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Formulary Decisions Criticized
A union questions whether GM's prescription-drug offerings are influenced by the former company of a long-time board director. Companies may need to begin documenting their formulary decisions to avoid the appearance of any conflicts of interest.
This year, Chrysler eliminated Nexium -- the expensive, brand-name "little purple pill" -- from its preferred drug list. Ford Motor Company makes Nexium available only for employees who first try lower-cost generic alternatives. But General Motors has kept Nexium -- which is manufactured and sold by pharmaceutical giant AstraZeneca -- on its preferred list. In an Oct. 4 letter to the Securities and Exchange Commission, the AFL-CIO questioned that decision. The federation of 55 national and international labor unions criticized GM for keeping Nexium on its prescription plan -- and noted that AstraZeneca's retired chairman, Percy Barnevik, has long sat on GM's board of directors, although it stopped short of accusing the company of a conflict of interest. GM spokesperson Michelle Bunker rejects that insinuation. "The board had no influence on decisions that were made," she says. Bunker says GM's prescription provider, Medco, the Franklin Lakes, NJ-based prescription benefits manager, makes cost and quality determinations. "The board does not see these decisions," she says, adding that GM's goal is to "offer the highest quality, safest drugs at the lowest cost to employees and retirees." Nevertheless, the issue could expand -- with 20 other companies being mentioned in the SEC letter alongside GM as potential conflicts of interest -- and the union preparing to offer shareholder resolutions on the matter. Depending on the affiliations of board members, some companies may want to outsource their formulary decisions, says Harold Goldner, a sole practitioner employment attorney based in Bala Cynwyd, Pa., who represents both employers and employees. Goldner recommends that companies talk with their PBMs about how best to build a wall between the board and the preferred drug decision-making process -- a visible wall that can be documented. "Be able to defend [your decision-making process] so you're not worried about a class-action suit," says Goldner. Blair Hains, an associate director of brand corporate affairs at the Wilmington, Del. office of the London-headquartered AstraZeneca, says that "each employer and its insurance plan goes through their own process" for determining which drugs go on its preferred list, or formulary. "We don't know the process for what goes on or off the formulary at GM," he says. What the company does know, however, is that "Nexium is effective. Studies show that Nexium suppresses [stomach] acid more than its major competitors," Hains says. Dan Pedrotty, the AFL-CIO's director of the office of investment, says the AFL-CIO is planning to file GM shareholder proposals that will go in proxies, asking shareholders to look at the company's conflict-of-interest policies. "We're early on in the conversation," he says. "We're asking questions." And one of those questions is: "Was [Barnevik] putting AstraZeneca in front of the interests of GM? We don't know," he says. GM and the other large companies mentioned in the AFL-CIO's letter all have significant employee and retiree health-care costs as well as board members who served as executives for drug or insurance companies. The letter questioned the relationships, suggesting that conflicts of interest could sway the corporations toward making formulary decisions that favored pharmaceutical or insurance companies. Asked how employers might stay above the fray altogether and avoid even the appearance of a conflict of interest, Pedrotty recommends starting with a sound conflict-of-interest policy. He says companies should make sure their policy is aggressive enough, and as a matter of course, know its rationale for keeping any drug on or off its formulary.
October 15, 2007 Copyright 2007© LRP Publications |
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