$250 Medicare Rebate Checks a 'Drop in the Bucket' Compared to Rising Drug Prices

$250 Medicare rebate checks a 'drop in the bucket' compared to rising drug pricesSometime in August, Patricia Holland will drop into Medicare's dreaded doughnut hole. She is already bracing for that financial wallop.

Holland, 67, of Centreville, Md., regularly takes seven prescription medications. One of them -- Entocort -- is especially expensive. It prevents severe attacks of her colitis, an inflammatory bowel disease.

Right now, with full Medicare drug coverage -- before the doughnut hole -- Holland pays $195 a month for Entocort. That's her co-pay, nowhere near the full price of the medication.

When she enters the doughnut hole, though, her Entocort cost will go up exponentially, consuming, she says, her entire state retirement check.

The doughnut hole is the coverage gap in the Medicare prescription drug benefit, called Part D. Seniors get initial coverage until their total drug expenses exceed $2,830. Then Medicare covers nothing until total spending reaches $6,440, when catastrophic coverage starts. The doughnut hole is the $3,610 space between the two amounts, when seniors pay all costs for their drugs.Health care reform legislation will shrink that hole in Medicare drug costs. This year, seniors who fall into the doughnut hole will get a rebate check for $250. Last week, the federal government mailed the first of those checks.

Next year, Medicare recipients will get a 50% discount on brand-name drugs while in the doughnut hole. The coverage will improve annually until the hole disappears in 2020.

The extra $250 doesn't impress Holland. "A drop in the bucket,'' she says. She spends hundreds of dollars a month on prescriptions even before she reaches the gap. When she arrives in the doughnut hole, the retail price of Entocort (three 3 mg pills a day) could reach $1,200 a month. For one drug.

Fortunately, her position as a volunteer at a nearby Maryland hospital offers her a price break. Holland began volunteering there in 1997. Two years ago, when her drug costs spiked with Entocort, she started taking advantage of the hospital program offering medications at the same price that the hospital pays.

When in the doughnut hole last year, Holland paid $680 for Entocort through the hospital. This year, she says, it will cost her $300 more a month in the doughnut hole. The hospital's cost has climbed to $988, she says.

The price difference stunned her. "My pharmacist told me that all drug prices have gone up,'' Holland says.

A recent AARP study found that average prices for brand-name drugs that are widely used by Medicare beneficiaries rose almost 10% over a 12-month period ending in March -- higher than the rate of increase in the previous eight years. That compares with a general inflation rate of 0.3% over that same period.

Meanwhile, the price of widely used generic prescriptions fell by an average of nearly 10% during that same period, the study found.

AARP has been tracking drug price increases since the enactment of Medicare Part D and the doughnut hole. "It's no surprise that prices have gone up,'' says John Rother, AARP executive vice president. "The surprise is they've gone up faster than before -- and gone up during an economic downturn.''

Responding to the AARP data, the brand-name drug industry said prescription drugs help control health care spending by reducing unnecessary hospitalizations and helping manage chronic diseases. "Prescription medicines represent a small and decreasing share of growth in overall health care costs in the U.S,'' said a statement from PhRMA, which represents the brand drug industry.

Entocort is manufactured by AstraZeneca, which referred questions about pricing to the company that markets the drug, Prometheus Laboratories. A Prometheus spokesman declined to comment.

The drug is expected to face generic competition in early 2012. As drugs near the end of their patent exclusivity, prices sometimes rise -- probably so the manufacturer can maximize its revenue before the drug goes generic, AARP says.

Holland takes generics when she can. She says her family income is too high for her to qualify for the manufacturer's drug assistance program for Entocort.

So the doughnut hole awaits -- along with the $988 per month tab.

"I know people in the doughnut hole who don't take their prescriptions'' because of the cost, Holland says, adding that it's a good thing that health reform will eventually close the doughnut hole.

Her overall assessment of the hole? "It stinks.''

And the price increase for her medication? "There's no rhyme or reason for that. It's already high enough. ''
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