	Background

On July 12, 2001, President Bush announced a Medicare-endorsed prescription drug discount card program tohelp Medicare beneficiaries reduce theirout-of-pocket drug costs. Critics of the plan have argued that the plan would not bring additional benefits for seniorsand that retail pharmacies would bear theburden of prescription drug cost reductions for seniors. Shortly after the card initiative was announced in 2001,pharmacy groups successfully filed a lawsuitagainst CMS, asking a federal court to issue an injunction that would halt the card program on the grounds that theAdministration had no statutory authority toestablish the program. The Administration proceeded with plans to modify the program and used a formalrulemaking process for a new proposal. On August 30, 2002, CMSissued the final rule. On January 29, 2003, a federal district court judge ruled against the Medicare discount card initiative, stating that the Administration did not have the statutoryauthority to implement the program. The President's proposed program would,in most respects, be similar to these other plans. This report will discuss prescription drug coverage gaps for seniors, private sector discount card programs, the discount card program the President originallyproposed in July, and the key differences in the final regulation issued in August 2002. This report will be updated as events warrant. Gaps in Senior Prescription Drug Coverage

In 1998, an estimated 10 million elderly people, or 27% of Medicare beneficiaries, did not have any form ofprescription drug coverage. Since the announcement of President Bush's proposal, several pharmaceutical companies formed theirown senior discount card plans in early 2002. Discount Card Plans for Low-Income Seniors

In 2002, a number of pharmaceutical companies started offering discount card plans for low-income seniors. Eligible participantsmust be U.S. citizens. In his original proposal, President Bush emphasized that the initiative would bean interim measure and that it was not intendedto be a substitute for a broader Medicare prescription drug benefit. The drug card initiative would authorize Medicare to endorse a number of qualified privately-administered prescription drug discount cards for Medicarebeneficiaries. CMS has estimated that seniors would be able to obtain a 10% to 13%, and possibly up to a 15%, discount on prescription drug retail purchases through theMedicare-endorsed card program. (26)
Critics of President Bush's program have disputed past statements made by the Administration of potential discounts of up to 25%. They cite the price study by GAO and say that the study indicates that seniors already have accessto drug discount cards and that theseprograms offer little savings for seniors for commonly used brand name drugs. It is difficult to assess the statements made bythe pharmacy associations, because the effect onpharmacies would depend on specific formularies and prices offered by the proposed card programs, which isinformation that is not publicly available 
The National Community Pharmacists Association (NCPA) and the National Association of Chain Drug Stores filed a declaration with the Washington, D.C.federal court on July 25, 2001 in support of the lawsuit filed against the federal government. In the 108th Congress,Representative Mark Foley introduced a bill ( H.R. 513 ) inthe House on January 31, 2003 to authorize the Secretary of HHS to endorse prescription drug discount cards foruse by medicare beneficiaries. In summary, a Medicare-endorsed discount card program might provide some savings on prescription drugs for seniors, although the net overall effects are notclear because of the lack of details on the individual card programs.
On July 12, 2001, President Bush announced a Medicare-endorsed prescription drug discount card program to help seniors lower their out-of-pocket drug costs. The President stated that the discount card program would be an interim measure until a broader Medicareprescription drug benefit for seniors can be created. Many seniors do not have adequate prescription drug coverage. In 1998, an estimated 10 million elderly people,or 27% of Medicare beneficiaries, did not haveany form of prescription drug coverage.
The Administration planned to implement the card program in January 2002, but it was put on hold because of a federal court order. Pharmacy groupssuccessfully filed a lawsuit against CMS in 2001, asking a federal court to issue an injunction that would halt thecard program on the grounds that theAdministration had no statutory authority to establish the program. The Administration proceeded with plans tomodify the program and use a formal rulemakingprocess for a new proposal. On August 30, 2002, CMS issued the final rule. Pharmacies continued to claim thatthe Administration lacked the statutory authorityto implement the initiative. On January 29, 2003, a federal district court ruled that the Administration did not havethe statutory authority to offer the cardprogram. CMS issued a statement saying that it would be evaluating its options and it would likely appeal. In the108th Congress, Representative Mark Foleyintroduced a bill ( H.R. 513 ) in the House on January 31, 2003 to authorize the Secretary of Health and HumanServices to endorse prescription drugdiscount cards for use by Medicare beneficiaries.
The proposed card program would be similar to prescription drug discount card programs that are currently available from a number of sources. TheAdministration's card would endorse and promote a number of qualified privately-administered prescription drugdiscount card plans which would have aone-time maximum enrollment rate of $25 per plan. Since the announcement of President Bush's proposal, severalpharmaceutical companies have implementedtheir own senior discount card plans for low-income seniors beginning in early 2002.
The Administration has stated that the Medicare-endorsed card plans would offer discounts in the range of 10%to 13%, and up to 15%, on retail prescription drugprices. The net overall effects of President Bush's proposed program would depend on the details of the individualcard plans, which are not yet available. Congressional critics of President Bush's proposal dispute the Administration's estimates of potential discounts. Some Members of Congress believe that thecard program would not provide additional benefits for seniors. They cite a recent study by the U.S. GeneralAccounting Office (GAO) on prescription drugdiscount prices available at retail pharmacies, Internet pharmacies, and existing drug discount card programs. TheMembers believe that the study indicates thatseniors already have access to drug discount cards and that these programs offer little savings for seniors.
This report will be updated as events warrant.