Incompetence and cronyism, the handmaidens of the Bush administration (980 days left), explain its failure to create a working prescription drug program. Simply put, they (a) don't want government to work and (b) want to enrich their friends, as Paul Krugman underscores (sub.req.):
[W]hile a straightforward addition of drug coverage to Medicare would have been good policy, it would have been bad politics from the point of view of conservatives, who want to privatize traditional social insurance programs, not make them better.
Moreover, administration officials and their allies in Congress had both political and personal incentives not to do anything that might reduce the profits of insurance and drug companies. Both the insurance industry and, especially, the pharmaceutical industry are major campaign contributors. And soon after the drug bill was passed, the congressman and the administration official most responsible for drafting the legislation both left public service to become lobbyists.
Remember, this is the administration that wants to shrink the government so small they can "drown it in the bathtub." What made anyone think the prescription drug plan would work?