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Executive Summary

General Motors spent approximately $ 275 mil. for outpatient prescription drug coverage in 1988 for its more than two million U.S. health care benefit program enrollees, GM Healthcare Benefits Senior Administrator Christine Gasiciel told a recent Frost & Sullivan conference. The cost of Rx drugs alone came to "slightly more than 9%" of the corporation's total health care outlay, which was over $ 3 bil. in 1988, Gasiciel noted. Putting that cost into automotive perspective, Gasiciel said that health care payments translated into $ 600 per GM vehicle produced last year, of which $ 54 went toward prescription drugs, 22% more in 1988 than in 1987. Vehicle prices were raised only 5% during the same period, she noted. By comparison, GM's domestic competitors pay between $ 400 and $ 500 per car for health care coverage and "transplant" competitors $ 50/car. On a per enrollee basis, the prescription costs came to roughly $ 157 per person last year. The price of the average Rx drug rose 14.6% from 1987 to $ 18.64 and the average number of claims per enrollee climbed 12% to 8.4 claims, Gasiciel reported. The large percentage of retirees enrolled in the plan is part of the reason for the magnitude of GM employee healthcare benefit costs in general and the sharp rise in prescription costs in particular, Gasiciel pointed out. Roughly one-quarter of the entire enrollment of two million beneficiaries are retired employees, or about 500,000 enrollees. Gasiciel pointed to six other factors in the general increase in company health plan costs: a shift from inpatient to outpatient care; the aging of the GM workforce; increased plan utilization; higher drug prices; greater R&D outlays per drug and higher selling and advertising expenses per drug. GM offers a three-option healthcare plan system: traditional coverage, health maintenance organizations and preferred provider organizations. The corporation works with 147 HMOs and 45 PPOs. The system, the "Informed Choice Plan" was put into place in the mid-1980's. The company encourages the use of generics and has a long-standing mail-order pharmacy program. GM pays for the system at no out-of-pocket employee costs. Employee co-payments depend on the system: traditional enrollees pay $ 5; the PPO co-pay is $ 3 and HMO enrollees pay $ 0 to $ 3. The co-pay for mail-order drugs is $ 2 for up to a three-month supply. GM employees saved $ 9 mil. from the lower deductibles by ordering drugs through the mail last year, she noted. The company said it incurred an additional $ 1 mil. in losses on the program. The corporation, however, has no plans to drop the mail program. In order to try and contain escalating costs, the company has begun utilizing a new computer claim system that came on board with GM's acquisition of EDS, the Dallas-based computer company. The data base has allowed the firm to systematically review its participation in networks and to evaluate hospital standards, Gasiciel pointed out, adding that now GM will apply the system to other health care areas, including employee prescription drug usage patterns. The next round of contract negotiations between GM management and the United Auto Worker GM representatives begins in 1990 and the company is preparing for the healthcare side of the talks by reviewing a number of options to help curb rising costs. Only some of the options will be raised at the actual talks, she noted. Gasiciel said some of these options include: raising generic substitution rates; increasing mail order usage; improving utilization review both at the corporate end and via the HMOs and PPOs; decreasing acquisition costs through such mechanisms as manufacturers' rebates; closed pharmacy networks and/or pharmacy PPOs; and, "but only if there is no viable alternative," formularies "either positive or negative ones."

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