Maybe the Jig Is Up"

Health Beat
by Niko Karvounis

Yesterday Reuters reported that, in comments at a Financial Times conference in London, a top executive at Roche Pharmaceuticals condemned direct-to-consumer advertising as a disaster. “Direct-to-consumer promotion [of drugs] was the single worst decision for the industry," said William Burns, Roche’s head of pharmaceuticals, to conference attendees. "When industry says we're spending all the money on R&D but actually it's spending it on TV advertising to preserve margins, it doesn't get much credibility,” he continued.

Burns’ despondency is understandable: if ever there was a time that the prescription drug industry needed credibility, it’s now. For the first time in recent memory, drug companies are facing the prospects of an end to their free ride of unregulated profiteering. There are already rumblings that both the Obama Administration and the Democratic Congress want to stack up a series of clean legislative victories by going for “low-hanging fruit”—bipartisan, popular initiatives that will pass easily—and there are few juicier targets than Big Pharma. 


A few days ago, The Chicago Tribune reported that President Obama will likely push for “cheaper copies of expensive drugs derived from biotechnology,” will let Medicare “negotiate drug prices directly with drug companies,” and will try to make “it legal for pharmaceuticals to be imported into the U.S.” In other words, Obama wants to make drugs cheaper for patients, and thus impact drug companies’ bottom line. According to David Dranove, professor of health industry management for Northwestern University's Kellogg School of Management, these changes have been “hanging there [in Congress] for some time and will be easy sells and easy to get through."

For its part, the industry knows that it’s got a big, fat target on its back. During the presidential election, drug companies were torn over which candidate to support, mostly because they couldn’t decide who hated them less. Even John McCain boasted—not untruthfully—that he repeatedly “took on the drug industry” over the course of his career.

The comparable distastefulness of both candidates led to a development that hasn’t happened in almost twenty years: the prescription drug industry gave to the Democratic and the Republican presidential candidate in almost equal amounts (usually pharma goes for the GOP). “Both [Obama and McCain] blame big drug companies for high prices and reduced innovation,” sighed one industry insider. “In either case, we should expect more price negotiation and re-importation [of drugs].” Translation: the honeymoon is over.

Indeed, momentum for meaningful changes to how—and how much—our system pays for prescription drugs seems to be building. Today The New York Times published an article about how the British model of institutionalized comparative-effectiveness research is inspiring reformers and policymakers around the globe. Meanwhile, here in the states, there’s already a comparative-effectiveness bill in Congress—and it even has the support of the Pharmaceutical Research Association.

This is compelling stuff: by definition, comparative-effectiveness research compares the effectiveness of different treatments, which means someone’s product is going to come out the loser. The fact that the pharmaceutical industry is supporting comparative-effectiveness research, even at this early stage, strongly suggests that industry knows that our health care status quo is unsustainable.

Another sign that Congress is likely to tilt the status quo against drug companies is the recent election of Rep. Henry Waxman (D-Calif.) to chair the House's Energy and Commerce Committee, which has oversight of the Food and Drug Administration (FDA). Waxman is famous (or infamous) for being an energetic watchdog, and has a long history of taking on the prescription drug industry, specifically direct-to-consumer (DTC) advertising: in the past, Waxman has proposed a mandatory FDA approval of all DTC ads before airing and a two- to three-year moratorium on ads for new drugs.

Like Waxman, Obama has DTC advertising in his sights, although the president-elect has been somewhat vague in defining his intended actions. Possibilities include Waxman’s proposals, generally more restrictive advertising standards, or limiting DTC advertising’s tax deductibility as a business expense. (Given all these possibilities, one gets the sense that Burns’ open criticism of DTC ads could be of the “if you can’t beat ‘em, join ‘em” variety).

The final piece of Big Pharma’s nightmare is an FDA with teeth—something that looks to become a reality under Obama. The folks supposedly under consideration for FDA commissioner read like a list of the drug industry’s greatest nemeses. Amongst the contenders is Dr. Steven Nissen, a Cleveland Clinic cardiologist who first made the link between Vioxx and an increased risk of heart attacks and strokes (much to the dismay of the drug’s manufacturer, Merck). Nissen also blew the whistle on Pargluva, a diabetes drug produced by Bristol-Meyers Squibb that increased risks of cardiovascular death, and publicly insisted that Vyotrin, a blockbuster cholesterol drug, only be used “as a last resort.”

Dr. Joshua Sharfstein, another possible FDA commissioner, is also bad news for drug companies. Sharfstein has served as a health policy advisor to Rep. Waxman and led the campaign to ban over-the-counter cold medicine for children under two. His efforts eventually forced the industry to “voluntarily” pull from the shelves all medicine that it claimed was safe for young kids. Also in the running is Peter Rost, a former Pfizer executive who’s become a vocal proponent of drug re-importation and increased price competition amongst prescription drugs—and who has been publicly lauded by Obama chief of staff Rahm Emanuel. 


One way or another, it looks like the prescription drug industry is in for a bumpy ride—or, to quote a (perhaps overly-dramatic) AdAge blog post: “Obama [is] already turning into a nightmare for Big Pharma.”

Let’s hope that this is the case. As we’ve noted oh-so-often here on Health Beat, the industry’s practices are consistently alarming, ranging from distortions of clinical data to a deluge of DTC advertisements that work hard to convince relatively healthy patients that they’re sick. All this scamming costs a whole lot of money: our per capita expenditure on pharmaceuticals is 92 percent higher than the average for OECD countries, and DTC advertising increased by 330 percent from 1996 to 2006, topping out at a whopping $4.2 billion that year. But patients get very little bang for the buck—and it’s time that this equation was changed. The new political establishment looks willing to explore the possibilities for doing just that.


Also relevant is the recession, which will inevitably change the political calculus of prescription drugs in the U.S. Like everyone else, drug companies will have to tighten their belts, which means that they’ll have to be more selective in their PR campaigns and legislative battles. Politicians will also come under increased pressure to take a more populist stance on the prescription drug issue. After all, backing up Big Pharma during the heady 1990s was one thing; but over the next few years, supporting drug company interests will increasingly mean keeping drug prices too high for struggling Americans to afford their medications. That’s not a choice that any politician wants to make.

The prescription drug industry will have to make some hard choices under an Obama Administration. The industry’s best hope is to recognize that its business practices are unsustainable and must be revised as our nation’s problems grow more severe, just as Burns did when he declared that the “marginally-different-and-market-it-like-hell model [of prescription drugs] is over” at the FT conference.

Let’s hope he’s right.