Evelyn Pringle August 11, 2004
In December 2003, the Medicare Prescription Drug and Modernization Act of 2003, was passed. Bush signed the bill into law at the White House in a room filled with senior citizens who honestly believed that they were finally going to get help with the escalating costs of prescription drugs. Less than a year later, they realize they were duped, and that they are still victims of the high-price whims of the drug industry.
The health care advocacy group, Families USA, recently went on what it called a "Medicare Roadshow" to learn what seniors knew about the drug bill. "What we've learned from this experience is, the more seniors learn about the new Medicare law, the more unhappy they are," said Executive Director Pollack.
One of the biggest errors of the Bush presidency will turn out to be underestimating the intelligence of senior citizens. They know a scam when they see one. Rep Sherrod Brown, an Ohio Democrat, says he has met with many seniors and that, "there is an intuitive understanding that this bill was written by the drug and insurance industries."
Seniors make up 13% of the population, which means 13% percent of the most active block of voters in the country will be voting against Bush. The ill-conceived Medicare scam may just cost Bush the election.
What's Wrong With The Bill?
The bill was supposed to make drugs more affordable for seniors, but numerous studies indicate that it has done just the opposite.
The actual so-called benefit from the bill will not go into effect until 2006, so in the meantime, Bush came up with the idea for a prescription drug discount card program intended to reduce prescription drug costs for senior citizens between now and then. To that end, Bush selected roughly 70 private companies to administer the program and provide discount drug cards to seniors, at a fee of up to $30, for use at their pharmacies.
In reality, the drug card program has actually contributed to the problem of high drug costs because, (1) it specifically bars Medicare from negotiating for better prices on behalf of its 40 million members; (2) it prohibits importation and consumer access to lower cost drugs from other countries; (3) companies can change the drugs they offer or the prices they charge whenever they please, but seniors can only change cards once a year; and (4) all cards are not accepted at all pharmacies.
Most of the companies that Bush selected are either large insurance companies or prescription benefit managers (PBMs), and not surprising, most are top Republican campaign contributors. Many lawmakers, from both sides of the isle, say the card program will benefit the drug and insurance industries far more than the elderly.
In 2003, to ensure the passage of the industry's preferred version of the legislation, drug companies, HMOs, their trade associations and industry-funded advocacy groups spent nearly $140 million, and deployed over 900 lobbyists to do their bidding in Washington.
Topping the list of lobbyist spending by interested card providers, was industry giant Merck, at $8 million. But other companies were close behind. Blue Cross also dropped close to $8 million; Aetna spent $2.9 million; Wellpoint Health Networks coughed up $1.5 million; Pacificare put up $1.42 million; and United Healthcare dumped $1.2 million.
In addition, the industry gave more than $3 million in political contributions to the 11 elected officials largely credited with crafting the bill (9 Republicans).
But nobody raked in more campaign cash than Bush. To date, 21 industry executives and lobbyists have achieved "Ranger" or "Pioneer" status, which means they have raised at least $200,000 or $100,000, respectively, during the 2000 or 2004 campaigns. These 21 Rangers and Pioneers have collected at least $3.4 million for Bush.
According to the Public Citizen report entitled "The Medicare Drug War," this group include 5 executives from brand-name drug companies, 6 officials from HMOs, the CEO of a pharmacy services company that runs a PBM, the head of a direct-mail pharmacy, and 8 Washington lobbyists who represent drug companies and HMOs.
Its no wonder that Republican Senator John McCain, has described the new prescription drug bill as a "a living, breathing testimonial to the political influence of the pharmaceutical companies."
Ron Pollack, leader of the health care advocacy group, Families USA, says there is no need for a card program, that Medicare should be allowed to bargain for lower prices like the VA does. "Other than political pressure from the drug lobby, there is no sensible reason why Congress and the president refused to take this far more effective step," he said.
Senator Edward Kennedy agrees, "A genuine discount program would provide a single discount card for Medicare, and the [HHS] secretary ... would negotiate large savings and fair prices for senior citizens, just as the secretary of Veterans Affairs does for veterans. We need to end this shell game and find honest solutions to the crisis of excessive costs of prescription drugs," he says.
The industry also scored big by getting a bill passed that bars seniors from importing prescription drugs from other countries. That's why busloads of seniors are forced to take trips to Canada every month to buy prescription drugs that cost 40% less than in the US.
This year alone experts at Boston University estimate that Americans could save $59.7 billion by paying Canadian prices, and yet, Republicans and Bush refused to include a provision that would have provided seniors with this much needed assistance.
Another major problem with the bill is that once they chose a card provider, seniors are locked into that card for a whole year, while the companies can change the drugs offered, and their prices, whenever they want. Democrats tried to include a provision in the law that would have at least stopped companies from raising prices more often than once a month.
However, typical of the caring guy that he is, Bush got his allies in Congress to defeat the provision because in his words, "price stability is not a requirement of the drug benefit." Well that may be, but I think a little price stability might be nice for those seniors on fixed incomes.
Without the provision, Pollack believes that companies will get seniors to buy their cards, by offering great savings on certain drugs, and then cut the discount, or worse yet, stop offering the drugs altogether. "The potential for bait-and-switch is enormous," he said.
How Did Bush Ever Come Up With The Idea For Card Program?
Trust me, Bush is definitely not the brain behind this complicated scheme.
His good friend, David Halbert, the CEO of AdvancePCS, one of the companies that Bush approved to administer the program, is the guy responsible for coming up with key portions of the legislation.
On Dec 11, 2003, only two days after Bush signed the new Medicare bill into law, he came forward and released the details about this great discount drug card program, right at about the same time that the Center for American Progress (CAP) released a report detailing the longstanding political and financial relationship between Bush and David Halbert.
CAP called attention to the fact that Halbert was allowed to help craft the very part of the bill that would have seniors buy discount drug cards from his company, Advance.
The next day, on December 12, the Boston Globe published an article that warned that a Texas company owned by Halbert, a campaign contributor and former business associate of Bush, would profit if Medicare endorsed the drug card program.
Other media sources noted the connection between the Medicare legislation, Bush and Halbert as far back as July 18, 2001, only 6 months after Bush took office. The Fort Worth Star-Telegram reported that, "AdvancePCS has been working with the White House to create a nationwide private discount card program ...David Halbert, AdvancePCS' chief executive, said the Bush administration contacted his company about 2 months ago." When Bush announced the original plan, "Halbert stood next to the president in the Rose Garden" and he said "it was quite an experience."
We're not talking here about a new friendship. Halbert even helped boost Bush into politics. In 1994, when he was running for governor and needed cash, Bush turned to Halbert and he came through. According to the CAP, Halbert and his family members gave Bush $14,500.
Their ties go all the way back to Bush's days in the oil industry. According to an August 8, 2002 article in the Star-Telegram, "before starting what would become AdvancePCS, Halbert helped clean up a deal with Harken Energy (Bush's failed oil company) that had prompted an SEC investigation of Bush."
Shortly after the SEC investigation ended, Halbert asked Bush to invest money in his then new company, Advance Paradigm. Bush made a small investment in the company, and walked away with a six-figure bonanza a few years later in 1998 when he sold his stock.
Of course as we now know, by 1998 Bush had decided to run for the presidency and it would not have looked too good if he openly held on to shares in a drug company in the light of the plans that him and Halbert had concocted in the event that Bush ended up winning.
So, it should come as no surprise that all of the predications about the 2 cronies came true. Advance was approved to administer the cards and David Halbert is set to make a bundle.
David Sirota, author of the Progress Report, says, "The president needs to explain why he allowed his longtime Texas crony and benefactor to help write key pieces of Medicare legislation that guarantees nothing for seniors but billions for his friend's business," he said. "The White House is supposed to be the people's house, not the drug industry's corporate headquarters," Sirota added.
As usual, Bush refuses to address the issue. When reporters raised questions about the connection between Bush and Halbert, White House Spokesman Trent Duffy, said ''I'm not going to be able to say anything about specific conversations the White House had in crafting this legislation.''
How Did This Bill Ever Get Passed?
Initially AARP, the nation's largest lobbying group for seniors, threw its 35 million member support behind the bill and described it as "a historic breakthrough and important milestone in the nation's commitment to strengthen and expand health security for its citizens."
However, since the bill was passed, AARP's decision to support the bill has led to damning repercussions. According to AARP CEO, Bill Novelli, "15,000 members have told the organization to cancel their membership because of the endorsement."
AARP has since acknowledged that the rising drug costs have wiped out any savings that may have resulted from the discount card plan. It conducted a study that showed that the prices of many brand name drugs commonly used by seniors rose sharply in the first few months of 2004, immediately following the enactment of the bill.
In fact, the study found that the overall annual rate of increase rose to 7.2% for the 12 months preceding March 2004. Which indicates that the industry already knew about the card program and was raising prices in 2003 in anticipation of it being implemented.
According to reports by both Families USA and AARP, the price hikes offset any savings on drugs bought with the cards. A report by the Wall Street Journal says companies raised prices on the most popular drugs "nearly 3.5 times faster on average than overall inflation." And it gets worse. In 2003, the price of 14 brand-name drugs that are most commonly used by seniors, increased by more than 5 times the rate of inflation.
Senator Kennedy summed up the drug card scam correctly. "For many medicines, price increases in just the last 12 months have already wiped out any savings that these cards may provide," he said, "the Bush Medicare bill is a sweetheart deal for big drug companies and a raw deal for senior citizens."
Bush Finds Ways To Con Congress Into Passing The Bill
The political plots behind the passage of the prescription drug legislation will likely be written about in history books in years to come. First off, Republican congressional leaders violated House rules by extending the voting period on the bill by 3 hours after the initial vote count came up short.
Then Rep Nick Smith (R- MI) disclosed that Republicans had attempted to sway his vote, with threats and bribery attempts, which included a promise of a $100,000 donation for his son's political campaign.
Next, Bush waged a $9 million deceptive TV ad campaign in attempt to sell the legislation to seniors (handled by the same media firm managing Bush's reelection campaign), and spent another $3 million for print, radio and Spanish speaking ads.
Then, shortly after the bill was passed, it became known that the administration had intentionally lied to members of Congress by quoting a $395 billion price tax for the bill, when it had known for 5 months that it would cost well over $500 billion.
It then came out that Bush's top negotiator on the bill, CMS Administrator Tom Scully, had threatened to fire the government's top expert on Medicare costs, Richard Foster, if he revealed the true cost of the bill to members of Congress, before they was voted it.
A March 23, 2004 Kaiser Daily Health Policy Report, quotes Foster as saying that the higher projection was known before the House and Senate votes but that Scully told him, "We can't let that get out."
During a House Ways and Means Committee hearing, Foster said that as early as June, 2003, he had shared his analysis that the legislation would exceed its target spending goal with Bush administration officials.
According to the NYTs, Foster's analysis revealed that the legislation "would cost 25% to 50% more than the Bush administration's estimates." And that Foster said, "The range of our estimates was $500 billion to $600 billion all the way through the process."
Foster's figures would have definitely threatened the passage of the bill because 13 Republicans had vowed to vote against it if the cost went over $400 billion. Even at the lower cost, the bill initially only passed the House by 1 vote. A later House-Senate compromise passed by only five votes. Had members of Congress known the truth, the bill would have been doomed.
But why would Scully do this? Intentionally withhold information from Congress and tax payers regarding the cost of legislation ready to be voted on involving 100 billion dollars?
Well it helps to know that within a days of the bill being passed, Scully told reporters that he had been negotiating future employment with 3 lobbying firms and 2 investment companies. An investigation by the watchdog group Public Citizen, revealed that those 5 firms either represented, or have major stakes in 41 of the companies that would be affected by the new law.
So where does Scully work now? In the end, he accepted employment with 2 of the companies, the lobbying firm Alston & Bird and the private investment firm Welsh, Carson, Anderson & Stowe. Since Scully joined the company, Alston & Bird has signed up over a dozen new health care clients, including industry giants Abbott Laboratories and Aventis Pharmaceuticals.
As it turns out, Foster was right. Estimates from the Office of Management and Budget released after the bill was passed showed that it would cost $534 billion, $134 billion more than the amount presented to Congress before they voted on the measure.
All of this was bad enough, but the icing on the cake came when the GAO recently announced that it had determined that Bush broke federal law by running the phony TV ads that concealed the fact that the news footage segments featured actors who were pretending to be reporters, and who were paid with federal funds to read scripts written by the administration.
The GAO concluded that the segments were "not strictly factual news stories," that they contained "notable omissions and weaknesses" about Medicare changes, and that running the ads constituted a "misuse of appropriated funds" in violation of federal law. So in a nutshell, Bush spent more than $12 million tax dollars to con the elderly.
What a guy. Bush may be the son of Barbara's every dream, but he's got to be every grandmother's nightmare.
How Were These Companies Chosen?
What qualifications were needed? That question requires a one word answer - money.
In order to protect the profits of the already most profitable business in the US, the drug industry made more than $44 million in political contributions since 1999, with 78% to Republicans and 22% to Democrats.
It also spent millions of dollars more hiring a multitude of lobbyists that outnumber the members in Congress; and funneled millions more to "front groups" that do the industry's bidding under more politically-palatable sounding names such as, "Citizens for a Better Medicare" and "United Seniors Association."
And of course the loyal guy that he is, Bush rewarded his top contributors. The top 7 executives and lobbyists from approved companies have raised, or pledged to raise, $100,000 or more for the Bush campaign. They are Wellcare executives Todd Farha and David Hart; Blue Cross executive Michael Hightower; United Health CEO William McGuire; Medco President Alan Lotvin; Express Scripts board member Samuel Skinner; and PacifiCare lobbyist Tom Loeffler.
Of the companies chosen, at least 20 have a history of being involveded in fraud charges, that include bilking Medicare and overcharging consumers. For instance, Best Buddy, David Halbert's company Advance, faced lawsuits last year over market manipulation, and its failure to disclose the extent of its financial ties with drug makers. AARP also sued Advance and accused the company of illicitly diverting seniors from AARP's drug-discount plan, and of actually putting seniors at risk for dangerous drug interactions.
Another Bush approved company, Medco Health Solutions, had to pay $29 million to settle claims by 20 states that it pressured doctors to switch the brands of their patient's medication to benefit Medco financially. It has also been charged with defrauding the federal employees' health plan.
In fact, Advance and Medco are both listed as defendants in a current lawsuit with 2 other approved companies, Caremark and Express Scripts. The suit alleges that they engaged in anti-competitive practices that harmed pharmacies, and that they entered into secret deals with drugmakers in return for kickbacks and other undisclosed incentives.
Yet even with its long history of corruption, Bush entrusted Medco to administer drug discount cards to our seniors. Why? $$$ A few weeks after Bush approved the company, Medco President, Alan Lotvin, co-sponsered a $100,000 fundraiser for Bush, according to a report by the Associated Press.
I know, I know. I should quit nitpicking. What are friends for right?
But Medco is not alone in paying huge fines. Many other companies that Bush approved have histories of paying large sums of money to settle fraud claims. According to the 2002 Medicaid Fraud Report, United Healthcare paid $4 million to settle allegations that it charged both Medicaid and Medicare for the same patient services.
In 2003, WellPoint paid over $9 million to settle charges that its Blue Cross subsidiary defrauded Medicare by auditing more claims and cost reports than it actually did.
Another example is Humana Health Plan. Between 1992 and 2000, it paid over $22 million to settle fraud claims that it billed both Medicaid and Medicare for the same services, and had received duplicate payments for the same patients.
Top lobbyists who raise big bucks for Bush also represent companies involved in fraud. Bush Pioneer, Tom Loeffler, is a lobbyist for PacificCare, a company that paid $87.3 million to settle charges of violating the federal False Claims Act in 2002.
The latest industry fraud case just became public on August 6, 2004, when New York City filed a lawsuit against 44 drug companies and their subsidiaries, accusing them of "deceptively inflating the cost of their drugs and defrauding taxpayers out of tens of millions of dollars," the NYTs reports. According to the LA Times, almost every major US drug company is listed in the suit. We'll have to wait and see what the gang was up to in that case.
Of course I'm convinced that all of the above legal problems are probably the result of an 8 year period of honest mistakes. So by all means, let's throw open the door to the Medicare fund so that these crooks can get their hands on more of our tax dollars.
The question is how did these corrupt companies ever end up in a position where they can so easily and blatantly exploit our elderly? Only one person can answer that question and Bush ain't talking.
Related topics still to be covered in a series of articles on the Prescription Drug Bill are: (1) Comparing Drug Prices with the Card Program against prices available in other countries, prices negotiated VA style, and prices of internet pharmacies; (2) Who Gets the $550 Billion? (3) The Revolving Door Between the Bush White House and the Industry; (4) Other Negative Consequences of the Bill for Retirees; (5) Other Corrective Bills Currently Pending In Congress; and (6) What Happens In 2006?