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Health Care Tour: “Seeking Patient-Centered Care”
Smith Drug Company
The Issues:
- Drug distribution industry: the industry plays a vital role in the overall health care market.
- By focusing health care on wellness and prevention for its own employees, Smith Drug Company projects a $10.3 million savings over 7 years in employee health care costs.
Findings:
- Prescription drug snapshot
- In the United States, 67% of prescriptions are generic drugs. Canadian generic drugs cost 118% more than generics in the United States and European generic drugs cost 20-90% more. Drug price inflation in 2007 was 1.4%, below the overall inflation rate.
- Many patients do not follow their doctors’ instructions. Only 25-30% of prescriptions are taken properly. This noncompliance adds $88 billion to health care costs annually.
- Drug distribution industry
- Health Distribution Management Association (HDMA) claims that 80% of prescription medicines sold in the US are in HDMA-member distributors. These supply chains represent 3% of the total cost of prescription medicines, and the industry operates at a net profit margin of 1.1%. In exchange, distributors save the health care system $34 billion per year through value-added services.
- Distribution centers are regulated by the FDA, EPA, DEA, OSHA, and the DOT. The HDMA leads efforts to improve patient safety and supply chain security by advocating more uniform licensing and pedigree standards, tougher law enforcement, and harsher criminal penalties for counterfeiting.
- Smith Drug Company wellness programs
- Wellness programs are a key feature of the Smith Drug Company’s overall health care plan, and these programs will save Smith about $10.3 million over a 7 year period. At Smith, health care spending per employee rose 0.65% in 2007, far below the national average of 6.2%, for a one-year savings of $320,000.
- Smith Drug pays 100 percent of costs for employees to have an annual physical. During his physical, one employee was discovered to have a heart valve problem that may have led to a heart attack. A titanium valve was implanted, saving thousands of dollars and, quite possibly, the employee’s life.
- Another free benefit for Smith Drug employees (which costs the company about $20 per employee) is the Health Risk Assessment (HRA). By screening employees for common health issues, the HRA saves lives and money. For instance, it was discovered than an employee’s blood produces a surplus of iron, which can lead to heart attack or stroke. The employee now controls the condition by donating blood every 4-6 months. The HRA saved tens of thousands of critical care dollars and, possibly, the employee’s life.
- Smith Drug Company also introduced a diabetes compliance program in 2007. By using education, information and free supplies, Smith saw the cost of care for compliant employees drop from $11,637 in 2006 to $5,406 in 2007, while the cost for noncompliant employees rose to $13,139 each. Compliant employees’ total medical costs are only 41% that of non-compliant employees.
Sources: IMS Health, Frasier Institute, European Generic Medicines Association, The Bureau of Labor Statistics, Booz Allen Hamilton, and HDMA.
When: May 19, 2008
Where: Smith Drug Company, 9098 Fairforest Rd., Spartanburg, SC
Hosts: Ken Couch (President), Shirley Camp (Secretary)