Medicare Discount Drug Card Savings in California: Technical Summary Prepared for CALIFORNIA HEALTHCARE FOUNDATION by Consumers Union June 2004 About the Foundation The California HealthCare Foundation, based in Oakland, is an independent philanthropy committed to improving California’s healthcare delivery and financing systems. Formed in 1996, our goal is to ensure that all Californians have access to affordable, quality healthcare. For more information about CHCF, visit us online at www.chcf.org. About Consumers Union Consumers Union, publisher of Consumer Reports, is an independent, nonprofit testing and information organization serving only consumers. It is a comprehensive source for unbiased advice about products and services, personal finance, health and nutrition, and other consumer concerns. For this analysis, Consumers Union assembled a team that included actuarial consultants as well as consumer experts. For more information on Consumers Union, visit www.consumersunion.org. ISBN 1-932064-73-7 ©2004 California HealthCare Foundation Contents 4 I. Background 6 II. Key Findings 9 III. Update and Additional Findings 10 Appendix A. Methodology 11 Appendix B. List of Drugs Analyzed 12 Appendix C. Drug Spending Scenarios 13 Endnotes I. Background For some consumers, UNDER P RO V I S I O N S O F T H E M E D I C A R E Prescription Drug, Improvement, and Modernization Act of the cards are worth a 2003, Medicare-approved discount drug cards became available close look. for purchase June 1, 2004 in California and throughout the country. As little information exists to assess the value of prescription drug discount cards, the California HealthCare Foundation (CHCF) sponsored a Consumers Union (CU) analysis of Medicare-approved discount card savings. The results of this analysis, summarized here, provide concrete advice to California consumers about the circumstances under which these cards are most useful. Under California law (SB 393) Medicare beneficiaries, regardless of income or supplemental insurance status, may obtain prescriptions at Medi-Cal negotiated prices if they (1) obtain prescriptions through a Medi-Cal-participating pharmacy, (2) present their Medicare card and (3) state that they want to receive Medi-Cal prices for their prescriptions. A 2002 CHCF analysis found that savings under the SB 393 program average 20 percent off pharmacy retail prices.1 Since these savings are already available to Medicare consumers on request, Medi-Cal prices are an appropriate benchmark against which to measure savings available through the new Medicare- approved discount cards. Analysis of Discount Drug Cards Shows Some Savings The team concluded that many, but not all, of the new Medicare-approved discount cards provide additional savings to some, but not all, California Medicare consumers. Savings vary substantially among the cards, by type of supplemental coverage, and by health status. Some consumers — particularly those who don’t spend much on drugs and who already have relatively comprehensive drug coverage such as Medigap Plan J or an HMO prescription plan that includes coverage for brand-name drugs — are unlikely to achieve additional savings by obtaining the card. For most other consumers — particularly those with traditional Medicare only and those who spend more than $1,000 on prescriptions per year, the cards are worth a close look. (For a more detailed examination of the cards, see the Health Currents article “Drug Discount 4 | CALIFORNIA HEALTHCARE FOUNDATION Cards Worth A Second Look” at Prescription Drug Coverage Scenarios www.californiahealthline.org.) Traditional FFS, Medicare only. No additional The research team conducted two types of coverage for prescription drugs. analysis. In the first, consumers’ total annual Medicare Supplement Plan J. $250 deductible, costs with each card were computed for a ‘market 50 percent coverage of prescriptions to $3,000. basket’ of 34 drugs, as shown in Appendix B. These drugs account for almost half of total Medicare HMO drug plan covering generic spending for drugs in the Medicare population. prescriptions. Subject to a $10 copayment for In the second analysis, cards were compared for generic drugs and a $500 annual maximum. This five different prescription drug spending level of coverage is typical of Medicare HMO scenarios, reflecting specific drugs that might be drugs plans currently available in California. used by particular consumers. The drug spending Medicare HMO drug plan covering both scenarios are shown in Appendix C. Each drug generic and brand prescriptions. Subject to a spending scenario was then evaluated separately $5 copay for generics, $20 copay for brand drugs, under five different scenarios for health insurance and a $1,000 annual maximum. This level of coverage, ranging from none to a moderately coverage is typical of employer-sponsored retiree extensive plan covering both brand and generic medical plans and is also available in a few drugs. The methodology section provides California locations to Medicare consumers additional information (see Appendix A). seeking to enroll as individuals. Low income. Eligible for $600 in transitional assistance. A $600 subsidy is available to income- eligible consumers who are not enrolled in Medi-Cal. The scenario assumes no supplemental coverage beyond traditional Medicare and the $600 in transitional assistance. Medicare Discount Drug Card Savings in California: Technical Summary | 5 II. Key Findings For consumers with extensive Medicare-approved discount cards can provide additional savings. drug coverage, obtaining a Based on the analysis of composite annual cost for the entire discount card can actually 34-drug sample, several cards provided average savings in the increase costs. range of 5 to 10 percent beyond the savings available through Medi-Cal (see Table 1). The average savings across all cards was 3 percent below the aggregate savings available under Medi-Cal pricing. Table 1. Medicare-approved Discount Cards: Average Overall Spending and Savings A V E R A G E S P E N D I N G with Discounts Relative to Medi-Cal BENCHMARK: Medi-Cal Prices $656 N/A Greatest Savings $587 Ϫ10% Median Savings $647 Ϫ 1% Least Savings $696 ϩ 6% Top Three Cards (greatest savings) Precision Discounts (Option A) $587 Ϫ10% SHL RxCard $591 Ϫ10% ScripSolutions Freedom $599 Ϫ 9% Note: Savings figures are in relation to the Medi-Cal benchmark prices. Savings vary depending on supplemental coverage. As shown in Table 2, savings are greatest for those who do not already have extensive drug coverage. The team analyzed the five different coverage scenarios described on page 5. Because most of the plans charge an annual enrollment fee (up to $30), the cards must generate additional savings to become a good investment. The presence of extensive drug coverage (such as Medigap Plan J or HMO coverage that includes both brand and generic drugs) reduces the share of savings that actually reach the consumer, since the plan pays some of the cost whether or not the consumer has a discount card. A person who fills one prescription per month will likely pay only their copay; a drug card would not reduce their cost since the copay is not affected by the discount card. As shown below, for 6 | CALIFORNIA HEALTHCARE FOUNDATION Table 2. Medicare-approved Discount Cards: Average Annual Spending for a Consumer with Two Brand-name Prescriptions, by Coverage Scenario Traditional HMO HMO Medicare Medigap Plan J Generic Only* Generic & Brand† Low Income# BENCHMARK Medi-Cal Prices $1,301 $776 $1,301 $480 $1,301 Lowest Spending $1,202 $726 $1,202 $480 $602 (% savings) (7.6%) (6.4%) (7.6%) (0.0%) (53.7%) Median Spending $1,266 $773 $1,266 $510 $666 (% savings) (2.7%) (0.4%) (2.7%) (Ϫ6.3%) (48.8%) Highest Spending $1,945 $1,108 $1,945 $945 $1,345 Top Three Cards Precision Precision Precision N/A Precision (greatest savings) Discounts Discounts Discounts Discounts ($ savings) (Option A) (Option A) (Option A) (Option A) ($99) ($49) ($99) ($699) Preferred Scrip Solutions Preferred Preferred Prescription Freedom Prescription Prescription Discount Card ($39) Discount Card Discount Card ($78) Liberty ($78) ($678) Scrip Solutions Prescription Scrip Solutions Scrip Solutions Freedom Discount Card Freedom Freedom ($77) ($35) ($77) ($677) Notes: Savings figures are in relation to the Medi-Cal benchmark prices. See Appendix C (Individual, B) for specific drugs analyzed. * with $500 maximum † with $1,000 maximum # eligible for a $600 subsidy consumers with extensive drug coverage, obtaining Because different cards can offer dramatically a discount card can actually increase costs, due to different discounts for particular prescriptions, enrollment fees that are not offset by savings rela- the cards affording the highest savings differed tive to Medi-Cal prices. For people who qualify for each consumer profiled. for Transitional Assistance, obtaining a card is likely to reduce their drug costs considerably, due Although cards offer savings, the to the $600 subsidy. remaining cost to consumers is still high. Savings vary depending on While savings of 5 to 15 percent are significant, prescription drug spending and are consumers must still pay the remaining 85 to 95 greatest for those using multiple percent from their own pockets. Even if they are brand-name drugs. able to identify and enroll in a card that offers As shown in Table 3 on the following page, them maximum savings, consumers without savings also vary depending on consumers’ other drug coverage taking multiple brand name prescription drug spending. The team analyzed drugs may face annual out-of-pocket costs of savings for five hypothetical consumers, A through $3,000 to $7,000. E, ranging from use of one (A) through eight (E) brand-name prescription drugs. (See Appendix C for specific drugs analyzed for each consumer). Medicare Discount Drug Card Savings in California: Technical Summary | 7 Table 3. Medicare-approved Discount Cards: Average Annual Spending for Consumers with Traditional Medicare Coverage Only, by Several Drug Spending Scenarios A (1 drug) B (2 drugs) C (3 drugs) D (5 drugs) E (8 drugs) BENCHMARK Medi-Cal Prices $934 $1,301 $3,433 $4,946 $7,235 Lowest Spending $781 $1,202 $2,986 $4,404 $6,056 (% savings) (16.4%) (7.6%) (13.0%) (11.0%) (16.3%) Median Spending $890 $1,266 $3,204 $4,681 $6,730 (% savings) (4.7%) (2.7%) (6.7%) (5.4%) (7.0%) Highest Spending $935 $1,945 $3,433 $5,111 $7,235 Top Three Cards SHL RxCard Precision EnvisionRx Plus SHL RxCard Public Sector (greatest savings) ($153) Discounts ($446) ($542) Partners ($ savings) Precision (Option A) Preferred Preferred Prescription Discounts ($99) Prescription Prescription Drug Discount (Option A) Preferred Discount Card Discount Card Card ($1,179) ($109) Prescription ($430) ($479) EnvisionRx Plus Preferred Discount Card Public Sector Public Sector ($1,090) Prescription ($78) Partners Partners Precision Discount Card Scrip Solutions Prescription Prescription Discounts and Prescription Freedom Drug Discount Drug Discount (Option A) Discount Card ($77) Card ($430) Card ($461) ($1,077) ($99) Notes: Savings figures are in relation to the Medi-Cal benchmark prices. See Appendix C for specific drugs analyzed for each consumer. 8 | CALIFORNIA HEALTHCARE FOUNDATION III. Update and Additional Findings Because card sponsors KEY FINDINGS ARE BASED ON DATA AVAILABLE May 11 and May 18, 2004. Because card sponsors are allowed are allowed to change to change prices on a weekly basis (yet consumers, once prices on a weekly basis, enrolled, may only change cards annually), consumers’ savings consumers’ savings will will vary over time. On June 7, 2004, the team obtained updated data and found that most cards offered improved vary over time. prices; in some cases, prices for particular drugs were dramatically lower. As compared to the original analysis reported here, the June 7th update indicated that more cards offered composite annual prices below the Medi-Cal level, and that median discount levels also improved in most scenarios. The update raised questions about the accuracy of data at the CMS Web site. One card that scored well in the May analysis (SHL Rx Card) was shown on June 7th as having approximately doubled its prices for two drugs. As of June 7th, this card would have had the highest composite cost among all the cards for the 34 drug sample. The team’s methods and data sources cannot confirm whether this change represents a reporting error or true volatility in discounts. The analysis focused primarily on Medicare-approved discount cards. However, the team also examined the discounts available through Costco, a national drugstore with locations throughout California.2 The team found that Costco’s savings were near Medi-Cal prices in most scenarios. Medicare Discount Drug Card Savings in California: Technical Summary | 9 Appendix A. Methodology On May 11 and May 18, 2004, the team Scenarios were based on a subset of the total obtained prices available through the Medicare- spectrum of drugs taken by Medicare enrollees. approved discount drug cards from the Center A different set of scenarios (e.g., people with for Medicare & Medicaid Services (CMS) different conditions, and hence different drugs website.3 Prices for Medi-Cal were obtained taken) would likely produce different results for through the Web site for the Medi-Cal SB 393 each card. Thus, these results should be considered program.4 All 33 Medicare-approved cards avail- indicative, rather than definitive. The analysis able in California for which CMS had pricing focused on the drugs that account for the greatest information on these dates were analyzed across proportion of spending in the Medicare popula- four locations (Los Angeles, San Francisco, San tion. These tend to be expensive drugs, and all Diego, and Sacramento). The team calculated the drugs in our study are brand name drugs. People composite annual cost per Medicare enrollee taking only generic drugs will likely have different separately for each Medicare-approved card and results. Since generic drugs tend to be less expen- for Medi-Cal. Each drug was weighted according sive than brand-name drugs, and since the to its annual utilization among the Medicare analysis shows that the greatest savings occur (over age 65) population. For cards that had for individuals spending the most on drugs, it is enrollment fees, those fees were included in the likely that discount card savings among people annual cost estimates. who take only generic drugs will be lower than those reported here. 10 | CALIFORNIA HEALTHCARE FOUNDATION Appendix B. List of Drugs Analyzed Pricing Product Drug Therapy Class Type* Aciphex Gastrointestinal agents SSB Actos Oral hypoglycemics SSB Allegra Antihistamines SSB Aricept Other CNS agents SSB Avandia Oral hypoglycemics SSB Celebrex NSAIDS SSB Cipro Fluoroquinolones SSB Coumadin Miscellaneous (Anticoagulant) MSB Cozaar ACE inhibitors SSB Detrol Miscellaneous (Antispasmodic) SSB Evista Miscellaneous (Osteoporosis) SSB Flomax Other CNS agents SSB Flovent Steroids - bronchial SSB Fosamax Miscellaneous (Osteoporosis) SSB Glucophage Oral hypoglycemics SSB Levaquin Fluoroquinolones SSB Lipitor Anti-hyperlipidemia agents SSB Lotrel ACE inhibitors SSB Miacalcin Other endocrine MSB Neurontin Other CNS agents SSB Norvasc Calcium channel blockers SSB Paxil Anti-depressants SSB Plavix Miscellaneous (Athersclerosis) SSB Pravachol Anti-hyperlipidemia agents SSB Premarin Other endocrine SSB Prevacid Gastrointestinal agents SSB Prinivil ACE inhibitors SSB Prozac Anti-depressants SSB Synthroid Thyroid medications MSB Toprol XL Beta blockers SSB Vioxx NSAIDS SSB Xalatan Miscellaneous (EENT preparations) SSB Zocor Anti-hyperlipidemia agents SSB Zoloft Anti-depressants SSB *“MSB” denotes brand-name drugs available from multiple manufacturers. “SSB” denotes brand-name drugs available from a single manufacturer. Drugs were ranked based on total Medicare spending. Originally, the top 40 drugs that account for about 50 percent of Medicare spending were included. Those for which Medi-Cal SB 393 prices were unavailable were excluded from the analysis, leaving these 34 drugs (which in aggregate account for approximately 42 percent of total annual Medicare expenditures). Medicare Discount Drug Card Savings in California: Technical Summary | 11 Appendix C. Drug Spending Scenarios Individual Product Drug Therapy Class A Fosamax Miscellaneous (Osteoporosis) B Glucophage Oral hypoglycemics Zoloft Anti-depressants C Cozaar ACE inhibitors Lipitor Anti-hyperlipidemia agents Prevacid Gastrointestinal agents D Avandia Oral hypoglycemics Celebrex NSAIDS Lipitor Anti-hyperlipidemia agents Norvasc Calcium channel blockers Paxil Anti-depressants E Actos Oral hypoglycemics Allegra Antihistamines Flovent Steroids - bronchial Lotrel ACE inhibitors Prevacid Gastrointestinal agents Toprol XL Beta blockers Vioxx NSAIDS Zocor Anti-hyperlipidemia agents All products are brand-name drugs available from a single manufacturer. 12 | CALIFORNIA HEALTHCARE FOUNDATION Endnotes 1. California HealthCare Foundation, “Pharmaceutical Discounts for Medicare Beneficiaries Can Save Seniors Money,” September 2002, available at www.chcf.org/topics/view.cfm?itemID=20080. 2. Costco prices were obtained at www.Costco.com by clicking on “Pharmacy” and then “Pricing Information.” 3. Drug discounts for Medicare-approved cards were obtained at www.medicare.gov/AssistancePrograms/home.asp. 4. Medi-Cal SB 393 rates were obtained at www.medi-cal.ca.gov/sb393inq.asp. Medicare Discount Drug Card Savings in California: Technical Summary | 13