Two Drug Companies Increase Prices in Discount Card Program in Response to CMS Interpretation of Federal Law

KFF, October 3, 2002

      Drug makers Bristol-Myers Squibb and GlaxoSmithKline on Oct. 2 announced plans to reduce the discount given to Medicare beneficiaries who use the Together Rx drug discount card until a dispute with CMS over drug prices is resolved, the St. Petersburg Times reports. The changes come in response to notification by CMS Administrator Tom Scully that federal law prohibits drug makers to offer discounts of more than 10% to Medicare beneficiaries unless those same discounts are available through Medicaid (Fritz, St. Petersburg Times, 10/3). Under Together Rx, Medicare beneficiaries who lack drug coverage and have annual incomes up to $28,000 for an individual and $38,000 for a couple receive 20% to 40% discounts on their prescription drug purchases. The plan was created in April by Abbott Laboratories, AstraZeneca, Aventis Pharmaceuticals, BMS, GSK, Johnson & Johnson and Novartis Pharmaceuticals (Kaiser Daily Health Policy Report, 8/2). About 300,000 seniors have enrolled in Together Rx, which covers about 150 drugs "most often used" by Medicare beneficiaries. In a June 24 memo to participating drug makers, Scully said that federal law requires pharmaceutical companies to charge Medicaid the "best price" for medications, adding that the drug makers are illegally allowing Together Rx cardholders to pay less than Medicaid for many treatments. However, GSK spokesperson Mary Ann Rhyne said it would be "prohibitively expensive" for her company to offer discounts to both Medicare and Medicaid beneficiaries. Until the dispute is resolved, cardholders will only receive up to a 25% discount on GSK drugs, Rhyne said. BMS spokesperson Rob Hutchinson said his company plans to continue negotiating with CMS to reach an agreement. CMS and drug company officials are expected to meet today to discuss the dispute, the Times reports (St. Petersburg Times, 10/3).