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GENERAL MOTORS EMPLOYEE HEALTHCARE PLAN's 1987 Rx DRUG COSTS OF $270 MIL. WERE 9% OF OVERALL $2.9 BIL. HEALTH BENEFIT EXPENSES; UP 25% FROM 1986

Executive Summary

General Motors spent $270 mil. on Rx outpatient drug coverage for its 2.3 mil. health care benefit program enrollees in 1987, GM's assistant director for health care benefits, Beach Beach Hall, told a March 15 workshop at the American Pharmaceutical Association (APhA) annual meeting in Atlanta. On a per enrollee basis, the GM drug product expenditures worked out to about $117 per person last year. GM enrollees had approximately 24 mil. prescriptions filled in 1987, of which roughly 1 mil. were filled through mail order services. Based on the overall $270 mil. figure, company expenditures on each prescription averaged about $11.25. The $270 mil. in 1987 drug costs were up about 25% from 1986, Hall reported. That growth rate indicates that General Motor's 1986 expenditures were in the $215 mil. range. Approximately 14% of the 25% increase was due to greater utilization of the benefit program, Hall said. The remaining 11% he attributed to either price increases or "shifts to more exotic drugs." GM has begun in the last couple of years to take a harder look at controlling prescription drug benefit costs, Hall said. He maintained that GM has "probably helped a lot of pharmaceutical manufacturers just by the fact of being a third party payor." Noting that Rx price increases are passed through to the payors, Hall said "we do know that we financed a lot of research, with a couple of exceptions, I'm not going to say that's bad." The company has implemented a maximum allowable cost (MAC) and generic substitution program nationwide, after testing the program in Michigan. In that state, the program resulted in one-third lower Rx drug expenditures per person compared to the rest of the country, Hall told APhA. GM's nascent mail order pharmacy is another cost containment measure. "It's used extensively by retirees, who love it," Hall said. About one-quarter of the GM enrollees (600,000) are retirees or their dependents. Hall declared GM's intent to negotiate volume discounts across the board in health care services and products. "We're going to begin negotiating volume discounts with the provider community," Hall said. He indicated that GM has had relatively little contact with drug manufacturers: "Our dialogue has largely been through Upjohn and Lilly and I know there are some other major players, but we're not, for one reason or another, communicating too well." GM is looking at the co-pay schedule in relation to some of the more expensive new products, Hall said. "We've taken a look at co-payment schedules," Hall explained, "because right now there are a lot of very expensive drugs somebody can get for a $3 or $5 co-pay." He pointed out that the co-pay concept is changed when some prescription prices are way above the normal range. Hall appeared on the APhA workshop panel as the representative of a major healthcare benefit sponsor. The drug manufacturing segment was represented by PMA President Gerald Mossinghoff, who reviewed recent association activities on the issue. Mossinghoff noted the establishment of an office within PMA to handle managed care issues. PMA is in the process of interviewing for a new VP to head its Health Systems office. The association reportedly is ready to narrow candidates to a short list. PMA has been emphasizing the managed care issue recently. Mossinghoff noted that the association's Marketing Section held a conference on the West Coast in late February to address the subject. At that meeting, Mossinghoff said, it became clear that "our companies are moving aggressively to work in this area of managed healthcare. It's coming, it's a thing we are going to have to live with; it's a new market for us."
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