New prescription drug plan saves Maytag millions

New prescription drug plan saves Maytag millions
Date November 24, 2004
Section(s) Local News

NDN Staff Writer

Beginning in 2005, Maytag‘s Newton UAW employees and retirees will switch to a new prescription drug plan requiring them to purchase all maintenance prescription drugs by mail.

The move comes as part of Maytag‘s companywide plan to switch its drug program in an effort to save money on the ever-mounting cost of health care.

How will the new plan affect Maytag‘s employees and retirees? What effect will the move have on local pharmacies? And, ultimately, is the move the best plan for the company and the community?

Maytag Compensation and Benefits Vice President Tim Schiltz spoke with the Daily News about those issues and the prescription plan in early November.

To him, the plan is a great way for Maytag to keep company costs down and still keep co-pays reasonable for employees and retirees.

He said institution of the program across the whole company will save Maytag an estimated $12 million a year once all employees are under the new drug plan. Without those savings, Schiltz said, the company would have to make cuts or changes in other areas to keep health care affordable.

Maytag began looking at health care issues in 2000, seeking ways to help cut the ever rising costs while still providing employees with a solid, affordable health plan. One aspect the corporate team examined was prescription drug costs. Ultimately that led to the new drug plan with mail order pharmacy Caremark.

Salaried employees are already under the mail order plan and Maytag has been systematically bringing union employees under the plan as the groups’ contracts are renewed.

In some cases, Schiltz said, there is resistance to the change. He said that some employees have the perception that the company is trying to cut their benefits as much as possible simply to save money. He said that’s not true.

“We really do want our employees to get the care they need,” he said, “It doesn’t do us any good to have unhealthy employees.”

The new program saves the company $12 million by requiring employees and retirees to purchase maintenance drugs through Caremark. Maintenance drugs typically include any drug a person takes long term for a medical condition, such as the arthritis drug Celebrex. Short term prescriptions for illnesses, like drugs to fight cold symptoms, can still be filled at local pharmacies.

Schiltz noted that while the mail order program saves the company a significant amount of money, it also saves union employees and retirees money. Under the new plan, Maytag employees and retirees would have to pay a $5 co-pay for generic prescription drugs, a $10 co-pay for formulary drugs and a $15 co-pay for brand-name drugs. Each of those co-pays would cover a 30-day supply of the drug.

But with the mail order, those co-pays double to $10, $20 and $30 respectively, but the employee gets a 90-day supply of the drug, effectively saving the employee 50 percent over a three-month period. A three-month supply of a generic drug from a pharmacy would require three co-payments totaling $15, versus the single co-pay of $10 under the mail order program.

Caremark’s wholesale drug purchases enable the savings.

But Lindsey Stephens, Best Practices Director for Medicap Pharmacies, contests how much money mail-order pharmacies actually save the companies they work with. She said mail order companies play games with average wholesale prices (AWP), leading to “smoke and mirrors” savings that don’t really exist. AWPs are numbers set by the drug manufacturer that function as a suggested manufacturer’s price.

“What people do not understand is that if a mail order company approaches the manufacturer with a large enough order, they can request that their order be specially packaged for them,” she noted. “They have oddball sizes and are able to request AWPs be assigned to the smaller packages. Since this is really a fictitious number, the manufacturer will assign any AWP to the package size that the mail order company requests.”

For up to 25 percent of drugs, mail order companies request inflated AWPs and make it appear as if they are saving companies money when in fact, in some cases, they actually charge more than a local pharmacy would, Stephens said.

Stephens said Maytag should have investigated other alternatives before jumping on the drug mail order bandwagon.

“Instead of first looking at alternative, innovative ways to confront increasing health care costs, utilizing an Iowa-based company and local pharmacy providers, they have decided to take their business out of town and the state,” Stephens said. “That isn’t being a good corporate citizen and doesn’t go very far in supporting the local economy or employees needs.”

Schiltz admits that requiring employees and retirees to use out-of-state drug service has a negative effect on local pharmacies.

“It is the one downside,” he said. “We want to be a part of this community … but we also need to make sure that the best way we can do that is to ensure our own financial viability.”

It’s unclear at this point just what sort of effect the mail order program will have on local pharmacies. In other areas where large employers switched to mail order business, smaller pharmacies were forced out of business.

About a year ago, “GM’s UAW began a mandatory mail order program and a tremendous amount of Michigan pharmacies had to close their doors because of that. That has been the most significant (effect on pharmacies) because of the sheer number of employees that are on that plan,” Stephens said.

Whether the same thing could happen here in Newton is unknown.

Julie McCarey, owner of the Newton Medicap, said about 25 percent of her business comes from Maytag employees. Although she’s concerned, she’s taking a wait-and-see approach toward Maytag‘s new plan at this point.

“I’m not sure yet,” she said. “Obviously, all of us in town are going to have to make some changes as to how we do things.”

So far, the only effect on McCarey’s business has been Maytag employees and retirees coming into Medicap with questions about Maytag‘s new plan.

“There’s been a lot of concern expressed by the employees,” she said. “That’s the hardest part. They’re coming to us and we don’t have the answers.”

Schiltz encourages Maytag employees and retirees to try the new system before knocking it. He uses it himself and said he came to like the mail order plan once he tried it.

“The only complaint we’re getting is from people who haven’t tried the system,” he said, “and I understand this. The first time I used it, I didn’t have a clue, and I’m a benefits guy. It’s pretty easy.”

Easy or not, local pharmacists still insist that mail order is a poor option for them and their customers alike.

“It’s not the patients’ preference and the problem is the patients aren’t given a choice if they want to get it locally or by mail for the same co-pay options,” Stephens said, “Their option is just that they have to get it through the mail. It doesn’t leave an even playing field.”


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