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Walgreens, the pharmacy giant that advertises hundreds of generic prescriptions at $1 a week, routinely charges Medicare and Medical Assistance more for the same drugs.
The pharmacy chain excludes from its "Prescription Savings Club" anyone who has government-sponsored drug benefits for older Americans or the poor. As a result, the government -- and, in some cases, Medicare recipients -- pay more.
"I don't think it's fair," said Brian Osberg, who heads Medical Assistance, Minnesota's health care program for the poor.
Some critics say Walgreens could charge Medicare and Medicaid its savings-club prices, but that the program appears to be structured to avoid doing that.
"It seems to me they are just trying to get the maximum out of the government," said Paul Precht, director of policy and communications at the Medicare Rights Center, a nonprofit advocacy and education group based in New York.
Walgreens defends the restrictions on its low-price generics program, saying it's only for the uninsured and under-insured, and that more than 1.7 million people have been helped. The company says Medicare and Medical Assistance -- known as Medicaid in many states -- may not get the same low prices on more than 400 advertised generics, but the government gets better prices overall when all drugs are considered.
"There are some drugs we lose money dispensing" in government programs, said Robert Elfinger, a spokesman for Walgreens in Deerfield, Ill.
Wal-Mart, Target and Sam's Club pharmacies also sell many generics at $4 a month or less, and the same prices apply to Medical Assistance, Medicare and private prescription coverage, according to plan officials and pharmacies.
Osberg, the assistant commissioner in the Minnesota Department of Human Services, said Walgreens' program is not illegal. That's because the pharmacy's $1-a-week "club" price for many generics is not the "usual and customary" price that pharmacies are obligated to offer the government and most health plans. Walgreens' club price is only available by paying a joining fee.
Effect on drug coverage
For people on Medicare, Walgreens' generics pricing can add frustration -- and higher cost -- to the already complicated federal prescription drug benefit.
That happened to retiree Sanford Morris, 67, of Minneapolis. He has a Medicare Advantage plan that includes prescription coverage. Like most such plans, his has a "doughnut hole," which means he sometimes pays the full cost of his medications.
When he visited the Walgreens on Lake Street last July, Morris rang up a $196 bill for 90 days of three generic medications for high blood pressure and diabetes. The same prescriptions are listed at $12 each in Walgreens' savings club. Morris said he asked the pharmacist if he could join. The $20 fee seemed like a bargain.
Walgreens employees repeatedly told him he didn't qualify because he was on Medicare. When he complained that the policy seemed unfair, he was told: "I'm sorry you feel that way." That angered him even more, and he contacted the Star Tribune's Whistleblower blog.
"It's not only me," said Morris. "It's all the other old guys and gals who shop at Walgreens."
What happened to Morris could happen to anyone in the Medicare "doughnut hole" seeking drugs on Walgreens' low-cost generics list. Morris had an extra disadvantage -- his Medicare health plan doesn't have a 90-day-supply contract with Walgreens, so he ended up paying close to retail prices. If Morris had walked into Target or Wal-Mart, he would not have faced these problems, according to his insurer, Medica, and other insurers that offer Medicare prescription plans.
Low-cost generics are offered through clubs at other large pharmacy chains, including CVS. But CVS and others don't explicitly exclude Medicare patients. Consumers may have to join a club, which generally means an annual fee, to get the lower price. Snyders, which also has a generics club, and K-mart, which sells generics at $5, would not discuss how their plans affect Medicare pricing. Costco offers low-cost generics to Medicare patients, but its pharmacy doesn't fill Medical Assistance prescriptions.
The price difference for generics can be significant for the government. For example, a month's supply of generic 40-mg lovastatin, an anti-cholesterol drug, costs the state Medical Assistance Program $9.65 a month at Walgreens under the state pricing formula. The equivalent price listed in the Walgreens' savings club -- not available to the government -- is $4. Even when Walgreens' $20 club fee is added, Walgreens collects an extra $40 a year when this drug is dispensed to Medical Assistance patients. The government pays the higher price; clients are charged a $1 co-pay.
To complicate such price comparisons, this lovastatin dosage is one of many generics not offered everywhere by Wal-Mart and Target at $4 a month. Its average wholesale price exceeds $4, according to state data. Minnesota, Wisconsin and other states have laws against selling drugs below wholesale.
This is another reason consumers must check the fine print on $4 generics programs. In some cases, experts said, Part D Medicare plans may have negotiated a price for a drug that is lower than what's offered by pharmacy generics programs. Medicare recipients can check the negotiated prices at medicare.gov.
Legal issue cited by pharmacy
Walgreens says it is legally barred from offering its savings club, with its $1-a-week generics, to Medicare and Medicaid recipients. "The front-end store rebates and coupons which are included with membership in the Walgreens Prescription Savings Club could be considered illegal inducements for patients covered under government programs," said Elfinger of Walgreens.
Last year, Walgreens agreed to pay nearly $10 million to settle U.S. Justice Department allegations that it regularly overbilled the government when filling prescriptions for low-income people whose private insurance covered part of a prescription cost.
Neil Thompson, a Minneapolis attorney and former Walgreens pharmacist who helped blow the whistle in that case, said the company's savings club pricing may not break the law, but the program appears to be structured to avoid giving the government the lowest price.
"It has got to be intentional," he said.
Patients faced with stark price differences on generics could switch pharmacies. That's what Morris said he plans to do -- after purchasing all of his drugs from Walgreens since 1962. Yet switching pharmacies for some drugs, and not others, makes it nearly impossible for a pharmacist to spot dangerous drug interactions.
Stephen Schondelmeyer, a University of Minnesota pharmacy professor who studies drug pricing, questions whether $4 generic prices will last. He said the Wal-Mart and Target $4 programs are loss leaders designed to draw customers. The $4 generics concept, he said, could "drive a lot of pharmacies out of business."
And if competition disappears, he said, "this is not a program that is going to be around."
David Shaffer • 612-673-7090