Rx Discount Card Plan Stalled by Judge

Published October 1, 2001

A federal court on September 6 blocked President George W. Bush’s plan to offer prescription drug discount cards to elderly Americans by early next year. The court found the administration may have lacked the authority to create the program without congressional approval.

The injunction–delighting pharmacy trade groups that had lodged a lawsuit opposing the discount cards–came weeks before federal health officials had planned to take the first significant step to put the program in motion. While the decision by Judge Paul Friedman of the U.S. District Court of the District of Columbia does not necessarily kill the plan, it will, according to the Department of Health and Human Services (HHS), postpone the program’s implementation for months.

Friedman predicted the pharmacy groups had a “substantial likelihood of success” on two grounds: that the administration lacked the legal authority to create the program, and that it had not followed the proper rules for making regulations.

White House spokesman Scott McLellan told the Washington Post, “[The] court decision is a loss for America’s seniors. The delay impacts seniors unable to get the same drug discounts other Americans receive through private health plans.”

Moving Too Quickly

Grace-Marie Turner, president of The Galen Institute, told Health Care News, “The administration hoped to speed access to drug discounts for seniors by giving a Medicare endorsement to existing prescription drug discount cards. It quickly became clear that even something as seemingly simple as a Medicare stamp-of-approval for an existing service was very complicated to implement. And it angered an important political constituency, namely pharmacists.”

Turner predicts the discount card battles will continue in the courts. She believes the administration and Congress are setting their sights now on creating a new Medicare prescription drug benefit. “It’s extraordinarily important,” says Turner, “to get this right so the remarkable progress in development of new medications continues.”

Dr. Merrill Matthews, a visiting scholar with the Institute for Policy Innovation and policy director for the American Conservative Union Foundation, warns the delay of the Bush plan may open the door for an even more intrusive government program. He explained,

“The administration’s discount card was an attempt to undermine an expensive new entitlement program being pushed by Democrats by giving seniors access to prescription drugs at somewhat lower prices. The judge’s ruling will doubtless re-energize Democrats’ call for a comprehensive federal program–now.”

At the time of this writing, HHS officials were reviewing their legal options and had not decided whether they would appeal the injunction. “Our goal remains to provide discounts to millions of seniors as soon as possible,” said Tom Scully, administrator of HHS Centers for Medicare and Medicaid Services (CMS), in a statement issued immediately after the judge’s decision was announced.

First Step in Medicare Reform

The Rx discount card program represents what President Bush has called “the first necessary step” in a broad framework for modernizing Medicare and including a prescription drug benefit. Currently, Medicare pays for medicine prescribed to persons being treated as hospital inpatients, but not for medications people take at home.

The Bush plan relies on private companies managing drug benefits to buy prescription drugs in bulk. Companies would offer Rx discount cards for a premium or fee to any Medicare patient who wanted one. In turn, patients could take their cards to pharmacies across the country to buy medicine at reduced prices.

The program is opposed by two organizations representing pharmacies, which sued HHS five days after Bush’s original announcement. As reported in the August 2001 issue of Health Care News, the National Association of Chain Drug Stores and the National Community Pharmacy Association alleged the program is illegal. They contend health officials created the plan in “secret meetings,” failed to allow the public participation required in drafting regulations, and lacked legal authority.

Some 28 pharmacy benefits companies have told federal health officials they would like to take part. CMS has been reviewing their applications and had planned to announce in two weeks which ones it would endorse. After the endorsements, the companies could have started marketing their cards to Medicare patients.

The pharmacy groups have contended that, based on the experience of discount cards already available in the private market, the savings would be relatively small. A Kaiser Family Foundation study lending strength to that argument was released in August. (See “Medicare Drug Plan May Deliver Less than Expected,” Health Care News, September 2001.)

On behalf of HHS, Justice Department attorneys argued the agency had proper legal authority, even without explicit approval from Congress, because the new program would be related to Medicare, even though the discount cards would not actually be covered by Medicare. The government further argued HHS was not actually regulating private pharmacy discount programs, but merely creating a voluntary program for companies and patients.

The court ruling surprised both sides of the issue, as Friedman rarely delivers oral decisions at the end of court hearings. He chose to block the administration’s plans on an emergency basis, noting harm would be done if HHS were permitted to go ahead with plans to choose which companies could participate in the Rx program.