Medicare changes: rejoice at more competition: Medicare legislation signed into law will help seniors get more affordable prescription drugs and inject more choice and competition into the Medicare program.

The legislation marks a turning point in Medicare and for pharmacy benefit managers. Because of the new law, seniors will be paying in the coming years for much-needed prescription drugs. PBMs represents the last, best alternative to direct government price controls on prescription drugs.

Numerous independent government and industry data document the savings and value PBMs have provided to consumers. Unions, health plans, small businesses, large employers, state and federal employee benefit programs and Medicaid all rely upon PBMs' proven ability to negotiate lower prescription drug prices. Now, with the new law, Medicare too is poised to avail itself of PBMs.

The Medicare drug benefit will allow choices among competing prescription drug plans, mall-order pharmacies, formularies, disease management programs, networks of retail pharmacies, drug utilization review, patient safety programs, patient compliance programs and electronic claims processing.

In January 2003, the General Accounting Office examined the value provided by PBMs participating in the federal employees' health plan. For prescription drugs dispensed through mail-order pharmacies, the average mail-order price was about 27 percent below the average cash price paid by consumers for a brand name at a retail pharmacy. It was also 53 percent below the average cash price paid for generic drugs.

For drugs dispensed at the retail pharmacy counter, PBMs negotiated discounts of 18 percent below what consumers would pay in cash at the retail pharmacy counter for 14 brand name drugs and 47 percent below what consumers would pay for four select generic drugs.

According to the GAO, prescription drug discount cards administered by PBMs provide consumers--including Medicare beneficiaries--access to medications and significant savings, as much as 44 percent less than what consumers would otherwise pay at the retail pharmacy counter without a discount card. The GAO examined the median retail drug-discount card price charged to consumers on nine prescriptions versus the median retail price charged to consumers with no drug card at pharmacies in the Washington DC the California and North Dakota. In Washington DC, the GAO found these savings for consumers averaged 18 percent for the nine drugs surveyed.

A March 2003 analysis conducted by Brandeis University found that, for seniors with no supplemental drug coverage, PBM-administered drug discount cards provide average savings for generic prescriptions of 25 percent and average savings for brand-name prescriptions of 14 percent.

Mail-order facilities achieve a much higher safety and quality rate than retail pharmacies when it comes to medication and dispensing errors. According to the Institute for Safe Medication Practices, one in 20 prescriptions dispensed in the retail pharmacy setting has an error. In contrast, it has been estimated that the mail-order error rate is a handful for every 1 million prescriptions dispensed in mail-order.

Drug discount cards with a home-delivery option provide consumers with significant savings over retail pharmacy prices paid without a drug discount card. For consumers who prefer the convenience and pricing advantages of the home-delivery option, drug discount cards also provide significant savings.

GAO's comparative analysis of home delivery prices and retail pharmacy pricing without a drug discount card found that consumers can save hundreds of dollars per year. In California, the savings provided to consumers from home delivery pharmacy options can potentially run into the thousands of dollars.

Mark Merritt is president and CEO of the Pharmaceutical Care Management Association, the national trade association representing pharmaceutical benefit managers.