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Inflated Drug Prices
January 8, 2009 • Volume 9, Issue 1
Switching to generic medicines can be a smart way to save money. People with Medicare, however, have to be careful that their Part D drug plan is not padding the bill for generic drugs.
Under the Silver Script Value plan, a
resident taking two heart medicines, a drug to lower cholesterol, an antidepressant, a medicine for a gastrointestinal disorder, and a drug to treat pain from shingles would spend $2,252 over the course of 2009, entering the Part D coverage gap in September. Once in the coverage gap (or doughnut hole), a SilverScript enrollee would pay the plan’s full price for these generic medicines—over $300 per month—for the rest of the year. Cleveland
For the savvy consumer, there are five drug plans in
that cost less than $700 for the year for the very same drugs, less than a third of what a SilverScript member would pay. Enrollees in these plans never hit the coverage gap. Cleveland
What explains the huge difference in drug prices?
CVS Caremark, the pharmacy benefit manager that offers the SilverScript plans, is jacking up the cost of these and other generic medicines. Instead of using the price SilverScript pays the pharmacy for these drugs, it charges enrollees an inflated price that it pays itself for administering the benefit. Carvedilol, a heart medicine, costs over $44 dollars under SilverScript, more than twice the price in other plans that charge enrollees the real pharmacy price. Gabapentin, for shingles pain, costs over $100 under SilverScript; it costs under $40 under competing plans. These high prices push SilverScript enrollees into the doughnut hole and stick them with higher prices once they have fallen into the coverage gap.
This pricing scam, which is also employed by other drug plans and Medicare private health plans that offer drug coverage, has been going on since the start of the Part D benefit in 2006, and it will continue throughout 2009. In 2010, however, thanks to regulation issued by the Centers for Medicare & Medicaid Services (CMS) this week, the scam will come to an end. Medicare private health and drug plans will no longer be allowed to charge members drug prices that are higher than the rate they pay pharmacies.
Not entirely. Consumers can still be victimized by this pricing scam when they use mail order pharmacies, many of which are owned by these pharmacy benefit managers or are partners in offering Part D drug plans.
WellCare Classic, one of the cheapest drug plans for a
resident with Medicare who takes these 7 drugs, would cost $444 for the year using retail pharmacies but $1,997 using mail order. Consumers who use WellCare’s mail order pharmacy, whose prices average twice the rate at retail pharmacies, get pushed into the doughnut hole in July. They never get out. Cleveland
CMS says in the recent regulation that it will keep an eye on such price discrepancies. They should. Such inflated prices are not just a bad deal for consumers; they cost taxpayers more money too.
“Consumers generally switch to a generic because of coverage restrictions imposed on brand-name drugs in the same therapeutic class, to reduce out-of-pocket spending, and to avoid falling in the Part D coverage gap. It is unfair that these consumers, after taking action they thought would lower their costs, should be subject to a pricing model that not only fails to deliver the full savings benefit of generic substitution but could also push them into the coverage gap earlier in the year.” (Improving the Medicare Program for Beneficiaries: Administrative Recommendations for the Incoming Administration,
, November 2008) Medicare Rights Center
“[W]e believe that requiring plans to determine beneficiary cost-sharing based upon the . . . price paid to the pharmacy or other dispensing provider will reduce out-of-pocket costs for most beneficiaries and slow their advance through the initial coverage phase of the benefit.” (Medicare Advantage and Prescription Drug Benefit Programs: Negotiated Pricing and Remaining Provisions, Centers for Medicare & Medicaid Services, January 2009)
“Last year I fell into the donut hole in early May. I then had to pay full price for all my medicines. My total prescription bill for 2007 was $4688.91. That is an average of $390.74 a month. This year I am getting my name brand medicines from out of the country and only using my Medicare D plan for my generic medicines. I think I will be cutting my average monthly cost down to $200 a month; a 50 percent savings.” (Prescription Drug Coverage Stories, Submitted to the
, May 2008) Medicare Rights Center
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Medicare Rights Center’s new Medicare Part D Appeals: An advocate’s manual to navigating the Medicare private drug plan appeals process offers an easy-to-understand, comprehensive overview of the entire appeals process, including real-life case examples, a glossary of important appeals terms, a sample protocol for advocates, and links to important resources.
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Medicare Part D Monitoring Project
would like to hear about your experience, or that of someone you know, enrolled in a private drug plan. With information about what the issues are with Medicare Part D, we will be able to demand that those problems be fixed. Medicare Rights Center
Submit your story at http://www.medicarerights.org/about-mrc/newsletter-signup.php.
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