Just over a month since its commencement, the Medicare Discount Drug Card program is already showing significant promise in lowering prescription drug costs for seniors.

Savings Estimates Continue to Mount

A score of studies using data from the Medicare Discount Drug Card (MDDC) drug price database demonstrate that the program is capable of achieving its primary goal: reducing the cost of prescription drugs for seniors, especially low-income seniors.

A study by the Centers for Medicare and Medicaid Services (CMS) finds potential savings of 32 to 85 percent for low-income seniors who enroll in the MDDC and thereby receive $600 transitional assistance.[1] Low-income beneficiaries stand to save the most. CMS makes the important point that "Beneficiaries-especially low-income beneficiaries-are forgoing substantial savings by not enrolling in any of these cards now."[2]

Preliminary results from a study being conducted by the Lewin Group for the Healthcare Leadership Council show that seniors save, on average, just above 20 percent with the MDDC.[3] The study also finds that seniors who qualify for the transitional assistance could realize savings between 29 and 92 percent.[4]

The American Enterprise Institute (AEI) recently published an extensive report on the MDDC. The report shows how the cards would bring low-income seniors savings of between 53 and 78 percent and that even moderate- and high-income seniors would enjoy significant savings with the cards.[5]

The AEI study takes into account a recent development that others overlook. Several drug manufacturers, in conjunction with certain discount cards, offer their drugs at greatly reduced prices ($12-$15 for a 30 day supply) to low-income beneficiaries who have spent their $600 transitional assistance. This additional discount will increase low-income seniors' savings, perhaps significantly.

Competition Continues to Lower Prices

Evidence continues to mount that competition between Medicare Discount Drug Card providers is driving down the prices of seniors' prescription drugs.

At the request of Congressman Henry Waxman (D-CA), the minority staff of the Committee on Government Reform studied how drug prices have changed since the drug card program's inception. Specifically, Waxman wanted to see how far, if at all, the prices of the least expensive prescription drugs have fallen. The results are telling.

Per Waxman's request, Committee staff chose ten drugs that are popular among seniors and compared the lowest available prices for those drugs at the inception of the program on May 3, 2004, to the lowest available prices on June 1, 2004, when the discount cards became valid.[6] The staff found that the total price for monthly supplies of all 10 drugs had fallen by only $4.75[7], but that is only half the story.

Of the ten drugs originally chosen for Waxman's study, eight decreased in price and two rose.[8] Merely adding up these changes, one does arrive at the $4.75 number. But this methodology does not present a real-world picture of price movements under the program. Three of the drugs included in the Waxman study- Nexium, Prevacid, and Protonix-all treat the same condition, acid reflux. Two of those drugs- Nexium and Protonix-are the two, of the ten altogether, that rose in price. Remove these two drugs from the bundle-since it is highly unlikely any senior would be prescribed all three-and the remaining eight decreased in price by $30.47 for a one-month supply, far more than the $4.75 Waxman highlights. While not monumental, $30.47 would be welcome savings for many seniors living on fixed incomes. Also, factor in that these savings are monthly: a senior requiring this particular bundle of prescriptions stands to save $365.64 more with the MDDC than just one month earlier.[9]

Replacing just one or two of these brand-name drugs with generics would only increase the savings. In a study predating the MDDC program by a month-it therefore does not include MDDC discounts-the FDA found that "costs per day can fall by 14 to16 percent if patients use generics instead of branded drugs, depending on their medical needs."[10]

"Too Much Choice"

At a recent Senate Finance Committee hearing on the MDDC, several senators complained that the card program is too confusing because there are too many cards. They assert that seniors face too many options and will simply not enroll in the MDDC.[11] Said Senator Max Baucus (D-MT), "The sheer number of discount cards has made the enrollment process daunting, confusing, and downright unattractive to many beneficiaries."[12]

In response to these concerns, Senator Kent Conrad (D-ND) introduced a bill to limit the number of cards in the program to three per region. Currently, there are 72 cards available, 39 of which are national and 33 regional. Conrad's Discount Drug Card Simplification Act, in addition to limiting the number of cards available, would also disallow price increases. Card vendors would have to maintain prices at the levels set on December 31, 2004, and would be forbidden from changing which drugs are covered by their cards. According to Conrad's office, this is "a measure that would serve to spur competition among companies offering discount cards."[13]

For two major reasons, though, limiting the number of cards available and restricting card vendors' pricing flexibility would be a step backwards for seniors.

First, having several dozen cards from which to choose allows every senior to find the one that best suits his or her needs. Seniors can choose a card that offers low prices on their prescription drugs and that makes those drugs available in the most convenient fashion-whether from a trusted pharmacist, through a local drug store chain, or by mail order. While mail order often provides the lowest prices, many seniors prefer to visit a pharmacist whom they have known for years and others visit a pharmacist to ask questions or to receive their prescriptions as quickly as possible. Limiting the number of cards that can participate in the MDDC program would necessarily limit the variety of ways seniors can obtain their prescription drugs. If the three cards chosen for a given region offered only mail-order service, for example, seniors would be forced to choose between the cards' savings and personal, sometimes crucial pharmacist care.

Second, blocking the ability of prices to fluctuate with market forces would bring a quick end to the MDDC program. While the prices of most drugs available through the MDDC have decreased since the start of the program, some prices have increased, for any number of reasons. If card providers were unable to adjust their prices or drop drugs from coverage, they would face the risk of being required, by law, to lose money on the sale of drugs that have become more expensive. Card providers may be loathe, understandably, to take on this risk, or they may be willing to bear it only by charging higher prices across the board. Either way, seniors' savings would be sacrificed.

Senior Interest Groups Unite

More that 80 organizations, many of which opposed the passage of last year's Medicare bill, are actively promoting enrollment in the MDDC program. The Access to Benefits Coalition (ABC) consists of members as diverse as the American Association of Retired Persons (AARP), the National Urban League, the Salvation Army, the Meals on Wheels Association of America, and Easter Seals.[14] This coalition is dedicated to making sure that eligible seniors "know about and can make the best use of both public and private prescription drug savings programs."[15] ABC has set a goal to enroll as many as 5.5 million low-income Medicare recipients in the MDDC program.[16] Thus far, 3.5 million seniors have enrolled in an MDDC.[17] In addition, ABC has set out to coordinate other programs, both at the state level and through drug manufacturers, to ensure that needy seniors receive all the help for which they quality.

Conclusion

Though the Medicare Prescription Drug Discount Card program is just over one month old, study after study shows that it will significantly help seniors who would otherwise struggle to pay for prescription drugs. And while seniors of all income levels will enjoy savings, those most in need, low-income seniors without prescriptions drug coverage, will enjoy the greatest savings.

Though enrollment has been slow in the program's infancy, the help of community and senior organizations, such as the members of the Access to Benefits Coalition, and word of mouth-especially as seniors become better educated about the savings the drug cards offer-will likely bolster interest and numbers in the months ahead.

Derek Hunter is a Research Assistant in the Center for Health Policy Studies at The Heritage Foundation.