Medicare's prescription drug program was supposed to cost less than buying retail, but a new analysis of South Florida drug prices shows seniors who fall into the "doughnut hole" coverage gap often pay more than they would at the drugstore.

The regular retail price at the lowest-priced drugstore beat doughnut hole prices charged by Medicare drug plans 80 percent of the time, according to a report released Tuesday by Consumers Union, the nonprofit group that publishes Consumer Reports. In some cases, the drugstore price was 10 percent less.

"We were surprised," said Peter Sikora, a co-author of the report. "The Medicare drug plan is not working, because of the doughnut hole. It's not delivering the right prices for the consumers."

At a news conference outside a Costco in Pompano Beach, consumer activists said the report strengthened the argument that Congress should change the law in order to allow Medicare to bargain directly with manufacturers, to keep prices down for consumers. Democrats in Congress agree, saying the Republican-drafted program boosts profits for drug makers.

The Department of Veterans Affairs can negotiate with manufacturers, and its prices were 54 percent less than prices charged by Medicare plans in the doughnut hole, the report said.

"It's absolutely appalling," said Bill Newton, director of the Florida Consumer Action Network. "The Medicare plan needs to be done over."

But spokesmen for Medicare and insurers offering the drug coverage said the report focuses on one aspect of the first-year program, which the government says saves $1,500 a year on average for each person on it.

A study by Medicare last month found Medicare drug plans saved consumers 27 percent on average -- as much as 56 percent at best -- compared with retail prices. Surveys show 80 percent of seniors are satisfied with the drug program.

"Overall, people will continue to save money. It's a no-brainer," said Mohit Ghose, a spokesman for America's Health Insurance Plans.

But Consumers Union focused on the most controversial piece of program, the doughnut hole, a period when most plans offer no coverage. After a recipient obtains $2,250 worth of drugs, most plans halt coverage until the person has spent a total of $3,600 out of pocket on drugs. At that point, the person comes out of the gap and the plan covers 95 percent of costs. An estimated 3 million to 7 million people are expected to reach the gap this year.

For its report, Consumers Union called all 261 retail drug outlets in Broward County to get regular retail prices for six commonly used medicines, including cholesterol drug Lipitor, antidepressant Zoloft and blood pressure drug Norvasc.

Then researchers compared doughnut hole prices charged by more than 40 Medicare drug plans available in Broward. Sikora said the comparison would have come out the same anywhere in South Florida, and applies nationwide.

The results: The lowest price retail store had lower prices 80 percent of the time. For example, a Wal-Mart charged $62.85 for a one-month supply of Lipitor, but the lowest price for Lipitor for those in the doughnut hole was $67.46, in SilverScript Plus plan.

Sikora said researchers were not sure why the drug plan prices were so high for recipients in the gap. Plans were supposed to have bargaining power to extract lower prices. "The plans failed to do what they were supposed to do," he said.

Sikora said he could not recommend that seniors in Medicare stop buying drugs through their plans when they reach the gap. Those who buy enough drugs to emerge from the gap should stay with their plans, because if they don't, they will never reach the 95 percent coverage.

But for those who will not emerge from the gap, it's worth shopping for lower prices once they reach the $2,250 threshold, he said.

"In many cases, individuals will want to make their own decisions based on what's best for them," Sikora said.

The gap hit hard for Rita and Abe Levine of Delray Beach. Their drug bill soared by $500 a month after they hit the gap.

"We're not poor from this but it's affecting our monthly budget. Whoever came up with this plan, it's a terrible plan," Rita Levine said. "I better start shopping around now."