Posted At Investors.com

BY : Sean Higgins

The Medicare prescription drug benefit has come under fire as being hard to understand.

But AARP, the nation's top seniors lobby, says the new entitlement could be a better deal for the elderly than buying drugs from Canada.

"Many who choose the least expensive Medicare drug plan in their area that covers all their drugs could pay less this year than getting those same drugs from Canada," found a new AARP study, "The New Math." It was subtitled, "Cheaper than Canada? The drug benefit may be the better deal."

Canadian drugs cost less, but seniors have to pay the entire bill, the study notes. Meanwhile, the drug benefit picks up most of the tab.

The study surprised many because AARP has long pushed for expanding sales in the U.S. of prescription drugs from Canada and other countries. The organization, once called the American Association of Retired Persons, indicates the powerful Capitol Hill player could be cooling toward the issue.

AARP has staunchly rejected reports, first published in the Washington, D.C., newspaper The Hill, that it has backed away on the issue. It still supports key Canadian drug importation bills, said lobbyist Anna Schwamlein, and hopes to see them pass.

"Importation, while not the sole solution to rising drug prices, will serve to put downward pressure on prices," Schwamlein said.

Advocates of cross-border drug sales, like Ron Pollack, executive director of Families USA, say AARP is still on their side but its focus has shifted for the moment.

"What AARP is clearly trying to do is they are trying to make sure that as many seniors as possible seriously consider signing up under the new program," he said.

Indeed, AARP has an interest in signing people up. It offers its own Medicare drug plan through United HealthCare Insurance Co.

Earlier this month it called problems with the benefit's rollout "unacceptable" and said it was in "constant contact" with Medicare administrators trying to fix things for its members.

Some fret that AARP's focus on signing up people for the Medicare benefit is draining interest from the trade angle.

"Would I rather have them in my corner clearly pounding on the drums, bringing in letters and petitions and so forth? Obviously yes," said Rep. Gil Gutknecht, R-Minn., who is sponsoring a Canadian drug importation bill. "It would help our cause if they were more aggressively promoting our cause."

Talking Up Benefit's Benefits

AARP is talking up the benefit and downplaying Canadian drugs.

A Dec. 29 AARP press release quoted CEO Bill Novelli saying, "Millions of Americans who have never had drug coverage can now save more money through Medicare Part D rather than turning to Canada to get their prescriptions."

That's a more favorable view than before. Though AARP support was key to Congress passing the drug benefit in 2003, it maintained afterward that the benefit alone did not do enough to lower drug costs. But by November 2005, an AARP bulletin quoted its director of policy, John Rother, saying, "The benefits look better than we'd thought they'd be."

The study also raises key concerns about Canadian drug sales.

"There are drawbacks in buying from Canada, even from safe and reputable pharmacies. It's still illegal under American law. Deliveries are occasionally intercepted by U.S. authorities. And there's no guarantee that supplies won't dry up as drug manufacturers step up pressure to cut off the cross-border trade," the report notes.

The AARP report is based on five case studies of what U.S. seniors living in different states would pay out-of-pocket for prescription drugs under the least expensive Medicare drug plan available to them and what they'd pay for the same drugs through Canadian pharmacies.

Four of the five would pay at least $300 less out of pocket annually through Medicare. Those requiring larger amounts of drugs would save more. In only one case was buying from Canada cheaper.

A Republican Senate health policy analyst said the report held no surprises.

"After all, the benefit is insurance, leaving the consumer on the hook only for co-pays and other cost sharing, while buying from Canada means that you have to pay everything out of pocket," the analyst noted.

The AARP report also notes that the Medicare benefit provides low-cost catastrophic coverage once out-of-pocket expenses exceed $3,600. Buying Canadian drugs does not count toward that.

Advocates of cross-border sales were not impressed. Most said the sample in the AARP study was too small to be representative and appeared to be skewed in favor of the benefit.

"A case study of five people is hardly a thorough study," Rep. Gutknecht said.

Anyway, it's hardly a savings for the U.S., he noted, because the taxpayer foots the bill for the benefit.