Pharmacy Groups File Suit Against U.S.

Published August 1, 2001

The National Association of Chain Drug Stores (NACDS) and National Community Pharmacists Association (NCPA) have filed a complaint against Tommy Thompson, Secretary of Health and Human Services, and Tom Scully, Administrator of the Centers for Medicare and Medicaid Services (formerly the Health Care Financing Administration), challenging the administration’s recently announced Medicare prescription discount card initiative.

Filed July 17, 2001 in U.S. District Court in the District of Columbia, the suit claims HHS and CMS lack legislative authority to adopt the initiative. The suit also alleges violations of the Administrative Procedures Act and the Federal Advisory Committee Act and challenges the drug initiative as an unlawful delegation of regulatory power to a private consortium.

The NACDS is the country’s largest pharmacy organization, serving nearly 170 members, including traditional chain pharmacies, supermarket chains, and mass merchandisers as well as nearly 1400 affiliate members. The NCPA represents the pharmacist owners, managers, and employees of nearly 25,000 independent community pharmacies across the United States.

The two groups have filed suit to prevent the Bush administration from promoting prescription discount cards in the Medicare program. They allege the Bush plan is “clandestine and unlawful” and would force them to bear the burden of trimming the cost of medicines for anyone insured by Medicare.

Unlawfully Adopted

According to the complaint, Congress did not authorize HHS to move forward with the drug discount initiative, as required by law. The Administrative Procedures Act requires that HHS be authorized by Congress to set standards and expend funds for such programs. Moreover, HHS is required by provisions of the Federal Advisory Committee Act to hold open meetings, for which prior notice has been given, in the development of government programs.

Instead, according to a NACDS news release, “the administration privately met with major Pharmacy Benefit Managers (PBM) in hopes of creating a short-term prescription benefit plan for needy seniors.” By setting up the consortium of PBMs to create, administer, and enforce the drug initiative’s standards, HHS unlawfully delegates power to a private company, the NACDS alleged.

Wrong Solution

White House officials said the administration could begin the new program without congressional approval as early as this Fall. The initiative would endorse and promote through Medicare several privately administered prescription drug discount cards, like those currently offered by pharmaceutical and other companies. At most, the cards would cost senior citizens $25; in many cases, they would be free. The administration says Medicare recipients would save 25 percent on typical pharmacy purchases, and as much as 50 percent for mail-order drugs.

But Craig Fuller, president and CEO of the NACDS, warned the administration against developing “false hopes” in senior citizens. He told the Associated Press, “This plan provides false hopes to our seniors when they walk into their neighborhood pharmacy. The possibility exists that there are no real discounts on the drugs that their doctors prescribe.”

Calvin Anthony R.Ph., executive vice president of NCPA, agreed. “The evidence is already abundantly clear that discount plans like this don’t work,” he said. “They’ve been outlawed in more than a half dozen states and abandoned in many others. This is a misguided approach to a serious problem.”

The NACDS/NCPA suit asks the court to declare the Medicare Rx Discount Card Program to be illegal and to preliminarily and permanently enjoin the Secretary and the Administrator from implementing the Card Program.

In a series of “talking points” posted on its Web site, the NACDS explains its opposition to the prescription card plans:

  • Prescription discount card programs are not coverage programs. They “overpromise” and “underperform.”
  • A discount is of no value to a senior citizen who has no means to pay for his or her prescriptions.
  • The discounts offered under card programs come entirely from reductions in the prices charged by pharmacies—not from price reductions by drug manufacturers.
  • Seniors who enroll in a card program may pay not only an enrollment fee, but also higher prices for their prescription drugs. Local pharmacies often charge lower prices for prescriptions than are charged by the major pharmacies that offer drug cards. An analysis of Washington State’s AWARDS prescription discount program found that for 235 drugs commonly prescribed for the elderly, AWARDS had the lowest prices in only seven instances. A state court struck down the program in late May.

Seeking Fuller Coverage

NACDS’ Fuller said the organization supports “true Medicare reform and the need to provide a Medicare benefit that covers the cost of prescription drugs.” For NACDS and other pharmacy organizations, that means “a ‘pharmacy benefit’ for the nation’s seniors—ensuring that they receive the necessary medications as well as the important counseling and services that only a community pharmacist can offer.”

“What seniors need is a true pharmacy benefit that guarantees them access to the valuable professional services offered by local pharmacies all across America,” said NCPA’s Anthony.

For more information . . .

The full text of the NACDS/NCPA suit is available on the Internet at Additional information about the suit is available on the NACDS Web site at The NCPA also has a Web site, at