With the first Medicare prescription plan opening for enrollment on Tuesday, drugstore chains eager to lure elderly customers have embarked on a marketing blitz aimed at people like Marie Williams of Elkridge.
Williams, who takes two medications regularly, says that every time she tries to learn about the Medicare plan that kicks in Jan. 1, she feels like a befuddled cook in an unfamiliar kitchen.
"It's like I'm trying to bake a cake but a few ingredients are missing from the recipe," said Williams, 74. "I can't find the answers I need."
Drugstore chains hope that if they can help seniors like Williams sort through the confusion, they will win over customers who are getting drug coverage for the first time -- boosting the amount of prescriptions they dispense and vastly expanding foot traffic in their stores.
To that end, Wal-Mart Stores Inc. rolled out a fleet of trailers to 200 stores across the country with representatives from the Humana insurance company on board for face-to-face chats with seniors. CVS Corp. hosted seminars at more than 500 senior centers nationwide. And this week, the pharmacy staff at all Walgreen Co. stores set up tables, passed out brochures and counseled seniors about various plans.
Fueling this marketing frenzy is Medicare's decision to offer prescription drug coverage to its 40 million elderly and disabled beneficiaries for the first time in its 40-year history. Enrollment ends May 15. The coverage would come from private companies that have contracted with Medicare, which picks up a large part of the cost.
In October, dozens of the companies began releasing details of their plans, leaving some seniors flummoxed by the array of options. In the Washington area, Medicare consumers have the choice of more than 40 prescription drug plans, with premiums ranging from $6.42 to $68.91 a month, according to the Kaiser Family Foundation. Deductibles and the drugs that are covered also vary from plan to plan.
It is no wonder seniors are confused. About 61 percent say they do not understand Medicare's drug benefit very well, if at all, according to a poll released this week by Kaiser and the Harvard School of Public Health. But they also said their pharmacists rank third, after the Medicare office and their doctors, as a source of help.
Similar research emboldened CVS -- which gets 71 percent of its sales from prescriptions -- to join the fray, said Jim Maritan, vice president of strategy and business development at CVS. "We decided we needed a plan."
The plan went well beyond education. CVS also struck a deal to have a subsidiary process claims for Universal American Financial Corp. Under the deal, CVS will determine which drugs Universal's plan should cover and handle mail orders.
For its services, the retailer will receive a fee, which it declined to disclose. But it will also bear half the risk, Maritan said. Universal submitted a bid to Medicare forecasting its total cost. If it overshoots the projected cost, the plan makes less money and so does CVS. If the plan makes more than expected, it gives some back to Medicare and keeps the rest, Maritan said.
"It's an interesting opportunity for Pharmacare," the CVS subsidiary, Maritan said. "It is essentially a way for us to bear limited risk and develop greater knowledge of how this population behaves."
Walgreen also plans to process claims. It is working with Wellcare Health Plans Inc. and United Health Group's Ovations unit. But unlike CVS, Walgreen bears no risk, said Michael Polzin, the company's spokesman. Both companies are marketing other insurers' plans in their stores.
"It doesn't matter to our pharmacy which program these seniors are signed up with," Polzin said. "But if they happen to be a Wellcare patient, not only will the pharmacy earn the usual money for filling the prescription, but we will earn money for processing that transaction as well.''
Another advantages to the Medicare drug benefit has these retailers salivating: Neutralizing Wal-Mart, the discount giant.
Currently, many seniors without prescription coverage go to Wal-Mart because they believe it offers the lowest prices. But under the new Medicare program, when those uninsured seniors sign up for a plan with Aetna, for instance, they will pay the same amount -- whatever the plan requires -- at a Wal-Mart, Walgreen, or CVS.
"Wal-Mart wins on price and drugstore chains like CVS win on convenience," said Eric Bosshard, an analyst with FTN Midwest Research. "When price doesn't matter, CVS and the others hope customers will leave Wal-Mart."
Art Alderson, vice president of pharmacy at Wal-Mart, said that will not happen. Under the minimum requirements Congress set for the drug plans, consumers must pay the first $250 of their prescription purchases and 25 percent of the next $2,250 in drug costs.
"That money will go further in Wal-Mart than any other pharmacy" because of the chain's low prices, he said. Though Wal-Mart accepts various plans, it has a co-branded card with Humana, which offers the lowest available insurance premiums of any of the drug plans, he said.
Besides, he said, value is not just price. It's about one-stop shopping for everything from drugs to diapers.
"We will gain more pharmacy customers," Alderson said. Wal-Mart does not make public how much of its sales come from prescription drugs.
But these drug plans are not a sure thing for retailers. For one, there is no telling what the acceptance rate will be for these plans. About 43 percent of seniors say they do not know if they will enroll next year and another 37 percent say they will not, the Kaiser-Harvard poll said. Some have better benefits from their former employers.
Also, those who do not have prescription coverage currently pay the highest prices for drugs because they do not have an insurer negotiating prices on their behalf, said Paul Ginsburg, president of the Center for Studying Health System Change.
"You're taking a population that paid the highest prices and now they will benefit from the purchasing power of the insurer," Ginsburg said. The retailers "will get lower payments for each prescription filled but they will presumably fill more prescriptions."
The challenge for retailers will be striking a balance so that the arrangement does not eat into profit margins.
Albert Johnston, of Severna Park, is trying to strike his own balance. This week, he visited Medicare's Web site and used a tool that compares drug prices at various pharmacies. Now he's trying to decide: Is price more important than convenience? Should he stick with his longtime pharmacist or go to the nearest Walgreens 10 miles away?
"That's 20 miles times 40 cents a mile," said Johnston, 82. "That price is part of the prescription. That's the way it gets credited in my book."
CVS stores such this one in the District have set up information centers to promote their Medicare drug plan.