Medicare says drug discount program shows savings up to 17 percent for brand name drugs

May 6 2004

The first analysis comparing the Medicare-approved drug discount cards with the current prices for prescription medicines shows savings of at least 10 to 17 percent for brand name drugs and far larger savings for generic drugs compared to the average prices paid by all Americans, including Americans with access to lower drug prices through public and private insurance plans, according to the Centers for Medicare & Medicaid Services.

"All along we expected that the Medicare-approved discount cards would provide beneficiaries with discounts off retail prices for brand-name prescription drugs," said HHS Secretary Tommy G. Thompson. "And now, thanks to the new discounts available through the Medicare-approved cards, we are seeing that seniors can now get significantly better prices than people typically pay - including people with public and private insurance."

The CMS findings reported today show that the 10 to 17 percent savings for name brand drugs off national average retail pharmacy prices (including those paid by people with private insurance, Medicaid and cash-paying customers). In just one month, most of these beneficiaries saved more than the maximum enrollment fee of $30. Savings compared to the average prices paid by Americans for generic drugs are even larger, ranging between 30 and 60 percent. Savings from Medicare-approved discount cards that offer mail order services are nearly 10 to 13 percent lower than certain Internet pharmacies offering similar services. This analysis is based on the best Medicare-approved discount card prices reported by card sponsors on the Price Compare website using randomly selected zip codes to data on national average retail pharmacy prices actually paid by Americans.

"Medicare beneficiaries are above average when it comes to their drug needs, but from now on, they can be below average when it comes to the drug prices they have to pay," said Dr. McClellan. "The new drug card program not only means that beneficiaries are no longer paying the highest prices in the drug store - it means they can get significantly lower prices than are available to many people with insurance coverage. And even greater savings are available to low-income beneficiaries who qualify for the $600 credit this year and next plus additional discounts from many drug manufacturers."

These actual prices paid reflect the fact that Americans with public and private insurance generally get significant discounts off the "list" prices based on the Average Wholesale Price (AWP). Thus, many Americans pay less than AWP for their drugs so that average retail prices are typically less. The drug cards provide discounts of 15 to 20 percent or more off the Average Wholesale Price (AWP) for brand name drugs, and far larger AWP discounts for generic drugs.

Larger AWP discounts are available on mail-order drugs through the drug cards, and these discounts translate into even lower actual prices for beneficiaries who prefer mail-order services. For mail-order prescriptions, which are generally less expensive because they are available less quickly, in higher volumes, and without face-to-face help and advice from a pharmacist, the Medicare-approved cards show savings between 9.9 percent and 12.9 percent compared to such widely reported sources as drugstore.com and costco.com. Costco.com has a $45 membership fee, compared to the annual enrollment fee of at most $30 for Medicare-approved cards.

All Medicare beneficiaries, except those who have outpatient drug coverage through Medicaid, can now enroll in a Medicare-approved drug discount card program. Beneficiaries who enroll by the end of May will be fully eligible for the discounts and financial assistance beginning in June. The card sponsors may charge an annual enrollment fee of no more than $30, though many cards have lower fees and some have no fee. There is no enrollment fee on any card for people who qualify for the $600 credit.

Beneficiaries can compare the prices of drugs offered by the drug cards at www.medicare.gov or by calling 1-800-MEDICARE (1-800-633-4227) to help them compare the discounted prices negotiated by the card sponsors, as well as the enrollment fees, and other discount card features. They can also compare the prices of drugs being charged at their local pharmacies and find out the cards the pharmacies honor. The card sponsors provide the pricing and pharmacy information to CMS and that information is being updated weekly.