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Drug Giant to Introduce Discount Plan for the Elderly

By: Melody Petersen and Milt Freudenheim
New York Times, October 3, 2001

GlaxoSmithKline, the second-largest drug maker, plans to announce today that it is creating a national discount program for low-income elderly people who lack prescription drug coverage, reducing the price of its drugs by 25 percent or more.

Under the program, millions of elderly people would qualify to receive an orange- colored card that could be shown at most pharmacies to receive discounts on all the company's medicines sold outside hospitals, including Avandia for diabetes, Paxil for depression, and Flovent for asthma, executives said. 

Jean-Pierre Garnier, GlaxoSmithKline's chief executive, said the company wanted to help elderly customers who cannot afford prescription drug coverage and who do not qualify for government programs like Medicaid. Many of the elderly begin to take the company's drugs for chronic illnesses like diabetes or heart disease, he said, but stop after a few months because they cannot afford them.

"It is a shame some patients can't get the full benefits of our drugs for economic reasons," Mr. Garnier said. "We are trying to close the gap."

The discount program will also give GlaxoSmithKline, which is based in Britain, a marketing boost. For millions of patients, GlaxoSmithKline's drugs may now be cheaper than similar brand-name medicines sold by competitors like Pfizer, Merck, and Bristol-Myers Squibb

"I do believe some companies will follow us," Mr. Garnier said.

The company is unveiling its new discount program at a time when drug costs have become a potent political issue for politicians in Washington and across the country. For several years, Congress and the White House, under Presidents Clinton and Bush, have been working on legislation to add drug benefits to Medicare, the federal health insurance program for people who are elderly or disabled.

The drug companies, including GlaxoSmithKline, have been pushing for their own version of a drug benefit — one run by private companies under the auspices of the government — in part because it would help decrease criticism of drug prices by advocates for the elderly.

For now, Congress has delayed debate on a prescription drug benefit while it works on legislation responding to the terrorist attacks.

Mr. Garnier said that the discount program, which will be announced today in Washington, would help low- income elderly people until a Medicare drug benefit could be passed.

Several advocates for the elderly welcomed GlaxoSmithKline's price cuts, but said they might make little difference to most elderly people living on fixed incomes.

GlaxoSmithKline's medicines accounted for only about 6 percent of the prescriptions recommended by doctors last year to patients 65 or older, according to IMS Health. And even with the company's new discount, the drugs may still be out of reach for many of the uninsured.

For example, a month's supply of Avandia, GlaxoSmithKline's diabetes drug, sells for $152 at a pharmacy in upstate New York, where drugstores have to contend with low- priced competition from Canada. With the discount, the drug would cost about $114. That is about 5 percent of the maximum monthly income a patient would be allowed to make and still qualify for GlaxoSmithKline's program. And many elderly patients need to take several drugs every day.

"This is as much a public relations effort on the part of Glaxo as anything," said Ron Pollack, the executive director of Families USA, a non- profit organization that works toward affordable health care. "The numbers of people who will get relief is likely to be very small."

GlaxoSmithKline was one of the first big pharmaceutical companies to discount its AIDS drugs in Africa after advocates there criticized drug prices and governments contemplated making copycat versions of patented drugs. Most companies that make AIDS medicines quickly offered similar discounts.

But it is not clear whether other drug companies will follow GlaxoSmithKline's new program.

Pfizer, the nation's largest drug company, said yesterday that it would watch what happened with GlaxoSmithKline. Bristol-Myers Squibb said it was considering adding new discount programs to some of the more limited plans it already offered, but said it could not give details. Merck & Company said it did not know enough about the GlaxoSmithKline program to comment.

To qualify for the program, which the company is calling the Orange Card, consumers must be 65 or over and have annual incomes at or below 300 percent of the federal poverty level, which is $26,000 for an individual or $35,000 for a couple. In addition, eligible people cannot have prescription drug coverage through a private insurance plan or qualify for a public plan like Medicaid. Disabled people of any age who are enrolled in the Medicare program will qualify if they meet the other requirements. The company said 11 million people could qualify.

GlaxoSmithKline said that it was guaranteeing that the elderly would get discounts equal to 25 percent of the price charged to wholesalers, which is known in the industry as the wholesale acquisition price. The company said it had asked pharmacies to provide an additional discount, but those negotiations are continuing.

The company said that it believed elderly people would ultimately get discounts of 30 percent or more off the prices they would have otherwise paid at the pharmacy.

Elderly people will begin getting discounts on Jan. 1, but they can sign up for the program now.

There are already a number of discount prescription drug cards available, but many of them require annual fees, and some studies have found that they do not generate significant savings for consumers. Many of the cards also require most of the discount to come out of pharmacies' pockets rather than from the drug manufacturers.

In July, President Bush announced that the government would endorse cards issued by private companies to help Medicare beneficiaries pool their purchasing power and get discounts on prescription drugs. But the administration's plan has been temporarily blocked by a lawsuit filed by hundreds of pharmacies, which say it will hurt their businesses financially.

Barrett Toan, chairman and chief executive of Express Scripts, a drug plan manager that will administer the Orange Card program, said GlaxoSmithKline, and not pharmacies, would cover most of the cost of the new program.

Kenneth S. Abramowitz, a managing director and a specialist in health care at the Carlyle Group, an investment firm, called GlaxoSmithKline's discount program "an innovative response to the political and economic environment."

Mr. Abramowitz said that if the company "doubled the consumption of its products in return for a 25 percent discount, they would still be 50 percent ahead."

Ira S. Loss, a health care researcher at Washington Analysis, which does research for financial institutions, said GlaxoSmithKline's discount program was a small step toward helping people without insurance. "It's not half a loaf but a couple slices," he said.

"The real impact is a question mark," Mr. Loss said. "The target population for these drugs cannot pay for them at 100 percent or at 75 percent" of the retail price.