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© St. Petersburg Times, published January 30, 2003
WASHINGTON -- President Bush's long-delayed program to create a Medicare-sponsored discount drug card was found to be illegal Wednesday by a federal judge.
U.S. District Judge Paul J. Friedman ruled the administration has no legal authority to designate private companies to serve as the sponsors of a government-endorsed discount card for Medicare recipients. He said it was "mind-boggling" that the administration had tried to create such a program without the approval of Congress.
The ruling was a major setback for the administration's approach to health care. However, it will have little, if any, effect on consumers because the number of drug discount cards available to seniors on the open market has increased dramatically since Bush's program was conceived.
The Department of Health and Human Services had announced plans to launch the card program by May 1. It promised discounts of up to 15 percent for seniors who paid a one-time enrollment fee of no more than $25.
Bush unveiled his discount drug card program with considerable fanfare during a White House Rose Garden ceremony July 12, 2001. Standing with him at the time were the top executives of five major prescription drug benefit management companies that expected to profit from the program.
By creating a discount drug card, the president said, he was laying the groundwork for a full-fledged program under which the government would finance prescription drug coverage for Medicare beneficiaries. In his State of the Union speech Tuesday night, Bush once again called on Congress to enact such a drug benefit for seniors.
Friedman acted on a motion by the nation's community and chain drugstores, who argued that the program would drive many of them out of business. For the drugstores, it was an important victory in what they see as a long-term battle for survival in an era of mail-order pharmacies.
HHS officials said they are likely to challenge Friedman's ruling in the U.S. Court of Appeals.
John Rector, a senior vice president for the National Community Pharmacists Association, said the government is not likely to win if it does appeal.
"It's dead in its tracks," he declared. "I hope they've learned their lesson."
Lawyers for the pharmacists' association and the National Association of Chain Drug Stores said the president's discount drug card program resulted from collusion between Tom Scully, a Bush appointee who heads the Medicare program, and executives of five private companies that would have profited from the program.
"Today's ruling is a loss for 40-million seniors who want and need discounts on their prescription drugs," Scully said in a statement.
The drugstores said the five companies, which already offer their own discount cards, would be able to buy the drugs at drastically reduced prices from the manufacturers. The five companies are Medco Health Solutions (which has a distribution center in Tampa), AdvancePCS, Express Scripts, WellPoint Health Networks and Caremark Rx.
But there was no requirement under Bush's program for the companies to share the savings with consumers or the drugstores, they contend.
At the time Bush appeared in the Rose Garden with executives of the five companies, little was known about their business practices. But consumers or health plans have sued a number of these companies over the past year, accusing them of making huge profits at the expense of the people who are supposed to benefit.
Medco, a wholly owned subsidiary of one of the nation's biggest drug manufacturers, Merck, acknowledged in federal court in New York recently that it failed to pass along about $2.8-billion in drug manufacturer rebates to its clients between 1995 and 1999. In addition, Medco admitted it has a program to switch patients to drugs manufactured by Merck, even if those drugs are going to increase the costs of the consumer.
At the same time, the U.S. attorney in Philadelphia and several state attorneys general are known to be investigating the business practices of Medco and the other top pharmacy benefit management companies.
The drugstore owners opposed the administration discount card program primarily because the pharmacy benefit management companies encourage their customers to order drugs by mail, thus circumventing the local pharmacies.
Friedman said nothing in the law authorizes HHS to create a discount drug card. "This is not a Medicare program," he said. "Rather, what's involved here is creating a whole new program that does not find its predicate in statute."
Lawyers for the government argued that HHS did not need an act of Congress to create a discount drug card. Nevertheless, Scully and other HHS officials made a number of unsuccessful attempts last year to persuade Congress to pass a bill authorizing such a program.