Latest Drugwonks' Blog

Roy Misses the Value Proposition

  • 07.20.2016
  • Peter Pitts
During a Presidential election cycle, facts are often the first casualty.

Avik Roy argues that the GOP needs a “clear plan to tackle the high and rising price of branded prescription drugs.” He calls it a Republican “blind spot.” And he’s right – but for the wrong reasons (“The GOP Needs to Tackle the High Price of Prescription Drugs").

According to Roy, “Even 66% of Republican voters said high drug prices should be a top policy priority, compared to 60% who said the same of repealing Obamacare.” What he doesn’t share (or more likely doesn’t know) is that for most Americans, “the price of drugs” means the co-pay they hand over at the pharmacy when they pick up their prescriptions. That’s not a drug-pricing problem; it’s an insurance industry problem. It’s so easy to blame Big Pharma. That’s the real blind spot.

Mr. Roy quotes from a recent Kaiser Family Foundation poll which says 72% of their sample find “drug prices” generally unreasonable. But he doesn’t share that the same exact percentage (72%) said they find their drugs affordable. If Mr. Roy is reporting one he should report the other. It’s an issue of probability versus reality.

Mr. Roy discusses consumer purchasing of iPhones and compares it to healthcare. His assumption that consumers can make choices through transparent pricing is false since, in healthcare, there are pesky things called therapeutic outcomes. Even if consumers have pricing information its not good enough to make an appropriate “purchasing decision” since they don't necessarily have or understand the information which drives positive outcomes. This is despite pharmaceuticals being the only segment of healthcare (compared to physician and hospital services ) where pricing and outcomes are the most transparent.

Also, Mr. Roy fails to mention that pharmaceuticals are the only segment of healthcare where the costs plummet after a period of time (brand vs. generics). Today’s expensive medicines are tomorrow's very inexpensive generics. Today’s hospitalizations, alas, are tomorrow's even more expensive hospitalizations. Modern medicines continue to provide value in perpetuity - what value does a site of care, like a hospital or an insurer or PBM provide?

Mr. Roy fails to mention that hospitals actually manipulate and increase drug costs by buying up physician practices and shifting site of care. According to Sloane Kettering data, a medicine administered in a hospital setting is 150% more costly that one administered in physician offices.  Hospitals make more money by shifting site of care while vilifying drug companies! They also artificially pad their bottom lines by taking advantage of the 340B program - but he fails to mention that as well.

Of course, drug pricing is a complicated matter -- which is why the pharmaceutical industry should focus on a few basic points when making its case.
Roy argues there’s no relevant connection between the pharmaceutical industry’s investments in R&D and pricing. That’s intuitively and factually wrong.

Since 2000, drugs firms have spent over half a trillion dollars developing new medicines. And research costs for the last year alone totaled more than $51 billion. That’s up from $15.2 billion in 1995.

These are extraordinary spending levels, even compared to other research-intensive industries. In fact, the pharmaceutical sector spends five times more on R&D than aerospace, and 2 ½ times more than the software and computer industry. This is the kind of investment that pharmaceutical innovation demands, and it’s reflected in the economics of advanced drugs.

Big Pharma also needs to do a better job explaining just how many failures firms endure searching for the next breakthrough medicine. Drug companies must develop hundreds of compounds until they find one suitable for testing on humans. Of those rare compounds that make it to phase-1 human trials, fewer than 12 percent win approval from the FDA.

That’s why bringing just one drug to market costs an average of nearly $2.6 billion and takes more than 10 years, according to researchers at Tufts.
If drug companies were open and honest about their frequent and expensive failures, they could quash the myth that pharmaceutical research is obscenely lucrative.

Consider the controversy surrounding the hepatitis C drug Sovaldi. When the medicine came on the market, it quickly became known in the press as “the $1,000 pill.” This may be a great sound bite, but it’s hardly accurate.

In reality, insurers and benefit managers negotiated discounts that reduced the price of Sovaldi by 20 to 50 percent. But they didn’t pass the full discount on to the consumer. Instead, insurers and pharmacy benefit managers pocketed the money to pad their bottom lines and executives’ wallets. Last year, CVS Caremark Corporation, one of the biggest benefit managers, paid its CEO over $32 million.

For many patients, particularly those without insurance coverage, Sovaldi’s manufacturer supplied a coupon ensuring that co-pays for the drug wouldn’t exceed $5.

But Mr. Roy’s key error is focusing on price as the denominator of the conversation. That’s wrong too, in fact it the fundamental error that allows people like Hillary Clinton and Donald Trump to blame for the biopharmaceutical industry for rising health care costs. The true denominator is value.

Consider one pre-Sovaldi “best practice” treatment for Hepatitis C, the drug Pegasys. This requires one injection a week for 48 weeks — and very few patients see the treatment through to completion, so much of that treatment, both physician time and drug cost, is wasted. Nor is it that much cheaper: At about $7,000/month, the full course of treatment is over $70,000 — barely less than cost of the three months needed for Sovaldi to work a cure.
And the price of not using Sovaldi is very high. One in three patients with the Hepatitis C virus eventually develops liver cirrhosis, and managing these patients is costly. A “routine” liver transplant (where the liver is from a cadaver) costs close to $300,000; a “living donor” transplant is even more expensive.

Thanks to Sovaldi, a pill that cures the disease when taken once a day over 12 weeks will eradicate the need, the risks and the costs of liver transplantation. Such radical innovation deserves to be both lauded and rewarded.

But it’s so much easier to place blame than say thank you. When it comes to pharmaceuticals, we have to learn to understand the value proposition. It’s not just the price of the product –it’s the price relative to the value the product provides to individuals and society.

In short, drugs aren’t the cause of rising health-care costs — they’re the solution. Demonizing new treatments distracts from the real problem in the US biopharmaceutical industry: top-down cost-centric policies that focus on the near-term, short-changing long-term patient outcomes, and so endanger “sustainable innovation” by denying fair reimbursement for high-risk investment in R&D.

But it’s so much easier to just place blame. Easy and wrong.  Avik Roy should know better.

Avik Roy wants congressional Republicans to enact free market policies to reduce drug prices.    So do I. Unfortunately, Roy begins with a misleading case against drug companies and ends up endorsing Bernie Sanders proposals to regulate the industry. 

Let’s start with his statement that spending on medications is closer to 20 percent of health spending instead of 10 percent.  So what?  I wish it were 100 percent, as with polio, measles, hepatitis B, etc. Spending more on drugs means less spending on other costlier services. 
If we were treating heart disease and cancer with the services available even 20 years ago, we’d be spending a lot less on drugs but spending twice the amount we are now with less effective treatments.   

Instead of recognizing that most of the increase in drug spending is due to more use and longer life, he claims it’s all due to drug companies charging whatever they want. He dismisses the claim that price increases in part reflect the rising cost of drug development:

“But it doesn’t follow that high R&D costs should lead to infinite pricing power. For example, Gilead didn’t discover its blockbuster hepatitis drug, Sovaldi. Instead, Gilead purchased the company that did—Pharmasset—for $11 billion, after key clinical trials had been completed, and then proceeded to charge unprecedented sums to insurers and patients in order to recoup their acquisition costs.  An even better example is Avonex, a multiple sclerosis drug from Biogen that was launched in 1996 for less than $10,000 per patient per year. In 2015, Biogen was charging $60,000 for exactly the same drug, even though numerous, more effective medicines had been launched in the intervening two decades.”

“If Apple today charged $10,000 for a 20-year-old computer, or Samsung $6,000 for a 20-year-old TV, citing the “high cost of innovation,” they’d be laughed out of Best Buy. And not because their costs of innovation aren’t high—but because it’s understood that consumers, in a free market, have no need to accept unaffordable prices.”


“One thing you hear from defenders of the status quo is that drug companies need to charge high prices in order to continue to produce innovation. Well that’s not true in the rest of the economy. Google and Facebook charge nothing for the core products—search engines and social networks—and yet they are two of the most innovative companies in the world.”

These are truly ignorant assertions.  First, it’s not just the cost of innovation, it is the cost of innovation given the risk of regulatory uncertainty and clinical results.   I daresay that if it took Apple an average of 10 years to bring a new product to market knowing that only 1 out of 10 they invested in would make it to consumers, it wouldn’t have to worry about being laughed out of Best Buy:  Apple would still be selling Newton's and first generation Macs.    Imaging if fracking companies had to conduct randomized clinical trials each and every time the were going to drill.   

Second, as Derek Lowe points out, comparing the development of apps and social media to drug development ignores the fact that engineering and pharmaceutical R&D require  fundamentally different processes. Upgrading the core technology of a computer is a hell of a lot easier than developing an anti-body and modifying it to adapt to rapidly mutating cancer cells..

As Derek Lowe has pointed out “medical research is different than semiconductor research. It’s harder. Ever seen one of those huge blow-ups of a chip’s architecture? It’s awe-inspiring, the amount of detail that’s crammed into such a small space. And guess what – it’s nothing, it’s the instructions on the back of a shampoo bottle compared to the complexity of a living system.”

Even more troubling is Roy’s claim that “prices for drugs that do not reflect what their value would be in a truly free market.”   That is quite an assertion and suggests that Roy can tell us what that value would be or how that would be communicated through pricing information. 

My guess is, based on his article, he has no clue.   Take his claim that drug companies engage in  “infinite’ pricing.  He points out that the retail price of the multiple sclerosis (MS) drug Avonex increased from 1996 to 2015 by 500 percent.  True, but over the same period of time Avonex revenues and global market share actually fell by 100 percent as newer drugs were introduced.   Meanwhile, the aggregate cost of MS hospitalization increased 372 percent even as the number of hospitalizations remained essentially flat.  Which of these two trends reflect a truly free market?   The one where competition eats away at revenues or the one where you increase revenues by providing a service that is increasingly obsolete? 

Roy calls the price of drugs like Sovadli, that cure hepatitis C Sovaldi’s price unprecedented because Gilead bought the company that developed the drug instead of creating it, itself.   Apparently, free market principles have two separate rules about pricing: one if you acquire a company and another if you spend the same money to make a product.  That is sort of like President Obama telling entrepreneurs “you didn’t build that.”

In any event, Roy fails to consider that the price of drugs does reflect their value relative to current treatments.  With regard to Sovaldi:

“Although the cost of antiviral treatment increased with the availability of new therapies, the cost per survival (SVR) has decreased. As shown in Figure 2, the cost of treating HCV genotype 1 with peginterferon-ribavirin, first-generation protease inhibitors, and sofosbuvir-ledipasvir (at wholesale acquisition cost) increased from $43,000 to $103,000 per patient. However, the corresponding costs per SVR decreased from $213,000 to $108,000. After applying the recent discounts (46%), the cost of treatment decreased to $56,000, which is less expensive than boceprevir- and telaprevir-based therapies, and the cost per SVR decreased to $58,000.” Moreover, in addition to reducing what it costs to save a life, drugs like Sovaldi will eliminate the risk of premature death for people with HCV. 

To create a free market Roy suggests “ending federal and state prohibitions on the ability of private insurers to jointly negotiate drug reimbursement rates. And they can eliminate regulations, like those in Obamacare, that force insurers to pay for expensive branded drugs even when more cost-effective alternatives are available.”

In essence, Roy wants to create a government led cartel to control drug prices.  Indeed, his proposals come straight out of the Bernie Sanders campaign.  Three large pharmacy benefit companies (Express Scripts, CVS Caremark and OptumRx ) control about 80 percent of all prescriptions in both private and public health plans.   Consolidating this control through a government cartel would reduce drug prices, but not for patients.  

That’s because, in the price regulated world of pharmaceuticals, rebates reduce what pharmacy benefit management companies, insurers and hospitals pay for medicines.  Patients wind up overpaying and find their choice of medicines restricted.  

All told, about 30 percent of the cost of medicines – about $135 billion – goes directly into the pockets of other health care business. 

Hence, even as drug prices decreased, the rebate-loaded prices – the one’s consumers are stuck with – surged.    Net drug prices (paid to PBMs and insurers) declined 200 percent between 2011 and 2015.   The rebate-loaded price increase by 33 percent over the same time period 

Data source: Medicines Use and Spending in the U.S. – A Review of 2015 and Outlook to 2020

And as the chart above shows over time rebates as a share of price increases has soared from 6.5% in 2011 to 77% in 2015. 

And very little if any of that rebate went to patients.  Rather, as a recent lawsuit against Express Scripts and Anthem reveals, Anthem used an additional $5 billion in rebates generated by raising retail prices to fund stock buybacks in 2009 and 2010 “during the low watermark” of Anthem’s stock price, which ultimately enriched Anthem’s stockholders and management. Anthem could have passed this money on to plan participants in the form of reduced drug pricing, but chose not to do so. “

In fact, the percent of patients facing cost sharing of up to 40 percent of a retail price has soared even as rebate revenue increased.  And the number of drugs with the highest cost sharing amount also generate the most rebates.   Roy calls PBMs collecting rebates market competition.  I think it’s government sanctioned extortion. 

Further, Roy’s assertion that Obamacare forces insurers to pay for expensive brand drugs is wrong.  Just the opposite has taken place: PBMs and insurers are using cost sharing and rationing to discourage using new medicines.

Insurers – with help from the PBMs that design drug formularies are increasing the use of step therapy, prior authorization, cost sharing to limit access.  As the chart below shows, the private companies Roy trusts to create a free market are increasing what consumers pay for a growing number of important drugs:

In 2016, that trend continues: A just published Avalere report finds that nearly 35% of Obamacare health plans use prior authorization and step-therapy for single-source drugs, a 5% increase in utilization management from 2015. From 2015 to 2016, Obamcare plans increased utilization management of hepatitis and mental health medications by more than 15% and oncology and immune medications by more than 10%.

The high cost of drugs is the result of such practices.  Republicans could provide immediate relief to consumers by capping cost sharing and allowing drug companies to provide rebates directly to people to use them to reduce the upfront cost of new medicines.   Instead, Roy would double down on policies that encourage overcharging and rationing by giving government and the three biggest pharmacy benefit companies even more power over the price of and access to new medicines.   

Does he really think that a government created cartel would make medicines affordable instead of enriching the syndicate members?  How does that create a freer affordable market?  His whole approach -- uninformed and pseudo populist – suggests Roy is motivated by political opportunity to join the anti-pharma bandwagon than in truly free markets. 


Much Congressional ado about ADOs

  • 07.14.2016
  • Peter Pitts
Potent report language on Abuse Deterrent Opioids (ADOs) from the House Labor HHS Appropriations Subcommittee Report for Fiscal 2017.

Specifically, "The Committee directs HHS to submit a report to the Committee on Appropriations regarding beneficiary access to ADOs and actions that Congress and the Administration can take to reduce barriers.

ADOs can't help if patients don't have access to them. It's that simple.

Incentivizing Antibiotics

  • 07.13.2016
  • Peter Pitts
From the pages of the Los Angeles Times ...

Can the government encourage the development of new antibiotics?

It’s been nearly 30 years since scientists have found a new class of antibiotics. But U.S. lawmakers tried to give the drug industry a boost in 2012.
That year, they passed the Food and Drug Administration Safety and Innovation Act. It included provisions — collectively known as Generating Antibiotic Incentives Now, or GAIN — aimed at streamlining the government approval process for new antibiotics. It also boosted financial paybacks to drug companies that develop them.

The law has spurred the introduction of several new medicines. But none so far represents a new class of antibiotic or treats a drug-resistant strain for which effective medicine does not already exist. They are called “me-too” drugs, created by engineering small changes in the chemical structure of existing antibiotics.

To foster the discovery of truly innovative medicines, drug companies may need to be offered more extensive inducements, including tax breaks or market guarantees, said Peter Pitts, president of the Center for Medicine in the Public Interest and former associate commissioner of the FDA.

The federal government may even need to do what it has done for antiradiation drugs and some vaccines, he said: Pay for their development and buy and stock these products itself

If Brexit, whither EMA?

  • 07.12.2016
  • Peter Pitts
If Brexit, whither EMA?

Will Great Britain become like Norway and Iceland, attending committees such as the CHMP, where their views and votes are not of the same standing as those of members of the EU, or choose to follow a different route? There’s a lot at stake for the future of the MHRA and the British public health.

But what about the impact of removing MHRA expertise from EMA?

According to “Perplexit,” by BioCentury’s Steve Usdin, there’s a lot for EMA to worry about. “Since the start of EMA, MHRA has been a major supplier of resources and scientific expertise,” former EMA Executive Director Thomas Lönngren told BioCentury.

Of the 3,678 scientific experts listed in an EMA database, 281, or 8%, are from the U.K. “Taking a leading role in providing scientific and regulatory advice at the European level is a position the agency is familiar with and has maintained this year,” MHRA stated in its 2015 annual report. The U.K. drug regulator noted that in 2014-15 it was given 166 appointments to coordinate CHMP Scientific Advice Working Parties, a figure which represented “the highest number of any member state and reflects the high regard in which the agency’s scientific and regulatory expertise is held.”

MHRA also continued to “have the highest number of rapporteur/corapporteur appointments in Europe” in 2014-15. The agency said the workload is an acknowledgement of the “widely respected knowledge of the MHRA and its assessment processes.”

Since EMA’s creation, MHRA officials have served as rapporteurs for 16.5% of CHMP assessments and as co-rapporteurs for 10% of assessments.
MHRA experts have played a major role in pharmacovigilance assessments, serving as rapporteurs or co-rapporteurs for 29% of Pharmacovigilance Risk Assessment Committee (PRAC) safety investigations.

In addition to leading assessments of applications submitted under EMA’s centralized procedure, the U.K. and MHRA are a top choice for companies using the decentralized procedure to obtain marketing authorizations in several EU countries.

Applicants can select a reference member state (RMS) for decentralized authorizations. In 2014-15 the U.K. “remained the preferred RMS responsible for leading on 195 (45%) of all procedures in which the U.K. was involved,” according to the MHRA annual report.

The U.K. agency has taken a leading position in developing EMA regulatory policies, BioIndustry Association CEO Steve Bates told BioCentury. He cited initiatives to revamp the clinical trials directive into a regulation that will facilitate multisite, multinational trials, EMA’s policies on advanced therapies such as gene and cellular therapies, and the PRIority MEdicines (PRIME) initiative, EMA’s version of FDA’s breakthrough therapies program.

Whatever arrangement is negotiated, a Brexit will likely force EMA and its 890 employees to leave its base in London’s Canary Wharf. EMA employs 60 British nationals, and about 10% of its management positions are held by Brits.
With EMA moving to the continent, and MHRA’s loss of status within EMA, will pharmaceutical companies to move their regulatory hubs out of the U.K. To do otherwise, according to Grant Castle, a partner in the London office of the law firm Covington & Burling, “would be like having European marketing authorizations maintained by staff in the U.S., Switzerland or Japan.”
Warsaw here we come?

Advancing Companion Diagnostics

  • 07.07.2016
  • Peter Pitts
Important news. FDA Commissioner Robert Califf outlined two draft guidance documents addressing regulatory approval of next-generation sequencing (NGS)-based diagnostics. The guidances were presented as part of an update on the White House's Precision Medicine Initiative, which is recruiting a cohort of 1 million volunteers for a longitudinal research study. 

The first guidance, titled "Use of Standards in FDA's Regulatory Oversight of Next Generation Sequencing (NGS)-based In Vitro Diagnostics (IVDs) Used for Diagnosing Germline Diseases," describes FDA-recognized standards to demonstrate test accuracy and provides recommendations for designing, developing and validating NGS-based tests for hereditary diseases. 

FDA said a second guidance, titled "Use of Public Human Genetic Variant Databases to Support Clinical Validity for Next Generation Sequencing (NGS)-based In Vitro Diagnostics" outlines "an easier path for marketing clearance or approval" of NGS tests that would allow developers to use genomic databases to support clinical claims.

Per a report in BioCentury, “Califf said the draft guidances are meant to strike a balance between encouraging innovation and supporting patient safety.” FDA will accept comments on the guidance for 90 days.

For a more independent FDA

  • 07.05.2016
  • Peter Pitts
From the pages of the Boston Globe and reporter Ed Silverman ...

Independence would be good for the FDA and the public

 In a moment remarkable for its symbolism, six former Food and Drug Administration commissioners last month sat together on a stage and argued that their former agency needs more autonomy from Washington bureaucracy. The solution: make the FDA independent and maybe give it a cabinet seat at the White House, too.

The idea has been kicked around a few times over the years, but never gained traction. Yet the panel discussion at the Aspen Ideas Festival has refocused attention on the notion that the FDA — and by extension, the American public — would be better off if the agency’s status was elevated. And the suggestion carried still more weight since the former commissioners worked for both Republican and Democratic administrations.

Right now, the FDA is part of the US Department of Health and Human Services, which adds a big layer of officialdom between the agency and the White House. And in a legislative holdover, the FDA budget is overseen by House and Senate agriculture appropriations committees, which may not always be familiar with matters surrounding cutting-edge medical developments.

“An independent agency could work directly with Congress and the White House on a one-to-one basis and create dialogue that could lead to policy changes,” Andrew von Eschenbach, who was FDA commissioner from 2006 through 2009, and is now president Samaritan Health Initiatives, a think tank, told me. “This would put FDA in a much better position to execute its mission.”

To what extent the notion can become reality is uncertain, but it’s worth considering.

Here’s one reason. In December 2011, former HHS Secretary Kathleen Sebelius overruled the FDA and refused to allow an emergency contraceptive pill to be sold over the counter to young teens. This was the first time the HHS took such a step, but it was politically expedient because it allowed the Obama administration to avoid a contentious battle over birth control during a presidential election season.

The decision smacked of malfeasance, but reflected a long-running battle between politicians and scientists over whether the “morning after” pill should be available without a prescription. The Bush administration initially resisted such a move but later allowed over-the-counter access to women 18 and older. In 2009, the Obama administration lowered the age to 17 in response to a federal court order.

Of course, it’s true that even an independent FDA would still remain beholden to the White House, which suggests the potential for political interference will always exist. This is a fact of life in Washington. But cabinet-level status may confer an added benefit, because whoever heads the FDA would, presumably, have more opportunity for direct contact with administration decision makers.

“It may not entirely change the political dynamic, but I think it would be an improvement, because it could make it more difficult to meddle,” said Peter Pitts, a former FDA associate commissioner, who heads the Center for Medicine in the Public Interest, a think tank that is funded, in part, by industry. “You want to make it possible for a commissioner to stand firm and do the right thing,” added Pitts who wasn’t at the Aspen conference.

Toward that end, the top FDA job might also be structured so that there is a fixed term of say, six years, that doesn’t directly overlap with a president’s tenure. Yes, the FDA chief would still be a political appointee, but this approach may encourage a midterm president to find the best candidate, rather than use the appointment as a way to pay a political debt following an election.

Another reason to consider a push for independence is the budget process. Since FDA is part of HHS, its budget is vulnerable to cuts and changes — even before Congress gets to decide what to leave in and what to leave out. By elevating the agency to cabinet-level status, the FDA presumably could have more sway over resources.

“In a way, the FDA has always been a stepchild,” said Ira Loss of Washington Analysis, a consulting firm that tracks the pharmaceutical industry and regulatory policy. “And it often gets trapped in the bureaucracy.”

The challenge is to make a good case for independence.

Right now, the odds seem long. A new administration would have to be convinced to make the idea a priority. And persuading Congress, which seems perennially critical of the FDA and is currently crafting legislation to remake some agency functions, would be a challenge. To speed things along, von Eschenbach noted that a few former commissioners may now consider drafting a joint white paper.

To be sure, there will always be bureaucratic hurdles. That’s the nature of government. But any effort that can recalibrate the balance between bureaucracy and resources should be pursued. The FDA deserves a seat at the table where decisions are made.
From the pages of this morning's Morning Consult:

JAMA and Pharma Freebies: Same Slander. Different Day.

The truth is rarely pure and never simple. -- Oscar Wilde

Much ado about pharma freebies to physicians. Much ado about nothing medically and everything politically.

A new study published by JAMA Internal Medicine (Pharmaceutical Industry–Sponsored Meals and Physician Prescribing Patterns for Medicare Beneficiaries) makes it sound (as Meagan McArdle has written for Bloomberg), that your doctor is “willing to sell you out for the price of a sandwich.” It’s not that simple … or true.

The JAMA methodology:

Cross-sectional study of 279,669 physicians that received industry-sponsored meals (retrieved from Open Payments program) and wrote Medicare part D prescriptions in any of four drug classes: statins, cardioselective beta blockers, angiotensin-converting enzyme inhibitors and angiotensin-receptor blockers (ACE inhibitors and ARBs) and selective serotonin reuptake inhibitors (SSRIs)/serotonin norepinephrine reuptake inhibitors (SNRIs). Prescribing rates of promoted medicines were compared with in-class alternatives adjusted for volume, demographic characteristics, specialty and practice setting.

It’s important to note up front the JAMA conclusion stated that, “The findings represent an association and not a cause and effect relationship.” But you won’t find that in the media coverage. Also, the Open Payments data and Medicare Part D prescription data are not temporally linked. As John Adams points out, “Facts are pesky things.”

Mechanism of association cannot be extrapolated from the methodology of the study; systematic confounding variables such as physician self-selection to attend the educational event and the effect of education itself obscure interpretation of the results. The study design is cross-sectional, only 5 months of payment data may not be representative of a full year and beyond. And, importantly, branded medicines that are often newer may represent advances over older generic agents with regard to efficacy and tolerability.

This is not a new debate nor is it new to the pages of the Journal of the American Medical Association. A widely cited 2000 JAMA article in summarized 29 published studies critiquing the interaction between doctors and drug reps. Notable feature of these articles, as quoted in the summary paper: "No study used patient outcome measures." Absent in 2000 and in 2016 was any discussion of how diagnostic and dispensing decisions are often influenced by external cost-control measures. Both JAMA articles allowed politics to trump the public health. The polite term for this is “normative bias.”

Studies and commentary that discuss alternative findings are generally ignored. In the February 7, 2009 edition of The Lancet, Richard Horton points out that the battle lines being drawn and between clinician, medical research and the pharmaceutical industry are artificial at best -- and dangerous at worst.  Dangerous, because all three constituencies are working towards the same goal -- improved patient outcomes. His main point is that we must dismantle the battlements and embrace of philosophy of "symbiosis not schism."  It's what's in the best interest of the patient.

Information is an important lubricant for markets and yields numerous benefits to market participants. Open, honest, and regular communication is critical for alerting both doctors and patients as to what medicines are available, and for what diseases. No single person, especially a general practitioner, can keep up with all of the information available on drugs, let alone health care. By one estimate every year some 1,700 articles are published in each of 325 professional journals on the 25 top medicines. Drug producers use a variety of promotional efforts to stand out in this information flood. One may like or hate the industry’s tactics, but there is nothing illegitimate about them.
Per Dennis Ausiello and Thomas P. Stossel (both of Harvard Medical School):

The real intent of these critics goes far beyond food and trinkets, and its true purpose is to curtail strictly or even eliminate all contacts between physicians and private industry. We strongly oppose this agenda. Despite extensive training, physicians cannot know the details of all products, especially new ones. Therefore, company salespersons complement physicians’ information derived from many sources. They tell physicians about a limited range of products about which their employers train them under strict FDA regulations. We believe that the best approach to optimize cost effectiveness of product prescribing is to promote more, not less, interaction among all stakeholders involved in health-care delivery, including company marketing reps.

From a strictly free market perspective, if there were only one drug company, there would be for that entity to speak with physicians. But who marketed anything in the Soviet Union? Imperfect though the process might be, marketing promotes price competition and lowers prices.
According to Paul H, Rubin, Professor of Law and Economics at Emory University and former Chief Advertising Economist at the Federal Trade Commission and Chief Economist at the U.S. Consumer Product Safety Commission:

Drug company reps offer overworked doctors useful, lifesaving information in an efficient manner. The drug companies are of course motivated by profit, but economists have known since Adam Smith that the profit motive is the best way to induce someone to do something useful. Marketing and research are both information activities; they work together to get effective drugs to patients. The two activities are not in competition for resources. The denouncers of drug companies don't understand this. One of the senators sponsoring the bill suggests that "the millions of dollars these companies spend on marketing ... could be put into research." In fact, drug companies would not switch money from marketing to research. If they cannot market drugs in the best way, they will reduce spending on research. What's the point of inventing a new drug if doctors and patients don't know about it?
This is crucial -- in all of the medical literature on drug sales, there was no evidence of harm to patients caused by doctors and drug reps sharing a few slices of pizza. Physicians who, by their oaths put patient welfare first wrote these articles. Yet they were critical of the industry based on analyses that totally ignore the only measure that really counts – patient outcomes.

“Good for sales” and “Good for the public health” are not mutually exclusive.

A valuable takeaway from the new JAMA study should be that wide adoption of Open Payments reporting has led to transparent interactions and value exchanges of education, money and meals between the pharmaceutical industry and prescribers. These data are now available to inform and improve educational efforts to meet the treatment needs of patients using the latest advances in medicine and science. However, such data must be cautiously interpreted with full acknowledgement of study limitations and author bias.

In summary, the new JAMA study is devoid of any data regarding patient outcomes; omits all the variables physicians consider when treating their patients; assumes pharmaceutical sponsored meals are purely social gatherings in which no educational information is shared; and reduces complex prescribing decisions to a simple transaction.

“The best interest of the patient is the only interest to be considered.” -- William Mayo, MD


Platform Prattle

  • 06.28.2016
  • Peter Pitts
Draft Democratic platform calls for both drug importation and direct Federeal negotiation for Medicare and Medicaid.

Populist rhetoric isn't good for the public health.

"Facts," as John Adams said, "are pesky things."

Pharmaceutical innovation has not only revolutionized the field of health care and significantly contributed to the fight against cancer, but it also allows Canadian governments to save billions of dollars. This is the general thrust of a Research Paper published today by the MEI, prepared by Frank R. Lichtenberg, Professor at the Columbia University Graduate School of Business and internationally renowned expert in this field of research.

Taking into account just the effects of new cancer drugs, Canadian governments registered savings of $4.7 billion in hospital expenditure in 2012 alone, whereas total spending on cancer drugs, old and new, was an estimated $3.8 billion that same year.

“If no new drugs had been registered from 1980 to 1997, the number of hospital days in 2012 would have been almost twice as high,” says Professor Lichtenberg, who has published numerous articles on the issue in a variety of scientific journals. “This represents in one single year net savings of at least $900 million for the Canadian health care system.”

The costs of new pharmaceuticals are often the subject of critical media coverage, but their benefits are rarely mentioned. Yet pharmaceutical innovation is responsible for a large part of long-term improvements in the health and longevity of patients.

For example, the premature (before age 75) cancer mortality rate declined by 8.4% from 2000 to 2011 in Canada. This rate would instead have increased by 12.3% in the absence of pharmaceutical innovation, implying that 105,366 years of potential life before age 75 would have been lost in 2011 alone.

“Although new drugs are expensive, this cost is small when compared with the benefits they provide for patients,” argues Professor Lichtenberg.

The publication also points out that financial incentives are a prerequisite for the industry to sustain a robust rate of pharmaceutical innovation. “It is important for drugs to be appropriately priced in order for manufacturers to have the proper incentives to invest in the development of new molecules, a very risky process that can be very expensive for the innovating company,” argues Youri Chassin, Research Director at the MEI.

The Research Paper entitled The Benefits of Pharmaceutical Innovation: Health, Longevity, and Savings was prepared by Frank R. Lichtenberg, Courtney C. Brown Professor at Columbia University Graduate School of Business and Associate Researcher at the Montreal Economic Institute. This publication is available here.

Center for Medicine in the Public Interest is a nonprofit, non-partisan organization promoting innovative solutions that advance medical progress, reduce health disparities, extend life and make health care more affordable, preventive and patient-centered. CMPI also provides the public, policymakers and the media a reliable source of independent scientific analysis on issues ranging from personalized medicine, food and drug safety, health care reform and comparative effectiveness.

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