Toyota has come up with an unusual approach to saving on health-care costs: building its own employee pharmacies. The company pharmacies — to be expanded from one opened...
Toyota has come up with an unusual approach to saving on health-care costs: building its own employee pharmacies.
The company pharmacies — to be expanded from one opened more than two years ago at its Georgetown, Ky., plant to its North American headquarters in Erlanger, Ohio, and other U.S. manufacturing sites — are part of a deeply overhauled pharmacy-benefit plan that takes effect Jan. 1.
“This is the biggest benefits change we’ve made since we started making cars in the United States,” Ford Brewer of Toyota said.
The company will require employees on maintenance medications for chronic conditions to stop using retail pharmacies after three refills. Workers will be expected to use the company pharmacy or mail-order services.
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It will pay all costs for several low-priced, generic medications, while requiring as much as 20 percent copayments for competing, more expensive, brand-name drugs.
Previously, the company required copayments of $3 or $5 a prescription.
Toyota also will encourage employees to participate in a “half-tablet” program. For some medications, such as the cholesterol drugs Lipitor and Zocor, it’s cheaper to buy a higher dose and split the pill, Brewer said.
Soaring health-care costs are a nationwide problem. Many employers are increasing paycheck deductions, raising copayments, limiting coverage for non-employees and reducing covered services.
Such changes are occurring even though overall cost increases for employers have slowed from 14.7 percent in 2002 to 7.5 percent this year, according to the Mercer human-resource consulting company. Benefit costs are projected to increase 6.6 percent in 2005.
Counting employees and family members, Toyota provides coverage to about 40,000 at its U.S. operations. As for many employers, prescription drugs have been the fastest-growing part of health-benefit costs.
Brewer would not say exactly how much Toyota spends on prescription drugs, but the amount has been in the millions and has more than tripled since 1998, with a 15 percent increase projected for 2004.
Currently, about 88 percent of prescriptions for Toyota workers are filled through retail pharmacies, the most expensive method, Brewer said. Government programs (such as Medicare and Medicaid), hospitals, nursing homes, even prisons get better purchasing deals.
The company goal is to slash retail pharmacy use to 25 percent, with about 40 percent of prescriptions filled through company-run pharmacies and the rest through mail-order services. Depending on the medication involved, savings could range from 15 to 95 percent, Brewer said.
Toyota’s pharmacy service is provided by CHD Meridian Healthcare of Nashville, Tenn., which runs more than 25 employee-only pharmacies nationwide.
Clients pay CHD a management fee and for the pharmacists and other costs of running the pharmacy. CHD buys medications directly from the drug companies and passes the savings on with no markup, said Casey Correnti, vice president of marketing and development.
“You need to have a large number of employees in a tight geographic area. But if you have enough prescriptions, we’re cheaper than a PBM (pharmacy-benefit manager),” Correnti said.
While smaller businesses might not be able to duplicate what Toyota is doing, many employers are shifting health-benefit costs to employees and looking for even more ways to push employees to follow healthier lifestyles and be more careful health-care shoppers.
“Until consumers understand their role in controlling rising costs, we’re going to continue to see overutilization,” said Robert Miller, president and chief executive of Cooper Research.