No co-pay pays off for pharma firms

Companies often give employees price discounts for purchasing company products.

For instance, Lenovo, which bought IBM's personal-computer line in 2005, allows employees to buy Thinkpad tablets and other gadgets for a discount.

Several large pharmaceutical companies with operations in this area go beyond discounts and provide their prescription products with no co-payment to employees who have a script, and the reason is simple: profit.

Opaque pricing is one of the systematic mysteries of American health care and, in various marketplaces, pharmaceutical companies are no different from other companies in using such situations to maximize profits.

But as employers, pharmaceutical companies are also no different from widget- or carmakers in wanting to keep employee health-care costs low. The drug industry - like many doctors - is a proponent of patients taking medication prescribed by a physician.

This idea helps Big Pharma in at least two ways.

Greater volume usage of a product is almost always a good thing for a company, and drugmakers are no different, albeit with the requisite safety concerns.

And if employees use drugs in properly prescribed ways, it might prevent a worse medical condition, a more expensive medical condition.

"We want to keep employees healthy," said Rick DeOliveira, GlaxoSmithKline's U.S. director of benefits. "Prescription medicines can prevent the need for more expensive procedures. If people are prescribed anti-hypertensive or cholesterol medicine, we want them to take them because it can prevent a heart attack or a stroke."

Glaxo is a global company based in London but has 1,300 employees in Center City - until they move to a new facility under construction at the Navy Yard.

Many big companies are self-insured, and they spread the costs among hundreds or thousands of employees. They often pay outside firms to administer health plans and sometimes a separate pharmacy-benefits manager to handle the prescription-drug plan.

Employees usually contribute some portion of their wages, and pay varying costs for services, including through co-payments. But, for example, if a higher-than-normal number of employees have long hospital stays or expensive surgeries, the company often pays more in a given year.

That's why companies encourage employees to exercise, stop smoking, and take cholesterol-reducing medication.

As with Glaxo, a Pfizer representative said company-made prescription medicines are covered at 100 percent, meaning no co-pay. Pfizer Inc. is based in Manhattan but has a big operation in Collegeville, Chester County.

Johnson & Johnson is based in New Brunswick, N.J., and has operations in the Philadelphia area. In a statement, a J&J representative said, "all U.S.-based employees and their families who are covered under the company-sponsored 'Healthy People Plan' have Johnson & Johnson prescription medicines covered at 100 percent. This may not apply to employees covered by certain HMOs that we do not self-insure."

Employees' drug-plan cards would identify them as being eligible for no co-pay for that company's product. The plans have co-pays for most other prescription medicines.

All three firms said that employees can purchase the company's consumer products such as toothpaste or over-the-counter medicines at discounted rates at company stores, though not all facilities have one.

When generic manufacturers begin selling a drug, the price usually drops precipitously compared with the period when the brand-name company had the market to itself because of patent protection. Drug plans for companies in other industries usually have different pricing levels for use of brand-name drugs vs. generic equivalents.

Aside from pride in thinking that the brand-name product is better than any generic, a brand-name company giving employees the product with zero co-pay avoids the potentially embarrassing situation of an employee choosing a generic because of price.

"Regarding brand-name or generic medicines, we believe employees and their physicians, not the company, should together make informed decisions about the best treatment options when it comes to prescription medicines or any health-related decision," the J&J representative said in the statement.

A Glaxo representative said the company's "holistic" approach to employee health-care benefits involves 100 percent coverage of preventive services, including routine physicals, cancer screenings, and vaccinations - even those of a competitor. Adult vaccinations are given on site. Employees have a financial incentive to participate in exercise programs and take annual health surveys. The plan covers medicines at low or no co-pay for chronic conditions such as asthma and diabetes.

"If we keep everybody healthy, it will lead to lower long-run costs," Glaxo's DeOliveira said. "It's not just the cost of the treatment, but also absenteeism. If people are not here because they are sick, then they are not working."