Sponsors' Management of the Prescription Drug Discount Card and Transitional Assistance Benefit

GAO-06-299R: Published: Jan 13, 2006. Publicly Released: Feb 21, 2006.

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Kathleen M. King
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The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) added a prescription drug benefit to the Medicare program, which became effective January 1, 2006. To assist Medicare beneficiaries with their prescription drug costs until the new benefit became available, the MMA also required the establishment of a temporary program, the Medicare Prescription Drug Discount Card and Transitional Assistance Program, which began in June 2004. The drug card program offers Medicare beneficiaries access to discounts off the retail price of prescription drugs at the point of sale. All Medicare beneficiaries, except those receiving Medicaid drug coverage, were eligible to enroll in the drug card program. Certain low-income beneficiaries without other drug coverage qualified for an additional benefit, a transitional assistance (TA) subsidy that can be applied toward the cost of drugs covered under the drug card program. Drug cards were offered and are managed by private organizations, known as drug card sponsors. General drug cards were available to all eligible beneficiaries living in a card's service area; there are both national and regional general cards. Exclusive and special endorsement drug cards were available to specific beneficiary groups. Some drug card sponsors offered more than one drug card. The Centers for Medicare & Medicaid Services (CMS)--the agency within the Department of Health and Human Services (HHS) that manages the Medicare and Medicaid programs--administers and oversees the drug card program. In response to a Congressional request, we examined drug card sponsors' management of the drug card and TA benefit and any challenges that sponsors experienced in meeting program requirements. Specifically, we (1) identified how drug card sponsors provided beneficiaries access to discounted drugs and the discounts obtained through these arrangements; (2) reviewed how drug card sponsors managed the TA benefit, including the enrollment of low-income beneficiaries and management of the TA subsidies; and (3) identified any benefits other than discounts on prescription drugs that drug card sponsors provided to beneficiaries.

Drug card sponsors generally built on existing arrangements that they, or their partner PBMs, had with drug manufacturers and pharmacies to provide beneficiaries access to discounted drugs. Drug card sponsors we interviewed generally reported little difficulty obtaining discounts for beneficiaries and meeting CMS's requirements to provide pharmacy access for beneficiaries. Analyses conducted by CMS found that beneficiaries enrolled in the drug card program could obtain prices that were 12 to 25 percent less than the average retail prices of brand-name drugs. Analyses by other research organizations found similar results. Some program requirements, however, were new and challenging for some drug card sponsors, or their partner PBMs, to implement. These included providing drug manufacturer discounts to beneficiaries at the point of sale and meeting CMS's requirements for reporting detailed data on discounts obtained from drug manufacturers and pharmacies. To manage the TA benefit, drug card sponsors generally relied on their prior experience in administering insurance coverage. Drug card sponsors that we interviewed reported some challenges with beneficiary enrollment for TA, reconciling TA subsidy balances with CMS, or both. Drug card sponsors' records of TA enrollment did not always agree with enrollment data from CMS's eligibility files, and some sponsors had difficulty maintaining accurate TA account balances. All of the drug card sponsors we interviewed told us they provided beneficiaries with at least one additional benefit beyond discounts on covered drugs, such as mail-order dispensing to lower drug costs and drug interaction monitoring programs to promote quality and safety. However, little is known about the extent to which drug card sponsors overall provided these additional benefits because sponsors were not required to report to CMS on the extent to which they provided these added benefits.

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