Update on Big Pharma

Recently, we looked at the ways that states are attempting to curb growth in prescription drug spending.

States, including Pennsylvania, are employing “unsales” representatives to counter the constant direct-to-doctor (DTD) advertising by the pharmaceutical industry that leads doctors to prescribe more expensive, name-brand drugs, even when cheaper, generic medications (or no medication at all) are just as effective.

The hope is that by providing doctors with research that is not produced by the pharmaceutical industry, states can influence the prescribing behavior of doctors on a wide scale, and reduce the overall cost of public, prescription drug assistance programs.

Now it seems that many doctors and medical centers also are taking action to reduce the influence of DTD advertising, and the cost of prescription drugs for consumers.

What we didn’t mention in our unsales post is that pharmaceutical reps often leave behind free samples of new, name-brand medications.

Doctors have traditionally used these samples:

• To allow a low-income patient to try a medication for free;
• To assist a low-income or uninsured patient in using a more expensive drug.

But now, some physicians and even entire medical centers are banning free samples. This is because:

• Eventually the free samples run out, and then doctors must continue prescribing the medication for the patient.
• Since many of the medications do not have generic equivalents, patients then struggle to cover the cost.
• Doctors realized that once they turned down free samples, they began to write more generic prescriptions as a result.
• Medical centers have come up with other ways to assist low-income consumers, such as by providing vouchers to be used in nearby pharmacies.

These local efforts to reduce the influence of DTD advertising and curb the growth of prescription drug spending may have a relatively small impact on name-brand pharmaceutical sales.

But they are coming at a time when the pharmaceutical industry faces an increasingly hostile environment at the national level, and potentially billions of dollars in lost revenue.

Despite the fact that drug company donations to Obama far outweighed those to McCain, the President-elect is already targeting the pharmaceutical industry in his health care reform agenda. While campaigning, he promised to “take on the drug and insurance companies and hold them accountable for the prices they charge and the harm they cause.”

One way that Mr. Obama is looking to accomplish this goal is by ensuring that the Food and Drug Administration (FDA) “has teeth,” when it comes to regulating the production and sales of pharmaceuticals.

The Bush administration has systematically under-funded and deregulated this important agency that is charged with ensuring the safety of food and drugs in the United States. The result has been to weaken the FDA’s ability to protect consumers, and thus to allow unsafe and harmful products to be sold.

• Several experts agree that the agency’s budget would have to be doubled at this point to hire new scientists and update the computer systems so that the agency could adequately complete all of its assigned tasks.
• Under the Bush administration, agency administrators and scientists have been exposed to and censored by the pharmaceutical industry. As a result:
  • The FDA approved a number of drugs that have no benefit over their predecessors, and/or that have harmful side effects on consumers.
  • These products were rushed to the market at the urging of industry lobbyists.
• Removing such influence, and promoting sound scientific research, should be a priority for the Obama administration.
  • The person chosen to direct the agency will play a big role in returning the FDA to its job as a regulatory body that is independent of the pharmaceutical industry.

This Health Beat blog post examines the candidates being considered to head the FDA. The list includes several doctors, researchers and policy analysts who were critical of the FDA’s state in the recent past, and who blew the whistle on a variety of poorly tested medications.

• Dr. Steven Nissen, a Cleveland cardiologist who made the link between the Merck’s painkiller drug Vioxx and an increased risk of heart attack and stroke, is a top contender.
• Dr. Joshua Sharfstein worked as a health policy advisor to Representative Henry Waxman (D-CA) and led a campaign to ban over-the-counter cold medications for children under the age of two. His work led to the drug industry’s “voluntary” removal of all such medications that were formerly deemed safe for children.

The President-elect has also mentioned regulating drug-related advertising. As we showed in this post, the billions of dollars spent annually on direct-to-consumer (DTC) advertising by the pharmaceutical industry in the form of commercials drives up demand for new, expensive medications, even amongst patients who are perfectly healthy.

This has a costly effect on our health system:

• Prescription drug spending is a relatively small portion of national health care spending (10% in 2004), but it is one of the fastest growing components.
• A recent study in the U.K.’s British Medical Journal (BMJ) showed that the quick launch of a marketing campaign following a drug’s release unnecessarily exposes a larger number of people to potential unknown side effects and risks, as demand for the drug is increased before the full impact of the medication is known.

Mr. Obama and others, including Congressman Waxman (D-CA), the newly elected chair of the House Energy and Commerce Committee, are considering:

• Granting the FDA the authority to ban DTC ads for new drugs for up to three years after their approval;
• Greater restrictions generally on DTC advertising; and
• Limiting DTC advertising’s tax deductibility as a business enterprise.

Besides these regulatory measures, Mr. Obama is looking at reforms to make generic medications more readily available (read=cheaper), both to assist consumers and to reduce government spending on Medicare and Medicaid.

These reforms, many of which have bipartisan support in Congress, include:

• Allowing Medicare to negotiate prices with drug companies
• Getting generic medications to the market faster, and promoting their inclusion in trade agreements with developing countries;
• Making it legal to import cheaper drugs from other countries; and
• Setting price controls.

Experts estimate that letting Medicare negotiate drug prices will reduce drug industry revenues by 10%, or $30 billion.

The industry is already planning a multimillion dollar ad campaign to air during the first weeks of the Obama administration in response. The ads will be in support of “free market health care” and in opposition to removing the federal ban on Medicare drug negotiations that President George W. Bush signed into law, known as the Medicare Prescription Drug, Improvement and Modernization Act of 2003.

Drug companies are amongst the most profitable American businesses. Without price controls, competition from abroad, and DTC regulations, they have raked in enormous sums at the expense of American consumers and taxpayers.

The days of exorbitant profits may soon be coming to an end when the new administration and Congress take office. We’ll have to see if the reduced revenues earned will inhibit the industry’s ability to produce new drugs, as they claim, or whether they will in fact become more cautious and reserved when bringing new drugs to the market and in developing advertising campaigns.