WASHINGTON -- A Texas company owned by a campaign contributor and former business associate of President Bush could profit if Medicare endorses its drug card program under guidelines set by legislation the president signed into law on Monday, according to a report released yesterday by a research group run by a former Clinton administration official.

The Center for American Progress, whose president is John Podesta, Clinton's former chief of staff, pointed out that David Halbert, a longtime friend and contributor to several of Bush's campaigns, helped craft the portion of the Medicare bill that allows seniors to buy discount drug cards they can use to purchase medicine from May of 2004 until 2006, when prescription drugs will begin to be covered by Medicare.

Halbert's company, Irving, Texas-based AdvancePCS, is one of the nation's largest pharmacy benefit management companies and would be well-positioned to compete for Medicare's endorsement to issue the discount cards.

Medicare officials will decide in April which companies can issue the discount cards. By then, AdvancePCS could be owned by Caremark Rx, which in September announced its intention to buy the company. That sale could be approved by the Federal Trade Commission in January. The Fort Worth Star-Telegram has reported that the sale could net Halbert as much as $200 million.

"The White House is supposed to be the people's house, not the drug industry's corporate headquarters," said David Sirota, author of the Progress Report, which conducted the AdvancePCS review for the Center on American Progress. "The president needs to explain why he allowed his longtime Texas crony and benefactor to help write key pieces of Medicare legislation that guarantees nothing for seniors but billions for his friend's business."

Bush had been an investor in a Halbert-owned predecessor company to AdvancePCS, called Advance Paradigm, the center reported. Bush's trust sold his shares in 1998. Halbert contributed to Bush campaigns from his 1994 gubernatorial race through his White House bid in 2000.

White House spokesman Trent Duffy said the administration consulted a wide range of experts in putting together the drug bill.

"I'm not going to be able to say anything about specific conversations the White House had in crafting this legislation," said Duffy, pointing out that no decision has been made on which companies will distribute the discount cards. "I will say the president designed this bill with 40 million special interests in mind -- the seniors of the United States of America."

Halbert could not be reached for comment, but AdvancePCS spokesman Dale Thomas said: "AdvancePCS is not going to dignify this with a response."

Democrats have been highly critical of the discount drug cards, complaining that they won't benefit seniors.

"Only in this administration would the words 'discount card' mean seniors get the card while corporations get the discounts," said US Senator Edward M. Kennedy, Democrat of Massachusetts.

The drug discount card is meant as a stopgap measure to ease the burden of prescription drug costs for seniors until 2006. Senior citizens would pay a maximum of $30 a year for the card.

All Medicare recipients would be eligible for the card. However, the companies, called prescription benefit managers, would not be required to pass on all the saving that they might be able to negotiate from drug manufacturers. Instead, the law allows firms to pocket much of the discount themselves, passing a smaller amount on to consumers.

Phil Blando, a spokesman for the Pharmaceutical Care Management Association, said seniors were likely to get healthy discounts. An analysis in March by researchers at Brandeis University found that drug discount cards administered by pharmacy benefit management companies provide average discounts of 25 percent for generic drugs and 14 percent for brand-name prescriptions.

Blando called the report "ludicrous," and said many firms might not even compete for Medicare's endorsement to offer discount cards, since costs might exceed revenues from enrollment fees.

"This is a red herring, a diversionary tactic, but we're not going to be swayed by it," he said.

This story ran on page A3 of the Boston Globe on 12/12/2003.

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