New Analysis Shows that Private Companies Awarded Lucrative Medicare Drug Contracts Contributed $6.5 Million to Win Congressional Favor

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“Rx Express” Riders Across the Nation Say Medicare Should Be Allowed To Use Its Purchasing Power To Negotiate Discounts

Santa Monica, CA — The 10 HMOs and drug benefit managers approved by the Bush Administration to receive lucrative MediCare prescription drug contracts contributed $6.5 million to federal lawmakers since 2000, according to the Foundation for Taxpayer and Consumer Rights (FTCR), which organized two chartered trains trips to Canada last year with seniors to buy lower cost prescription drugs. FTCR discovered that members of the House of Representatives received more than half of the contributions, $3.4 million — 80% of which went to Republican members.

The 10 companies awarded national contracts will likely keep 15-20% ($90-$120 billion) of the $600 billion of taxpayer money earmarked for the Medicare drug program over the next 10 years for overhead, advertising, executive salaries and profit. As a result, seniors and taxpayers will pay more for prescription drugs. In comparison to private companies, Medicare’s overhead costs are roughly 3%. Recently, Senator Wyden (D, OR) narrowly missed a vote in the Senate for his measure to allow Medicare to use its bargaining power to negotiate discounts, thereby bypassing HMOs and drug benefit managers and lowering the cost of prescription drugs.

“As an Hispanic senior citizen dishing out more than a thousand dollars a month for drugs, I urge Congress to provide Americans with a program that will cut our monthly prescription debt,” said Felix Fraustro of Orlando, Florida. Felix and his wife Sandra rode the Rx Express train to Canada last fall to buy affordable prescription drugs. “In the last year, my wife and I have had to cut transportation, food and rent. We are still alive but hungry to have some little luxuries such as paying for gas to drive to McDonalds.”

The majority of the private companies offering Medicare drug coverage are not HMOs, but drug management companies. These companies will negotiate volume discounts with drug companies but charge Medicare for overhead and profit.

Campaign Contributions

According to the analysis by the Foundation for Taxpayer and Consumer Rights, the 6 HMOs (Aetna, Cigna Coventry Health, PacifiCare, WellPoint/UniCare, UnitedHealth and WellCare), and the 4 drug benefit managers (Medco Health Solutions, MemberHealth, SilverScript/Caremark, and MedCo) approved for nation-wide contracts contributed:

* $6.5 million to Congressional candidates and PACs since 2000, including $988,135 in the first half of 2005;
* 75% of the $6.5 million total to Republican candidates and Republican affiliated PACs, 25% to Democratic candidates and Democratic affiliated PACs;
* 50% more money to Congressional candidates and PACs during the period that the Medicare prescription drug law was written (2004 election cycle) compared to the previous 2 year period;
* $2.5 million, 38% of the 6 year total, to Congressional candidates and PACs during the 2004 election cycle;
* the largest annual expenditures during 2003-2004: Cigna $585,556; WellPoint $390,400; UnitedHealth $268,125; Aetna $253,600; and, PacifiCare $204,500.

Click here to download and view the campaign contribution analysis.

In addition to the 10 national plans, additional drug benefits managers and other companies will provide drug plans at the state and regional level. The campaign contribution analysis is based on data from the Federal Elections Commission.

Private vs. Public

The 2003 Medicare prescription drug law broke with the tradition of other public health care plans by banning the 41-million member Medicare program from using its bargaining power to negotiate lower prescription drug prices. Instead, the law requires seniors to access the new prescription drug program by joining private HMOs and drug benefit managers. HMOs commonly take up to 25% of the premiums they collect for overhead, executive salaries, advertising and profit.

Prescription drugs provided through HMOs and private companies are more expensive than those provided by government programs like the U.S. Department of Veteran Affairs, which negotiate discounts directly with pharmaceutical companies. According to a recent report, the Department of Veterans Affairs uses the bargaining power of its 5 million members to negotiate drug prices 58% lower than the best price available to seniors through the discount cards currently provided to Medicare enrollees by private companies.

“This Medicare drug law is a thanksgiving feast for the nation’s politically powerful health insurers and drug companies. Under the current program, seniors and taxpayers will pay too much for prescription drugs by being forced to subsidize HMO and drug company profits,” said David Fink of the Foundation for Taxpayer and Consumer Rights (FTCR) . “Congress must untie the hands of the federal government and allow the MediCare program to use its market clout to negotiate cheaper drugs.”

Rx Express

To dramatize the savings potential of allowing Medicare to use its bargaining power to negotiate discounts, and the need for a U.S. solution to high drug costs, FTCR organized two train trips last fall — dubbed the Rx Express — taking patients to Canada to purchase their prescriptions. Many seniors traveled three days to access the same discounts that could be available in the U.S. if Medicare was authorized to negotiate directly with drug companies as do the U.S. Department of Veteran Affairs and big business.

“Medicare should negotiate discounts, not HMOs whose only interest is lining their pockets. At issue is our health,” said 79 year old Carole Jaquez of Apple Valley, California who rode both Rx Express trains and has made several trips to Mexico to help pay for her monthly prescription drug needs. Carole has been forced to cut her prescription pills in half in order to make them last longer — a common practice that threatens a senior’s health by lowering the necessary medication dosage.

Holding press conferences along the route, the Rx Express riders raised public awareness about the potential of a U.S.-wide bulk purchasing program:

* 45 seniors and other patients traveled for a total of 6 days on the Rx Express trains, boarding in states throughout the West and East Coasts: California, Oregon, Washington, Florida, Georgia, North Carolina, Pennsylvania, New Jersey and New York;
* Rx Express riders saved an average of 60% off the prices they pay for the same drugs in the U.S. for annualized savings of $2000 each;
* Rx Express passengers held 22 press conferences resulting in over 300 television appearances with a Nielsen audience of 65 million, and more than 65 newspaper articles and 100 radio interviews.

Rx Express Rider Comments on Medicare Prescription Drug Program:

Ft. Lauderdale, FL

“Allowing HMOs and private drug managers to run the Medicare prescription program is like having the fox guard the chicken coop! HMOs are notorious for abuses like fraudulent practices, excessive profits, and not serving their clients’ best interests. Medicare must negotiate discounts that will be in the best interests of those served and not corporate stockholders and administrators,” said Sheila Franklin of Ft. Lauderdale, Florida who rode the Rx Express to Toronto.

Savannah, GA

“We would like Congress to allow Medicare to negotiate drug prices, not require seniors to sign up with a private company. This would be much more cost effective. Experience has shown that very few participants in HMOs or discount card companies are satisfied with their service,” said Nellie McGowan, a retired nurse living in Savannah, Georgia who rode the east coast Rx Express with husband David.

Sacramento, CA

“I am happy to pay a reasonable amount for my health care, through my health care plan. But health care providers must be allowed to negotiate for the best price. That’s how we buy cars and insurance, and everything else: at the best dollar value,” said Terelle Terry of Sacramento who rode the Rx Express to Vancouver. “We don’t throw money at them and say name your own price.”

San Diego, CA

“It is my strongest belief that Congress is not representing “We the people” if they do not support the right of any group to negotiate bulk purchasing with any pharmaceutical company,” said Barry Fowler of San Diego who rode the Rx Express to Vancouver along with his wife Sharon. “Not to do so is simply pandering to special interests at the great expense of the people who elected them to serve.”

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The Foundation for Taxpayer and Consumer Rights (FTCR) is a nationally recognized nonpartisan consumer advocacy organization.

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