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Medicare Part D Awareness

A Presentation for Senior Citizen and others who qualify for Drug Coverage


                        MEDICARE PART D
                     THE PRESCRIPTION DRUG

                           BLACK HOLE


The Subscriber share of drug cost between $2,250
and $5,100 when Medicare pays nothing ($0)
toward the cost of drugs has been called the
"Donut Hole".  In fact it is a Black Hole that
siphons the limited resources of Medicare



Presentation Goals:

To make Medicare Part D Beneficiaries explain
and make aware some of the items that drive the
Medicare Part D discussion

To suggest actions that an informed Beneficiary
community should consider in pursuing  their best





What is Medicare Part D (short form)

The structure is unnecessarily complex

The Federal Government subsidizes drug purchasing plans offered by
private insurers

Insurers negotiate prices with drug makers and create menus
(Formularies) for different plans

Plans range from low/cost/minimum coverage to expensive/extensive.

All plans must offer at least two drugs in every category.  They can be

For the parts where medicare incurs cost, they pay 75% of the cost.  The
plan pays all or part of the cost remaining.

Medicare pays $0 after subscriber cash outlay reaches $2,250 until out of
pocket expenses reach an additional $3,850 (or $5,100 from the start).
Above $5,100 Part D Pays 95% of the cost of drugs
Source: NY TIMES






Drug Prices are based on a Manufacturer's Cost
Estimate called the AVERAGE WHOLESALE
PRICE (AWP)            





Why AWP Drug Costs are Excessive

     Big rewards for little work

     marketing direct to consumers via TV

Increased Usage
     advertised top 50 drugs grew 6 times faster
     than all others

Brand Name Versus Generic
     Only 8% of prescriptions are generic

     Top 50 drugs rose a twice the rate of inflation

R&D Costs
     A new drug costs $800,000,000 on average to develop

Patent Pressure
     Three in four new drugs fail so costs must be recovered by the

     Nine of the ten top drug companies spend twice their R&D cost for
marketing, advertising and administration ------ Yet, Pharmaceuticals
Companies were the most profitable in the United States in 2005.
                                    Source: Wall Street Journal




     Samples of the Top Drug Company Executive Salaries and

Net Income     Company                               Salary             Bonus
31,424,000     Bristol Myer Squibb - Pres    31,424,000        159,691,000

29,574,000     Pfizer - CEO                          40,191,845     130,944,439

40,363,000     Merck - EVP                          26,454,600       80,559,000

9,815,000      Schering Plough - CEO           21,444,020            -------

40,363,000     Merck - Pres                          19,600,975     181,252,976

18,216,000     Bristol Myers - CEO               39,753,000       227,869,513

13,178,000     Abbott Labs - CEO                 16,272,000            830,000

12,929,000     Warner Lambert -CEO           22,061,000       250,681,000

10,003,000     Eli Lilly - CEO                         12,940,000         33,667,000
                           Source: Families, Inc. 2005/actupny 2005

The Salaries and Bonuses of the top twenty-five (25) executives in the drug
industry would pay the Part D costs of 6,800,000 low income seniors





The AWP varies by Purchaser and Purchasing Group

We require a starting point to gain understanding of how the
costs you incur happen

PRICE (on average)       % added to the AWP 

Retail (Drug store)                +79%
Private Drug Plan                  -26%
Federal Supply Service          -65%
Canadian Drug Seller            -50%
Wholesaler (Walmart)          +$2 or $3
                  Source: House Special Investigations Committee 2005

     The profit lost in bulk transactions is compensated for by
                       boosting retail prices

On average Generic Drugs cost 65.9% less than Brand name
                       Source: House Government Reform Committee 2005







Sample Drug Prices for the Five Biggest Sellers

RM      Drug                        FSS      Drug Plan    Wholesaler  Retail

8.63    Zocor/60 tab          34.80     85.47          106.84         113.97

 .14    Norvasc/90 tab       59.71     95.33           119.16        127.17

 .20    Procardia/100 tab    68.35   110.69          110.69        144.89

 .52    Prisolec/ 30 cap      59.10      96.74          120.93        122.62

1.75    Zoloft/100 tab        115.70    181.71         227.14       238.44
                                          Source: Families USA 2005






                 Samples of Cost Variances for the
                           Identical Drug

Drug                        AWP            FSS          Change

Lanoxin                  20.51            10.05        -51%
Norvasc               122.86            61.27        -50%
K-Dur 20                49.98            23.73        -53%
Lipitor                   169.08          102.28        -40%
Prilosec                119.57            58.73        -51%
Pepcid                    53.13            18.39        -65%
Glucophage           64.62            30.60        -53%
Fosamax               60.89             33.74        -45%
Synthroid              30.84             20.91        -32%

The Federal Supply Schedule is negotiated by the Veterans
Administration for the DOD, PHS, VA and USCG
           Source: Journal of Clinical Pharmacology Theory, Sept 2006





Sample Drug Markups for Drug Store Customers   

ITEM                          Ingredient cost          Markup
Celebrex                           .60                   21,712%
Claritin                              .71                   30,306%
Lefkex                            1.88                     8,372%
Lipitor                             5.80                     4,696%
Norvasc                             .14                  134,493%
Paxil                               7.60                     2,898%
Previcid                            1.01                   34,136%
Prilosec                              .52                   69,417%
Prozac                                .11                 224,973%
Tenormin                            .13                    80,392%
Vasotec                              .20                    51,185%
Xanax                                .024                 699,588%
Zestril                               3.20                       2,809%
Zithromax                       18.78                       7,892%
Zocor/B                            8.63                       4,051%
Zoloft                               1.75                     11,821%
        Source: Steve Wilson, Investigative Reporter, WXYZ-TV Detroit


The cost for manufacturing, Inventory, Administration, Marketing and
Research and Development reduce the mark-up percentage.


George Washington University states that raw materials amount to 12% of
the average wholesale price in New York State





                    What Should Replace the AWP?

AMP - Average Manufacturers Price, i.e., price paid to the drug company by
the wholesaler (after discounts are applied)

ASP - Average Sales Price, i.e., average of all prices charged across all
purchasing groups

Best Price - Lowest price available from Drug Manufacturer to any customer

FCP - Federal Ceiling Price, i.e., the maximum the drug manufacturer can
charge the four government agencies under the FSS.

FSS - Federal Supply Schedule, i.e., the price negotiated by the Veterans
Administration for the "Big Four".

MAC - Maximum Allowable Cost, i.e., a ceiling set by state governments for
the drug program within their state (30 states have a MAC).

WAC - Wholesale Acquisition Cost, i.e., list price charged by the drug
manufacturer to the wholesaler before discounts

Retail Price - The price the manufacturer charges a retail pharmacy making a
direct purchase.







Lobby congress (write, call or e-mail your representative and
senators) to act for you to help Medicare's 14 million
beneficiaries save over $60,000,000 in premiums, co-pays and
out of pocket drug costs

Ask Medicare to switch to generic drugs.  This would prevent
6.2 million beneficiaries from reaching the donut hole.  If this
change would occur, the average out-of-pocket expenses would
not reach $1,700 in 2007.
Source: Committee on Government Reform Minority Office Oct 2006






                             DRUG COST
               Drug Industry Political Clout in 2005

$184 Millions for Lobbying
$   74 Millions for Campaign Contributions

824 Lobbyists in DC
      7 are Former Congresspersons

            The President and CEO of the Pharmaceutical
              Research & Manufacturers of America is:

     `              BILLY TAUZIN

            Mr. Tauzin was Chairman of the House Energy
               and Commerce Committee, the Committee
                   responsible for regulating the
                           DRUG INDUSTRY.
                                                Source: NYPIRG 2006





                  Your Responsibility is to be Aware

   Medicare Part D is confusing - It was created as the foregoing
                      suggests by bureaucrats.
      Your Elected Representatives have a better plan than that
            available to you   Make them earn their plan
    It is your obligation to speak out to obtain the information
               you need to make an informed decision.





                    DRUG PLANS ARE GOVERNED BY A
           (A List of Drugs for which the Plan will pay)

Not all Drugs are covered by every plan so a
potential subscriber must be careful when making
their choice of the plan best suited to their needs







     MAKE A LIST of your prescription drugs

     ASK YOUR DOCTOR if a generic drug can be
     substituted for his prescribed drug

     CORRECT YOUR LIST (Plans tend to
     substitute Generic drugs when they have them

     CALL THE PLAN you choose and assure
     yourself that your prescription drugs are in the
     formulary.  (A plan that does not feature your
     drugs is worthless to you)

     IF A DRUG IS NOT COVERED ask the plan
     administrator if the plan will make an exception
     and provide your drug





                          WHAT YOU CAN DO

Become a voice for Seniors Citizens as an individual
or as part of an outspoken group.  Petition (lobby)
your elected representatives and your local political
leaders to make them act in your interest.  They need
your vote to remain in office.

Keep aware of pending actions that affect you and
your peers.  If you do not act for yourself, who will.

Work as a team player to spread the word about
actions and decisions which impact on your way of

Be active in your club or center.





                     BUYING OFF SHORE IS AN IDEA
                      The Foreign Drug Market

Are Foreign Drugs Much Cheaper?
     It matters which drugs are included, i.e., extremes cloud the result

     Different US Buyers pay different prices, i.e., large purchasers pay less,
     retail purchasers pay more.

     Price disparities vary by Country, i.e., foreign governments become
     involved to prevent local drugs moving out of their control to the
     highest bidder.

Other factors affect price

     Government regulation
     Foreign Drug Makers prohibit exports and/or limit volume

     American Regulator actions affect the volume entering the US

     Big Government and Drug Manufacturers (Buying into foreign
manufacturing and R&D) act to stabilize prices to keep them near US levels.
                           Source: Congressional Budget Office 2004








               Dangerous Foreign Products are Common

Unapproved Drugs are sold at reduced prices

Controlled substances in US are not controlled in Foreign Countries

Foreign Drugs withdrawn for safety reasons are shipped to US

Drugs are improperly packaged

Animal drugs are sold for human consumption

Drugs recalled in their country of origin are dumped in the US

Drugs requiring risk management and or restricted distribution are not
     identified when shipped to the US

Drugs are inadequately labeled with volume/dosage information

Counterfeit drugs and placebos are shipped to the US
                                 SOURCE: Consumer Reports Best Buys






                        ABOUT FOREIGN DRUGS


Good News
     On average drugs can be from 75% to 90% cheaper

     Many are old (Expired)
     Dosage (conversions are not accurate)
     Wrong medication with an accepted US Brand or generic name
     Placebo (some pharmacies dispensing drugs cheat)

Compare prices:
                          SOURCE: Congressional Research Service 2005







                          MORE THAN CANADA

ITEM                          NYS       NYC
Allegra                       133.1%         133.1%
Lipitor                          66.1%            66.5%
Norvasc                        36.8%            41.4%
Premarin                    549.3%           593.9%
Singular                       63.8%             63.2%
Synthroid                   284.1%            266.2%
Zithremak                   48.5%              45.5%
Zyrtec                       291.2%            302.7%
                                                Source: NYPRIG 2005







                     EXAMPLES OF DRUG PROGRAMS






In 2007 there will be 61 standalone plans (up from 46 in 2006).
These plans enhance Medicare Parts A and B and most times
include Part D.  Some plans combining A and B are called C.
A few of the 61 plans will offer reduced premiums to low
income senior citizens.


In 2007 there will be 13 Benchmark Plans (down from 15 in
2006).  Only two waive premiums for low income seniors

To enjoy drug coverage you must be a participant in either
Medicare Part A, B or A&B.
                                        Source: Brehenson, NY Times






                 Foreign Government MEDICARE PART D
                          Similar Programs

     Government maintains lists of approved drugs
     Reimbursement varies, i.e., outpatient vs hospital
     Government Commission determines price and reimbursement (the
          French have the lowest drug prices in the world)
     Consumers pay 100% of commission approved cost and then apply for
     Patient generally pays very little out of pocket after government refund

     Government maintains a negative drug list, i.e., drugs not eligible for
          reimbursement (mostly over the counter drugs)
     No price established controls but Government sets a maximum amount
          it will reimburse patient
     Reference reimbursement price for a drug is set slightly higher than the
          lowest price in the drug category (arthritis, cardiac, etc.)
     Patient pays difference between the reference price and the real cost
          charged by the supplier
     Doctors are monitored to assure performance, i.e., if brand name drugs
          exceed a certain percent of total prescriptions, the doctor pays a
          penalty (assures prescribing generic)
                                Source: Congressional Budget Office





                         What You must Do:

    Realize that Corporations face competition and therefore be
    willing to adjust without sacrificing the benefits you have
                        earned and deserve.
     Be willing to accept generic drugs as replacements to brand
          name drugs when your Doctor approves the switch.
       Question any change that happens without explanation or is
               limited to only those in your situation.
       Prod your Human Resources, Union and Elected
              Representatives to support your interests.
                                                      Source: AARP 2006




                        TIPS FOR PART D USERS

Shop Around

Buy Generic

Be up front with your doctor about your ability to pay

Consider Information from certified Pharmacy sources:
          www.MinnesotaRxConnect.com lists State of Minnesota approved
          Canadian Pharmacies






Eli Lilly                                  Glaxo-SmithKline
Novartis                                 Pfizer
Abbot Labs                            Astra Zeneca
Adventis                                Bristol Meyer Squibb
Johnson & Johnson                 plus 64 more

(In 2005 the Drug Manufacturers give Doctors sample drugs valued at
$8,500,000.  Ask for samples when you visit your Doctor).


New York Attorney General (NYAG.GOV)

End of Slide Presentation