Dealing the Drug Cards

This month, some 40 million people on Medicare can start using discount cards touted by the Bush Administration as a major initiative to help seniors save money on their prescriptions. Health and Human Services Secretary Tommy Thompson has said these cards will provide "real savings for many seniors." He's right--up to a point. An actuarial study by Consumers Union's Center for Consumer Health Choices and the California HealthCare Foundation shows that for people who take a lot of medicines, the savings can be significant. For example, someone taking eight medications for such ailments as heart disease, high cholesterol, arthritis and diabetes will pay about $1,200 a year less with a card that gives good discounts than he or she would pay for the same prescriptions using the discounted rate that the State of California pays when it buys drugs for residents on Medi-Cal, the state's Medicaid program.

But in the long run, discount cards are not good for seniors; they are simply a Band-Aid covering a deeper problem: the rising cost of healthcare, in particular prescription drugs.

Just on their own merits, the cards have problems. For one thing, finding good discounts takes a lot of work on the part of consumers who don't have actuaries running the numbers, and whether those discounts will last is anyone's guess. Card sponsors can change their prices weekly in response to market conditions and competition. But once consumers buy a card, they can't switch to do the same; they're locked in until the end of the year.

More important, the cards are the first step on the path to privatizing the government's forty-year commitment to helping seniors pay for healthcare through the Medicare program. Anyone over 65 is entitled to health insurance benefits, and through the years Medicare has shielded millions from poverty. But conservatives and their Republican allies would like to eliminate Medicare and turn healthcare for seniors over to private companies. This would practically guarantee that private insurance companies would make millions while shifting the burden of rising medical costs to seniors themselves.

The drug cards provide the pilot program for how it will be done. The Medicare reform law passed this past fall, which authorized the discount cards, also provides for a new, more elaborate drug benefit starting in 2006. But to be eligible for it, seniors must sign up with a private insurer. That's why so many companies are racing to offer the cards; a substantial base of cardholders will give them a ready market for the new drug benefit two years from now. The expectation is that the government will eventually force all seniors to choose a private insurer for all their medical care, just as it is doing with the cards.

The discount program does not address the twin problems plaguing the drug market: Americans pay the highest drug prices in the world, and annual spending for pharmaceuticals, now some $250 billion, has been doubling every five years. In late May, the AARP, whose support was instrumental in passing the new law, noted that prices for the most commonly prescribed brand-name drugs for seniors have risen at least three times faster than inflation in the past four years. So even if a person gets a good discount today, that savings will evaporate as drug-makers continue to raise prices.

Ironically--when seniors have trouble figuring out which card to buy and come to realize they may be stuck with a plan that doesn't provide much relief over time--the cards may help build support for real reform. Seniors still flock to Canada, where drugs are cheaper than even those bought with good discount cards. The limitations of the card will also help the effort to legalize drugs from Canada, which lays the groundwork for government involvement in negotiating drug prices. The House has passed a bill legalizing drug importation from Canada, and the Senate is expected to do the same by July 4. "Americans have seen Canadians pay much less and no longer accept high drug prices as natural and inevitable," says Alan Sager, a drug industry expert at Boston University's School of Public Health.

Drug-makers are getting worried. Through new advertising campaigns, some are trying to reinforce their message that high prices are necessary to finance research for new cures. Several, including Eli Lilly, Glaxo SmithKline and Pfizer, are supplying just enough drugs for only the Canadian market, in effect cutting off extra supplies that Americans can buy. "Importation is a form of price control," says Glaxo spokesperson Nancy Pekarek.

Discount cards and the new drug benefit are the last stand for private solutions to rising drug prices. In the end, only federal involvement in negotiating or regulating cheaper prices for drugs will allow seniors--and all Americans--to have the medicines they deserve at a cost the country can afford.

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