Gm's War On Drug Costs

The purple pill has General Motors seeing red. The automaker spent $52 million last year buying Prilosec, the brightly colored ulcer medicine, for its employees and retirees. That is millions more than GM executives believe they should have spent, and they blame much of the extra cost on savvy marketing by Prilosec's maker, AstraZeneca. Enticing ads, featuring a woman in a purple dress, floating blissfully across a soft blue sky, have consumers clamoring for Prilosec, including many with common heartburn who don't need such a powerful drug, GM says. "If we don't get the right people getting the right drugs, then we're wasting a lot of money," says James Cubbin, GM's point man for its aggressive plan to curb drug spending. AstraZeneca says Prilosec is popular because it is effective, and disagrees that its drug is being used inappropriately.

Prilosec is just part of GM's mounting drug problem. With 1.25 million people enrolled in its health plans, GM is the largest private purchaser of health care in the United States. The company is staggering under a prescription-drug bill that topped $1.1 billion in 2000 and is expected to climb as much as 22 percent this year. Prescription drugs are the fastest-growing part of GM's health-care costs, accounting for more than 25 percent of its total medical spending last year. That's a big bite out of the automaker's bottom line, and Cubbin's year began with a concerned call from GM's new chief financial officer, John Devine, who wanted to know what exactly was being done to rein in skyrocketing drug costs.

Quite a lot, as it turns out. Cubbin and his team are attacking the problem from all directions, with the goal of keeping the growth in drug spending this year under 15 percent. Two years ago GM became one of the first corporations to hire its own pharmacist to oversee its prescription-drug programs. To promote the use of generic drugs, GM is printing messages on pay stubs ("using generics saves you money") and holding closed-circuit teleconferences with retirees, who gather in local movie theaters to hear the company pharmacist talk about the safety and efficacy of generics. It also raised copayments on brand-name drugs for retirees and some employees. (Each 1 percent increase in the use of generics saves GM $3 million.) But most important, GM is taking its complaints directly to the pharmaceutical giants, as part of a pointed campaign against their well-funded marketing efforts. "I don't want to draw battle lines necessarily," says Cubbin, "but I do think some more responsibility and accountability is going to be necessary from the drug companies."

Some in GM's vast army of workers and retirees, however, are concerned that they will be the casualties in the company's war on drug costs. "I think the majority of people are more comfortable with the original type of medication rather than the generic," says Marty Aldrich, 54, president of the United Auto Workers Local No. 2250 in Wentzville, Mo. Aldrich, who started with GM in 1968, says switching from brand-name drugs to generics is "like trying to put Autolite spark plugs into a GM vehicle. It just don't jibe." GM retiree Robert H. Bickmeyer, 71, says his annual copayments for prescriptions will more than double this year, from $440 to $990, due to the increases that took effect Jan. 1. Bickmeyer and his wife, Phyllis, 63, of Troy, Mich., fill prescriptions for 13 different medicines each year, 11 of them brand-name drugs. "It hurts," Bickmeyer says. GM says generics have to meet the same quality standards as brand-name drugs and acknowledges that it raised copayments for brand-name drugs to encourage greater use of generics.

But when it comes to drug spending, what's bad for General Motors is bad for the country. An aging population and the increased importance of medication in treating illness are driving up costs for both. Prescription-drug spending in the United States climbed 15 percent in 2000, to $145 billion. The soaring cost of medicine is a burden for millions of Americans, including the 13 million Medicare seniors who lack prescription-drug coverage. Their plight became a red-hot issue during the presidential campaign, and President Bush wants to add drug benefits to a reformed Medicare system.

General Motors isn't waiting around for a governmental fix. In the No. 1 automaker's most aggressive tactic so far, Cubbin has been taking his case to senior executives at some of the nation's largest drugmakers, including AstraZeneca, GlaxoSmithKline and Merck. In recent months Cubbin and GM pharmacist Cynthia Kirman journeyed from Detroit to New Jersey, where many drugmakers are located, for face-to-face meetings. At the sessions, Cubbin acknowledges the many contributions of the pharmaceutical industry, then details GM's complaints against the drugmakers, chief among them the intense marketing campaigns for brand-name drugs aimed directly at consumers.

The pharmaceutical companies, which spent more than $2 billion on consumer advertising last year, 50 percent more than in 1998, aren't backing down. James Coyne, a spokesman for AstraZeneca, acknowledges that consumer advertising of prescription drugs has become "very controversial" for its role in increasing drug spending. But he says such advertising is educational and often results in people's seeking treatment they really need. "I can certainly appreciate that GM is seeing a lot of patients coming into doctors' offices more informed than they would otherwise be," he says.

Cubbin points to Pharmacia's Celebrex as another example. The arthritis medication was one of the most heavily marketed drugs in the United States last year, with a total advertising and promotional budget of $242 million. Citing the studies that led to the FDA approval of Celebrex, Cubbin says the drug is a great medicine for the small percentage of arthritis patients who also have a propensity for gastrointestinal bleeding. But marketing the drug as an improved pain medication is inaccurate, he says. (Cubbin is a lawyer, not a doctor, but he relies on research and analysis by GM's pharmacist as well as outside medical experts.) Celebrex's frequently aired TV commercial shows an attractive, gray-haired woman performing pain-free tai chi in a park. Pharmacia had to change the ad last fall after the FDA said it suggested that Celebrex was "more effective than has been demonstrated by substantial evidence." Pharmacia vice president Steven Geis says the drug is much better for pain than over-the-counter alternatives, and that there is no way to predict exactly who is going to develop a bleeding problem, which makes Celebrex a smart choice for many of the 19 million arthritis patients in the United States.

Locked in a high-stakes chess game with the pharmaceutical industry, Cubbin is always thinking a few moves ahead. With a key Prilosec patent due to expire as soon as April, GM's prescription-drug spending might be expected to decrease by millions as generic versions of the purple pill come on the market. (Generics usually cost about one third the price of the brand-name drugs they replace.) But AstraZeneca is about to release a new and improved version of Prilosec called Nexium. AstraZeneca declined to comment on its plans for Nexium, but Cubbin anticipates a massive marketing campaign designed to get Prilosec users to switch to Nexium, rather than generic versions of the popular ulcer medicine. Other big new drugs are sure to follow, and given the continued resistance to generics among workers and the resolve of the drugmakers to establish their brands in the marketplace, GM faces a tough road ahead. "These guys really know what the hell they are doing," Cubbin says, with a hint of grudging admiration for the drug marketers. It's enough to give a guy an ulcer.