General Motors Seeks Savings in Prescription Drugs

Strategic Insights -

As General Motors navigates its financial struggles, including a $10.6 billion loss in 2005, the company has turned to a creative solution to reduce its costs. With the patent protection for several name-brand prescription drugs set to expire over the next five years, GM is encouraging its 1.1 million beneficiaries to switch to less expensive generic alternatives. This shift could save the company and other employers up to $49 billion by 2011, according to the Pharmaceutical Care Management Association. GM's corporate pharmacist, Cynthia Kirman, notes that this is one of the biggest opportunities the company has had in lowering its costs for treatment.

Key Takeaways:

  • GM, the largest private provider of health insurance in the United States, is planning to switch its 250,000 beneficiaries who take cholesterol reducers to a 90-cent generic copy of Merck's Zocor, which would save the company $82 million annually.
  • If all 1.1 million beneficiaries switch to generic drugs for 70 name-brand drugs set to lose patent protection, GM could save up to $49 billion by 2011.
  • The use of generic drugs is expected to accelerate over the next few years, with Ron Fontanetta, principal at consulting firm Towers Perrin, stating that the generic use rate has increased in the last decade and is likely to continue.
  • GM's corporate pharmacist, Cynthia Kirman, emphasizes the importance of doctor approval in switching patients from name-brand to generic drugs.
  • John Bond, a 75-year-old retired GM engineer, uses a spreadsheet to manage his and his wife's out-of-pocket prescription drug expenses and has already realized significant savings by switching to a generic anti-cholesterol drug.

Statistics:

  • GM's annual bill for cholesterol treatment could fall by 59 percent to $82 million if all 250,000 beneficiaries switch to a generic for Zocor.
  • The Pharmaceutical Care Management Association estimates that employers could save up to $49 billion by 2011 if they switch to generic drugs for 70 name-brand drugs set to lose patent protection.
  • GM's 1.1 million beneficiaries could realize significant savings by switching to generic drugs, with John Bond's co-pay expenses decreasing from $140 to $10 for a 90-day supply.

Sources:

  • Nicole Ostrow, "General Motors Seeks Savings in Prescription Drugs," Bloomberg Business News
  • Pharmaceutical Care Management Association
  • Towers Perrin
  • General Motors Company
  • Bloomberg Business News