Free drugs? Paid for by employers? Is “health care for all” the new business mantra?

Today’s front-page New York Times coverage outlines this emerging revolution:

In the most radical of various moves, a number of employers are now giving away drugs to help workers manage chronic conditions like diabetes, high blood pressure, asthma, and depression.

Major employers — the Times profiles hotelier Marriott (MAR), office products maker Pitney Bowes (PBI), carpet maker Mohawk Industries (MHK), and Maine’s state goverment — are testing free-of-charge pharmaceuticals with employees, with the expectation that the return on that investment will be lower health-care costs and higher employee loyalty (and lower staff turnover costs).

Companies now recognize that “if you get people’s obesity down, cholestrol down, asthma down, you save a lot of money,” said Uwe E. Reinhardt, a health economist at Princeton University.

Nearly 60 million Americans have hypertension, or high blood pressure, leading to heart attacks. Asthma sufferers are estimated at 17 million Americans. Nearly 20 million Americans have diabetes. Combining these three conditions with depression, the Times quotes Hewitt Associates as saying 25% of working-age adults encounter these health issues. And those who cannot afford health care, especially at lower income levels, are skipping even the $10-$50 co-pays for their prescription drugs So, what happens when companies give employees free medicine?

“We can see in the preliminary numbers that employees taking part have improved their [health treatment] compliance,” said Jill Berger, the vice president for health and welfare at Marriott, which covers 160,000 hotel and resort workers and dependents.

Earlier this year, the online edition of the journal Health Affairs published Value-Based Insurance Design by Harvard Professor Michael E. Chernew and University of Michigan Professors Allison B. Rosen and A. Mark Fendrick.

When everyone is required to pay the same out-of-pocket amount for health care services whose benefits depend on patient characteristics, there is enormous potential for both under- and overuse. Unlike most current health plan designs, Value-Based Insurance Design (VBID) explicitly acknowledges and responds to patient heterogeneity. It encourages the use of services when the clinical benefits exceed the cost and likewise discourages the use of services when the benefits do not justify the cost.

How should health care be delivered, and who should pay how much? The CEO of Merck (MRK), Richard T. Clark, writes in “The American Journal of Managed Care“:

Currently, we price our products to health plans on a per tablet basis, regardless of who the patient is. Within a given health plan, patients share the same benefit design with the same copayment for a given drug. To control costs, payers raise copayments and set up formularies to restrict use. To create demand and drive volume, we promote our products to the physicians and patients.But what if we all focused on quality measures, appropriate patients, treatment gaps, and goals instead? What if we priced to the plan on a population basis, the way a health plan manages its business?

Maybe some products are overused among some patients and underused by others. Maybe some patients should be discouraged from using a product (through higher opayments or other restrictions), while other patients should be encouraged. Should a patient who has already had a double bypass and a stent, and who has multiple comorbid conditions, really have the same copayment for his cholesterol drug as an otherwise healthy 40-year-old with mildly elevated cholesterol who is responding to a direct-to-consumer ad?

In addition, wellness programs are starting to emerge in more corporations. However, General Mills (GIS) was early in its wellness program with its sales and marketing employees 20 years ago, and has tracked the longitudinal results. The findings shared with HIP Investor claim that those staff are eating better, living healthier and suffering from fewer conditions now than they were two decades ago.

IS THIS HIP?

  • HEALTH: Obviously, with free pharmaceuticals properly prescribed, employee health should improve. In addition, employee satisfaction grown leading to boosted mental health and lesser stress. However, some companies aggressive behavior like Scotts Miracle-Gro(SMG) have led to contention and lawsuits described in the current issue of Business Week “Get Healthy or Else“, where a smoker who refused to give up his habit was fired and now is suing the company.
  • WEALTH: When people are healthier, they can attend work, pay closer attention to detail, and reduce stress at home by not being ill. In addition, healthy employees inspire other employees to be healthier - and may walk, run or play sports at breaks or lunches (see Google’s sand volleyball “beach”). All of this is expected to lead to a more productive workforce, but could also increase customer satisfaction, as companies improve individual and collective health. Also, as previously blogged at HIP Investor, healthier-weight people tend to earn more in income and accumulate assets faster.
  • EARTH: More preventive health approaches, including more exercise, could lead to a better environment - as employees could walk rather than drive during breaks, and possibly during commuting. In addition, healthier food intake supports more sustainable food production. As pharma companies pursue “green chemistry” practices, their products will be healthier for the earth. Companies may even try Eastern medicine solutions to examine a particular treatment’s ROI.
  • EQUALITY: Finally, free-of-charge medicine is a great boost to “health care for all.” and could spur a new form of competitive advantage to attract, retain and promote the best talent. One challenge will be how low-margin businesses and high-turnover businesses encourage health-care prevention and wellness and realize benefits from their financial constraints.

WHAT DO YOU THINK?

What practices exist at your company? Have you selected who you work for by health care benefit? What else could companies do to encourage positive health? Tell us about it.