Medicare to monitor prices on drug discount cards

Officials say they'd punish bait-and-switch tactics


WASHINGTON - The Bush administration said yesterday that it will monitor the prices of prescription drugs purchased by Medicare beneficiaries, to ensure they are not overcharged when they start using drug discount cards next June.

The discount card program was authorized by the new Medicare law as a temporary measure, to help elderly and disabled people until the full-fledged drug benefit becomes available Jan. 1, 2006.

Medicare officials estimate that 7.3 million of the 40 million beneficiaries will sign up for the cards, to be offered by private companies with a federal seal of approval.

Under a rule issued yesterday, a beneficiary can select one card and will generally be locked into that choice, with one change allowed at the end of 2004.

The sponsors of drug discount cards will be allowed to change their prices - and the list of covered drugs - "on a weekly basis."

To avoid price gouging and "bait-and-switch" tactics, the Medicare agency said it would "monitor drug price changes."

In general, price increases for people using the discount card cannot exceed the amount that would be expected based on changes in wholesale prices and other costs.

Sponsors of the new drug cards will have to report drug prices to the government and post them on Web sites.

Tim Trysla, a Medicare official, said that if a company lured people with low prices and then charged much higher prices, Medicare could revoke its endorsement, freeze enrollment or impose civil fines.

The law does not specify the size of discounts. But Leslie V. Norwalk, acting deputy administrator of the Medicare program, said, "We expect beneficiaries to save about 10 to 15 percent on their total drug spending, with discounts up to 25 percent or more on individual prescription drugs."

Under the new regulation, companies sponsoring discount cards must obtain "some level of rebates, discounts or other price concessions" from drug manufacturers and must share "some, but not necessarily all," of these savings with Medicare beneficiaries.

Discounts should be determined by competitive forces in the market, not by federal regulation, the administration said.

"We have chosen not to establish minimum threshold levels for price concessions because doing so could have the unintended effect of undercutting market competition," it said.

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