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Waxman: New GAO Reports Find 'Serious Flaws' in Drug Benefit

NOVEMBER 30, 2005 -- Rep. Henry A. Waxman, D-Calif., said Wednesday in a letter to the Centers for Medicare and Medicaid Services that two recent Government Accountability Office reports indicate "serious flaws" in the implementation of the Medicare drug discount card.

In a letter to CMS Administrator Mark B. McClellan, Waxman said the errors "have important implications for the new Medicare drug benefit."

The Medicare drug discount card was a temporary program that went into effect in June 2004 to assist Medicare beneficiaries with their drug costs until the new prescription drug benefit is enacted on Jan. 1.

An Oct. 28 GAO report found that CMS' oversight of the drug card sponsors was constrained because the program was implemented within a six-month time frame. CMS was not able to give adequate guidance to sponsors, the report said. For example, CMS developed the drug card sponsor application before the program's operational guidelines were finished, the GAO report found.

CMS did not finalize its guidance on how drug card sponsors should report data on price concessions from manufacturers and pharmacies until five months after the program began. As of August, the overall quality of the guidance "remained questionable," pointing to problems such as outliers and missing data, the report found.

The Price Compare Web site also had inaccurate information on participating pharmacies, listing some pharmacies on the site who were not participating in the drug discount program. Also, many pharmacies that were listed did not know they were participating pharmacies. CMS officials said that they worked with drug card sponsors to improve pharmacy awareness about the program. CMS also corrected errors on the site.

The report found that two pre-enrollment marketing packets were missing required materials or had materials that had not been approved by CMS.

The report also found that $1.3 million in Transitional Assistance funds were inappropriately used by drug card sponsors to pay for excluded drugs. The report said this happened because the comprehensive list of excluded drugs was not created until November 2004.

Beneficiaries also complained about delays in receiving drug cards, the report said.

CMS took 23 compliance actions against 15 drug card sponsors in warning letters or corrective action plans, the report said.

CMS used a noncompetitive solicitation process to get drug card sponsors in which all qualified organizations could participate, according to the report. There are 66 approved general drug cards, sponsored by 38 different organizations.

The report said that CMS has corrected some of the problems, but it has "some limitations with respect to the timeliness of oversight activities and the guidance provided to sponsors."

Another report, issued on Nov. 18, said that CMS was able to raise awareness for the drug card program but was not able to adequately inform and assist beneficiaries with its education and outreach efforts. These efforts did not provide information that was "clear, accurate and accessible," the report found.

About 6 million beneficiaries obtained drug discount cards, which was below the enrollment projection set by CMS, but was above the one set by the Congressional Budget Office.

The report said that beneficiaries were confused about the features of the discount card, which may have limited enrollment. Beneficiaries also have reduced ability to access information to navigate the different health care options, which is coupled with challenges in dealing with beneficiaries who are low-income and non-English-speaking.

A response letter from CMS Administrator Mark B. McClellan said that the report "did not create the full picture of the depth and breadth of the actual activities undertaken."

He said that the analysis was based on CMS' "lessons learned activities," which are "lessons that we applied early on to adjust our educational and outreach efforts for the Drug Discount Card and that we have clearly been applying with the Drug Benefit."

McClellan also said that the report focuses on the negative results, rather than the overall outreach and education activities of CMS.

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