Prescription Drug Discount Cards: Savings Depend on Pharmacy and
Type of Card Used (03-SEP-03, GAO-03-912).
While prescription drugs have become an increasingly important
part of health care for the elderly, more than one-quarter of all
Medicare beneficiaries have no prescription drug coverage. Over
the past decade, private companies and not-for-profit
organizations have sponsored prescription drug discount cards
that offer discounts from the prices the elderly would otherwise
have to pay for their prescriptions. These cards are typically
administered by pharmacy benefit managers (PBM). Pharmaceutical
manufacturers also sponsor and administer their own discount
cards. The Administration has been interested in endorsing
specific drug cards for Medicare beneficiaries to make the
discounts more widely available. Legislative proposals in the
Senate and House of Representatives have included drug cards as a
means to lower prescription drug prices for Medicare
beneficiaries. GAO was asked to examine how existing drug
discount cards work and the prices available to card holders.
Specifically, GAO evaluated the extent to which PBM-administered
drug discount cards offer savings off non-card prices at 40
pharmacies in California, North Dakota, and Washington, D.C., and
the differences between PBM-administered cards and cards
sponsored by pharmaceutical manufacturers.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-03-912
ACCNO: A08279
TITLE: Prescription Drug Discount Cards: Savings Depend on
Pharmacy and Type of Card Used
DATE: 09/03/2003
SUBJECT: Aid for the elderly
Beneficiaries
Health care cost control
Health care costs
Health care programs
Drugs
Elderly persons
Managed health care
Prices and pricing
CMS Medicare-Endorsed Prescription Drug
Card Assistance Initiative
Medicare Program
Medicaid Program
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** figure captions are reproduced. Tables are included, but **
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GAO-03-912
Report to Congressional Requesters
United States General Accounting Office
GAO
September 2003 PRESCRIPTION DRUG DISCOUNT CARDS
Savings Depend on Pharmacy and Type of Card Used
GAO- 03- 912
Medicare beneficiaries can receive prices with prescription drug discount
cards at retail pharmacies that are generally lower than those available
to seniors without cards. Prices available for a particular drug tend to
be similar across PBM- administered cards. Savings from PBM- administered
cards, however, can differ because retail pharmacy prices vary widely. For
example, in Washington, D. C., which had the highest median retail
pharmacy prices of the three areas GAO surveyed, median savings using a
PBMadministered card ranged from $2.09 to $20.95 for a 30- day supply of
the nine drugs frequently prescribed for the elderly that GAO examined.
This was after accounting for the 10 percent discount for senior citizens
given by each of the 14 surveyed pharmacies. Savings in California with
the use of a card tended to be lower because 10 of the 13 California
pharmacies GAO surveyed participated in the state*s Medicaid program
(Medi- Cal) and are required to give Medicare beneficiaries the Medi- Cal
price. For seven of the
nine drugs, savings ranged from $0.44 to $13.06. For the other two drugs
the cards offered no savings at Medi- Cal- participating pharmacies
because the Medi- Cal prices were lower than the median price available
with a PBMadministered card. Savings in North Dakota for the nine drugs
ranged from $0.54 to $7.72 even though 10 of the 13 pharmacies there did
not offer a senior discount. Any savings achieved with a card are reduced
by the annual or one- time fee charged by the PBM- administered cards.
Prices available with a pharmaceutical- manufacturer- sponsored card for a
particular drug
are typically lower than prices obtained using PBM- administered cards,
and are often a flat price of $10 or $15.
PBM- administered cards differ from pharmaceutical- manufacturersponsored
cards with respect to eligibility and the range of drugs they cover, as
well as the price available with the card. PBM- administered discount
cards are available to all adults and can be used to purchase most
outpatient prescriptions. Pharmaceutical- manufacturer- sponsored cards
are available only to Medicare beneficiaries with incomes below a certain
level who have no prescription drug coverage and can be used to purchase
only outpatient
prescription drugs produced by the sponsoring manufacturers. While
prescription drugs have become an increasingly important part of health
care for the elderly,
more than one- quarter of all Medicare beneficiaries have no prescription
drug coverage. Over the past decade, private companies and not- for-
profit
organizations have sponsored prescription drug discount cards that offer
discounts from the prices the elderly would otherwise have to pay for
their prescriptions.
These cards are typically administered by pharmacy benefit managers (PBM).
Pharmaceutical manufacturers also sponsor and administer their own
discount cards. The Administration has been interested in endorsing
specific
drug cards for Medicare beneficiaries to make the discounts more widely
available. Legislative proposals in the Senate and House of
Representatives have included drug cards as a means to lower prescription
drug prices for Medicare beneficiaries. GAO was asked to examine how
existing drug discount cards work and the prices available to card
holders. Specifically, GAO evaluated the extent to which PBMadministered
drug discount cards offer savings off non- card prices at
40 pharmacies in California, North Dakota, and Washington, D. C., and the
differences between PBMadministered
cards and cards sponsored by pharmaceutical manufacturers.
www. gao. gov/ cgi- bin/ getrpt? GAO- 03- 912. To view the full product,
including the scope and methodology, click on the link above. For more
information, contact Laura A. Dummit at (202) 512- 7119. Highlights of
GAO- 03- 912, a report to
congressional requesters
September 2003
PRESCRIPTION DRUG DISCOUNT CARDS
Savings Depend on Pharmacy and Type of Card Used
Page i GAO- 03- 912 Prescription Drug Discount Cards Letter 1 Results in
Brief 3 Background 5 Characteristics of Drug Discount Cards Vary Based on
Their
Sponsor 7 Card Savings Depend on Usual Pharmacy Prices and Any Card Fees
10 State Regulatory Efforts Focus on Protecting Consumers 12 Comments from
External Reviewers 14 Appendix I Selected Drug Discount Card
Characteristics 17
Appendix II Median Retail Pharmacy PBM- Administered Drug Discount Card
Prices and Median Retail Pharmacy Noncard Prices 19
Table
Table 1: Selected Provisions of State Regulation of Prescription Drug
Discount Card Programs, November 2002 13 Abbreviations
CMS Centers for Medicare & Medicaid Services PBM pharmacy benefit managers
Contents
This is a work of the U. S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed in
its entirety without further permission from GAO. However, because this
work may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this material
separately.
Page 1 GAO- 03- 912 Prescription Drug Discount Cards
September 3, 2003 Congressional Requesters Prescription drugs have become
an increasingly important part of health
care for the elderly. While many Medicare beneficiaries have some of their
out- of- pocket drug costs covered by employer- sponsored retiree health
plans, Medicare+ Choice plans, Medicare supplemental plans, or Medicaid,
more than one- quarter of all Medicare beneficiaries have no prescription
drug coverage. 1 Over the past decade, private companies and not- for-
profit organizations have sponsored card programs that give the elderly
discounts from the retail prices they would otherwise have to pay for
their prescriptions.
In July 2001, the President announced a set of principles for reforming
Medicare, including adding a prescription drug benefit for the elderly. As
an initial step toward providing a drug benefit, the Administration
proposed establishing a drug discount card program to lower prescription
drug out- of- pocket expenses for Medicare beneficiaries. The Centers for
Medicare & Medicaid Services (CMS) issued a final rule in September 2002
for the Medicare- Endorsed Prescription Drug Plan Assistance Initiative,
in which the agency would endorse discount card programs developed by
private entities if they met certain standards. 2 The initiative would
promote the use of drug discount cards by Medicare beneficiaries. A
federal district court judge found in January 2003, however, that CMS did
not have authority for the initiative and permanently enjoined the agency
from going forward with it. 3 In March 2003, CMS filed a notice of appeal
from this decision. More recently, legislative proposals in the Senate and
the
House of Representatives have included drug cards as a means to lower the
prices Medicare beneficiaries pay for their prescription drugs.
1 Medicare generally does not cover outpatient prescription drugs, except
if they cannot be self- administered and are related to a physician*s
services, such as cancer chemotherapy, or are provided in conjunction with
covered durable medical equipment, such as inhalation drugs used with a
nebulizer. In addition, Medicare covers selected immunizations and certain
drugs that can be self- administered, such as blood clotting factors and
some oral drugs used in association with cancer treatment and
immunosuppressive therapy. 2 Medicare- Endorsed Prescription Drug Card
Assistance Initiative, 67 Fed. Reg. 56,618 (2002).
3 National Association of Chain Drug Stores v. Thompson, No. 01- 1554 (D.
D. C. 2003).
United States General Accounting Office Washington, DC 20548
Page 2 GAO- 03- 912 Prescription Drug Discount Cards
The Medicare- endorsed card initiative has focused interest on
privatesector prescription drug discount card programs. You requested that
we examine these programs and pertinent state laws and regulations.
Specifically, you asked (1) how do existing prescription drug discount
card programs work, (2) how do the prescription drug prices available with
existing discount cards compare to prices available without a discount
card, and (3) how do states regulate card programs?
To obtain information on discount card programs, we used a structured
interview guide to conduct telephone interviews with officials from five
organizations that administer many of the programs. Four of these
organizations are among the nation*s largest pharmacy benefit managers
(PBM) 4 *Medco Health Solutions (formerly Merck- Medco Managed Care),
AdvancePCS, Express Scripts, and WellPoint Health. They administer
numerous nationwide card programs sponsored by a range of entities, such
as health insurers, retail pharmacies, employee associations, and other
organizations. 5 The fifth organization was Citizens Energy, a nonprofit
company that sponsors and administers the Citizens Health drug discount
card, which is available to all adults in Connecticut, Massachusetts, and
Rhode Island. We also obtained information from
company Web sites on the prescription drug discount card programs
introduced in the last 2 years by four pharmaceutical manufacturers* Eli
Lilly, GlaxoSmithKline, Novartis, and Pfizer* as well as the Web site for
Together Rx, a card that provides discounts on some drugs produced by
eight pharmaceutical manufacturers. 6 An estimated 18 to 19 million people
have enrolled in one or more of the drug discount card programs that we
examined. In addition, we examined CMS*s final rule on the
MedicareEndorsed Prescription Drug Plan Assistance Initiative. To
understand the role of drug discount cards in the retail pharmacy
marketplace, we spoke with representatives of three retail pharmacy chains
whose pharmacies comprise about 22 percent of all retail pharmacies
nationwide.
4 The primary functions of PBMs are negotiating drug prices with
pharmacies and pharmaceutical manufacturers on behalf of health plans,
processing drug claims for health plans, and dispensing prescriptions
through mail order pharmacies.
5 Discount card sponsors put their name on the card and establish its
terms and conditions. 6 The founding members of Together Rx are: Abbott
Laboratories; AstraZeneca; Aventis Pharmaceuticals, Inc.; Bristol- Myers
Squibb Company; GlaxoSmithKline; Janssen Pharmaceutical Products, L. P.;
Novartis; and Ortho- McNeil Pharmaceutical, Inc. OrthoMcNeil and Janssen
are owned by Johnson & Johnson.
Page 3 GAO- 03- 912 Prescription Drug Discount Cards
We obtained April 2002 prices from 40 retail pharmacies in California,
North Dakota, and the Washington, D. C. area for nine drugs frequently
prescribed for the elderly. 7 The prices reflect any senior citizens
discount that the pharmacies routinely provide. We compared these prices
to prices for these drugs in the same period that were available using
five PBMadministered discount cards at retail pharmacies or through the
PBMs* mail order pharmacies. 8 We did not independently verify the drug
prices that we obtained, and they may not reflect current prices.
To examine state regulation of drug discount cards, we obtained
information from the National Conference of State Legislatures, the
National Association of Chain Drug Stores, and several PBMs that track
state regulation of discount cards. We also contacted legislators from New
Hampshire, South Dakota, and Mississippi to learn more about why they
supported legislation to regulate drug cards. We performed our work from
July 2002 through August 2003, in accordance with generally accepted
government auditing standards.
PBM- administered cards differ from pharmaceutical- manufacturersponsored
cards with respect to eligibility, the range of drugs they cover, whether
the pharmaceutical manufacturer pays the pharmacy part of the card
discount, and the price available with the card. Most of the card programs
administered by PBMs are available to all adults, while the pharmaceutical
manufacturers* cards are available only to Medicare beneficiaries with
incomes below a certain level who have no prescription drug coverage. The
PBM- administered cards provide discounts on most outpatient prescription
drugs, while each of the cards sponsored by a pharmaceutical manufacturer
typically provides discounts on all the outpatient prescription drugs that
its manufacturer produces. For drugs purchased with PBM- administered
cards, retail pharmacies accept a lower price from cardholders than their
usual price, and in some cases receive partial payment for the difference.
For drugs purchased with cards sponsored by pharmaceutical manufacturers,
retail pharmacies receive payment from the manufacturer for a portion of
the difference between
7 The nine drugs are Atenolol, Celebrex, Fosamax, Furosemide, Lipitor,
Norvasc, Premarin, Prilosec, and Zocor. 8 For additional information on
drug discount card prices see U. S. General Accounting Office,
Prescription Drugs: Prices Available Through Discount Cards and From Other
Sources, GAO- 02- 280R (Washington, D. C.: Dec. 5, 2001). Results in Brief
Page 4 GAO- 03- 912 Prescription Drug Discount Cards
the usual price and the cardholder*s price. PBM- administered cards
typically offer a price to a cardholder that is 10 to 15 percent below
either a standard reference price or the retail pharmacy*s usual price,
whichever is lower. Prices available with a manufacturer- sponsored card
for a particular drug are typically lower than those through PBM-
administered cards because the pharmaceutical- manufacturer- sponsored
cards offer either a larger discount off a lower reference price or a flat
price ($ 10 or $15).
PBM- administered drug discount cards used at retail pharmacies or the
PBMs* mail order pharmacies generally offer savings to cardholders because
card prices are typically lower than the prices retail pharmacies would
otherwise charge. Card savings* the difference between the pharmacy*s
usual price and the cardholder*s price* vary, primarily because the usual
price varied across the 40 pharmacies we surveyed. For example, even
though all the surveyed Washington, D. C. pharmacies offered a 10 percent
discount to senior citizens, cards provided the highest median savings
because the usual pharmacy prices were higher than in the other areas. The
median savings with the use of a PBM- administered card were from $2. 09
to $20.95 for a 30- day supply of the nine drugs. The range of card
savings in North Dakota for these drugs was from $0.54 to $7.72, even
though most of the pharmacies there did not offer a senior discount.
Because the majority of the California pharmacies we surveyed participated
in the state*s Medicaid program (Medi- Cal) and are required to give
Medicare beneficiaries the Medi- Cal price for drugs, card savings ranged
from $0.44 to $13.06 for seven of the drugs. Medi- Cal prices for the
other two drugs were lower than the median drug card prices so a card
offered no savings at Medi- Cal participating pharmacies. Savings achieved
through a drug discount card would be reduced by any fee that the card
charges.
As of October 2002, 16 states had enacted laws regulating one or more
aspects of prescription drug discount card programs. While the scope of
each of the laws varies, the sponsors of several of the laws have
characterized their purpose as consumer protection. Thirteen of the states
required that a notice appear prominently on the card declaring that it
does not represent insurance coverage (the cards may be similar in
appearance to insurance cards). Eleven states required that the discounts
offered by the cards not be misleading, deceptive, or fraudulent. Twelve
states required that the discounts be specifically authorized by separate
contracts between the card administrator and each pharmacy or pharmacy
chain that accepts the card. Under certain conditions, Mississippi
requires
Page 5 GAO- 03- 912 Prescription Drug Discount Cards
a drug card program to compensate a pharmacy for accepting the card price.
We received technical comments on a draft of this report from four of the
five PBM administrators we surveyed, as well as from one pharmaceutical
manufacturer that sponsors its own card and participates in the Together
Rx card, and from one independent expert reviewer. We incorporated their
technical comments as appropriate.
Prescription drug discount cards are a relatively new option for
consumers. Most of the large PBM- administered programs have been
operating for less than 5 years, although some cards, such as one
administered by Express Scripts, have been available for about a decade. 9
Pharmaceutical- manufacturer- sponsored discount cards are a more recent
development; the first one began in fall 2001. Together Rx began operating
in June 2002. PBM- administered drug discount card programs are generally
offered to consumers through such organizations as retail stores, retail
pharmacies, employee and other associations, nonprofit organizations,
insurance companies, and PBMs. The sponsoring organization typically
markets the program under its own name, but contracts with another
organization* usually a PBM* to administer the program. Generally, the PBM
creates a network of participating pharmacies that have contracts with the
PBM specifying discount arrangements. The PBM processes orders for the
cards and operates a mail order pharmacy that cardholders may use.
Consumers
can have as many different cards as they like. Each card can be used at
any participating retail pharmacy or through the PBM*s mail order
pharmacy.
Retail pharmacies play an important role in drug discount card programs
because they agree to offer a lower price to cardholders. The PBM
administrators with whom we spoke estimated that retail pharmacies fill
75 to 95 percent of the prescriptions paid for using PBM- administered
discount cards, with mail order filling the remaining prescriptions. A
large majority of prescriptions paid for using pharmaceutical-
manufacturer
9 Kaiser Family Foundation, Prescription Drug Discount Cards: Current
Programs and Issues (Prepared by Health Policy Alternatives, Inc., Feb.
2002), p. 9. Background
Features Common to Most Cards
Page 6 GAO- 03- 912 Prescription Drug Discount Cards
sponsored cards are also filled by retail pharmacies, rather than through
mail order. To the typical pharmacy, however, card users comprise a small
share of their prescription business. Representatives of three retail
pharmacy chains we contacted told us that from 2 to 10 percent of a
pharmacy*s prescriptions are purchased using a card.
Under the Administration*s proposed Medicare- Endorsed Prescription Drug
Plan Assistance Initiative, established drug card sponsors could apply to
CMS for a Medicare endorsement; if they get it, sponsors could advertise
this endorsement. 10 Before the injunction was issued, applications from
card sponsors were due March 7, 2003, and a final decision on the initial
cards that would be Medicare- endorsed was slated to be announced in May
2003. On this timetable, CMS said it expected that beneficiaries would be
able to enroll in the card program of their choice beginning in September
2003. Cards receiving the endorsement would have to meet certain
standards, which are described below. The CMS rule does not provide
details on some of these standards and is silent on how the agency would
ensure compliance with some of them.
Beneficiary eligibility. A card program would have to be open to all
Medicare beneficiaries. Each beneficiary could be enrolled in only one
Medicare- endorsed card program at a time, but could withdraw from it at
any time. (A database of all cardholders would be maintained to ensure
that each beneficiary was enrolled in only one Medicare- endorsed card
program.) After withdrawing from a card program, the beneficiary could
enroll in another Medicare- endorsed card program, but that enrollment
would not take effect until the first day of the following July or
January, whichever came first.
Fees. A card program could charge an enrollment fee of no more than $25 to
each Medicare beneficiary.
Coverage. Each card program would provide a discount for at least one
brand name or generic prescription drug from each therapeutic class of
drugs (specified in the final rule) commonly needed by Medicare
beneficiaries. CMS said it anticipated periodically modifying the
therapeutic classes to keep them up to date with Medicare beneficiaries*
10 Major legislative proposals in both houses of Congress, S. 1 and H. R.
1, contain sections on establishing drug discount card programs. Medicare-
Endorsed Prescription Drug Card
Assistance Initiative
Page 7 GAO- 03- 912 Prescription Drug Discount Cards
use of drugs and with changes in the pharmaceutical marketplace, including
newly approved drugs.
Advertised discounts. The discount that a beneficiary would receive by
purchasing drugs with a Medicare- endorsed prescription drug card must be
advertised in dollars, not as a percentage. CMS said it anticipated
working with beneficiaries and the pharmaceutical industry to create a
means to compare prices for drugs among all Medicare- endorsed
prescription drug cards. CMS stated that it would give a special
designation to up to 10 percent of cards that offered the deepest
discounts
to beneficiaries.
Negotiation of discounts. Medicare- endorsed cards would require card
administrators to negotiate with pharmaceutical manufacturers to provide
lower prices to retail pharmacies for drugs purchased by cardholders.
Discount card administrators would have to ensure that a *substantial*
share of the lower prices was passed on to beneficiaries, either
indirectly, through retail pharmacies, or directly.
Information for beneficiaries. Enrollment fees, the availability of
patient management services, such as drug interaction warnings, and
information about the generic equivalent of brand name drugs for each
Medicare- endorsed card would be included on CMS*s Web site and in the
documents that contain card price comparisons developed by CMS.
PBM- administered drug discount cards differ from
pharmaceuticalmanufacturer- sponsored cards with respect to eligibility,
the range of drugs they cover, the extent to which the retail pharmacy is
paid for all or part of the difference between the price a person pays
without a discount card and the discount card price for a particular drug,
and the prices available with a card. The discount card programs
administered by PBMs are available to any adult, while the pharmaceutical
manufacturers* cards are available only to Medicare- eligible individuals
and couples with incomes below a certain level who do not have
prescription drug coverage. Each PBM- administered card covers most
outpatient prescription drugs, while the cards sponsored by pharmaceutical
manufacturers generally provide discounts only on the outpatient
prescription drugs that company produces. PBM- administered discount cards
specify that the cardholder*s price will be the lower of a percentage
below a commonly used reference price or the pharmacy*s usual price
(generally referred to as the usual and customary price). The typical card
sponsored by a pharmaceutical manufacturer offers cardholders either a
Characteristics of
Drug Discount Cards Vary Based on Their Sponsor
Page 8 GAO- 03- 912 Prescription Drug Discount Cards
price that is a specified percentage off a list price or a fixed price for
a specified quantity of each covered drug. (See appendix I for selected
characteristics of the drug card programs that we examined.)
The eligibility requirements for a card generally depend on whether it is
administered by a PBM or sponsored by a pharmaceutical manufacturer.
Unlike the PBM- administered cards, which are available to any individual,
the drug company- sponsored cards are available only to Medicare- eligible
individuals and couples with no prescription drug coverage who earn less
than a certain amount. Income eligibility limits for these cards range
from $18,000 to $30,000 for an individual and from $24,000 to $40,000 for
a couple.
PBM- administered discount cards usually cover most brand name and generic
drugs. PBM officials said exceptions could include high- cost drugs in
limited supply, those needing special administration, and the relatively
few outpatient prescription drugs covered by Medicare. Each of the cards
sponsored by a pharmaceutical manufacturer typically covers all the
outpatient prescription drugs that the manufacturer produces. The number
of drugs covered by the four manufacturer- sponsored cards we reviewed
ranges from 14 to 46. The Together Rx card offers discounts on about 150
brand name drugs manufactured by its participating pharmaceutical
manufacturers. 11 Under all drug discount card programs, retail pharmacies
agree to accept a
lower price from a cardholder than the usual price they would charge a
noncardholder. The card programs vary, however, in whether and to what
extent the pharmacies are paid for the difference between these two
prices. For purchases with the Medco Health Solutions and WellPoint Health
PBM- administered cards, there is no such payment. For some of the
purchases made with the other three PBM- administered cards, the retail
pharmacy is either paid a portion of the difference between the pharmacy*s
usual price and the price the cardholder pays. For other purchases made
with any of these three cards, the pharmacy is not paid for any of the
difference between the usual price and the price the cardholder pays.
11 In November 2002, one retail pharmacy chain began offering discounts on
generic drugs to Together Rx cardholders. Eligibility Requirements
Covered Drugs Retail Pharmacy Payment Arrangements
Page 9 GAO- 03- 912 Prescription Drug Discount Cards
Under the typical pharmaceutical manufacturer- sponsored card, the
manufacturer pays retail pharmacies for a portion of the difference
between the usual price it charges for a drug and the lower price the
pharmacy agrees to charge a cardholder. Some manufacturers set limits on
the usual price that will be used to determine this portion.
While PBM- administered drug discount cards typically express their
savings to cardholders as a percentage off what a cardholder would
otherwise pay, the cards differ in how they calculate the price that
cardholders pay at a retail pharmacy. For example, all the PBMadministered
cards other than Citizens Health express the cardholder*s price as the
lower of the average wholesale price 12 minus 10 to 15 percent or the
retail pharmacy*s usual price. Citizens Health and the AARP card
administered by Express Scripts use similar formulas, but further
stipulate that the cardholder*s price must be at least one dollar below
the retail pharmacy*s usual price. Drug prices available with
pharmaceutical manufacturer- sponsored cards
are typically lower than the prices available with PBM- administered cards
because a manufacturer- sponsored card*s price is either a percentage off
the manufacturer*s list price to wholesalers, 13 which is generally lower
than average wholesale price, or a dollar amount for a specified amount of
a drug. For example, Aventis cardholders pay no more than 15 percent below
its list price to wholesalers for a covered drug, and a Pfizer Share Card
enrollee pays $15 for each 30- day supply of any covered drug. With
GlaxoSmithKline*s Orange card a cardholder pays a price that is the
pharmacy*s usual price, subject to a limit determined by the manufacturer,
minus 25 percent off the company*s list price to wholesalers. Each
manufacturer participating in Together Rx sets the price for each of its
drugs independently, while guaranteeing that the price will be at least 15
percent off the manufacturer*s list price to wholesalers.
12 Average wholesale price is often described as a list price or suggested
retail price because it is not necessarily the price paid by a purchaser.
Most manufacturers periodically report average wholesale prices to
publishers of drug pricing data who make them publicly available. Because
it is publicly available, average wholesale price is a commonly used
reference price for determining drug discounts. 13 The list price to
wholesalers, also called the wholesale acquisition cost, is the price that
manufacturers generally charge wholesalers, excluding any rebates or
discounts, and is published by the manufacturers. Expression of Card
Prices
Page 10 GAO- 03- 912 Prescription Drug Discount Cards
PBM- administered drug discount cards used at retail pharmacies or the
PBMs* mail order pharmacies generally offer savings to consumers because
card prices are typically lower than the prices retail pharmacies would
otherwise charge. Card savings* the difference between the pharmacy*s
usual price and the cardholder*s price* vary, primarily because the usual
price varied across the 40 pharmacies we surveyed. For certain drugs at
certain pharmacies, however, no savings were achieved through the use of
the card because the retail pharmacy*s usual price was
lower than the median card price. Savings achieved through a
PBMadministered card would be reduced by the annual or one- time fee that
the card charges.
The range of savings achieved using a PBM- administered drug discount card
at a retail pharmacy for a 30- day supply of the nine drugs we examined
varied within and across geographic areas, primarily because of
differences in the usual prices charged by the pharmacies. Choice of
pharmacy rather than choice of card had more effect on how much a person
saved with a discount card. (See appendix II for more information on the
median retail drug card prices and the median retail pharmacy prices in
the three areas we examined.)
Median savings available with a PBM- administered card in the Washington,
D. C. pharmacies ranged from $2.09 to $20.95 for the nine drugs. All 14 of
the surveyed pharmacies offered a 10 percent senior discount. Card savings
amounted to an additional 1.7 percent to 43.9 percent off the median
pharmacy price. The highest percentage discount was for the two generic
drugs in our sample (atenolol and furosemide), although because these were
the lowest priced drugs, the dollar savings were among the lowest in the
sample. The substantial price differences
across pharmacies affected the card savings for a given drug. For example,
the noncard price for a 30- day supply of 200 milligrams of Celebrex at
the surveyed Washington, D. C. pharmacies ranged from $74.33 to $95.59.
Median savings in North Dakota ranged from $0.54 to $7.72 for the nine
drugs or from 1.3 percent to 42.3 percent off the median pharmacy price.
Only 3 of 13 pharmacies offered a senior discount (two offered 10 percent
and one offered 5 percent). At one of the pharmacies offering a senior
discount, some card prices for eight of the nine drugs were higher than
the pharmacy*s usual price for those drugs.
In California, Medi- Cal, the state*s Medicaid program, requires retail
pharmacies that participate in the program to offer the Medi- Cal price to
Card Savings Depend
on Usual Pharmacy Prices and Any Card Fees
Cards Used at Retail Pharmacies
Page 11 GAO- 03- 912 Prescription Drug Discount Cards
Medicare beneficiaries who do not have prescription drug coverage. 14 At
the 10 Medi- Cal- participating pharmacies, savings for seven of the nine
drugs ranged from $0.44 to $13.06 or from 0.7 percent to 11.1 percent off
the median pharmacy price. The Medi- Cal prices for the other two drugs at
these pharmacies were lower than the median drug card prices for these
drugs so the use of the card offered no savings. At the two pharmacies
that did not participate in Medi- Cal, but offered a 10 percent senior
discount, the savings were similar to those at the Medi- Cal participating
pharmacies, although one pharmacy*s prices for four drugs were lower than
the median card prices. Savings at the other pharmacy, which did not offer
a senior discount or participate in Medi- Cal, were considerably higher.
Mail order prices for a 30- day supply 15 of a drug with a PBM-
administered discount card were typically lower than the retail
pharmacies* usual price without a discount card, resulting in greater
card- related savings. The mail order prices with a discount card resulted
in savings ranging from $6.30 to $27.56 for eight of the nine drugs we
examined at the Washington, D. C.
pharmacies we surveyed. The average retail pharmacy usual price without a
discount card for the other drug was lower than the mail order price with
a card. In North Dakota, the savings realized by using a PBMadministered
drug card to purchase the nine drugs from a mail order pharmacy ranged
from $0.63 to $17.58. In California, mail order prices using a PBM-
administered drug card were lower than the Medi- Cal price for eight of
the nine drugs we examined, resulting in savings ranging from $1.03 to
$19.67; the Medi- Cal price was lower than the mail order drug card prices
for the other drug. Mail order savings at the three California pharmacies
that were not participating in Medi- Cal ranged from $3.12 to $104. 32,
except at one of the pharmacies offering a 10 percent senior discount
where the retail price for two drugs was lower than the mail order price.
Because it generally offers lower prices than retail pharmacies, mail
order
can be an attractive option for purchasing drugs for the chronic
conditions 14 Florida is the only other state that requires retail
pharmacies in the state that participate in Medicaid to offer the Medicaid
price to Medicare beneficiaries who do not have prescription drug
coverage.
15 The mail order option of PBM- administered cards generally dispenses a
90- day supply of a drug. The PBMs gave us their mail order prices for a
30- day supply, which allowed us to compare these prices to 30- day retail
pharmacy prices for purchases without a discount card. Cards Used at Mail
Order
Pharmacies
Page 12 GAO- 03- 912 Prescription Drug Discount Cards
common among the elderly, such as diabetes, arthritis, and high blood
pressure. Two PBM administrators noted, however, that many elderly people
cannot afford to buy at one time the 90- day supply of a drug that mail
order pharmacies typically dispense.
Consumers who use a mail order option can purchase drugs at Internet
pharmacies without a discount card. Our comparison of prices using data
from November 2001 found that the median mail order price using a
PBMadministered discount card was generally lower than Internet pharmacy
prices for a drug. But we also found at least one Internet pharmacy at
that time that offered a price lower than the median discount card mail
order price for 8 of 17 drugs that we examined. 16 The savings from using
a card are reduced if the card charges a fee. None of the pharmaceutical
manufacturers* cards charges a fee. The PBMs whose cards we examined
generally charged a one- time fee or an annual
fee. For example, the discount card we examined from Wellpoint Health
charges a one- time fee of $25 for an individual and about $50 for a
family. The Citizens Health card costs $12 a year for an individual and
$28 a year for a family.
As of October 2002, 16 states had passed laws regulating one or more
aspects of prescription drug discount card programs (see table 1). While
the scope of each of the laws varies, the sponsors of several of the laws
have characterized their purpose as consumer protection. 16 See U. S.
General Accounting Office, Prescription Drugs: Prices Available Through
Discount Cards and From Other Sources, GAO- 02- 280R (Washington, D. C.:
Dec. 5, 2001). Card Fees* Effect on
Savings State Regulatory Efforts Focus on Protecting Consumers
Page 13 GAO- 03- 912 Prescription Drug Discount Cards
Table 1: Selected Provisions of State Regulation of Prescription Drug
Discount Card Programs, November 2002
Source: National Conference on State Legislatures and National Association
of Chain Drug Stores.
Thirteen of the states require that a notice appear prominently on the
card declaring that it does not represent insurance coverage. Eleven of
the states require that the reporting of discounts offered by the cards
not be misleading, deceptive, or fraudulent. New Hampshire*s law, for
example, requires that the advertising for any discount card expressly
state that the discount is available only at participating pharmacies. The
law was enacted in May 2001 after some consumers complained about
confusion in how and where discount cards could be used. The sponsor of
the New Hampshire law told us that she heard from consumers in her state
who said they would pay for a card over the telephone, only to later find
that the nearest pharmacy honoring it was 50 to 100 miles away from their
home.
Twelve states require that the discounts be specifically authorized by
separate contracts between the card administrator and each participating
pharmacy or pharmacy chain. South Dakota*s law, which includes such a
provision, was enacted following complaints from pharmacists that
companies were selling cards that promised discounts at various
Provision States that have adopted the provision
Card must prominently display that it does not represent insurance
Ark., Ga., Idaho, Ind., Kans., Ky., Minn., Mont., N. H., Oreg., S. C., S.
Dak., Tenn.
Discounts* description must not be misleading, deceptive, or fraudulent
Ark., Idaho, Ind., Kans., Minn., N. H., Oreg., S. C., S. Dak., Tenn., Tex.
Discounts must be authorized by separate contracts for each retail
pharmacy
Ark., Ga., Idaho, Ind., Kans., Ky., Minn., Oreg., S. C., S. Dak., Tenn.,
Tex.
Card seller must register with state N. H., Oreg., S. C.
Card administrator required to pay a portion of any discount Miss.
Specifies restrictions on use of information about consumers by retailer
issuing card
Conn.
Page 14 GAO- 03- 912 Prescription Drug Discount Cards
pharmacies, but that the companies did not have agreements with all of
those pharmacies to actually provide the discounts. The sponsor of the
South Dakota law said some cardholders claimed that certain pharmacies
that the card*s sponsor advertised as accepting the card did not do so.
The sponsor of the law told us that it is intended to protect consumers
and pharmacies from deceptive sales practices by drug discount card
sponsors.
Mississippi*s drug discount card law bars a program administrator, such as
a PBM, from requiring pharmacies to accept a card as a condition of
receiving a contract for the PBM*s other business, unless the
administrator *pays a portion* of the cost of the discount given by the
pharmacy. According to a representative of the Mississippi Attorney
General*s office, which is responsible for enforcing the law, the state
has not defined *portion* in regulation and the meaning of the term has
not been the subject of litigation.
We provided a draft of this report for review to the five PBM
administrators whose cards we examined, four of whom responded. We also
obtained comments from a pharmaceutical manufacturer that sponsors its own
card and participates in the Together Rx card, and one independent expert
reviewer. They provided technical comments that we incorporated as
appropriate.
As agreed with your offices, unless you publicly announce this report*s
contents earlier, we plan no further distribution until 30 days after its
issue date. At that time, we will send copies to the Administrator of CMS,
the PBMs that administered the cards we examined, the pharmaceutical
manufacturers that sponsored cards we examined and other interested
parties. We will also make copies available to others upon request. This
report is also available at no charge on GAO*s Web site at http:// www.
gao. gov. Comments from
External Reviewers
Page 15 GAO- 03- 912 Prescription Drug Discount Cards
If you or your staffs have any questions about this report, please call me
at (202) 512- 7119 or John Hansen at (202) 512- 7105. Major contributors
to this report were Roseanne Price, Michael Rose, and Jeff Schmerling.
Laura A. Dummit Director, Health Care* Medicare Payment Issues
Page 16 GAO- 03- 912 Prescription Drug Discount Cards
List of Congressional Requesters The Honorable John D. Dingell Ranking
Minority Member Committee on Energy and Commerce House of Representatives
The Honorable Henry A. Waxman Ranking Minority Member Committee on
Government Reform House of Representatives
The Honorable Charles B. Rangel Ranking Minority Member Committee on Ways
and Means House of Representatives
The Honorable Sherrod Brown Ranking Minority Member Subcommittee on Health
Committee on Energy and Commerce
House of Representatives The Honorable Pete Stark Ranking Minority Member
Subcommittee on Health Committee on Ways and Means
House of Representatives The Honorable Mike Ross House of Representatives
Appendix I: Selected Drug Discount Card Characteristics Page 17 GAO- 03-
912 Prescription Drug Discount Cards
Card sponsor Card name Eligibility Income requirements Drugs covered
Advertised
prices Approximate
number of enrollees
Retail pharmacies, employee associations, and insurance companies (All
administered by PBMs)
Cards use different names No eligibility
requirements No requirements Each card covers all generic drugs and most
brand name drugs
10 to 15 percent off average wholesale price
17- 18 million a Consortium of 8 pharmaceutical manufacturers Together Rx
Medicare eligibility
and no other prescription drug coverage
Individual annual income below $28,000 or couple income below $38,000 b
About 150 brand
name drugs produced by participating pharmaceutical manufacturers At least
15
percent off manufacturer*s list price to
wholesalers 920,000 c
Eli Lilly LillyAnswers Medicare eligibility and no other prescription drug
coverage
Individual annual income below $18,000 or household income below $24,000
All drugs
manufactured by the company, except controlled substances, and products
not distributed by retail pharmacies
$12 for a 30- day supply 100,000 d GlaxoSmithKline Orange Card Medicare
eligibility
and no other prescription drug coverage
Individual annual income below $30,000 or couple income below $40,000 e
All outpatient
prescription drugs manufactured by the company
Average savings of 30 percent off the usual price 100,000 f
Novartis Care Card Medicare eligibility and no other prescription drug
coverage
Individual annual income below $18,000 or household income below $24,000
Certain Novartis outpatient
prescription drugs
$12 for a 30- day supply or 25 to 40 percent off depending on the
beneficiary*s income
15,000 g Pfizer Share Card Medicare eligibility
and no other prescription drug coverage
Individual annual income below $18,000 or household income below $24,000
All Pfizer
prescription drugs
$15 for up to a 30- day supply 250,000 h
Source: Pharmaceutical manufacturers* Web sites and interviews with card
administrators. a Based on information provided by five PBM card
administrators surveyed in February 2003. b As of February 2003. c As of
August 2003. d As of October 2002.
Appendix I: Selected Drug Discount Card Characteristics
Appendix I: Selected Drug Discount Card Characteristics Page 18 GAO- 03-
912 Prescription Drug Discount Cards
e In Alaska, individual annual income must be below $35,000 or a couple*s
income below $48,000. In Hawaii, individual annual income must be below
$33,000 or a couple*s income below $44,000. f As of November 2002.
g As of April 2002. h As of December 2002.
Appendix II: Median Retail Pharmacy PBMAdministered Drug Discount Card
Prices and Median Retail Pharmacy Noncard Prices Page 19 GAO- 03- 912
Prescription Drug Discount Cards
Drug Median retail drug card price California median
retail price a North Dakota median retail price b Washington, D. C.
median retail price c
Atenolol 50 mg $5.57 $5.19 $9.65 $9.09 Celebrex 200 mg $75.35 $69.76
$78.12 $84.68 Fosamax 70 mg $62.42 $62.86 $70.14 $71.05 Furosemide 40 mg
$5.04 $5.60 $7.65 $8.99 Lipitor 10 mg $63.77 $69.62 $66.09 $70.85 Norvasc
5 mg $41.37 $45.16 $41.91 $50.93 Premarin .625 mg $22.53 $25.33 $23.10
$26.00 Prilosec 20 mg $123.19 $130.06 $126.95 $125.28 Zocor 20 mg $116.39
$129.45 $119.69 $137.34
Source: Drug prices obtained from five PBM- administered drug discount
cards and 40 retail pharmacies. Note: GAO analysis. a Ten of the 13
pharmacies were Medi- Cal participants, meaning they had to offer seniors
Medi- Cal
drug prices. Two of the three pharmacies not participating in Medi- Cal
offered a 10 percent senior discount; the other pharmacy offered no
discount. b Two of the 13 pharmacies offered a 10 percent senior discount
and one offered a 5 percent discount;
the other ten pharmacies offered no senior discount. c All 14 pharmacies
offered a 10 percent senior discount.
Appendix II: Median Retail Pharmacy PBMAdministered Drug Discount Card
Prices and Median Retail Pharmacy Noncard Prices
(290128)
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