The war between payers and pharmacies just got nastier. In a pre-emptive move, GM anounced that Walgreen’s would no longer be allowed to fill prescriptions for its insureds. It appears that GM made this move after Walgreens got into a dispute with Toyota over Toyota’s efforts to increase the use of a mail-order pharmacy by its employees. (Mail order pharmacies are generally significantly less expensive than retail. Retail pharmacies want people to come into their stores, buy drugs, and pick up other goods on the way to check out, thus they really do not like mail order) As a result of the Toyota-Walgreen’s dispute, Walgreen’s cut Toyota out.
Perhaps Walgreens hoped Toyota’s employees would rise up in arms and demand Toyota include the chain, or perhaps Walgreen’s just could not afford to participate on Toyota’s terms. Regardless, GM decided to pre-empt any similar move by Walgreen’s towards the GM employee benefit plan. As one of the largest private payers, GM represents significant dollars for many health care providers.
According to Reuters, “GM provides health care coverage for 1.1 million workers, retirees and their families in the United States. Last year, GM spent $5.2 billion on health care in the United States, including $1.5 billion on prescription drugs.”
GM’s move is a clear indication of how seriously large employers take this issue. And with prescription drug costs leading the inflationary charge, don’t expect them to back down.

The announcement last week that the Medicare Drug benefit will cost $724 billion over ten years, instead of the Administration’s original forecast of $400 billion, may be the long-awaited trigger for fundamental reform. Perhaps this is wishful thinking, perhaps not.
Three recent reports from prominent media outlets present rather compeling arguments that the sticker shock may well cause Congress to rethink its approach to prescription drugs.
In an article labeling the issue “sticker shock and awe, the Christian Science Monitor reports that the price tag is “focusing the minds of many lawmakers” on confronting the rising cost of drugs in Medicare.
The San Francisco Chronicle quotes a Heritage Foundation spokesman who claims the drug cost issue, along with the seemingly unstoppable rise in other entitlement programs will “cast a shadow over the entire conservative domestic agenda.”
National Public Radio on Thursday featured a segment with Dan Schorr commenting on Medicare costs and the potential fallout from same.
Among the suggested fixes to the problem are the reimportation of drugs from Canada (a non-answer, as discussed in previous postings here) and the negotiation of prices by the government with drug companies. The former is no answer at all, but the latter may well offer some hope. Almost every other country negotiates directly with pharma manufacturers, and receives much better pricing than does Medicare. In addition, the US Veteran’s Administration negotiates drug prices directly and has done a very effective job in containing prescription drug costs.
While this may offer scant hope for commercial payers, it is important to recall that many physician, hospital, and ancillary reimbursement arrangements are based on Medicare rates (Workers’ comp fee schedules, DRGs, RBRVS, etc.). Therefore, it is possible that any Federal pricing standard would replace the much-maligned Average Wholesale Price as the basis for pricing drugs.
And that would be great news.

DR. R Centor’s DB’s Medical Rants weblog has a great piece about an MD’s decision to stop meeting with drug reps and accepting gifts from same. The piece is short and well worth the read.
Timing is everything; I am just finishing the second annual survey of prescription drug management in WC. One of the notable changes from last year to this is the recognition by WC payers of the key role of the treating MD in prescription drug cost. There is what can only be characterized as wide-spread recognition on the part of large WC insurers that the most important single stakeholder in this is the treating physician.
Kudos to the Cedar Rapids docs for showing the way.