they do in 
the private sector now, by offering negotiated discounts to 
individuals through the card sponsorship. We believe that the 
competition between the card sponsors and we believe that our 
new tool, the price comparison as you mentioned, will be very 
powerful incentives to help lower the price of prescription 
drugs.
    For the individual, individual beneficiaries can anticipate 
savings of 10 to 15 percent off their prescription drug 
spending with discounts of 25 percent or more on specific drugs 
as they are getting their prescription filled. Again so the 
typical senior without drug coverage today is spending about 
$1,400 annually, so this will be a significant benefit to them.
    The card effectiveness itself, we believe that one of our 
important roles is to do outreach to inform as many Medicare 
beneficiaries of this bridge to Part D and this is an important 
education process in anticipation of the full benefit beginning 
in January 2006. We are very aggressively pursuing an outreach 
strategy that involves multimedia broadcasts but it also means 
people on the ground and educating people who senior citizens 
know well and serve senior citizens on a day-to-day basis. So 
we are working with state departments of aging, our Senior 
Health Insurance Programs, known as SHIPs, state minority 
health offices, state social services offices, as well as our 
partners in the Social Security Administration. We are also 
working with the providers themselves--with our pharmacists, 
with physicians, again to spread the word of the availability 
of the discount card in anticipation and signing as many 
seniors up as we possibly can.
    We are also working with the states themselves. A number of 
states have state pharmacy programs. We are working to 
coordinate the benefits with those state programs and helping 
the states to have a seamless transition to the drug card. So 
those interactions with the drug cards are very important, as 
well.
    The advertisements we are pursuing because we believe that 
it is incumbent on us to spread the good news and reach as many 
Medicare beneficiaries as we can. Let me mention our 1-800-
Medicare toll-free number that we have been promoting over the 
last several years, again anticipating the role that it will 
play to help inform senior citizens.
    We anticipate that--to put into context, in fiscal year 
2003 we received approximately 5.6 million calls over 1-800-
Medicare and we anticipate more than doubling that amount and 
are anticipating that we will receive about 12.8 million calls 
this year. To do that we are increasing our capacity to handle 
those calls and we have already expanded the number of 
individuals by more than three times in terms of the number of 
individuals who will be handling those calls and also our 
contracts are such that we can add additional volume, as well. 
So I want to assure seniors that when they do call 1-800-
Medicare that they will be well served on the other end.
    A number of publications are also planned for release this 
year to explain the drug discount card and the $600 low-income 
assistance. We are publishing a pamphlet that provides an 
overview of the discount card and we are also publishing a 
booklet that will be mailed to all Medicare beneficiaries, that 
they will have the information that they need.
    We are also working with the Social Security Administration 
that they will specifically do a mailing to low-income Medicare 
beneficiaries detailing the drug card and the $600.
    We are sponsoring conferences across the country and 
regionally. We are holding a number of teleconferences with our 
partners in the private sector, the pharmacists and providers, 
and we will be scheduling a national conference here in 
Washington, D.C. in April.
    Those are some of our outreach activities. We also want to 
emphasize our outreach to people with disabilities, as well, 
who are also Medicare beneficiaries, and the importance of this 
benefit to them.
    Let me talk very briefly about, as you mentioned, our price 
comparison. This is a tool that we will be making available and 
the price comparison--again, as you know, information and 
knowledge is power and that is what we are trying to bring to 
the beneficiaries themselves.
    So as they review their choices and their options, they 
will be able to access through our Medicare website or they can 
call through 1-800-Medicare or, as I mentioned, the other 
individuals who are being trained to use our resources will be 
able to get information by the card sponsor and will be able to 
make comparisons on the negotiated discounts that will be 
available to them.
    We believe this information will be a very powerful tool to 
those beneficiaries themselves as they make their choices and 
to the overall market, as well, as competition in the 
marketplace will in itself become a benefit to everyone.
    Let me assure you, as I said, we are working aggressively 
on our implementation strategies. We are on target, meeting our 
time deadlines. We do have some important milestones coming up. 
At the end of this month we will be announcing the drug card 
sponsors themselves. In April, as I mentioned, a national 
conference on training. The mailings will be going out the 
first of May. The first week of May the drug sponsors 
themselves will be able to begin their marketing and outreach 
and signing up our senior citizens for the benefits to begin 
the first of June.
    So I am very pleased to tell you that we are on target and 
moving very aggressively. As I said at the outset, the 
discounts themselves are good news for those without drug 
coverage. The $600, $1,200 over 2 years, is very good news for 
our low-income seniors. We believe that this will set the stage 
for the full Part D drug benefit to begin in 2006, the 
education of the senior citizens themselves to make them aware 
of the options and the choices that they will have to be able 
to lower the cost of prescription drugs that they now face.
    Thank you very much, Mr. Chairman. I am pleased to be able 
to answer any of your questions.
    The Chairman. Well, Dennis, thank you very much. We 
appreciate again your being here today. For the Congress and 
the president to hand you late last year a rather daunting 
task, it appears that you are well on your way toward getting 
it implemented in a timely fashion.
    You testified that CMS has received over 100 applications 
for potential card sponsors, more than expected. What are the 
reasons driving such a positive response?
    Mr. Smith. Senator, I believe the positive response was as 
people positioned themselves for the full drug benefit in 2006, 
the manufacturers, the Medicare Advantage sponsors, the 
discount card sponsors are really trying to make their products 
known to beneficiaries. For their own competition amongst 
themselves, they are positioning themselves for 2006 and again 
I think that is good news for everybody.
    The Chairman. It now looks likely that seniors will have 
quite an array of cards. That is certainly going to be a lot of 
choices to make in enrollment. To help with these choices, you 
have talked about the 1-800-Medicare number and the ability to 
log onto your Price Compare site.
    A senior does not have to be, I assume, too Internet-
friendly to be able to get there, do they? Talk to us a bit 
about that because I see that as a very valuable empowering 
kind of tool for them.
    Mr. Smith. Senator, I believe that it will be, as well. Our 
website at www.Medicare.gov, we have worked with the senior in 
mind as we develop that website, making it easy to understand, 
simple, check boxes to move you through the process.
    So the pop-up features----
    The Chairman. You should use me as a guinea pig. I am 
relatively Internet-and computer-ignorant, so I might be a good 
test subject.
    Mr. Smith. Well first, let me assure you there is no need 
to be hesitant. If seniors do not want to use it at all they 
can call the 1-800-Medicare. But as you said, ``Many seniors 
now are becoming very savvy in the use of the Internet.''
    But what they will see as they go to that website is a very 
user-friendly, simple answers, check boxes, that will then move 
them through the menu. The website is geared to the beneficiary 
itself and to help them also understand other options that 
might be available. For example, we want them to know 
specifically about the $600 but we also want them to know that, 
in fact, they may be eligible for Medicaid and that there are 
other state pharmacy programs available to them, as well.
    The Chairman. That was going to be my next question. How 
much information does the senior have to bring with them to 
that point of contact, be it the 1-800 number or the website? 
Then what kind of options might they be talked through as it 
relates to choices?
    Mr. Smith. We think it is information that seniors will 
readily know on their own. As I said, we have tried to make it 
simple in terms of the questioning itself but because the $600 
is geared to an income level, we ask them a question about 
their income. So we need to know that, that they would be 
eligible for the $600.
    There is also questioning--again they will be able to have 
a simple check box for the things that they want, that they are 
answering yes or no to. So they are not filling out a lot of 
information. The information is basically being presented to 
them and then they respond in an easy fashion.
    The Chairman. Well, for any of us approaching a new task, a 
simple, straightforward approach is, of course, the most 
valuable. For example, will there be a standardized enrollment 
form? Will that variety of options be accessed through a 
standardized form?
    Mr. Smith. The enrollment form? Yes, Senator. The 
enrollment form itself we have been testing with seniors, 
making it easy to use, easy to understand, and the process for 
enrollment itself. So we have shared that with the seniors. We 
have been working with the sponsors, as well, and outside 
groups, advocacy groups, testing that to make sure they have 
all the information so that you can complete it, so there is 
not a lot of back-and-forth, but the standardized form, I 
think, we have gone through a lot of work and effort to try to 
refine it down to make it easy to use.
    The Chairman. Now that we have a senior either on the phone 
or through the Internet, they have filled out a form, obviously 
they are going to be approached with a variety of options. What 
kind of action might CMS take against plans that would offer 
extremely tempting deals in the first instance only to switch 
later on. I am not going to suggest that anyone would do a 
bait-and-switch, but actually I am going to suggest that 
somebody might do a bait-and-switch. That is, after they got 
the person enrolled, up would go the prices.
    How will you monitor that to make sure that that game is 
not played?
    Mr. Smith. We will be monitoring that, Senator, and we will 
be monitoring to assure that those discounts that were offered 
are real.
    Also let me assure you again the discount card in many 
respects is positioning people's plans for the future, so they 
have every incentive to make sure they are dealing straight 
with the beneficiary. The worst thing, the last thing they are 
going to want to do is to upset the beneficiary, to get 
themselves in hot water with CMS or the inspector general over 
their marketing strategies or marketing tactics.
    The Chairman. Or some national senior publication 
highlighting an individual group as a bad performer.
    Mr. Smith. When you are looking to the future and what role 
you want to play, the last thing you want to do is mess up 
between now and then.
    The Chairman. You find someone that has messed up, what do 
you do at CMS?
    Mr. Smith. We have a number--again, each of the plan 
sponsors sign contracts with us and those contracts deal with 
enforcement activities. So we have the authority to impose 
intermediate sanctions in terms of halting enrollment. We can 
impose civil monetary penalties and pulling the plugs in its 
entirety, terminating their endorsement of a card sponsor. We 
have all those tools at our disposal.
    I do want to say, since you gave me an opening, for our 
seniors again to reiterate those basic consumer protections 
about protecting your individual information--never give out 
your Medicare number, never give out your bank account number, 
those are not things legitimate card sponsors are going to be 
asking for, so never give out that type of information.
    The Chairman. There are some reports out already that there 
may be some gaming going on. Is it serious? Do we know or have 
you been able to see anybody out there yet? I notice there are 
a few reports of I guess I will use the word con artists at 
hand.
    Mr. Smith. We are pursuing a couple of different leads of 
behavior that may indeed be fraudulent and again we have really 
a coordinated activity with the Department of Justice, as well 
as our own inspector general, to pursue any of those leads and, 
in fact, we will be doing that. Obviously there are severe 
penalties associated with that if it turns out to be true.
    The Chairman. Well, we have already mentioned the ``do-
nots'' that certainly a senior ought not get involved in. Are 
there any other kinds of danger signs that are evident that a 
senior might see or red flags, if you will? Will you develop in 
your information a checklist of those kinds of things, a due 
diligence, due caution kind of checklist, let us say, to the 
average senior?
    Mr. Smith. Again the legitimate card sponsors who have come 
to us and entered into contracts, we have specific agreements 
with them about the timing of their marketing and they cannot 
jump the gun on everybody else, on specific ways to do their 
marketing to make sure that they do not cross the line in the 
way the marketing to seniors is being done.
    So those are a part of the criteria and why we invited them 
to come in for our endorsed cards, to assure seniors that those 
safeguards have been put into place and people with the 
endorsed cards are following those specific guidelines and 
rules.
    Again I think our partners in the private sector, in 
consumer groups, are going to be out there helping us and to 
spread the word to seniors that if you feel like something is 
wrong, do not hesitate to call and report any activity that you 
think is not appropriate.
    The Chairman. Well, thank you. Let me now approach the 
other part of this that you have spoken to and that Congress is 
very intent on, and that is the $600 direct assistance. 
Experience from some public assistance programs has 
demonstrated that lower-income folks are sometimes a little 
harder to reach. What effort is CMS planning that would help 
assist in fully reaching the many eligible seniors who will 
qualify for that $600 assistance that we have targeted?
    Mr. Smith. Senator, the Social Security Administration 
itself will be doing a targeted mailing to low-income seniors 
to inform them about that $600 and encourage them to 
participate. Experience does show that the low-income seniors 
in particular do not always avail themselves of the resources 
that are available to them.
    We are, in addition to working with Social Security, we 
will be working with the other groups at the state level. A 
number of states offer their own pharmacy assistance programs 
and discount cards, so working with the states, they know who a 
lot of the seniors are and to avail them of that assistance. 
Again I think that this is an area in particular--in my other 
job in terms of administering the Medicaid program, we know 
that seniors need that extra assistance in reaching them, 
informing them of the options, and helping them to make a 
choice and make a decision.
    So this is an area that we will be very aggressive in. Our 
partners in the states will be of great benefit to us and again 
our partners in the private sector, as well, to make sure 
people know what is available to them.
    The Chairman. A couple of last questions. I think early on 
many pharmacy groups were opposed to the Medicare-sponsored 
discount card program for a variety of reasons, and yet the 
final legislation included several provisions to help assure 
adequate access to pharmacies. Now we are seeing the major 
pharmacy groups seeking to sponsor cards on their own.
    What do you see as the effect of the card program on 
America's pharmacies?
    Mr. Smith. Well again, the fact that the pharmacists 
themselves are coming to you today to talk about their role in 
the discount card is just a great development and we are 
delighted to join with them as partners. I think that the 
protections in terms of access to include the local pharmacist 
in the delivery of the discount card in itself was an important 
bridge to cross and Congress did the right thing in making sure 
that those safeguards were there and our partners have 
responded in a very positive way and we are very grateful for 
that.
    The Chairman. Well, getting off on the right foot, I think, 
is always important for new programs. It certainly appears at 
this moment that you are making every effort to make that 
happen, and I hope that the robust interest in the card 
sponsorship in 2004 bodes well for and is a prelude to a full 
drug benefit in 2006 and a robust participation there.
    How would you react to that? Is that a reasonable 
conclusion to draw?
    Mr. Smith. I think that it is, Senator. I think that and 
the folks here in the first row that you see in front of you 
have worked night and day on building relationships that will 
make this all work from our information technology and 
understanding states of their information systems so that the 
linkages can be made, so everybody can talk together, from a 
system standpoint to testing out the application form has been 
a tremendous effort and I do want to thank the professionals at 
CMS who have, I think, done an outstanding job in these first 
few months.
    I have been on the front lines of bringing new programs up 
and know what it takes and all the thousands and thousands of 
decisions that have to be made so it all works smoothly and I 
come before you today with great confidence that it indeed is 
going to be a very smooth transition.
    The Chairman. Well, Dennis, thank you very much for your 
testimony and the enthusiasm you bring to what you are doing, 
and we hope you have the greatest of success, for America's 
seniors' sake. But having said that, we will watch you very 
closely.
    Mr. Smith. Senator, I want to thank you for your leadership 
and I am delighted to come before you today and look forward to 
additional visits to assure you we are on the right track.
    The Chairman. When you get your website up and it is fully 
operative, we might get you back before the committee for a 
full demonstration, to understand it and to again draw greater 
attention to it, as hopefully we can, so that it can be 
effectively used. I would hope that if your better than 
doubling of calls to the 1-800-Medicare actually develops, that 
you have a substantial call center to handle those. There is 
nothing that provokes anybody more than to dial a 1-800 number 
and wait 45 minutes for a live body to come on line.
    Mr. Smith. Senator, one of the things about Medicare is we 
have parents and family members who do not hesitate to inform 
us when maybe we did not perform as well as we expected to. So 
the feedback is always welcome and I think our seniors are 
going to be very pleased with the service that they will get.
    The Chairman. Well, Dennis, again thank you. Thank you very 
much, and let me thank the folks out at CMS for the work that 
is being done. We appreciate it.
    Mr. Smith. Thank you, Mr. Chairman.
    [The prepared statement of Mr. Smith follows:]

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    The Chairman. We will ask our next panel to come forward 
and please be seated.
    Let me thank our second panel today for being here, and I 
will proceed in alphabetical order. So we will first hear from 
Jim Firman, who is president and CEO of the National Council on 
the Aging. In this capacity, Jim has served as a tireless 
advocate for seniors, and we appreciate you being here today.
    Next will be Craig Fuller, who is the president and CEO of 
the National Association of Chain Drug Stores, whose 
organization has announced its desire to enter into a 
partnership to offer a drug card of its own.
    Then next we will hear from Forest Harper, who is the vice 
president of Pfizer, for Pfizer's Pfizer for Living Share Card 
program. He will be talking about Pfizer's plans to continue to 
enhance the Share Card as a supplement to the new program, as 
well as about Pfizer's unique and very encouraging efforts to 
go even further and participate directly in the new Medicare-
sponsored discount card program. Overall, the assistance 
programs offered by Pfizer, Merck and certain other drug 
manufacturers may go a long way toward helping make the new 
card program a success.
    Next we will hear from Karen Ignagni, the distinguished 
president and CEO of what I understand is now a newly 
christened organization called America's Health Insurance 
Plans, or AHIP. AHIP is the product of a recent merger of the 
American Association of Health Plans and the Health Insurance 
Association of America, both of which played vital roles in the 
creation of the new Medicare law.
    Finally, with us today is Mark Merritt, CEO of the 
Pharmaceutical Care Management Association representing 
America's pharmacy benefit managers, many of whom have been 
leaders in developing drug discount cards and from whom we can 
all, I think, learn a great deal.
    So I look forward to all of your testimony and again let me 
now turn to Jim Firman, president and CEO of the National 
Council on Aging. Jim, welcome.

  STATEMENT OF JAMES FIRMAN, PRESIDENT AND CEO, THE NATIONAL 
              COUNCIL ON THE AGING, WASHINGTON, DC

    Mr. Firman. Good morning, Senator. Thank you for the 
opportunity to participate in today's hearing, I am pleased to 
represent the National Council on Aging, the nation's first 
organization formed to represent America's seniors and those 
who serve them.
    There are three messages I want to convey today. First of 
all, the new Medicare law is the single most important 
opportunity to help low-income Medicare beneficiaries that has 
emerged in the past 35 years.
    Second, the actual savings to many low-income beneficiaries 
under the new discount card program are going to be far more 
generous than most people realize.
    Third, the confusion about the new law and the benefits 
created will give us a unique set of challenges that 
policymakers, government agencies and advocates are all going 
to have to work together to solve.
    The new Medicare law is a unique opportunity to provide 
prescription drugs and other assistance to an extremely 
vulnerable population that is struggling daily to get their 
needs met; namely, low-income seniors and younger people with 
disabilities, many of whom live alone, suffer from multiple 
chronic illnesses, and take several medications. Although most 
beneficiaries will realize savings of 10 to 20 percent under 
the Medicare-approved discount card, many with incomes below 
135 percent of poverty, regardless of assets, will be eligible 
for $600 transitional assistance this year and next.
    However, there is very good news to report about the 
transitional assistance benefit. Most low-income beneficiaries 
who enroll will actually save a lot more than $600 because of 
the commendable action by several pharmaceutical manufacturers 
to offer savings programs that will wrap around the Medicare-
approved card.
    There are two charts over here that I would like to draw 
your attention to. The first is an example of an 82-year-old 
man from Idaho with an income of $10,000 and assets of cash in 
the bank of $20,000. Now as you know, Senator, there is no 
state pharmacy assistance program in Idaho and he would not 
qualify for Medicaid because of his assets.
    In this particular case this individual would be spending 
$5,500 on three different medications. As a result of the 
transitional assistance and the wrap-around programs offered by 
the three companies, this person's actual costs for the year 
would only be approximately $460. This person will save over 
$5,000 per year in 2004 and 2005.
    The second example, is a 68-year-old woman living in 
Louisiana with income of $11,000 and assets of $30,000. She 
currently may be spending $2,500 a year on medications. As a 
result of the transitional assistance and the wrap-around 
program she would be spending about $475-480 a year. Her 
savings will be about $2,100 a year.
    Now every case is different. It depends on the individual, 
the medications they are taking, how much they are paying 
retail, what the dispensing fees are, but if persons have 
income less than 135 percent of poverty and qualify for 
transitional assistance, many of them are going to achieve 
dramatic savings.
    This is very important because as we are out there 
encouraging low-income people to enroll, the message needs to 
be that the $600 savings may only be the beginning of what you 
can actually save in 2004 and 2005.
    However, to fully achieve these substantial savings it is 
imperative that as many low-income beneficiaries as possible 
actually enroll in the programs. Unfortunately, as you noted, 
the track record of various past efforts to enroll low-income 
populations in public and private benefits has been, at best, 
inconsistent and uneven. For example, the take-up rate for the 
current Medicare low-income benefits, QMB and SLMB, are 
estimated to only be 43 percent after all these years. Now, we 
are talking about a very short timeframe and much more 
ambitious enrollment goal.
    In addition, we face the challenge that beneficiaries are 
already very confused about the new law and as the Kaiser poll 
showed, many do not even know the bill passed and was signed 
into law.
    NCOA and others view this as an extraordinary and time-
sensitive opportunity to organize and mobilize a broad-based 
public/private partnership to significantly increase projected 
participation rates. While proposed CMS and SSA awareness 
efforts will reach millions of low-income beneficiaries, also 
the private sector has to do our part, as well. There needs to 
be complementary, coordinated efforts that go deeper into the 
community.
    In response to these challenges and opportunities, NCOA and 
other voluntary groups are organizing the Access to Benefits 
Coalition, a broad-based public/private partnership including 
CMS, and government agencies, dedicated to ensuring that low-
income beneficiaries know about and can make optimal use of the 
new Medicare prescription drug programs and other resources 
available to save them money.
    The goal of the ABC campaign is to quickly and measurably 
educate low-income Medicare beneficiaries and their families, 
provide hands-on, personalized outreach and assistance, and 
facilitate actual enrollment in the transitional assistance and 
other benefits. Our plan is to extend and complement Federal 
efforts, not to duplicate them. This is a huge job and we all 
have to do our part.
    NCOA is now developing an enhanced version of our 
BenefitsCheckUpRx website to facilitate customized 
decisionmaking and enrollment in a full range of savings 
programs. The new decision support tool will help beneficiaries 
to determine the individualized combination of programs that 
will save them the most money, not only the new Medicare 
benefits but state pharmacy programs, manufacturers' discount 
cards, 130 private drug company patient assistance programs, 
because the reality is in 2004 and 2005 people are going to 
need to piece together a combination of programs in order to be 
whole.
    If their income is over 135 percent of poverty, they will 
not qualify for the transitional assistance, but they are still 
going to need help and they are going to need to put together 
the right package for them.
    As part of our effort we will train and support thousands 
of local coalition members and volunteers to serve as 
intermediaries with low-income beneficiaries to use our new 
tool and the CMS Compare tool, which is also a great tool.
    With the cooperation of the card sponsors, we also hope to 
ease the burden of obtaining and completing the enrollment form 
for transitional assistance by including printable e-forms for 
the Medicare-endorsed card and other important savings programs 
right on the website.
    Other strategies that can be used to maximize low-income 
participation in the new Medicare benefit would be to 
automatically enroll Medicare savings program recipients in the 
credit program and to create a universal enrollment form for 
the transitional assistance benefit, which if I understand it, 
Mr. Smith said CMS is planning to do and I think that would be 
very helpful to this process.
    Let me conclude by saying regardless of whether an 
individual or organization supported or opposed the Medicare 
legislation, our responsibility now is to America's seniors and 
people with disabilities and their families. This transcends 
politics and is very clear. We all must come together and 
combine our energies and resources behind a coordinated, 
sustained campaign to maximize prescription drug savings for 
underserved older Americans and persons with disabilities.
    By working together in a nonpartisan way on outreach and 
enrollment initiatives focussed on underserved populations, we 
can significantly improve the quality of life for millions of 
Americans who need help this year. Thank you.
    [The prepared statement of Mr. Firman follows:]

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    The Chairman. Well, Jim, thank you very much. Information 
flows are going to be critical. I recently hosted a health care 
conference in Idaho about the new programs, and it was well 
attended, upwards of 600 folks. What was fascinating to me 
throughout that conference, and I have never seen it before, is 
that there were nearly 600 people there, all of them taking 
notes with every speaker. There is a great hunger for 
information. While some have been critical of what Congress did 
in one way or another, there is still a true recognition that 
this is a valuable asset for America's seniors.
    Now let me turn to Craig Fuller. Craig is president and CEO 
of the National Association of Chain Stores. We welcome you 
before the committee, Craig.

    STATEMENT OF CRAIG FULLER, PRESIDENT AND CEO, NATIONAL 
        ASSOCIATION OF CHAIN DRUG STORES, WASHINGTON, DC

    Mr. Fuller. Mr. Chairman, thank you very much. It is a 
pleasure for me to be here today. I have submitted a statement 
for the record and I would like to just spend a few minutes 
talking to you about some of the experiences we are having and 
hopefully being responsive to some of the good questions you 
asked a little bit earlier.
    I would also like to reciprocate, frankly, and invite you 
and members of this committee, indeed your colleagues in the 
Senate, to visit a pharmacy over the next few months and see 
first-hand how seniors are coming to learn about the program, 
enroll in the program, and receive the benefits from this 
program because that is really where our commitment lies.
    As Jim said so eloquently, we debated various aspects of 
this legislation as it moved through the Congress but today the 
Medicare Modernization Act is the law. It is a law that 
reflects some of the concerns we had during the course of last 
year but it is a law that we fully intend to do everything we 
can to ensure is made operational and works for America's 
seniors and provides the kind of benefits not only in 2004 and 
2005 but in 2006, as envisioned by the legislation.
    We have, of course, members all across the country. Our 
members are held within 217 different companies, 33,000 
different stores. We have 120,000 pharmacists that see hundreds 
and hundreds of thousands of patients every single day across 
the country.
    I also wear another hat though, as you suggested. NACDS is 
the co-owner of the Pharmacy Care Alliance. We decided early 
this year to partner with Express Scripts, one of the nation's 
largest and leading pharmacy benefit managers, in the Pharmacy 
Care Alliance for the purpose of offering a senior drug 
discount card. We felt if we were going to be able to do this 
effectively, we had to work with an organization that had a lot 
of experience in this area and we have been very pleased with 
this partnership. I must say that it is an intense activity. As 
you were suggesting with the previous witness, Dennis Smith, 
you kind of get into this on a 24-hour-a-day basis in order to 
get ready for the enrollment that begins in May and obviously 
the benefits beginning in June.
    We are going to reach out, though, to all of our 
pharmacists, as well as to independent pharmacists across the 
country because we think that that's where most of these 
seniors go. It is always important to remember that of the 40 
million plus Americans who are Medicare-eligible, 75 percent 
have some kind of coverage, not always good coverage, but 25 
percent or so have no coverage at all and those patients today, 
for their medication needs, are speaking with their physicians 
and with their pharmacists.
    The minute this legislation was passed, people were coming 
into the stores asking about the program, asking about how to 
enroll, asking about when it would be available. For those 10 
or 12 million people who have no coverage during the course of 
the year, they, and as Jim suggested, their friends or 
relatives and their caregivers are very much interested in how 
we are going to deliver on June 1. So we are going to be 
actively involved through the Pharmacy Care Alliance in 
enrolling patients and in hopefully meeting their needs.
    You asked in organizing this hearing to have a discussion 
of some of the issues we face, and there are issues. One, I 
think, lies with expectations. What is that senior going to 
expect when they come into a pharmacy to enroll and when they 
come in to receive the benefit from their card? Well, I am 
pleased to tell you that I actually believe that because the 
pharmaceutical manufacturers and retail pharmacy are going to 
be participating and making concessions on the cost of this 
medication that we should exceed the estimated 10 to 25 percent 
savings. I think we can beat that. We are working now with the 
manufacturers on the details of the program and that is good 
news.
    However, of course, some of the expectations are that this 
is a benefit program with a $10 co-pay and it is not that, and 
so we are going to have to find ways to help educate seniors. 
That is why we are very pleased, frankly, with what CMS has 
done. We commend CMS. They are working tirelessly with us and 
many others to get this information out to seniors and we have 
been distributing the information they provide to seniors.
    I think there are going to be issues with the sheer 
magnitude. One of those common phrases heard in this town is 
``This isn't rocket science.'' Well, this is about as close to 
rocket science as a health care program can get when you think 
of the fact that we may have 10 or 12 million people, plus 
another 10-12, 20 million people who are concerned about them, 
coming to stores, coming to organizations like Jim's, coming to 
the Congress and to Medicare saying, ``How do I enroll?'' They 
are all going to do it on May 3 when this program kicks off and 
they will have 30 days, if they want to be able to participate 
in June, roughly 30 days to do that. There is a lot of 
technology behind these programs and we are working closely 
with CMS to make sure it happens.
    The website that you asked about is very important. We also 
will have a website for our program to help educate seniors. A 
lot of seniors and their caregivers come to websites for 
information. A lot of seniors come to our retail pharmacy 
websites for information and all of these are going to have to 
be coordinated.
    It is an important undertaking and I will close by saying 
that as you pointed out, we have had concerns but our concerns 
were addressed last year. We think one of the reasons we wanted 
a program that was developed within the community of pharmacy 
was to demonstrate that a level playing field that does not 
push people to mail order, a program that has transparency, a 
program that has open access, can be competitive, can work, and 
can serve America's seniors, and that is what we are about 
building as we go forward. Thank you again for allowing us to 
come and talk to the committee.
    [The prepared statement of Mr. Fuller follows:]

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    The Chairman. Craig, thank you very much for that 
testimony.
    Now let me turn to Forest Harper, who is vice president for 
Pfizer's Pfizer for Living Share Card program. Forest, we 
appreciate your participation today, and I will tell you that 
in the health care conference we had in Idaho, we appreciated 
Pfizer's involvement there. Obviously your company is taking a 
very active role in this effort. Please proceed.

 STATEMENT OF FOREST HARPER, VICE PRESIDENT, PFIZER FOR LIVING 
            SHARE CARD, PFIZER, INC., WASHINGTON, DC

    Mr. Harper. Thank you, Mr. Chairman and members of the 
committee and staffers. My name is Forest Harper and I am vice 
president of Pfizer in charge of the Pfizer for Living Share 
Card program. I deeply appreciate your invitation and to appear 
here today to talk about our program. I am happy to discuss 
Pfizer's continuing commitment to providing patients in need 
with access to prescription medicines. I ask that my written 
statement be included in the record.
    The Chairman. It will be.
    Mr. Harper. It was just 2 years ago that we created the 
Pfizer Share Card program as a bridge to Medicare prescription 
drug benefits. The Pfizer Share Card has provided immediate 
assistance to those most in need while Congress took on the 
challenge of creating a more enduring legislative solution. 
Over those 2 years Pfizer's Share Card has helped more than a 
half a million low-income Medicare enrollees fill nearly 4.5 
million prescriptions. The Pfizer Share Card allows low-income 
Medicare beneficiaries who have no prescription drug coverage 
to purchase most Pfizer medicines for just a flat fee of $15 
per month per prescription, as you can see on the chart to my 
left.
    We have learned a number of important lessons that have 
helped make the Pfizer Share Card a success. We believe these 
lessons can help ensure the success of the interim discount 
card and we also learned that to maximize the enrollment of 
Medicare beneficiaries, the program has to be as user-friendly, 
simple, predictable, and convenient as possible.
    We have also learned that to reach this target population a 
successor program must go the extra mile, not just 
advertisement. What really works is partnering with grassroots 
organizations that Medicare beneficiaries truly trust. We work 
with a network of over 25,000 local community-based 
organizations. This is necessary to ensure that nobody is left 
out and to reach across language and cultural boundaries.
    The interim Medicare discount card is an integral and 
important piece of the new Medicare bill. Like the Pfizer Share 
Card, it is designed to provide immediate assistance to those 
most in need. While CMS goes about the challenging task of 
implementing the new and universal prescription drug benefit in 
2006, we will be here.
    Let me emphasize that Pfizer is committing to making both 
programs a success, both the Medicare discount card and the 
permanent Medicare prescription drug benefit. To that end, we 
are actively working with leading health care organizations to 
create a new cooperative program that will offer Medicare 
beneficiaries immediate assistance through the new Medicare 
discount card. We believe that this cooperative program 
currently under discussion could be one of the most 
comprehensive discount cards currently under consideration by 
CMS.
    The proposed program envisions a broad coalition of health 
care companies aligned around common goals. Our first goal is 
to assure continuity of care for our current Pfizer Share Card 
members. Second, we want to provide patients in need with even 
broader access to the prescription medicines that can help them 
better manage their health. We are also committed to preserving 
the integrity of the physician and pharmacist patient 
relationship, as Craig mentioned earlier, that is at the heart 
of the health care delivery system.
    Let me also emphasize that Pfizer's commitment to patients 
in need did not start with and certainly will not stop with the 
Pfizer Share Card or the coming Medicare discount card. For 
more than 30 years in which I am proud to say 22 of those years 
I have personally witnessed, Pfizer has been reaching out to 
people in need. We donate over $1 million each day in medicines 
throughout our U.S. outreach programs.
    In 2003 alone we donated $500 million in medicines to more 
than 1.2 million Americans, are our second chart points out, in 
our three different programs on access. One program is the 
Sharing Care program. The second program is our Connection to 
Care program, which is the physicians offices, and then the 
Pfizer Share Card program.
    Before I close I would like to share with you one of the 
thousands of success stories from a Pfizer Share Card enrollee. 
You know, I really had the privilege of personally meeting 
Lorraine, who is a 74-year-old and lives in Sandy, UT. She 
became a Pfizer Share Card member in September 2002 and at that 
time Lorraine had no prescription drug coverage and a great 
difficulty getting the medicines she needed.
    She went looking for help and I am pleased to say found the 
Pfizer Share Card. Lorraine was an accountant before she 
retired and she did the math. She found the Share Card saved 
her $100 a month and since then she has become a passionate 
advocate of the Pfizer Share Card. She has actually taken it up 
herself to speak at community events, including Aging Committee 
conferences like yours, Senator Craig, but this time in Utah at 
an event that Senator Hatch hosts each year in his aging 
conference.
    Lorraine and others like her are the reason we started the 
Pfizer Share Card and they are the reason we are committed to 
making the Medicare discount card work. We commend this 
committee, Congress and the Administration for their commitment 
to improving Medicare. We are pleased to be a part and do our 
part of this program.
    Pfizer is committed to discovering new medicines that 
improve health and enhance lives. We are equally committed to 
doing whatever we can do to ensure people receive the medicines 
they need and when they need it and how they need it. Thank you 
for your time and attention and I look forward to answering any 
questions you may have.
    [The prepared statement of Mr. Harper follows:]

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    The Chairman. Forest, thank you very much for that 
testimony and for Pfizer's involvement.
    Let me now introduce once again Karen Ignagni, president 
and CEO of a newly formed organization called America's Health 
Insurance Plans or AHIP. Welcome before the committee.

    STATEMENT OF KAREN IGNAGNI, PRESIDENT AND CEO, AMERICAN 
          ASSOCIATION OF HEALTH PLANS, WASHINGTON, DC

    Ms. Ignagni. Thank you, Mr. Chairman. Our members would 
like to commend you for convening this hearing and we are 
delighted to participate and want to thank you very much for 
the invitation.
    I would like to speak with you about three things this 
morning. First is to express the strong commitment on the part 
of our organization, AHIP. We are committed to this legislation 
and we are committed to the implementation schedule and we 
believe that we can be strong solution-providers. Second, to 
that end I want to discuss the value that we can bring and we 
are bringing to this program, and third, the results that we 
are achieving.
    As this hearing looks ahead and focuses on the June 1 
implementation of the drug discount card, I would like to first 
highlight the progress that already has been made for 
beneficiaries with the passage of this legislation. CMS has 
reported that 95 percent of new funding for the Medicare 
Advantage program is being used in improving benefits, and we 
see reports of that all over the country. The remaining 5 
percent has been saved for benefit enhancements in 2005. 3.7 
million beneficiaries are receiving expanded benefits. Premiums 
have been reduced for 1.9 million enrollees and have declined 
by an average of 26 percent and co-payments have been reduced 
for 2 million enrollees.
    These improvements are clear evidence that the legislation 
passed 3 months ago is providing significant value for the 
nation's seniors and I want to commend the efforts of the 
members of this committee and you, Mr. Chairman, for making 
sure that was part of this agenda.
    Two-thirds of our enrollees in Medicare Advantage get 
prescription drugs. This is expanding now with the additional 
legislation and the discount card will make those dollars go 
farther for beneficiaries.
    As we look forward to the implementation of the discount 
card, our members are participating in three ways. First, of 
the 106 entities that have submitted applications, 
approximately half are for Medicare Advantage and Medicare Cost 
plans.
    Second, a number of our member companies have submitted 
applications to sponsor nationwide or statewide discount drug 
cards that will be broadly available.
    Third, other health plans and medigap carriers are 
exploring opportunities to collaborate with general sponsors in 
offering the cards to enrollees.
    In addition to their participation, our members are 
developing a number of initiatives that go right to the 
questions that the committee posed in terms of how will we get 
the message out? First, we are designing innovative training 
programs for our customer service teams all over the country. 
We are developing other information resources to help 
beneficiaries, including brochures with frequently asked 
questions, e-mail access to pharmacists and others who are 
available to answer questions, web pages, call centers, and 
other resources to facilitate information-sharing.
    Our members are committed to increasing especially the 
awareness among beneficiaries about the possibility that they 
may be eligible to receive up to $600 over each of the next 2 
years in the transitional assistance. We know further that a 
significant number of these individuals are already involved in 
Medicare Advantage plans and we are working especially with CMS 
to design innovative programs in coordination with CMS to get 
the word out and get the job done.
    The Medicare legislation clearly required the discount card 
program to be implemented very, very quickly. While entities, 
Mr. Chairman, in the private sector are often before Congress 
with concerns they may have with the implementation of specific 
bills, we believe that it is also important to recognize when 
performance exceeds expectations.
    We want to commend the agency for maintaining, first, open 
lines of communication and working very hard. This is the work 
that no one sees but they are on an almost 15-hour day cycle to 
get this job done, to provide timely responses to our members 
on the many implementation questions, and I hear from the tenor 
of the comments from my colleagues on this panel that they are 
doing the same with the other stakeholders.
    Building on our past success--the way we will increase 
value of this discount card to beneficiaries is that we will 
use private sector pharmacy benefit management tools and 
techniques in the discount card program over the next 2 years 
and in the prescription drug program beginning in 2006. These 
tools increase access to prescription drugs by reducing out-of-
pocket costs, improving quality, an often skipped-over but 
tremendously important issue for this population, and in 
reducing medication errors.
    They encourage first, the use of generics when doctors say 
that they are permissible. Second, step therapy programs so we 
can begin to determine out what works well, what works fast, 
what works best. Third, negotiating discounts with pharmacies 
that participate in our networks. Fourth, disease management 
techniques that includes practice guidelines to encourage the 
use of safe and effective procedures and the latest in 
scientific information. Finally, the appropriate use of mail 
order pharmacies.
    To conclude, Mr. Chairman, we are also proud to tell the 
committee that a number of studies not done by our 
organization, but by external sources, have demonstrated that 
the use of these techniques by private sector benefit plans is 
beneficial not only to enrollees in private plans but to 
enrollees in public programs. For example, a 2003 study found 
that the PACE program in Pennsylvania, arguably one of the most 
effective prescription drug programs throughout the country, 
could save up to an additional 40 percent by adopting the full 
range of private sector pharmacy benefit management techniques 
I talked about.
    Second, a Lewin study found that Medicaid managed care 
plans reduce prescription drug costs for states by 15 percent 
below the level states would otherwise have experienced under 
Medicaid fee-for-service. That is significant in and of itself 
but when you recognize that this statistic is married with the 
observation by the consulting firm that did this report, we 
start at a 10 percent disadvantage, achieving 15 percent 
reduction is a major accomplishment.
    We are pleased, Mr. Chairman, to join with our colleagues 
in participating in this hearing today. We are pleased to talk 
about the value we are bringing to beneficiaries and we want to 
express our strong commitment to being full participants to 
make this program work effectively. Thank you.
    [The prepared statement of Ms. Ignagni follows:]

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    The Chairman. Karen, thank you very much.
    Now let me turn to Mark Merritt, CEO of the Pharmaceutical 
Care Management Association. Mark, thank you very much.

 STATEMENT OF MARK MERRITT, PRESIDENT AND CEO, PHARMACEUTICAL 
          CARE MANAGEMENT ASSOCIATION, WASHINGTON, DC

    Mr. Merritt. Well, thank you, Mr. Chairman.
    My name is Mark Merritt. I am president of the 
Pharmaceutical Care Management Association, the trade 
association for PBMs, and we, too, are enthusiastic about the 
discount card program and, of course, the funded benefit beyond 
that.
    Our member companies together administer drug benefits for 
over 200 million Americans. We commend the committee for 
holding this hearing today to highlight the card program 
because often it is looked over as we look toward the funded 
benefit, but seniors are going to save a lot of money on this 
program and PBMs look forward to helping them do that.
    If we could leave you with two key points today it would be 
this. First, PBMs are new to people and we want to let people 
know that they work and work well. We do not brand ourselves, 
but this discount card gives us an opportunity to show in 
public programs what we can do for seniors.
    Second, in line with that first point is that as we go 
forward with implementation of the discount card and then later 
the funded benefit, it is really important to preserve the 
tools that PBMs use that have worked so successfully for 
seniors and others in the commercial market. The reasons that 
we saved money in the commercial market are why we are involved 
in the Medicare plan right now and we need to preserve those 
tools as we move forward.
    Just a quick primer on what PBMs do and how they add value 
for consumers. Basically what we do is we take regular people 
and we aggregate their buying power and then we use that to 
negotiate big discounts with manufacturers and retail pharmacy. 
Then, of course, we throw in other innovative tools, like mail 
service and other things that can save people money, add 
convenience, and so forth.
    But we also work on the quality front. We work 
collaboratively with patients, with physicians, and pharmacists 
to help promote quality, improve patient outcomes, and so 
forth. It is not just about money. The drug utilization review 
that we use is very helpful to people and helps the clinically 
based formularies, and so forth, helps to be in better 
compliance with regular people.
    I think according to recent projections from CMS, the rate 
of growth in drug spending, although still too high, is 
actually decelerating over the last couple of years, which we 
believe is coincidental with the fact that PBMs' tools have 
been more and more adopted in the marketplace over the last 5 
to 10 years. These tools are multi-tiered formularies, 
therapeutic interchange, increased competition, and a lot of 
independent studies and government data confirm that what we 
are doing are working. From CBO to GAO and others, they have 
documented that PBMs save significant amounts for people, often 
18 percent on drug cards in the ones that have been used prior 
to this, and can save people hundreds of dollars a year. That 
is again not even including the examples that Jim showed 
earlier about people who can save a lot more money.
    Turning to Medicare, PBMs are pleased that the new law 
recognizes the role that PBMs have played to save people money 
and to provide better access to drugs. The legislation strikes 
the right balance by promoting more choice and competition 
while, at the same time, setting forth important beneficiary 
protections. The interim drug discount card represents 
beneficiaries' first real encounter with the new law and we are 
optimistic that seniors and other beneficiaries will like what 
they see.
    PBMs have a great deal of experience in administering 
discount cards to both seniors and the under-65 population. At 
last count GAO estimates that at least 17 million Americans are 
enrolled in a PBM-administered drug card. Preliminary estimates 
from CMS, as was discussed earlier by Mr. Smith, showed that 
there is also going to be robust participation from PBMs, 
health plans, and others.
    We expect that seniors will see meaningful savings, on 
average 10 to 25 percent in this program. For some drugs we 
anticipate even deeper discounts for beneficiaries.
    The transitional assistance program is, of course, going to 
be crucial. Of course, more than half the people in the 
discount card program will be in TA and its annual $600 in 
assistance will provide even greater relief to those who need 
it most.
    At the same time, since PBMs have the vast majority of the 
nation's retail pharmacies in their networks, seniors and the 
disabled will have broad access to pharmacies in urban, 
suburban, and rural settings. Beneficiaries will also have 
access to mail service pharmacies, which provide even greater 
savings to those who find that in their interest to use.
    The discount card program represents a significant 
improvement over the status quo for millions of seniors and is 
an important lifeline while CMS works to implement the 
permanent benefit in January 2006.
    In conclusion, PBMs look forward to the opportunity to 
serve the Medicare population. We have a unique opportunity to 
forge a lasting partnership with both America's seniors and the 
Medicare program. We look forward to working closely with CMS 
and others to implement a program that puts the needs of 
seniors and other beneficiaries front and center.
    Mr. Chairman, again thank you on behalf of the member 
companies of PCMA. We thank you for this opportunity to share 
our views and we look forward to any questions you might have.
    [The prepared statement of Mr. Merritt follows:]

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    The Chairman. Mark, thank you very much.
    Some of the questions I will be asking may be directed at 
specific individuals here on the panel, but others who might 
wish to add to or make comment off of those questions, please 
do so.
    Jim, you testified that low-income seniors, those below 135 
percent of poverty, could actually see savings well above the 
$600, indeed, as much as 40 to 90 percent savings on 
prescription drugs during the 2004-2005 period, and that much 
of this has to do with interaction of the new law itself, with 
supplemental assistance programs being volunteered by drug 
manufacturers like Pfizer, Merck, Lily and others. This is 
obviously very encouraging news for low-income seniors.
    Jim and Forest, could you comment in a little more detail 
just how this will work and what benefit seniors might be able 
to expect?
    Mr. Firman. I think all of the details on how this will 
work remains to be seen as the companies work out some of their 
relationships with the card sponsors. For example, Merck has 
indicated that once a person qualifies for transitional 
assistance and uses the $600 benefit, they will be able to get 
Merck drugs for free for the rest of that year. Now, part of 
what Merck needs to do is work out an arrangement with every 
single one of the card sponsors to make sure that this is a 
seamless process.
    TogetherRx has taken a different strategy. TogetherRx 
represents seven companies and about 170 medications and offers 
discounts of anywhere from 20 to 40 to 70 percent, depending on 
the medication and they are saying that you use your CMS-
approved card and then you use the TogetherRx card and you come 
together to the pharmacy and you show them.
    I will let Forest speak to the Pfizer experience. Lily has 
indicated that people who qualify for transitional assistance 
will be able to buy medication for $12 per medication per month 
and you can use the $600 transitional assistance to pay the 
$12.
    So the bottom line is it is going to be complicated and 
people are going to need help sorting through it but those 
savings are there if they are able to navigate them and figure 
out the right combinations.
    The Chairman. Forest?
    Mr. Harper. Yes, Senator Craig. In taking off from Jim's 
comment, what we learned in our Pfizer Share Card experience 
over the last 2 years is that when you make it a meaningful 
benefit--that is, a $15 flat fee--the seniors can predict it. 
It is pretty simple. The average price--I think the GAO put out 
for average cost of prescription drugs of about $70.70 for a 1-
month supply and if you pay $15, that is about a $55 out-of-
pocket that goes back into the pocket of those seniors.
    We plan to continue that same type of meaningful benefit or 
something similar in taking forward and supporting the interim 
discount card. So our focus is to continue that same pattern of 
types of benefits that are meaningful to disabled and the 
Medicare beneficiary.
    The Chairman. Craig.
    Mr. Fuller. Mr. Chairman, if I may on this question, it is 
an important one. There are about 1.2 million seniors using the 
TogetherRx card. There are over 500,000 on the Pfizer Share 
Card. I think it approaches that on the Lily Answers card.
    Obviously our pharmacies work with those patients now and 
they rightfully know that they are signed up and enrolled and 
qualified for those plans. We are working hard with the 
Pharmacy Care Alliance with each of these organizations to try 
to find ways to, through automation and other ways, make sure 
that the patient gets the best benefit they are entitled to. 
This is not only important for the patient; I would flag it as 
an issue to look at. It is very important as these programs are 
run in the individual pharmacies.
    I do not need to tell you pharmacists are very busy people. 
There is still a shortage of pharmacists in this country of 
several thousand. If every patient that comes up with multiple 
cards and says, ``I have multiple prescriptions and multiple 
cards; please help me sort it out,'' that kind of interaction, 
one, does not really help the patient who needs counseling 
perhaps on medication, not on which of the cards to use.
    So we are looking for ways and we have worked very closely 
with Forest and the folks at Pfizer, as well as the other two 
organizations, to try to make sure that this process can be as 
seamless as it possibly can be for the senior. It is a very 
important question.
    The Chairman. Let us pursue that line a bit further. First 
of all, there are real benefits to be gained out there if you 
can understand the system and you are properly educated and 
effectively access it. Obviously, Craig, probably the greatest 
point of contact for anyone is the pharmacy and the 
informational flow that would be available there.
    So let me ask these questions of you all and any of you can 
certainly respond. Is CMS on the right track in doing what 
needs to be done to give seniors the information they need, 
based on what you now know?
    Mr. Fuller. I will just quickly say that we have applauded 
what CMS has done. They are a very good partner in the early 
stages here of implementing this program and I certainly think 
they will continue to be.
    The fact sheet that they produced, they gave it to us and 
we sent it electronically within 24 hours to all of our 
pharmacies and tens of thousands of pharmacists because it was 
the single best official document that explained exactly what 
the program was about. That sort of collaboration, not just 
with us but really with others on the panel, as well, is, I 
think, the spirit in which CMS has been operating and that is 
very encouraging to us.
    There is going to be an enormous need to continue, as you 
have suggested by your questions, in helping seniors and their 
caregivers understand the program and its benefits over the 
next couple of years.
    Mr. Harper. I would like to reiterate that we have seen 
them out in the community and I think that is one of the most 
effective parts we have seen with our program. CMS has 
dispatched folks like Leslie Norwalk out. I have seen her at 
conferences presenting for the seniors and getting the 
information and getting the word out on a one-on-one basis with 
senior groups. The advertisements. We learned through our 
commercials that you have to repeat it over and over and over 
as seniors and their caregivers see the message, as well.
    So we think CMS is off to a good start in getting the word 
out.
    The Chairman. Karen.
    Ms. Ignagni. Mr. Chairman, I wanted to echo a point that 
Mr. Harper just made. There are two parts to your question. One 
is getting to the people, and we have been engaged in very 
active discussions and I know my colleagues have, as well, with 
CMS about their operational systems, making sure that they are 
doing what needs to be done to actually find and locate 
beneficiaries. The second part of this challenge is giving 
people understandable information. We think we have an 
important role to play in that and I discussed about the ways 
that we are going about designing outreach and giving people 
understandable information. But the agency really needs to be 
commended for prioritizing these issues and being very 
aggressive about a full-court press designed to deal with these 
issues.
    Will there be bumps in the road? Probably, but I think that 
this agency is doing more than has ever been done to find, to 
locate, as well as give people information, and we intend to be 
full partners with them.
    The Chairman. Jim?
    Mr. Firman. Senator, I think that CMS is certainly to be 
commended for what they have been able to do under a 
tremendously short timeframe, but there are limitations that we 
should all recognize.
    First of all, as we know, there are an estimated 7.4 
million low-income seniors estimated to be eligible for this 
transitional assistance and CMS's earlier estimate is that 2.7 
million of them, would not get them. So the best case is that 
we are going to get to about 60-65 percent of the people who 
are eligible.
    We also have to recognize that to achieve that 65 percent 
enrollment penetration in 18 months is unprecedented. It has 
never been done before in the history of any low-income benefit 
in this country. There is no program that has been able to 
achieve that kind of success.
    So that means that we just cannot look to CMS to achieve 
this. We all have to do our part--the voluntary sector, the 
faith-based groups, and everybody else.
    The second thing is that CMS is doing an excellent job on 
what it was charged to do, which is to help people make choices 
and comparisons among the Medicare-approved cards. But there 
are larger decisions that people are going to have to make. In 
30 states, they are going to have to decide should I take this 
card or should I take my state program? How should I sign up 
for the Pfizer card? What about Merck and Lily?
    So, there is a more complex set of decisions that need to 
be made beyond which card do I choose, and that is where I 
think we and other groups can help with complementary decision 
support tools because it is not one decision; it is multiple 
decisions that have to be made very quickly.
    I might make one last point as I have thought about this 
whole thing. This is a whole track meet. It is both a 50-yard 
dash to get things ready by June; it is a quarter mile for the 
next period of time, 2004 and 2005; and then it is a marathon, 
looking at what we are going to do in 2006, 2007, and 2008. 
Even if you look at the CBO estimates for the longer-term 
benefit where we think there will be 14 million people 
eligible, CBO is only estimating--7 years into it--that we will 
only get a 70 percent enrollment rate.
    So we are both doing it for the short term and the long-
term. But these people we are finding now are by and large 
going to be people who will also be eligible for the Part D. So 
we have to approach this short term and long term and recognize 
that everything we learn now will contribute to the long-term 
success.
    The Chairman. Anyone else wish to comment on that?
    Mr. Harper. I would just like to make one further comment. 
We published a report by Marist National Poll and we actually 
talked to the seniors and I think that that is the part that we 
all must remember. We have to talk to the seniors and the 
Medicare beneficiaries that are disabled.
    We did talk to them in our polling and they told us where 
to go and how to reach the hard-to-reach groups of 
beneficiaries and that also includes keeping it at the local 
level, working with churches. We just finished a project with 
the General Baptist Convention in Virginia. We trained 1,000 
ministers on how to help fill out the applications. I think it 
is going to take that kind of grassroots efforts, day to day, 
door to door, and the Visiting Nurses Association, which we 
work with.
    So it is those kinds of organizations who live in the 
community on a day-to-day basis, Senator, that we will continue 
to work with and I know that CMS has been all ears in listening 
to those kinds of approaches.
    The Chairman. It is interesting you would say that. Here is 
a wire story out of the Tennessean newspaper this morning: 
``Methodists Offer Drug Discount Card.'' There is also an 
interesting line at the end. They also, through the Methodists, 
might offer it to Baptists and Catholics, so at least they are 
being nondiscriminatory. It is fascinating to me that so many 
different organizations are getting in the act and in a very 
important way.
    Is there any one thing that you can think of now as you 
interface with CMS that they are not doing that might be 
recommended in this 50-yard dash that remains? Because Jim, I 
think you have assessed it well. We are not going to get to 
everybody now. It is a beginning, and what is most important is 
as big a beginning as is possible and then the continuation of 
working and improving as we do that.
    As I mentioned in passing, one of the frustrating 
disappointments I had, while in Idaho hosting that health care 
conference, CMS informed me that one of the networks had 
refused their advertising. Now I guess maybe that has been 
solved by now, but the refusal came because they thought it was 
too political. I thought, shame on that network. You know, it 
is a very political year, but this is a program that has 
already passed and that and is now well on its way toward being 
implemented, and I hope that bias has gotten washed out of it 
at this moment. To me, the network's decision was a 
demonstration of a bias, or at least I read it that way.
    These CMS efforts are clearly an outreach effort, and a 
very open way to reach as many people as are eligible and truly 
in need of it.
    Yes, Craig.
    Mr. Fuller. If I could turn your question just slightly, I 
would say that one thing I hope CMS does not have to do is go 
back and make modifications to the program as a result of 
legislative activity, which I do not mean to be audacious in 
saying that. There is plenty of work to do probably in refining 
the 2006----
    The Chairman. Are you telling us to leave it alone for a 
while?
    Mr. Fuller. Well, I think all of us who are trying to get 
this work done want a degree of certainty about what the next 
18 months will look like.
    The Chairman. That is a fair----
    Mr. Fuller. I know there is concern.
    The Chairman. Sure.
    Mr. Fuller. I hope Forest Harper will agree to do this--I 
would say that report ought to be submitted into your record--I 
was pleased to participate in the press conference a few months 
ago in which it was released--because it identifies how real 
people actually benefit by these programs.
    I am certain we are going to deliver real benefits as a 
result of implementing these programs. The toughest thing to do 
would be to deal with sort of shifting sands as we are in the 
middle of doing it.
    Mr. Merritt. Mr. Chairman.
    The Chairman. Yes, Mark.
    Mr. Merritt. One other mission that the rest of us have 
here as we educate consumers is not just on what the program 
entails but I think truly everybody here at this table is 
making a good faith effort, along with CMS and the Federal 
Government, to do the very best they can to get a very big and 
complicated project out the door as quickly and well as we can.
    Ms. Ignagni. Mr. Chairman.
    The Chairman. Yes, Karen.
    Ms. Ignagni. In the spirit of Mr. Merritt's comment, we are 
establishing a baseline for 2006. So I think Mr. Fuller has 
made a very important observation about the need for 
predictability and the need to plan now with consistent rules 
and regulations as we look forward to 2006. Our members want 
very much to participate in that program and intend to do so 
but if there are major changes, it becomes very difficult 
because you do not know what to look forward to; you do not 
know what world you are living in, et cetera.
    So I just want to join the points that have been made, very 
effectively by my colleagues. This is a very serious--we are 
accomplishing a lot in a short period of time. I think people 
can already see tangible benefits, which we are very proud of, 
in our health insurance plans in terms of what we have already 
contributed in 3 months. We will be also major contributors in 
the discount program and beyond to 2006. But consistency and 
predictability is a very important part of this.
    The Chairman. Well, I hear you. I serve on the board of 
``Medicare, Inc''., as do a good number of others, about 535 of 
us, I believe, and the message you are delivering is a very 
important message for the interim period as we go into 
implementation.
    Let me ask this question. Some of you have alluded to it; 
see if there is something you might add to it. Seniors will be 
choosing between cards offered by a wide variety of 
organizations, including health plans, PMBs, pharmacy 
organizations, consumer groups, and others. From the standpoint 
of the average senior, how will the products offered by these 
varying kinds of sponsors differ from one another? I.e., will a 
senior see a difference between a card offered by a pharmacy 
group and one offered by a health plan or a PBM?
    Mr. Merritt. I would say first of all, assuming we can get 
them access to the right information through the web and so 
forth, they will have more information on drug pricing than 
they have ever had. So they will be able to look at the 
negotiated price of each drug before they sign up for a card 
and they will see which cards offer which drugs at which 
prices. Of course, health plans, some of them have a different, 
special thing that Karen can talk about.
    But overall, there is going to be a multitude of blessings 
of information. The question is just making sure that people 
get access to it. So the information is there; it is just a 
matter of people seeing it.
    Ms. Ignagni. I think, Mr. Chairman, the difference between 
our sector and some of the others, an individual who is a 
member or enrollee in a health plan would have the discount 
card as part of an integrated benefit program and we would use 
all the tools and techniques I described from a quality 
perspective, disease management perspective, a pricing 
perspective to try to leverage those dollars and make them go 
farther and make it part of the integrated benefit plan.
    Mr. Harper. Mr. Chairman, I would just like to say I 
certainly agree with Mark. The pharmaceutical industry has 
already experienced that in the last 2 years. If you can 
imagine, companies that typically compete against each other on 
the front came together with one unified stance--whatever is 
best for that beneficiary. We all put our cards out on the 
table. Some were discounts, some were flat fees, some were 
discounts with less, but at the end of the day we spoke on 
panels together, presented to each other. I mentioned my 
competitors' programs just as much as they mentioned mine.
    I think you are going to see that same spirit and 
atmosphere going on because of coalitions that were gathering 
today because it is all about the beneficiary and not about any 
of the companies at this point.
    The Chairman. Karen, many of your members are obviously 
looking ahead to 2006 when America's health plans will be 
entering the new Medicare drug market and the expanded Medicare 
Advantage market. What effects do you think the background 
experience of 2004-2005's transitional drug card program will 
have on the 2006 enrollment of the full Medicare drug benefit?
    Ms. Ignagni. I think two things, Senator. One is clarity 
and second is confidence. Clarity in terms of understanding the 
rules and having had now a great deal of discussion with CMS 
about their views about setting up the regulations, the 
architecture, we are very clear about that and now we can lay 
the groundwork for 2006. This has been tremendously helpful.
    Individuals, I might say, consumers and advocates and 
observers, will be able to see results. So we are proud of 
that.
    Second in terms of where we go next, we are looking in an 
excited fashion at the clarity that has been established in the 
legislation with respect to providing true choices for seniors. 
Some of our members are going to be out in the market with 
HMOs, PPOs, medigap plans. Some will participate in the 
regional PPO structure. Others will be participating in a 
smaller region but more locally based.
    We will have a multiple set of plans, in addition to some 
consumer-directed plans that are being developed for this 
population, as well, and that is, exactly what Congress 
envisioned--to give people choices. Our responsibility will be 
to work with CMS to give them information and we are proud of 
that and will be giving people the information they need to 
make the choices that are appropriate for them.
    The one lesson we have learned in health care is that one 
size does not fit all, so beneficiaries appreciate the 
opportunity to have these choices and we are committed to 
putting a range of products out there so people can evaluate 
them. We will be working with partners. We work with PBMs, we 
are working with a variety of individuals represented on the 
pane. WE will be working with consumer advocates and senior 
advocates to make sure that we are partnering appropriately in 
local communities, getting the word and message out.
    The Chairman. Anyone else? Yes, Jim?
    Mr. Firman. Senator, the Access to Benefits Coalition, 
which I chair, a public/private partnership, that is focussed 
on making sure that low-income seniors get the assistance both 
short-term and long-term.
    So the CBO estimates that by 2013, 7 years into the 
program, approximately 8.8 million of the 14 million people who 
are eligible will receive this benefit. Our coalition is taking 
a much more aggressive goal. We want to beat those numbers. We 
will let you guys worry about the budgetary impact. Our goal is 
to make sure that at least 8 million people are there by 2008, 
and 12 million by 2012.
    So we view this process of the short-term period of most of 
the people who sign up for the transitional assistance, we know 
they will qualify on the basis of income for the Part D 
benefit. So we view by capturing 5.5 or 6 million people, at 
least 80 percent of those we will have the names for, we will 
know who those people are and we can help beat those enrollment 
goals.
    In addition, there are people between 135 and 150 percent 
of poverty who are going to be looking for this assistance in 
2004. But they are going to be told that they are not eligible, 
so we are also going to tell them they will be eligible for the 
Part D low-income assistance in 2006.
    So if we do our job well now in 2004 and 2005, we will beat 
the enrollment numbers. The reason the NCOA supported this 
legislation was primarily because of the benefits to low-income 
seniors and we and all of us collectively are going to do what 
we can to make sure that those enrollment numbers are met. So, 
this really is critical both for the short-term and for the 
long-term success.
    The Chairman. Yes, Craig?
    Mr. Fuller. I would quickly add that in addition to the 
comments Karen made, we too are looking at this program as a 
way to give ourselves valuable experience leading toward 2006 
and one of the important elements that you will hear a lot of 
us talk about in the next 18 months or so has to do with risk.
    We need to understand how to help this population that has 
not had a traditional drug benefit manage their medication 
needs and reduce their costs. If we are going to be called upon 
to accept risk going forward in 2006, we need this kind of 
experience and I think this program will help give us that.
    The Chairman. I am very pleased to hear you say that. We 
continually hear about it. We have done some oversight on it, 
overmedication, and the problem of patients having a 
prescription filled out when they no longer need it, and that 
kind of thing, and the kind of counseling and observation that 
needs to go on. If there is greater access, and that is what we 
hope there will be, clearly what you have just said, Craig, is 
every bit the more important today than it was.
    Mr. Fuller. It will be very valuable, sir, to have a 
patient who may have been going from store to store purchasing 
medication for cash suddenly in a system where their drug 
utilization can be reviewed, where conflicting medications can 
be sorted out, where their physician can be contacted and 
medications changed and where, frankly, they can be helped 
through various means to find the medication most appropriate 
for them and which perhaps costs a little less than what they 
have been taking.
    Ms. Ignagni. Mr. Chairman, physicians in our networks often 
report compelling testimony about individuals presenting 
themselves in their office with a shopping bag full of 
prescriptions and one of the hallmarks of what we have been 
able to do in our networks is to coordinate the care, to assess 
what has been prescribed, and our physicians have contributed 
quite substantially to the learning of what it takes to 
actually accomplish that objective.
    So we would be delighted to share some of those experiences 
with the committee should that be desirable to you.
    The Chairman. I appreciate that.
    Mark, another question of you. It has been argued that the 
new Medicare drug card program could well be much more 
effective at securing discounts than current card programs 
because the additional $600 low-income assistance payments will 
give card sponsors added new leverage at the bargaining table. 
Do you agree? Why is this the case, if it is, and how 
significant might that effect be?
    Mr. Merritt. Well, we are not sure how significant it will 
be. First of all, it kind of is the case, kind of is not. It 
depends what company you talk to. The philosophy behind it is 
that transition assistance is actually kind of a funded 
benefit, so you have cash-paying customers, uninsured, who 
typically when they do buy drugs pay more than AWP, more than 
the average wholesale price.
    So the problem is they underutilize drugs. They do not use 
the drugs that they need. So often the problems being monitored 
are people using too many drugs, using the wrong drugs. The 
problem with people who are poor is, of course, they do not buy 
them as much.
    This program, by taking $600 of the $1,400 that a typical 
senior spends, a beneficiary spends on drugs, should give 
pharmaceutical companies an incentive to offer bigger rebates 
because there will be more utilization of their drugs but in 
early discussions with some of our companies, although that is 
proprietary information, it is not clear how great that value 
is, although it certainly makes sense in theory.
    The Chairman. Before I close, one of the things that I find 
fascinating here today, and I sense you are all agreeing, is 
that I do not think Congress, when we looked at an immediate 
discount card, we probably did not fully understand the value 
of that transitional time that you are now reflecting on as it 
relates to getting it right, getting people identified toward a 
full-blown system coming on line in 2006.
    Obviously we knew giving attention to those who are truly 
needy now was critical. At the same time, we also knew giving 
time to get it right so that we could gain all of the 
advantages of what we wanted, plus cost containment and meeting 
budget goals and all of that, gaining access to the eligible, 
was all very, very necessary.
    Am I hearing from you that the discount card, beyond just 
improving access in its own right, is also a valuable 
transitional learning experience for all the parties involved?
    Mr. Harper. I would certainly agree with that, Senator. 
What we learned, it is not just the discounts; it is also 
health information. Our model is built on the fact that we give 
the beneficiaries health education on diabetes, high blood 
pressure, and other illnesses, along with the information on 
how they can get the best discount and/or a flat fee.
    So in the last 2 years we have learned a lot but we are 
also going to learn even more in this interim period as we go 
to reach a broader group of patients out there. Our focus is to 
work with volunteers--Jim said it a lot but we also want to 
train volunteers on how to respond to those who are most in 
need.
    Ms. Ignagni. Mr. Chairman, this is a private/public 
partnership, so I think that two things have been accomplished. 
One is that Congress has clearly established for the private 
sector and all the stakeholders is a line of sight, which is 
very important and was a major issue in the discussion of how 
this legislation should be crafted. I think we are only all 
beginning to understand the power of that as we go through this 
process.
    Second, the allegation has been made that beneficiaries 
will not be able to sort through complicated information in 
2006. We do not agree with that. We work with beneficiaries 
every day that are looking and evaluating our members and the 
products that they offer. But nonetheless, CMS now has time to 
do a dry run in terms of developing information, developing 
information to help people sort through multiple products. That 
will be tremendously valuable in the market that has been 
designed for 2006 and beyond where there will be a range of 
options for this population.
    So frankly, in our community we gave all of you a great 
deal of credit in being smart in establishing the line of 
sight, thinking about moving and phasing the benefits so that 
we could get the implementation worked out before the program 
would be fully live in 2006 with a full implementation of 
prescription drugs. So it was a smart thing to do.
    Mr. Fuller. Mr. Chairman, NACDS developed a reputation back 
in 2001 for feeling fairly strongly that there should be legal 
authority for enacting a prescription drug card. The initial 
efforts of the administration actually deserve credit because 
out of that came the cards from the manufacturers--the Pfizer 
Share Card, TogetherRx and the Lily Answers Card--and those 
gave us good experience and we supported those programs.
    But I actually will tell you that we strongly believe that 
the legislative effort last year produced a card program that 
is much stronger than what was originally envisioned, that 
definitely leads us down a path that gets us to a meaningful 
prescription drug benefit in 2006 and, as you have heard today, 
gives us the experience we need in order to be able to 
understand how to best implement that.
    So it serves a number of purposes. It was, I know, not an 
easy issue to deal with but I think the process itself helped 
all of us and I do believe we are going to learn more as we go 
through this.
    Mr. Merritt. Furthermore if I may add, Mr. Chairman, just 
very quickly, PBMs have kind of been at the center of these 
discussions on discount cards and drug benefits for almost a 
decade, so this is our first opportunity to really get our feet 
wet and really begin understanding this program, but also 
getting beyond all the politics of it, showing that we really 
can help a lot of people when things are done right and where 
PBMs' tools are really used.
    Mr. Firman. Mr. Chairman, I agree with what has been said. 
I do think this is an important dry run but I think I disagree 
a little bit with Karen Ignagni. I think the choices that 
people--the stakes are going to be a lot higher in 2006. The 
choices that people are going to make will have larger 
consequences. Whether you choose one discount card over another 
discount card probably will not make a huge difference in the 
quality of your life and may make a difference of 10 percent or 
15 percent on the drugs you save. Choosing among the Part D 
plans or opting into Medicare Advantage programs and the new 
plans is going to be a much more significant choice with much 
more complexity in choosing among the cards.
    So it is good that we are at least going to get some of the 
kinks out, but we should not underestimate the challenge ahead.
    Ms. Ignagni. Mr. Chairman, clearly we understand the 
complexity of the choices before seniors in 2006. The point, 
though, that needs to be acknowledged is that CMS has learned a 
great deal and is learning a great deal in how to educate this 
population and we intend, along with our colleagues, to be full 
participants in that and I think that has been valuable not to 
have to approach that de novo in 2006. That was the point that 
I was making.
    The Chairman. Well, there is no question it is a great 
challenge for all of us.
    Let me use this as a concluding comment that you may wish 
to respond to. If I liken this to a space odyssey, this may be 
your last chance before May to talk to the mother ship and I am 
not it. CMS is.
    In your conclusion, and I will offer you that opportunity, 
are there any one or two additional recommendations based on 
your current experience that you might want to extend to CMS at 
this moment as we work toward the enrollment period and the 
introduction of the program in June? Jim?
    Mr. Firman. I know CMS is trying to do this but in order to 
get to these ambitious enrollment goals, we cannot just do 
things the way we have always done them. Insanity is doing the 
same thing over and over again expecting a different result. 
So, it is predictable that if we use the old strategies, we 
will not succeed.
    I think that we need to the extent possible to look at 
wholesale strategies, meaning I know states have come in and 
said we want to enroll in the program; help us do that quickly. 
They recognize that the people eligible for transitional 
assistance may already be in some other database receiving home 
energy benefits or SSI or other kinds of programs. To the 
extent that CMS is able, and they are limited in the short 
term, to enable government, states or local, to use innovative 
strategies to bring people in wholesale, it will really help 
achieve the goal.
    The Chairman. Anyone else?
    Mr. Fuller. A similar thought. Maybe just that with the 
``marketing programs'' kicking off on May 3, we really have a 
very short period of time to help enroll seniors. CMS has been 
good in looking at some ideas that we and others have put 
forward about educating seniors.
    When these announcements come out in March, that flag goes 
up and seniors are going to be in our stores, 55,000 stores, 
talking to 130,000-140,000 pharmacists about why they cannot 
enroll now. We can explain that but we really need to be able 
to provide as much information as we can on demand, if you 
will. Telling them that ``sorry, the government says we cannot 
share with you information until May'' is not going to work.
    We are sharing the CMS information and it is good 
information but I think all of us who have card programs or who 
are contemplating them would like to get about the business of 
educating seniors directly just as quickly as we can.
    Mr. Harper. Mr. Chairman, I would just like to say at the 
start of my presentation and my testimony I talked about the 
intent of the model of this program. I would like to just 
ensure that CMS works with those who have had the experience in 
the last 2 or 3 years of reaching out to low-income seniors and 
Medicare beneficiaries, take the reports we will offer again 
from our Marist polling and our National Polling system to see 
how we reach those low-income and tough to reach and at the end 
of the day the intent is to assure the American people, 
particularly those who are Medicare beneficiaries, this program 
will lower the cost of drugs and make accessible to those 
innovative things that they need to take care of their health.
    The Chairman. Mark.
    Mr. Merritt. I would ask on, I guess, a nontechnical level 
something that CMS is probably already doing but it would be 
very helpful if they could get together with top executives of 
each of the major television networks, radio networks, and so 
forth, and explain not only the ins and outs of what is going 
on in the program, but also that now is not the time to pile 
onto the program. Now is not the time to say oh, there are 
going to be so many choices; what are seniors going to do? I 
mean people need to have the information that they should have 
about the program but it would be helpful if, almost as a 
public service, the networks could get involved in helping try 
to educate people, not just whether or not they air our ads or 
not, but some of the news articles I have seen have been almost 
kind of neurotic in their fear of overinformation, and so 
forth.
    I think, as Karen mentioned earlier, there are going to be 
some bumps in the road because we have such a short time line 
but the benefits we are offering are going to be numerous, they 
are going to be great for seniors, and if we can just give it a 
little time to play out, it is going to be a tremendous 
opportunity for them.
    The Chairman. Karen.
    Ms. Ignagni. Mr. Chairman, to conclude, it really involves 
an assessment of what happened in the past and not to repeat 
it. Post-1997, post-Balanced Budget Act, we faced a regulatory 
framework that strangled the private sector. It, in addition to 
the funding situation, forced our members to reluctantly 
withdraw from this program. We did not want to do that.
    This has been such a breath of fresh air. This is a new day 
where CMS is actually going out and listening to the private 
sector about how to implement this program, how to work in a 
partnership and develop a workable structure.
    So my message would be to keep up the good work. We will 
continue to work with them on all issues and there are 
challenges, but I think with that spirit of cooperation, a 
great deal can be accomplished, and I think that is good for 
beneficiaries.
    The Chairman. Well, thank you all very, very much. 
Obviously, this is an extremely important issue for America's 
seniors. I have always been frustrated by those who assume that 
a senior could not navigate his or her way through. Given 
access and information, they can and they will. It really is an 
information game. It is of the highest importance to make sure 
that we reach out as extensively as we can. I think the 
Congress has also spoken very clearly.
    This is a partnership between the private and the public 
sector. The public sector cannot afford to go this alone. But 
obviously, the need for access to these critical care 
components today is necessary for all of our citizens.
    So we thank you very much. We will stay in close contact. 
We will continue to monitor and do necessary oversight where we 
think it important to give greater exposure, and please feel 
free to contact us as we work our way through this, and with 
CMS to make sure that, at the end of the day, as Jim said, we 
have broken out of the old models and we have reached out and 
contacted and brought people in.
    Thank you all very much. The committee will stand 
adjourned.
    [Whereupon, at 11:53 a.m., the committee was adjourned.]


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