SECTION: CAPITOL HILL HEARING TESTIMONY

LENGTH: 2747 words

COMMITTEE: HOUSE ENERGY

SUBCOMMITTEE: HEALTH AND THE ENVIRONMENT

HEADLINE: TESTIMONY PRESCRIPTION DRUG BENEFIT FOR SENIORS

TESTIMONY-BY: ROBERT D. MORONI , ASSISTANT DIRECTOR

AFFILIATION: HEALTH CARE PLANS

BODY:
February 15, 2001 Testimony Of Robert D. Moroni Assistant Director - Health Care Plans General Motors Corporation General Motors Coverage of Prescription Drugs for Employees and Retirees Before the Subcommittee on Health Good morning. My name is Robert Moroni and I am the Assistant Director - Health Care Plans, for General Motors Corporation. In this capacity, I oversee the GM self-insured health care plans including coverage for prescription drugs. I have been employed by General Motors for almost twelve years, the last 6 of which have been in our Health Care Activity. My professional background is as a certified public accountant. I hold a Masters Degree in Health Services Administration from the University of Michigan's School of Public Health. Background By way of background, under our health care programs we offer enrollees a variety of health plan options, including self- insured "Traditional" and Preferred Provider Organization options and Health Maintenance Organizations (the latter being insured). General Motors' health plans cover over 1.2 million salaried and hourly employees, retirees, surviving spouses and their families. Of the total enrollment, 75% (almost 900,000 enrollees) are in the self-insured Traditional and PPO plans, for which GM pays prescription drug expenses directly. We require that the HMOs offered to our people provide prescription drug coverage, but it varies in detail from HMO to HMO. We estimate that our HMO premiums include $300 million in prescription drug costs. Since we offer over 130 HMOs nationwide, I think you can appreciate why my comments today will be limited to our self-insured coverage which, after all, addresses the bulk of our program enrollees. In calendar year 2000, GM spent approximately $3.9 billion to provide health care coverage for its total population. Of that amount, nearly $900 million was for our self-insured prescription drug coverage. That was a19% increase over our prescription drug expense for 1999. Approximately $700 million (or $1,289 per enrollee) of the $900 million was for retirees, surviving spouses and their families. General Motors has been providing prescription drug coverage for its retirees, surviving spouses and their families since 1971. As noted, this group accounts for the vast majority of our prescription drug expense. Under the current design, retirees, surviving spouses and their dependents pay the same co-pays as their employee counterparts, even though they account for proportionately more of the expense. Coverage Design The current design of our prescription drug coverage is often referred to as a "Card Program", with enrollees issued ID cards that they present at local pharmacies to procure covered prescription drugs. The enrollee pays a co-pay at the time of dispensing and the balance is billed to GM through our carriers or pharmacy benefit manager (PBM). We pay the ingredient costs, dispensing fees and administrative fees. There are both retail and mail order options, the latter option being of particular benefit to those with long term "maintenance drug" needs and/or limited access to a local pharmacy. There are different co-pays for our hourly and salaried programs. Currently, hourly program "Traditional" and PPO option enrollees pay flat $5 or $3 retail co-pay and enrollees of both options pay a $2 mail order co-pay for each prescription or refill. The salaried program co-pay is 25% of the prescription cost at retail with a $15 minimum and $25 maximum. If a generic drug is chosen the retail co-pay is $5. The salaried mail-order co-pay is $20 for brand-name drugs and $10 for generics. It should be noted that with mail order a 90-day supply is available, versus a 34- day supply at retail. We have what I refer to as a "preferred formulary" - actually an open formulary where we do not restrict the choice of drug dispensed but we try to influence physician prescribing behavior and/or patient selection, as I will describe shortly. GM uses two PBMs, Merck-Medco and Blue Cross/Blue Shield of Michigan. We believe these PBMs provide some level of quality control and cost containment through a managed network of retail pharmacies and a mail order house. They have put a number of components in place to encourage medically-appropriate and cost- effective prescribing and dispensing practices. Many of these are "transparent" to the enrollee and/or voluntary, and operate on a pharmacist-to-physician interaction. Among the tools our PBMs use are: - Partners for Healthy Aging - an enrollee/patient and physician education effort which provides information on issues of pharmaceutical safety and use among the elderly. - Therapeutic Interchange - contacts with physicians to encourage use of formulary medications - Physician Profiling and Peer Rating - an expansion on the above which provides feedback on quality and utilization performance. - Severe Drug-Drug Interaction Edits - on-line, electronic feedback at the time of dispensing that prevents dispensing drugs that could represent life-threatening interactions. This situation often arises when an enrollee is seeing more than one physician and the respective physicians are not aware of all of the drugs the enrollee is taking. When one of these cases arises, the pharmacist contacts the prescribing physician and reviews the facts of the case before dispensing the potentially conflicting medication. - Digestive Health Solutions - addressing unique concerns of patients with gastro-intestinal disease. It provides educational materials to enrollees and encourages appropriate prescribing practices by physicians. - Dose Optimization - which simplifies the dosing regiment for patients and capitalizes on cost savings of taking one pill versus two. - Generic Substitution Component - When an appropriate generic drug is available it is dispensed unless the physician specifies "dispense as written" or the enrollee requests the brand drug. If the brand drug is dispensed at the enrollee request, the enrollee pays the difference between the cost of the generic and brand, in addition to the normal co-pay. This is not an exhaustive list, but will give you a feel for some of what we feel are important components of a well-managed pharmacy plan. Cost Considerations I would be remiss if I did not tell you that regardless of the efforts discussed above, we are extremely concerned about our continuing ability to provide the kind of prescription drug coverage that our people have come to expect. Prescription drugs are the most inflationary component of our health care costs. Year-to-year increases for the last 3 years have averaged more than 19%. Future costs are projected to increase at even more alarming rates. Prescription drugs do not operate according to the traditional free-market model. Consumerism is limited. Patients are inundated by direct-to-consumer advertising yet lack the information to make fully-informed decisions. Other practices that are a concern include unwarranted patent extensions and pharmaceutical manufacturers' pricing practices in the U. S., compared to their practices in Europe and Japan, or even other countries in North America. These factors impose unnecessary costs which, in turn, have a negative impact on competitiveness of U. S. firms which provide prescription drug coverage. It should not come as a surprise that such firms would consider implementing increasingly stringent controls, or discontinuation of the coverage altogether. Potential Medicare Coverage of Prescription Drugs General Motors supports the addition of a prescription drug component to Medicare. We regard the coverage as necessary - not only for the treatment of illness and injury but because in many cases prescription drugs are the most clinically appropriate and cost-effective treatment option. We believe Medicare prescription drug benefits should be universal so that access is available to all, and employ quality assurance features to assure that the drugs being covered are necessary, appropriate and effective. The Medicare program should have effective program controls or expenditure limits to ensure spending is controlled at a manageable level. It should have broad-based equitable financing. To construct a program with less than universal coverage would be unfair to enrollees and employers who paid into Medicare for many years. Further, to the extent it might provide coverage only for those who have no coverage through employers, it would seem to penalize responsible employers who have voluntarily provided prescription drug coverage in the past. Summary In closing, I must reiterate that General Motors is very concerned about the economics of continuing to provide prescription drug coverage. Obviously we hope to continue to provide prescription drug coverage for our employees, retirees and their families. It is our hope that a fair and equitable Medicare Program will be implemented to help seniors bear the cost of prescription drugs. Such a program should not put responsible employers, who have provided such coverage to date, at a disadvantage.

LOAD-DATE: February 16, 2001, Friday