Statement by
Mark McClellan, Administrator
Centers for Medicare and Medicaid Services
Department of Health and Human Services
Medicare-Approved Drug Discount Card
before the
The House Energy and Commerce Subcommittee on Health

May 20, 2004

Chairman Bilirakis, Representative Brown, distinguished Committee members, thank you for inviting me to discuss the Medicare-Approved Drug Discount Card and the Transitional Assistance Program, which were enacted into law on December 8, 2003, as part of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA). This May, we reached the five-month mark since the legislation was enacted. CMS worked diligently to meet this aggressive deadline to implement the drug card and transitional assistance program - and we succeeded. In that time, we issued an interim final regulation and guidance, set up the new drug discount card program with new information and outreach systems to support them. Drug card sponsors began marketing and enrollment efforts on May 3 as scheduled.

As we speak, Medicare beneficiaries are enrolling in Medicare-approved drug cards that will give them immediate assistance with high prescription drug costs. We are already seeing evidence of significant savings between 10-17 percent off the retail prices that the average American pays, and even greater discounts of 30-60 percent or more on generics. These cards will offer real help to those Medicare beneficiaries struggling with their drug costs. And many cards have a low annual fee (or no fee at all) so many beneficiaries can recoup the cost of enrollment in their first purchase. In addition to the real savings, low-income beneficiaries may get even more help in the form of a $600 annual credit on the discount card, nominal cost sharing, and other price reductions from manufacturers.


In spite of substantial progress we have made thus far and the fact that beneficiaries are seeing savings, we recognize there have been some operational problems. However, we are identifying and correcting these problems and, with each passing day, improving the efficiency of this program. As you all know, in the brief five months since MMA was signed into law, CMS took the drug card program - the first of its kind to be offered through Medicare - from conceptual idea to reality. Implementing the drug card in such a short period of time presented many challenges for the Agency, including developing the technical platforms to support public display of unprecedented amounts of drug pricing information.

The initial phase of a major new program is clearly a time of learning, and what we have seen is that millions of seniors and people with disabilities are very interested in learning about the best ways to save on their drugs. During the first few days of May, we averaged 400,000 calls to 1-800-MEDICARE each day. This is an extraordinary call volume for one week, particularly when you consider that we had 6 million calls in all of 2003. Responding to this volume of calls was a significant challenge to our high customer service standards in Medicare. Even with this unprecedented level of interest, we are committed at 1-800-MEDICARE to provide service that reliably gets customers the help they need in a matter of minutes.

We have worked quickly to improve the program and we will continue to do so as we identify problems. At 1-800-MEDICARE, we tripled the number of customer service operators from 400 to more than 1400 available by last week. In recent days, we added another 600 customer service staff, and we expect to add many more trained representatives in the next couple of weeks to handle the unprecedented number of callers in a timely and effective manner. We've also taken steps to reduce the time that our customers have to take when they call, by adding voice messages that can help callers to be better prepared when they reach a customer service representative. We have also provided self-service information in our interactive voice response system so that callers can get information to address their questions without needing to speak with a customer service representative. And, we have also developed additional tools to help our customer service representatives use "best practices" to work more efficiently -- reducing our call handle time significantly and allowing our representatives to serve more callers more quickly. As a result, we are achieving much better support results - the kind of results our beneficiaries deserve and expect. We are tracking our call center wait times and call times, and we are reaching the balance we want between calls and caller support. This week, during our busiest times of the day, the wait times were from 4 to 15 minutes (and we are advising beneficiaries about approximate wait times), and at many times the waits have been even less.

We are committed to getting people with Medicare the information they need to get the most out of the drug cards, and that starts with personalized facts now available in just a few minutes through 1-800-MEDICARE or Medicare.gov. To help callers and web visitors who have trouble matching up their medicines with the discount information, we have added a "drug lookup" feature to assist with the spelling of their drug names and we are expanding our drug entry list - a large and growing "dictionary" of drug names. In the interim, we have also provided instructions to users that they can "add another drug" if they do not find their drug on our initial drug entry screens. Further improvements to the drug and dosage entry screens will be in place in the next few weeks. We are committed to continuing improvements to the site navigation and functionality features based on feedback from all of our users.

We appreciate the unprecedented level of interest and feedback we are receiving from beneficiaries and others in the first days of this new program. We will continue to refine and improve our 800 number and our web site by using feedback from all interested parties, including the suggestions we have received from Members of Congress. By following a few simple steps - especially by being ready with zip code, drugs and doses, and income information - beneficiaries can get the personalized information they need quickly. And beneficiaries should remember that the drug card is voluntary - there's no deadline and no late enrollment penalty, although signing up by June 1 means that they will start seeing the discounts right away. We also know that beneficiaries have diverse needs and are waiting to get information to help make the choice that is best for them.

It's also important to remember that despite the challenges we face in implementing this brand new program, we are providing beneficiaries with information they have never before been able to access. Further, the drug card is a fundamental change in how Medicare helps beneficiaries buy drugs. Beneficiaries will get lower prices for their drug purchases because they will be able to band together to use their purchasing clout through the power of large purchasing pools to leverage discounts from drug makers. By combining unprecedented transparency of prescription drug prices with individualized assistance and educational resources, we are working with card sponsors to use modern technology to provide the medicines Medicare beneficiaries need at a lower cost. Transparent prices for Medicare-approved cards gives beneficiaries important information to help them choose the best card for their needs.


One of the most important messages I can convey today is the tremendous help the drug card will provide for low-income beneficiaries. Medicare beneficiaries are eligible to enroll in the drug card of their choosing, unless they have drug coverage through Medicaid. If beneficiaries receive help with prescription drug costs through other sources - retiree insurance, Medigap coverage, or health plan benefits, they don't have to enroll if they don't want to - the program is completely voluntary. However, beneficiaries with limited incomes who are struggling with prescription drug costs unquestionably can get much needed financial assistance. More than7 million beneficiaries with incomes below $1,047 a month ($12,569 a year) for single people or less than $1,405 a month ($16,862 a year) for couples who do not have drug coverage may qualify for the $600 drug credit as early as next month and an additional $600 again in January of next year. The discounts from the cards combined with the $600 credit available in June and again in January, and substantial additional manufacturer and pharmacy discounts specifically targeted at low-income individuals make this an exceptional program for low-income people with Medicare - our most vulnerable beneficiaries. We want to make sure that everyone who qualifies for the $600 credits get it. So, we have worked closely with our partners at the Social Security Administration (SSA) to send letters to millions of low-income beneficiaries that are eligible for the $600 credit. We are also working closely with community organizations to make sure these beneficiaries are aware of the substantial savings and assistance now available to them through the drug card program.


We are doing everything we can to ease the drug card enrollment process for Medicare beneficiaries, and a big part of enrollment is selecting the best card for an individual's needs. Today, beneficiaries comparison-shop for many decisions in their daily lives comparing the price and quality of a product or a service. Medicare beneficiaries with and without prescription drug coverage often find it difficult to find the best prices on prescription drugs, especially at neighborhood pharmacies. That's changing with our new Medicare Price Compare tool, which we will demonstrate for you today. This is a feature on our website, www.Medicare.gov, that beneficiaries can use directly, or that they can have a representative from 1-800-MEDICARE helpline walk them through the same process. In addition, beneficiaries can consult with beneficiary advocates, such as the thousands of local trained State Health Insurance Assistance Program (SHIPS) volunteers, or consumer groups to find the best deal. And beneficiaries need only three key pieces of information: their zip code, the medicines they use, and their income.

The Medicare Price Compare feature - the website and the assistance available through 1-800-MEDICARE - is designed to help people with Medicare lower their drug costs by selecting the best discount card. Price Compare is a unique tool that allows users to customize their search to get the best prices available for that drug or mix of drugs. Making price comparisons on a drug-by-drug basis is difficult for many beneficiaries who take multiple medications, and Price Compare permits comparisons involving multiple drugs. Price Compare provides this information for the retail pharmacy setting - where most Medicare beneficiaries purchase their drugs. Moreover, card sponsors must assure beneficiaries that they will pay no more than the discounted prices listed on Price Compare. The price the beneficiary ultimately pays may be even lower due to the increased visibility of prices and ongoing competition among card sponsors.

Through the new website, beneficiaries for the first time in the Medicare program will have access to prices for approximately 60,000 products sold at nearly 75,000 pharmacies around the country - all turned into information they can use to get the best bargains on the drugs they need. Using the website's therapeutic alternative function, a person can look up a clinical condition like high cholesterol, and see average prices for Lipitor as well as for other cholesterol-lowering agents like Zocor and Crestor - options that may be worth discussing with their doctor if they are less expensive and clinically appropriate. In addition, patients can also get information on generic alternatives, which are just as safe and effective as the brand-name versions when approved by the FDA.

We are working with card sponsors to ensure that the prices they have submitted to us for posting on the website are prices they can guarantee to beneficiaries at the included participating pharmacies. We believe the information now on the website reflects just that, and we have also taken new steps to make sure that Medicare and the HHS Office of the Inspector General can take effective enforcement actions against cards that don't live up to their promises. Over the coming weeks, we will continue to work with the card sponsors to help consumers get consistent information whether they visit medicare.gov or the sponsor websites. But in the meantime, we remain committed to our requirement that beneficiaries must pay no more than the discounted price listed by Medicare.

With the unprecedented amount of information now available on drug prices through Price Compare, CMS has put comprehensive systems in place to help beneficiaries use this information to find the best deal on their prescription drugs. The 1-800 MEDICARE customer service representatives will provide detailed information over the phone and then follow up by sending out a personalized report that includes information on how the drug card program works and detailed information on the best cards for that beneficiary. Beneficiaries can even designate the number of cards they want to review - 2, 3, or as many as they want. The Price Compare search can also turn up cards that get the lowest prices on certain drugs, cards with low or no fee, networks that include specific neighborhood pharmacies, and/or cards from specific sponsors familiar to beneficiaries. We'll also include information on total drug costs, and additional ways to save, such as purchasing generic drugs. The brochure also includes information on how to sign up for the card the beneficiary chooses - including the 1-800 numbers for the card sponsor choices for with the best prices for that beneficiary and our standard 2-page enrollment form. After enrolling, beneficiaries will get their cards in a matter of days.

But we're reminding beneficiaries that they don't need to sign up yet - this is a good time for beneficiaries to shop around to consider their options for Medicare-approved drug discount cards. They can window shop now on the website to see how cards compare on price, and visit again whenever they choose. For those individuals who sign up by the end of May, they will get the benefits of the discount program when it starts on June 1. Beneficiaries, however, are not required to choose a card in May; they can choose a card whenever they wish, with no penalty for enrolling later. However, we are encouraging beneficiaries with limited incomes to look into the program now, so they can start saving immediately on their prescription drug costs. Best of all, it doesn't cost low-income beneficiaries anything to enroll in a drug card of their choosing. The $600 credit this year and the $600 credit next year, plus additional discounts that a growing number of major drug manufacturers are offering to wrap around the discount cards and existing state-sponsored drug programs all translate into literally thousands of dollars in additional assistance for low-income beneficiaries.


Twenty states currently have programs that already provide drug benefits to low-income beneficiaries, many of whom will be eligible for the $600 credit. Since most of these Medicare beneficiaries may enroll in both the state program and the Medicare program at the same time, CMS recently announced that low-income Medicare beneficiaries enrolled in State Pharmacy Assistance Programs (SPAP) that provide discounts on prescriptions drugs and who act as the beneficiary's authorized representative in accordance with state law, may, at the state's option, be automatically enrolled for the $600 credit on a Medicare-approved drug discount card. Auto-enrollment benefits both Medicare beneficiaries and the states. Medicare and the states want low-income beneficiaries to get the additional $600 credit, and auto-enrollment is one way to maximize the number of people who enroll for transitional assistance. In addition, the states would be exempt from paying the first $600 for each of these beneficiaries, thus freeing up additional money to finance their own drug assistance programs.

We are going to work with states to automatically enroll their SPAP members into a Medicare-approved drug card and obtain the $600 credit so there is no loss in coverage or confusion for the beneficiaries. However, the auto-enrollment process must allow a beneficiary the choice to decline being enrolled in a Medicare-approved card before the actual automatic enrollment takes place. States that have agreed to automatically enroll Medicare beneficiaries include Connecticut, Maine, Michigan, New Jersey, New York, Pennsylvania and Massachusetts, as long as they are able to meet the CMS requirements. A number of other states are also considering auto-enrollment, and we will continue to work with states to facilitate this process.

While Medicare is providing price comparison information and assistance with enrollment, beneficiaries must enroll directly with the card sponsor they choose. CMS has established a standard enrollment form that all card sponsors must accept to make it even easier to sign up for a discount drug card as well as the $600 credit. This form will also be used by State Health Insurance Assistance Programs (SHIPs), and other partners and community-based organizations that assist beneficiaries with their health care decisions. CMS has made this model form available on the Internet at http://www.cms.hhs.gov/discountdrugs/forms/, and has included instructions for its use as well as access to the information needed to complete it.


While we have long been confident that the drug card program will give beneficiaries real savings on their prescriptions, we are excited to have some data to reflect such savings. According to a recent CMS study, Medicare beneficiaries can, for the first time, get significantly lower prices through the Medicare-approved drug discount cards at their local retail pharmacies. This preliminary analysis, released May 6, compares the best Medicare-approved card prices from the Price Compare website using randomly selected zip codes to data on national average retail pharmacy prices actually paid by Americans. The findings indicate that savings of at least 10 to 17 percent compared with the average market prices actually paid by Americans for brand name drugs that can be obtained from Medicare drug discount cards. Potential savings from generics are even greater - 30 to 60 percent. A recent Food and Drug Administration (FDA) analysis underscores the savings available through generic substitution. For mail-order prescriptions, which are generally less expensive because they are available less quickly, in higher volumes, and without face-to-face assistance and advice from a pharmacist, Medicare-approved drug discount cards also compare favorably to mail-order prices available from such sources as drugstore.com and costco.com.

CMS has also recently completed analysis of the savings low-income beneficiaries (incomes below 135 percent of the federal poverty line, or FPL) who are eligible for $600 in transitional assistance and, in many cases, additional manufacturer discounts on drug prices, can expect to see under the drug card program. Our results indicate that our illustrative low-income beneficiaries can save 29 - 77 percent over the next 7-month period through the end of 2004 compared to national average retail prices for "baskets" of commonly used brand name drugs when both discounts and $600 in transitional assistance are taken into account. In addition, our analysis indicates that low-income beneficiaries can save 39 percent to over 96 percent on individual brand name drugs that are commonly used by the Medicare population when both the discount and transitional assistance are taken into account. Five of the nine brand name drugs we examined had savings of over 90 percent when including the transitional assistance.

The combination of the discounts and the $600 in transitional assistance result in a more than 92 percent savings for the random sample of drugs and geographic areas in the analysis. Furthermore, our analysis does not reflect the special pricing arrangements some manufacturers have with certain discount cards after the $600 in transitional assistance is spent. If all of these lower pricing arrangements could be captured, these new sources of savings may lead to thousands of dollars in savings this year and next through the Medicare-approved drug card program for low-income beneficiaries. For example, based on our analysis, one sample beneficiary's savings increased from 58.4 percent with the drug card alone to 88 percent with the added special manufacturer offerings.

The best way to illustrate the level of potential savings for low-income beneficiaries is through some case study examples. CMS analysts used the data from the FDA analysis to illustrate potential savings for low-income Medicare beneficiaries in a number of geographic areas. In all of these cases, Medicare would pay the annual enrollment fee, if any. For example:

  • A typical person taking Celebrex (osteoarthritis), Zocor (high cholesterol), Paxil (depression), and Norvasc (hypertension) might expect to pay $2,545.20 without the discount card over the 7-month period. A low-income Medicare beneficiary residing in Pittsburgh, Pennsylvania could enroll in a Medicare-approved drug discount card and save about 42 percent between June 2004 and December 2004 (7 months). The savings include a discount of about 19 percent and $600 in transitional assistance.

  • A person taking Prinivil (hypertension), Glucophage (diabetes) and Lasix (congestive heart failure) would expect to pay $913.50 over a 7-month period. A low-income Medicare beneficiary in Orange County, California could enroll in a Medicare-approved drug discount card and save 77 percent over the 7 months. The savings include a discount of 11.3 percent and $600 of transitional assistance.

  • A typical person taking enalapril, a generic medication for hypertension, might expect to pay $170.10 over 7 months for this medicine. A beneficiary residing in Louisville, Kentucky with income over 100 percent FPL but no more than 135 percent FPL could enroll in a Medicare-approved discount drug card and save about 95 percent over 7 months, including savings from the discount and the transitional assistance. The beneficiary would have several hundred dollars to roll over for use, if necessary, in 2005.

  • An individual taking Celebrex for osteoarthritis might expect to pay $636.30 over a 7-month period. A beneficiary with income at or below 100 percent FPL residing in Portland, Oregon could enroll in a Medicare-approved drug discount card and save over 95 percent over 7 months, a savings of over $609.

We are continuing to analyze the data on Price Compare, and are seeing drug prices continue to fall as more sponsors come online. According to our analysis, many Medicare-approved drug discounts cards are providing significantly lower drug prices and savings to beneficiaries over what they receive in retail pharmacies today. These initial price comparisons demonstrate that the Medicare-approved drug discount card program will help assure that beneficiaries without prescription drug insurance will no longer have to pay the highest prices of any American for their drugs.


While the drug card is proving to be a success thus far, CMS remains vigilant in overseeing the program and working with outside groups to protect beneficiaries from cards that try to "bait and switch." CMS also is monitoring changes in overall drug prices and identifying programs that stray from the expected changes in prices. Drug card sponsors have to report to CMS if prices increase in an amount that exceeds the corresponding increase in average wholesale price (AWP) and such increases must be based on a change in the sponsors' costs, such as changes in the discounts, rebates, or other price concessions received from a drug maker or pharmacy. We'll also engage in other activities to ensure that card sponsors are charging the advertised enrollment fees and following other Federal guidelines.

We expect that by making the prices of the 200 most commonly prescribed drugs used by Medicare beneficiaries available to the public, the prices will actually drop due to competition. And since the Price Compare site began operation on April 29th, we have been working with the card sponsors to ensure that we change our Price Compare database in a timely manner when they lower the prices even more. We stand by our policy of listing the best discount that beneficiaries can be assured to get on a card, but it is true that some card sponsors may be able to provide significantly better discounts on many prescriptions than the "assured" prices currently listed on Price Compare.

The discount card programs must get rebates from the drug manufacturers - along with other discounts - to help keep prices low. Those sponsors with the most Medicare enrollees will be able to negotiate the best prices. Because the Medicare-approved programs are competing for beneficiaries, the card programs have a real incentive to pass on the savings in the form of the lowest possible prices. The cards need to offer savings and service, and we're going to be taking steps to make sure beneficiaries get both. The simple fact is that if a drug card wants to succeed in holding onto its beneficiaries, and in building up its client base for when their drug benefit becomes available in 2006, the only way to do so is to offer consistently good deals and consistently reliable service to beneficiaries.


In addition to Price Compare and the personalized drug card information services provided through 1-800-MEDICARE, CMS has a number of education and outreach efforts underway. In particular, CMS has prepared customer service representatives at 1-800-MEDICARE with up-to-date information on the drug card, as well as other CMS programs, and training on using the Price Compare website. As I mentioned earlier in my testimony, we are getting unprecedented volume at our 800 number and on the website. Our latest call volume statistics show that 1-800-MEDICARE received nearly 407,000 calls on May 3, the day drug card enrollment commenced - quadruple the last highest call record - and another 328,000 on the subsequent day. And during the first week of May, CMS received more than 10 times the regular call volume, with 1.6 million calls to 1-800-MEDICARE and more than 7 million internet visits. Based on our analysis, we estimate 1-800-MEDICARE will receive 12.8 million calls in FY2004. This compares to an FY2003 call volume of approximately 5.6 million calls. To handle this increased volume and attend to beneficiaries in a timely manner, we are in the process of increasing the number of customer service representatives at the Medicare call centers, bringing the total to close to 2,000. We are getting the additional help from trained customer service representatives from some Medicare contractors, including the private companies that process and pay Medicare Part B claims. Enhancements are also being implemented in Medicare's Price Compare services based on feedback from beneficiaries, customer service operators, and advocates. For example, www.medicare.gov now has a new, easily visible link making the Price Compare database easier to find, and the "drug dictionary" of drugs included on Price Compare is being expanded. We will continue to take user feedback to improve and refine these systems to assure beneficiaries get the most up-to-date and easy-to-use information as possible.

CMS also has a number of publications designed for beneficiaries that explain changes in the Medicare program. For example, CMS has published a small pamphlet with an overview of the drug card program and an introduction to the discount cards and the $600 low-income assistance, as well as a larger booklet with more detailed information about eligibility and enrollment. This larger booklet, the Guide to Choosing A Medicare-Approved Drug Discount Card, also includes a sample enrollment form and a step-by-step guide to comparing and choosing a discount card. The "Guide" is currently available in English, Braille and audio-tape (English). A Spanish-language copy is on the web, and Spanish copies are to be printed and available in late May.

In addition, a brief document that introduces beneficiaries to the discount cards and the Medicare-approved seal has been mailed directly to beneficiary households. CMS has already launched print, radio, and television advertisements to highlight the upcoming changes to the Medicare program, including the addition of the drug discount card.

CMS has produced a variety of products geared toward educating physicians, pharmacists, and providers who often have one-on-one relationship with beneficiaries, to help them assist their patients in drug card enrollment decisions. The products include brochures, articles, and journal ads in major medical publications including the New England Journal of Medicine and the Journal of the American Pharmacists Association. For states, territories, the District of Columbia, and stakeholders, CMS will sponsor a variety of listening sessions and open door forums to make the latest drug card developments available nationwide. For example, we hosted in-person trainings at the Drug Card Kickoff Conference on April 7-8 and intend to host the National SHIP Conference on May 24-25, where CMS staff will provide technical assistance and support. In addition, we recently announced unprecedented new funding for the SHIPs. Last year we awarded $12.5 million in grants to the SHIPs. This year, we are increasing that amount by 69 percent, to $21.1 million. And next year we are proposing an even larger increase, to $31.7 million. We will continue to work with our partners on the challenge of getting information to beneficiaries so that they can make an informed decision about drug card enrollment, and begin lowering their drug bills now.


For the past thirty years, May has been recognized as "Older Americans Month" - a time to acknowledge the many contributions made by our nation's seniors. One of the best things we can do to thank them is to make sure they have access to affordable prescription drugs. The Medicare-approved drug discount card provides an unprecedented opportunity for beneficiaries to band together to get lower negotiated prices, along with large-scale public reporting of prescription drug prices. Starting June 1, 2004, this voluntary card program will provide immediate assistance by lowering prescription drug costs for Medicare beneficiaries until the new Medicare drug benefit takes effect on January 1, 2006. We recognize the importance of the discount cards and the low-income credit to Medicare beneficiaries, many of whom, for too long, have gone without outpatient prescription drug coverage. Medicare beneficiaries will soon have the kind of health care coverage that actually delivers on meeting their needs. Thank you again for this opportunity. Please allow me to turn the presentation over to Mary Agnes Laureno from CMS' Center for Beneficiary Choice, who will walk us through a demonstration of the Price Compare tool. After the demonstration, I look forward to answering any questions you might have.

Last Revised: June 8, 2004