Washington Watch

Medicare Drug Discount Cards? Not Yet!

by James L. Thorne, Esq.

INTRODUCTION
President Bush announced his administration's Medicare Rx Discount Card Program with much fanfare on July 12, 2001. Soon thereafter, the CMS (previously HCFA) placed several documents on its web site explaining the program and the perceived need for it.

In addition, HHS Secretary Tommy Thompson testified about the program before Congress on July 19, 2001. The Secretary's full testimony before the House Ways and Means Committee stated the Bush Administration's principles to "strengthen and modernize Medicare." "Principle 1" of the eight stated principles was "all seniors should have the option of a subsidized prescription drug benefit as part of modernized Medicare".by negotiating volume discounts and helping seniors choose the best treatment for them while avoiding adverse drug interactions."

Noble words of help for senior citizens. Yet, not everyone is behind the Bush Administration's specific approach for the use of prescription drug discount cards. In fact, the National Association of Chain Drug Stores and the National Community Pharmacists Association came out swinging against the prescription discount card proposal.

As designed by HHS, the administration's plan seeks to rely on private companies that managed drug benefits to buy prescription drugs in bulk. Companies would sell the drug discount cards to any Medicare patient who wanted one. In turn, patients could take their cards to pharmacies across the country to buy medicine at reduced rates. So, why did the chain drug stores and the community pharmacists oppose the program? They fear that any discounts the program provided to older Americans would come at their expense and profitability.

Acting on their concerns in late July 2001, the National Association of Chain Drug Stores and the National Community Pharmacists Association filed for a preliminary injunction in the United States District Court for the District of Columbia to stop the HHS from implementing the Medicare Rx Discount Card Program. On September 6, 2001, the court granted their injunction and, as of September 17, 2001, the court gave the Bush Administration until October 9, 2001 to respond to the plaintiffs' initial complaint.

What the federal government does to address the availability and affordability of prescription drugs will affect AAEM members and all of our society. The balance of this article attempts to summarize the Bush Administration's discount card plan and the plaintiffs' initial complaint against it, in particular, the complaint's five counts as to why the injunction should be granted. AAEM members should know that the Bush Administration is sure to respond to the complaint. In addition, an effort to introduce new federal legislation to require the discount card program is currently under way.

WHY THE BUSH ADMINISTRATION THINKS SENIORS SHOULD BE PROVIDED WITH A MEDICARE PRESCRIPTION DRUG BENEFIT
According to the CMS Medicare News Release dated July 11, 2001, one of the most glaring omissions in Medicare's benefits is the lack of prescription drug coverage. Almost 400 new drugs have been developed in the last decade alone to fight diseases such as cancer, heart disease, diabetes and arthritis. Yet, while over 98 percent of employer-sponsored health plans pay for prescription drugs, Medicare still does not cover prescription drugs. President Bush supports a new prescription drug benefit for seniors to help them live more enjoyable and healthy lives.

THE ADMINISTRATION'S INITIATIVES FOR THE DISCOUNT CARD PROGRAM
When it was released, the Bush Administration believed that two basic initiatives could be taken immediately under existing authority. For one, Medicare will endorse and promote a number of qualified privately administered prescription drug discount cards, to be made available either free of charge or at a nominal, one-time enrollment charge (no more than $25/enrollment) to seniors. Further, Medicare will require the approved card sponsors to publish the discounted prices for most prescription drugs purchased by seniors, to encourage price competition and simplify the prescription drug buying decisions of seniors. Well-informed seniors will drive the market to competitive pricing.

SPECIFIC FEATURES OF THE DISCOUNT CARD PROGRAM
Again, according to HHS, the program encompasses eight specific features:

• The card will provide access to discounts on prescription drugs for Medicare beneficiaries.

• Card sponsors can charge no more than a one-time $25/enrollment fee for the card, and are encouraged to compete by offering lower-fee or no-fee cards.

• Seniors can enroll in one and only one Medicare-endorsed card program at a time, and can change enrollment on a semi-annual basis.

• All Medicare-endorsed plans will agree to participate in a joint computer system to track enrollment to avoid duplicate card issuance-to give real purchasing power to each discount card sponsor.

• Medicare will launch a $35 million education campaign this fall to publicize and educate seniors about their options in Medicare, including the options among the endorsed prescription cards.

• Card sponsors are encouraged to offer a combined retail-mail-order card. To assure seniors access to retail-based discounts, a mail-order only option will not be considered.

• Card sponsors can market additional services to cardholders, but must allow seniors to decline to participate in the additional services when they enroll.

• Card sponsors can adopt the quality-enhancement and cost-containment strategies common in private plans, including but not limited to: formularies; preferred networks; patient and physician education programs; and disease management.

A PROGRAM ON A "FAST TRACK"
Working from these specifics, the selected card sponsors were required to participate in and help finance a Consortium to handle all enrollment and eligibility functions of the program. Further under the program directive, the Consortium was required to develop and implement, by October 1, 2001, a system to permit seniors to compare card programs using basic information on formulary content, networks and discounts. Last, by October 12, 2002, the Consortium will enhance the ability of seniors to comparison shop by providing consumers the actual discounted drug prices associated with various endorsed card programs, including information on generic and formulary alternatives consistent with the cards' programs.

The program and its willing participants were clearly moving toward a speedy enactment. Before the district court issued its preliminary injunction on September 6, 2001, some 28 pharmacy benefit companies had, reportedly, told federal health officials they would like to take part in the program. The HHS was actively reviewing their applications and planned to announce on or about September 20, 2001 which pharmacy benefit companies it would endorse. After the endorsements, the companies could start marketing their discount cards to Medicare patients.

WHAT DID THE FEDERAL JUDGE CONCLUDE?
The plaintiffs' (National Association of Chain Drug Stores and National Community Pharmacists Association) Motion for a Preliminary Injunction and Request for a Hearing is lengthy but the judge's Order is not. In his two-page Order, Judge Paul Friedman found that "plaintiffs have a substantial likelihood of success on the merits of their claim that defendants violated the Administrative Procedure Act and acted without legal authority in creating the Medicare Rx Discount Card Program." The court also concluded that "unless enjoined, defendants' (HHS Secretary Thompson and CMS Administrator Scully) actions are likely to cause plaintiffs and their members irreparable harm for which no adequate remedy at law exists." This is somewhat "standard" language for an order granting a Preliminary Injunction. However, the immediate effect is profound-it stops the program at least for months.

WHY DID THE JUDGE ISSUE HIS ORDER? WHAT DID PLAINTIFFS SUCCESSFULLY ALLEGE IN THEIR MOTION?
As stated in the plaintiffs' motion, the standards governing the issuance of a preliminary injunction are well established. In summary form, a court should consider: (1) whether there is a substantial likelihood that plaintiffs will succeed on the merits; (2) whether plaintiffs will suffer irreparable injury absent an injunction; (3) the harm to defendants or other interested parties; and (4) whether an injunction would be in the public interest, or at least not adverse to the public interest.

In addressing these established standards, the plaintiffs articulated five basic counts in their motion as to why the court should (and did) issue a Preliminary Injunction in this case. Although it would serve no purpose to recant the plaintiffs' successful reasoning or authoritative sources in-depth, the writer does believe that AAEM members should be acquainted with the basic principles of each count. However, the AAEM or the writer will provide the entire motion to interested AAEM members.

Count I - Defendants Exceeded Their Authority
In this count the plaintiffs made three basic allegations: Nothing in the law authorizes the Secretary (of HHS) to establish and implement the card program; courts previously have enjoined HHS when it has acted without statutory authority; and when Congress authorizes the Secretary to use private organizations to furnish services to Medicare beneficiaries or to the Medicare program, it does so expressly.

Count II- Defendants Violated the Notice and Comment Requirement of the Administrative Procedure Act (APA)
In this count the plaintiffs made two basic allegations: The card program is a substantive rule that is subject to APA Notice and Comment Rulemaking; and the card program rule is invalid because it was adopted without observance of the required notice and comment procedures.

Count III- The Card Program is Arbitrary, Capricious, An Abuse of Discretion, and Otherwise Not in Accordance With Law
Here, the plaintiffs successfully made two basic allegations: There is no rational connection between the restrictive standards and the purported purpose of the program; and the defendants have not even attempted to explain the basis for their restrictions of participation (in the program).

Count IV- Defendants Have Violated the Federal Advisory Committee Act
The Federal Advisory Committee Act, 5 U.S.C. App.2, basically regulates the formation and operation of federal advisory committees in order to ensure the open and fair discussion of policy by bodies of the federal government. The Act imposes upon federal agencies and their advisory committees a number of requirements, including open meetings, registration and notice requirements, balanced membership, and public participation. See id. Sections 5, 8-10.

Here, the plaintiffs alleged that the discount card program was in violation of the Act because it was developed as a result of alleged secret meetings that CMS held with a committee of several of the largest Pharmacy Benefits Managers (PBMs/the "Committee"). According to the plaintiffs, members of the retail community pharmacy industry, drug manufacturers, and senior citizens were excluded.

Count V- Defendants Violated the APA by Unlawfully Delegating Executive Authority
In this count, the plaintiffs made four basic allegations: Nothing in the law authorizes the Secretary to delegate Executive Authority to the consortium; plaintiffs will suffer irreparable injury absent an injunction; the defendants would not be harmed by the issuance of a preliminary injunction; and the public interest favors granting a preliminary injunction.

CONCLUSION
Does all of this mean that the plaintiffs "proved up" each of these counts and sub-points in order to obtain the Preliminary Injunction to stop the drug discount card program? No. Yet, the issuance of the order by Judge Friedman does mean, again, that based on these arguments, the plaintiffs "have a substantial likelihood of success on the merits of their claim." Certainly, the defendant federal government has its work cut out in order to be successful on its October 9, 2001 response. Further, after the Preliminary Injunction was issued on September 6, officials at the White House and the Department of Health and Human Services acknowledged that the judge's order will likely postpone the discount card program for months.

In a related development after the judge's order was issued, Senator Bill Frist (R-TN) announced that he would introduce legislation soon to advance President Bush's desire for a Medicare prescription discount card. According to Senator Frist's health care staff on September 19, 2001, he still intends to introduce the bill. However, the terrorist attacks on September 11, have delayed introduction of the bill.

James L. Thorne is a Washington DC government relations counsel for AAEM. He can be reached at jnlt@erols.com.