Rx: Higher Drug Costs for Seniors

October 5, 2002
Stung by public criticism of high drug prices, pharmaceutical companies last year began offering discounts to low-income elderly consumers who were not poor enough to qualify for Medicaid assistance. Now, Bristol-Myers Squibb and Glaxo-SmithKline are reducing their discounts, thus raising the price elderly consumers will pay, and there are indications other drug companies will follow.

Why?

The drug companies say they are fearful that the discount program, called Together Rx, would subject them to a federal law that requires drug makers to offer Medicaid the lowest price paid by any buyer.

But federal officials are dubious. The New York Times quoted Thomas A. Scully, administrator of the Centers for Medicare and Medicaid Services (CMS) as saying he had spent many hours meeting with the drug companies to be sure that the discount plan was not affected by the law.

"It's impossible to overlook the odd coincidence that this is happening just as it becomes clear that Congress will take no action on a prescription plan for seniors this session. Could it be the drug companies feel the heat is off for another year or so and they can take back this rather slim olive branch?" ConsumerAffairs.com President & Founder James R. Hood asked.

Whatever the reason, some 300,000 seniors who've benefited from the discount program will soon face much higher drug costs. Bristol-Myers, for example, has been selling a month's supply of Pravachol, which lowers cholesterol, for $15 to elderly people with incomes of $18,000 or less. Last week, the company raised the price to $59.

GlaxoSmithKline says its revised plan will give elderly participants a discount of about 25 percent rather than 33 percent.

The seven companies participating in Together Rx have been offering discounts ranging from 20 to 40 percent. Besides Bristol-Myers and GlaxoSmithKline, the companies are Johnson & Johnson, Aventis, AstraZeneca, Abbott Laboratories and Novartis.

Pfizer and Eli Lilly have their own discount programs. They sell drugs at a flat fee of $12 to $15 per prescription, rather than granting a percentage discount. Their plan is designed specifically to avoid problems with the lowest-price rule.

The Bush Administration has repeatedly lavished praise on the drug companies for participating in the program and has proposed a similar discount plan for Medicare recipients. That's been blocked, however, by protests from drugstores who argued it would cost them millions in reduced prescription fees.

Meanwhile, lobbyists for seniors groups say it appears that if Republicans take control of the Senate, they intend to "means-test" Medicare prescription drugs, meaning that only low-income persons would receive government help in paying for prescriptions.

Senate Minority Leader Trent Lott, (R-MS), said Friday that if Republicans control both chambers next year, they will focus primarily on economic and budget issues. He vowed action on a Medicare prescription drug benefit that would be targeted to "the low-income, needy elderly, the people that really need it," without letting it "become an explosive program that just blows a huge hole in Medicare."

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