A federal judge yesterday rejected for the second time a Bush administration plan to develop a Medicare prescription drug card program that would offer discounts to seniors, ruling again that the government lacks the statutory authority to proceed.

U.S. District Judge Paul Friedman permanently enjoined the U.S. Department of Health and Human Services from going forward with the program, finding that the plan went well beyond what the popular Medicare program was authorized to do when it was created in 1965.

"We all agree on finding a solution to affordable prescription drugs, and we applaud the government's good intentions, but this just isn't the way to do it," said S. Lawrence Kocot, general counsel for the National Association of Chain Drug Stores, a Virginia-based trade group of more than 200 companies that filed suit in July 2001. "This is not so much about discounts as much as it is the future of Medicare."

White House spokesman Scott McClellan said, "The ruling is a loss for millions of seniors who would have realized significant discounts on their prescription drugs." Medicare administrator Tom Scully said the administration would still seek to implement the idea, through congressional authorization or a further appeal.

President Bush first announced the administration's plan, officially known as the Medicare-Endorsed Prescription Drug Card Assistance Initiative, in 2001 as part of a $190 billion package of Medicare changes.

Medicare, created in an era when hospital stays were the predominant medical expense for seniors, does not cover prescription costs for patients who are not in a hospital or nursing home or do not have a special, life-threatening condition. That has become an issue over the past two decades as hospital stays have become shorter and prescription expenses have soared, hitting seniors on fixed incomes particularly hard. Bush spoke again yesterday of making Medicare a "reformed and strengthened system."

The administration's program would have designated certain companies to issue cards entitling Medicare beneficiaries to discounts of perhaps 10 to 13 percent per prescription. HHS said an administrative clause that authorized the agency to educate beneficiaries gave them the right to create the program.

The drug store association sued, saying the clause gave HHS no such right. The group, which includes chains of four to 4,000 stores, said the program unfairly favored a handful of companies with mail-order prescription programs.

Friedman agreed with the chain stores in September 2001, issuing a preliminary injunction that stopped the program. The government modified the program, but the chain stores asked the judge to reject the new version as well.