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http://www.commonwealthclub.org/arch...ll-speech.html
Marcia Angell - October 5, 2004
CONFRONTING DRUG COMPANY DECEPTION
Marcia Angell
Senior Lecturer on Social Medicine, Harvard Medical School; Former Editor-in-Chief, The New England Journal of Medicine
I'm going to be talking to you about something that I think almost all Americans are concerned about these days: the pharmaceutical industry and, in particular, the high prices it charges and the justifications it gives for charging those high prices. This year Americans will spend about $250 billion on prescription drugs, making them the fastest-growing component of our health care bill, which itself is growing very rapidly. The skyrocketing expenditures on prescription drugs are partly a matter of greater overall use - more people are taking more drugs - but it's mainly a matter of increasing prices. New drugs are almost always priced higher than old ones, and once on the market, for the drugs that are most commonly used, the prices are jacked up, usually at about three times the inflation rate, so it's unsustainable. Most Americans have insurance that covers at least part of drug costs, but not everyone. Medicare, for example, does not have a prescription drug benefit yet (and I'll say more about that benefit later) so that Medicare recipients who do not have supplementary insurance have to pay for their prescription drugs out of pocket. And, in one of its more perverse practices, the pharmaceutical industry charges much more for people who don't have insurance than they do for people who have large insurance companies to bargain for lower prices or rebates.
In 2002, senior citizens paid, on average, $1,500 per year for the drugs that they took, and if they took six drugs, which is not rare for an older person, they had a bill of $9,000 a year. Not many senior citizens have such deep pockets. In fact, a recent survey showed that one-third of senior citizens either did not get their prescriptions filled in the first place, or if they did get them filled, didn't take the full dose but played out the dose to make the drugs last longer. In recent years there has begun to be a public outcry about this, probably stimulated in large part by the knowledge that you can buy exactly the same drugs in Canada for about half the price. This has caused people to look very carefully at the pharmaceutical industry.
Still, the industry has been remarkably successful in dampening any serious move toward price regulation. Witness, for example, the Medicare prescription drug benefit that Congress passed late last year; it will go into effect in 2006. That bill actually contains a provision that explicitly prohibits Medicare from using its bulk purchasing power to bargain for lower prices with drug companies. That's quite a provision. It makes, first of all, prescription drugs unique in the Medicare system. Medicare does regulate doctors' fees, Medicare does regulate hospital payments - but prescription drugs are off the table. Drug companies can continue to charge whatever the traffic will bear, and it will bear quite a lot.
How does the pharmaceutical industry justify its high prices? What it says, what it would like you to believe, is that the high prices are necessary to cover their high research and development costs, which implies that they spend most of their money on research and development and that afterwards they have very little left over - enough for modest profits but not much more than that; they're just getting by. They also make the argument that they are a highly innovative industry and they need the high prices as a spiritual incentive for their innovation. They say that any form of price regulation would choke off the stream of miracle drugs that they are turning out, so don't mess with us.
A part of this argument is the implication that this is somehow a peculiarly American industry, that the pharmaceutical industry is an example of the success of our free enterprise system. Other countries have drug price regulation; we don't, and therefore this industry is an American industry that is especially innovative and successful because there is no price regulation. That's implied - it's not stated exactly, but it's implied. What they are saying with these arguments is, You get your money's worth. Just shut up. Pay up. You get your money's worth - is that true? Do you get your money's worth? The reality of this industry is very different from the image it tries to portray in its public relations. There is a huge rhetoric reality gap.
The pharmaceutical industry claims to be a high-risk business, but year after year for well over two decades, drug companies have higher profits than any other industry in the United States. [clearly excluding FIRE - c1ue] In 2002, for example, the top 10 American drug companies listed on the Fortune 500 had a profit margin of 17 percent of sales, compared with a median of only 3 percent for all of the Fortune 500 companies. That's a stunning profit margin. The biggest company, Pfizer, had a profit margin that year of 26 percent. In 2003, for the first time, the pharmaceutical company fell slightly, from first place to third place, but still its profits were well above the median, and there were special circumstances for this small drop.
The industry claims to be innovative, but only a small fraction of its drugs are truly innovative in any real meaning of that term. Of the 78 drugs approved by the Food and Drug Administration in 2002 (the FDA has to approve a drug before it can be sold; every year it approves roughly 75 drugs) only 17 actually contained new active ingredients, and only seven of those were classified by the FDA as likely to be improvements over drugs already on the market. Most of the others were just minor variations of old drugs. Incidentally, of those seven innovative drugs, not one came from a major American drug company - not one.
The most profitable drugs are variations of top-selling drugs already on the market. These are called "copycat" or "me-too" drugs. There are whole families of me-too drugs and no good reason to believe one is better than another at equivalent doses. They simply cash in on already established lucrative markets. For example, the top-selling drug in the world, Pfizer's Lipitor, is a me-too drug; it's the fourth of six cholesterol-lowering drugs of the same type. Incidentally, the first of them, Mevacor, which came on the market in 1987, is now available as a generic (Lovastatin), much cheaper than the brand name drugs like Zocor and Lipitor and Crestor, but nobody buys Lovastatin because it's not marketed.
The industry's most innovative drugs usually stem from research done at government or university labs. An internal National Institutes of Health (NIH) document showed that only one of the 17 key research papers that led to the five top selling drugs in 1995 came from the company that sold the drug. Big drug companies license or otherwise acquire about a third of all their drugs from universities, NIH or, increasingly, small biotech companies. They feed on the early basic research done elsewhere. Contrary to popular belief, big drug companies spend less on research and development than they keep in profits, and far less than they spend on marketing. By their own figures, in 2002, when profits were 17 percent of sales, the top 10 American drug companies spent only 14 percent of sales on research and development and a whopping 31 percent, more than twice as much, on marketing and administration, the lion's share of which went to marketing.
The industry claims it spends, on average, $802 million to bring each new drug to market, but independent analysis shows that the true figure is a small fraction of that amount. In a sense, it doesn't really matter whether it's $800 million or $800 trillion or $800 gazillion; as long as they have more than that left in profits and spend twice as much on marketing and administration, you can hardly say that they are strapped to cover their R&D costs.
The U.S. is the only advanced country that does not regulate drug prices in some way. Other countries spend only about half as much for the same drugs as Americans. Methods of regulating prices vary, but essentially governments in other countries take advantage of their bargaining power to negotiate prices, which our government does at the Veterans Affairs system and the Department of Defense - they have just put Medicare off limits.
The Canadian system is probably of most interest because so many Americans are now buying drugs from Canada. What they do is say that when a drug comes on the market it can't be priced higher than the highest price of a drug already on the market to treat the same condition. If it's a me-too drug it can't be priced higher than the highest price of the other drugs in the same class. And once on the market, the price can't be jacked up like the top-selling drugs are here. The price increases are limited to what inflation would justify. If the drug is truly a new drug and not a me-too drug, then it can't be priced higher than the median price in seven other advanced countries - the U.S. is one; the outlier, the most expensive. This isn't too onerous, it seems to me. The drug companies do make profits in other countries, they do make a profit in Canada. They are not charities; they are not giving away their drugs in Canada and Europe.
The pharmaceutical industry has an iron grip on Congress and the White House. It has the largest lobby in Washington, with more lobbyists than elected representatives, and it contributes heavily to political campaigns. Over the past two decades, Congress has enacted a series of laws that practically ensure windfall profits to the pharmaceutical industry at public expense. For example, the Medicare prescription drug benefit enacted in 2003 prohibits Medicare from negotiating prices. This provision could have been written by the industry, and I suspect it was.
Drug companies promote diseases to fit drugs. This is worth thinking about. The drug companies have become a giant me-too industry, turning out the same drugs over and over and over again. You have the six cholesterol-lowering drugs of the Lipitor type. You have five anti-depressants of the Paxil type - big families of drugs. These families of drugs are pointed toward large markets. That means that the population for which they are intended has to be relatively affluent - they don't make drugs for malaria because the people who need them are not very affluent - and it has to be an expandable market. Also, you have to remember that there are more healthy people in this country than there are sick people. What they want to do is convince healthy people that they only seem to be healthy. They are all potential patients. They are trying to persuade people in affluent countries that they are suffering from conditions - essentially normal people - that need long-term treatment. They promote the condition as well as the drug.
Thus millions of otherwise normal Americans come to believe that they have dubious or exaggerated ailments like generalized anxiety disorder, erectile dysfunction, premenstrual dysphoric disorder, gastro esophageal reflux disease or acid reflux disease. It used to be that if you had heartburn you bought an over-the-counter antacid or you took a glass of milk or you lost some weight or you stopped eating two Big Macs in a row. Now you are encouraged to think that this is a proteome of cancer of the esophagus - that this is a serious disease that should be treated to keep dreadful things from happening to you in the future. Now, sometimes that may be true, but not nearly as often as they would like us to believe. Or take erectile dysfunction disorder (incidentally, these are all-new words, they are coined for the drug); this started out when it was just Viagra and not the me-too drugs Cialis and Livetra. It was directed towards Bob Dole, towards older men who were debilitated, where you could make a case that maybe this was a good idea. But now, Livetra is directed toward young athletes, Cialis to young, very good-looking couples on getaway weekends. The message is clear: If you have anything less than 110 percent performance at all times, you need one of these drugs; it's a lifestyle drug now.
Generalized anxiety disorder, the makers of the anti-depressants of the Prozac type. Here is another family of the me-too drugs where you can see the move from older drugs to newer drugs. Prozac was the first of the SSRI (Selective Serotonin Reuptake Inhibitor) anti-depressants, a genuinely innovative drug owing primarily to publicly funded research done in universities and done abroad. That came in the market in 1987. It's now available as generic Fluoxetine, much cheaper than Paxil or Zoloft, but nobody buys Fluoxetine because it's not being promoted.
Not only are the newer drugs being promoted more, but the indications had been expanded with the FDA's agreement. So, instead of just being for the treatment of depression, they are now sold to treat things like generalized anxiety disorder, social anxiety disorder, obesity - all kinds of things that might be related to depression. They are being sold for social anxiety disorder, which is another word for shyness. Who hasn't been shy at some time? I walk into a cocktail party and I'm very shy; I hate them. You are supposed to think, It's not a problem with the cocktail party, or it's not one of these things in life, this is a disorder and I better take something for it; I better take Paxil. That's what the drug companies are doing in promoting their me-too drugs. They are expanding the market by promoting the conditions as well as the drugs.
The part of the FDA that approves new drugs receives over half of its support from drug companies. The FDA reviews drugs for safety and effectiveness before they are allowed on the market, but drug companies pay large user fees in return for quick reviews. That means this agency is now dependent on the industry it's supposed to be regulating, and it's become quite friendly to the pharmaceutical industry. It's been too quick to approve drugs of dubious value and perhaps too slow to remove drugs that are shown to have serious side effects. New drugs are not required to be any better than old ones. And there is usually no way to know whether they are, one way or the other.
Drugs do have to be tested before the FDA can approve them. The manufacturers are required to carry out clinical trials to show that the drugs are reasonably safe and effective. But in those clinical trials they don't have to compare the new drug with older drugs for the same condition at comparable doses. They only have to compare their new drugs with sugar pills, with placebos. That's a very, very low standard. I would submit that doctors and patients are not all that interested in whether a new drug is better than a sugar pill; they want to know whether it's better than what they are already using, but there is no way to find that out. For all we know, new drugs may be worse than old drugs. It could be that each successive generation of drugs is actually worse. I suspect that they are very similar, that they are the same. They are promoted as though they were better; they could be worse.
Drug companies have enormous influence over what doctors are taught about drugs and what they prescribe. The companies support the great majority of continuing medical education courses, medical conferences, meetings of professional societies; in fact, wherever doctors gather there is drug company money. They have armies of sales representatives to visit doctors in teaching hospitals to tout their wares, hand out free samples and provide meals and other gifts. There is ample evidence that this huge investment in medical education - they call it education, but it comes out of their marketing budgets - pays off in terms of the prescriptions doctors write.
Doctors are taught a very drug-intensive style of medicine. They are taught for every ailment, no matter how minor every discontent, reach for a drug, and the drugs they reach for are the free samples left with them by the drug companies. This is really a very false economy: Nothing is free to begin with, but these drugs are for the newest, most expensive drugs with long patent lives ahead of them. They are not for generics; they are not for older drugs about to go off patent. When the free samples run out, both you and your doctor are hooked on the most expensive drugs.
Drug companies have a lot of control over clinical trials of their drugs, which make drugs look better than they are. They support much of the drug research done in academic medical centers by facility researchers. In return, they insist on designing the studies that increase the likelihood of a favorable result. There is good reason to believe that much of the companies-supported research on prescription drugs is biased as a result. I saw that during my years at The New England Journal of Medicine.
There are many ways to bias a study. One obvious one is to compare a new drug with the placebo rather than with an old drug at equivalent doses; that makes the new drug look good, even though it may be worse than the old drug. Facility researchers go along with carrying out these studies that are designed in a way that almost certainly will make a drug look better than it probably is. There are other ways to buy research studies. For example, drug companies will do studies of drugs in young, relatively healthy people even though the drugs are meant to be used in older people who often have multiple other conditions at the same time. Why? By testing the drug in young, healthy people they are less likely to have problems, they are less likely to have side effects. And so the drug is going to look relatively risk free. But when it's then used in an older population with multiple illnesses, the matter might be quite different.
What we have been hearing about recently is the studies that don't get published at all. The attorney general of New York sued GlaxoSmithKline because it turned out that some of the studies of Paxil, the anti-depressant, had not been published. These studies showed that the drug was, first of all, not effective in children and adolescents; and, second, there was a hint that it may have led to suicidal thoughts. This is fairly standard practice. Drug companies don't have to publish their research. What they choose to do is publish the research that shows favorable results and not publish the trials that show unfavorable results, so that doctors and the public come to believe that the drugs are much better than they probably are and have fewer side effects.
The pharmaceutical industry portrays itself as a model of American free enterprise; it's anything but that. Of the top 10 companies in 2002, fully half are European. While the industry is free to decide what drugs to develop and to price them as high as the traffic will bear, it's utterly dependent on government-funded research and government-granted monopolies in the form of patents and FDA-conferred exclusive marketing rights.
Let me go back to this European issue, because that's interesting. These are really multinationals; this is not an American industry. I've spent a lot of time in the past year or two reading annual reports of drug companies. I recommend it. Go to their web sites; it's all right there to see. If you look at these top 10 companies - half European, half American - you find out that their annual reports look very similar, their profit margins are about the same, they spend about the same percentage of sales on marketing, they spend about the same percentage on research and development. About the only difference is that the European companies have been slightly more successful in bringing innovative drugs to market in the past few years, but none of them is very successful at doing that. They sell their drugs all over the world; they manufacture them all over the world. Pfizer, for example - the largest company - has 60 manufacturing plants in 32 countries, some in the Third World.
Drugs are flying across borders all the time. That makes it kind of quaint that our government should worry so much about the Canadian border. Somehow drugs cross the Canadian border and they turn to poison, even while these drugs are flying across borders all the time. Even while the pharmaceutical industry turns out whole families of me-too drugs for relatively mild conditions and affluent people, it pays almost no attention to major scourges in poor people, like malaria. It also gives short shrift to less profitable drugs that it might be discovering and developing here. For example, it's been a long time since we've had a good antibiotic that would help the growing problem of antibiotic resistance in infections. We have been hearing recently about shortages of the flu vaccine. There are now shortages of some vaccines because they aren't very profitable for drug companies. There are shortages of other life-saving drugs such as anti-venoms for poisonous snakebites because few companies want to make them. They do much better with the me-too drugs.
Let me touch on the excuses the companies give for the me-too drugs. They make two justifications. They say, If you have a lot of drugs of the same type, like a lot of cholesterol-lowering drugs of the Lipitor type, that introduces price competition, that probably makes your prices lower. It's a nice theory, but there is no evidence of price competition in this industry. They act more like an oligopoly. Prices never go down, never ever, ever go down. Even if a new me-too drug comes on the market slightly lower than those currently on the market, if it can get a foothold, it quickly jacks up the prices. When you watch television ads, do you ever hear Lipitor advertised as being cheaper than Zocar or vice-versa? No. You hear the implication that it's somehow better, even though there is no evidence on that score. They push it as better; they don't push it as cheaper.
Second, the drug companies make the argument (and this has been made with the Vioxx withdrawal in the last couple of days), Lucky we have Celebrex and Bextra, we had to take Vioxx off the market because it doubled the risk of heart attacks and strokes. We've got these other me-too drugs, and so people who criticize me-too drugs should see that they do have a function in being a backup for drugs that didn't work in some patients or caused unacceptable side effects. Well, until they test that proposition, it's simply an assertion. It would be very easy to test. If you had a me-too drug, you would do a clinical trial in people who had not responded to the earlier drug; they don't do that. They just make the assertion. An educated guess would be that it's more likely that if a drug causes side effects in one patient, a me-too drug is very likely to cause the same side effects because they are so similar - but it has to be tested and it hasn't been. As far as the Vioxx case goes, I want very much to see longer-term, larger trials of Celebrex and Bextra. I would not bet my ice skates that they don't turn out to have similar side effects if longer studies were done.
So back to the original question: Are we getting our money's worth? Not by a long shot. This is an industry that in some ways is like the Wizard of Oz, still full of bluster but now being exposed as something far different from its image. Instead of being an engine of innovation, it's a vast marketing machine; instead of a free market success story, it lives off government-funded research and monopoly rights. Yet this industry occupies an essential role in the American health care system and it performs a valuable function, if not in discovering important new drugs, at least in developing them and bringing them to market. But big pharma is extravagantly rewarded for these relatively modest functions. We get nowhere near our money's worth. The U.S. can no longer afford the pharmaceutical industry in its present form. The question is, Will the industry realize this and agree to real reforms that will curb its appetites but preserve its strengths? One thing is sure: it can't continue on its present course.
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Marcia Angell
Senior Lecturer on Social Medicine, Harvard Medical School; Former Editor-in-Chief, The New England Journal of Medicine
I'm going to be talking to you about something that I think almost all Americans are concerned about these days: the pharmaceutical industry and, in particular, the high prices it charges and the justifications it gives for charging those high prices. This year Americans will spend about $250 billion on prescription drugs, making them the fastest-growing component of our health care bill, which itself is growing very rapidly. The skyrocketing expenditures on prescription drugs are partly a matter of greater overall use - more people are taking more drugs - but it's mainly a matter of increasing prices. New drugs are almost always priced higher than old ones, and once on the market, for the drugs that are most commonly used, the prices are jacked up, usually at about three times the inflation rate, so it's unsustainable. Most Americans have insurance that covers at least part of drug costs, but not everyone. Medicare, for example, does not have a prescription drug benefit yet (and I'll say more about that benefit later) so that Medicare recipients who do not have supplementary insurance have to pay for their prescription drugs out of pocket. And, in one of its more perverse practices, the pharmaceutical industry charges much more for people who don't have insurance than they do for people who have large insurance companies to bargain for lower prices or rebates.
In 2002, senior citizens paid, on average, $1,500 per year for the drugs that they took, and if they took six drugs, which is not rare for an older person, they had a bill of $9,000 a year. Not many senior citizens have such deep pockets. In fact, a recent survey showed that one-third of senior citizens either did not get their prescriptions filled in the first place, or if they did get them filled, didn't take the full dose but played out the dose to make the drugs last longer. In recent years there has begun to be a public outcry about this, probably stimulated in large part by the knowledge that you can buy exactly the same drugs in Canada for about half the price. This has caused people to look very carefully at the pharmaceutical industry.
Still, the industry has been remarkably successful in dampening any serious move toward price regulation. Witness, for example, the Medicare prescription drug benefit that Congress passed late last year; it will go into effect in 2006. That bill actually contains a provision that explicitly prohibits Medicare from using its bulk purchasing power to bargain for lower prices with drug companies. That's quite a provision. It makes, first of all, prescription drugs unique in the Medicare system. Medicare does regulate doctors' fees, Medicare does regulate hospital payments - but prescription drugs are off the table. Drug companies can continue to charge whatever the traffic will bear, and it will bear quite a lot.
How does the pharmaceutical industry justify its high prices? What it says, what it would like you to believe, is that the high prices are necessary to cover their high research and development costs, which implies that they spend most of their money on research and development and that afterwards they have very little left over - enough for modest profits but not much more than that; they're just getting by. They also make the argument that they are a highly innovative industry and they need the high prices as a spiritual incentive for their innovation. They say that any form of price regulation would choke off the stream of miracle drugs that they are turning out, so don't mess with us.
A part of this argument is the implication that this is somehow a peculiarly American industry, that the pharmaceutical industry is an example of the success of our free enterprise system. Other countries have drug price regulation; we don't, and therefore this industry is an American industry that is especially innovative and successful because there is no price regulation. That's implied - it's not stated exactly, but it's implied. What they are saying with these arguments is, You get your money's worth. Just shut up. Pay up. You get your money's worth - is that true? Do you get your money's worth? The reality of this industry is very different from the image it tries to portray in its public relations. There is a huge rhetoric reality gap.
The pharmaceutical industry claims to be a high-risk business, but year after year for well over two decades, drug companies have higher profits than any other industry in the United States. [clearly excluding FIRE - c1ue] In 2002, for example, the top 10 American drug companies listed on the Fortune 500 had a profit margin of 17 percent of sales, compared with a median of only 3 percent for all of the Fortune 500 companies. That's a stunning profit margin. The biggest company, Pfizer, had a profit margin that year of 26 percent. In 2003, for the first time, the pharmaceutical company fell slightly, from first place to third place, but still its profits were well above the median, and there were special circumstances for this small drop.
The industry claims to be innovative, but only a small fraction of its drugs are truly innovative in any real meaning of that term. Of the 78 drugs approved by the Food and Drug Administration in 2002 (the FDA has to approve a drug before it can be sold; every year it approves roughly 75 drugs) only 17 actually contained new active ingredients, and only seven of those were classified by the FDA as likely to be improvements over drugs already on the market. Most of the others were just minor variations of old drugs. Incidentally, of those seven innovative drugs, not one came from a major American drug company - not one.
The most profitable drugs are variations of top-selling drugs already on the market. These are called "copycat" or "me-too" drugs. There are whole families of me-too drugs and no good reason to believe one is better than another at equivalent doses. They simply cash in on already established lucrative markets. For example, the top-selling drug in the world, Pfizer's Lipitor, is a me-too drug; it's the fourth of six cholesterol-lowering drugs of the same type. Incidentally, the first of them, Mevacor, which came on the market in 1987, is now available as a generic (Lovastatin), much cheaper than the brand name drugs like Zocor and Lipitor and Crestor, but nobody buys Lovastatin because it's not marketed.
The industry's most innovative drugs usually stem from research done at government or university labs. An internal National Institutes of Health (NIH) document showed that only one of the 17 key research papers that led to the five top selling drugs in 1995 came from the company that sold the drug. Big drug companies license or otherwise acquire about a third of all their drugs from universities, NIH or, increasingly, small biotech companies. They feed on the early basic research done elsewhere. Contrary to popular belief, big drug companies spend less on research and development than they keep in profits, and far less than they spend on marketing. By their own figures, in 2002, when profits were 17 percent of sales, the top 10 American drug companies spent only 14 percent of sales on research and development and a whopping 31 percent, more than twice as much, on marketing and administration, the lion's share of which went to marketing.
The industry claims it spends, on average, $802 million to bring each new drug to market, but independent analysis shows that the true figure is a small fraction of that amount. In a sense, it doesn't really matter whether it's $800 million or $800 trillion or $800 gazillion; as long as they have more than that left in profits and spend twice as much on marketing and administration, you can hardly say that they are strapped to cover their R&D costs.
The U.S. is the only advanced country that does not regulate drug prices in some way. Other countries spend only about half as much for the same drugs as Americans. Methods of regulating prices vary, but essentially governments in other countries take advantage of their bargaining power to negotiate prices, which our government does at the Veterans Affairs system and the Department of Defense - they have just put Medicare off limits.
The Canadian system is probably of most interest because so many Americans are now buying drugs from Canada. What they do is say that when a drug comes on the market it can't be priced higher than the highest price of a drug already on the market to treat the same condition. If it's a me-too drug it can't be priced higher than the highest price of the other drugs in the same class. And once on the market, the price can't be jacked up like the top-selling drugs are here. The price increases are limited to what inflation would justify. If the drug is truly a new drug and not a me-too drug, then it can't be priced higher than the median price in seven other advanced countries - the U.S. is one; the outlier, the most expensive. This isn't too onerous, it seems to me. The drug companies do make profits in other countries, they do make a profit in Canada. They are not charities; they are not giving away their drugs in Canada and Europe.
The pharmaceutical industry has an iron grip on Congress and the White House. It has the largest lobby in Washington, with more lobbyists than elected representatives, and it contributes heavily to political campaigns. Over the past two decades, Congress has enacted a series of laws that practically ensure windfall profits to the pharmaceutical industry at public expense. For example, the Medicare prescription drug benefit enacted in 2003 prohibits Medicare from negotiating prices. This provision could have been written by the industry, and I suspect it was.
Drug companies promote diseases to fit drugs. This is worth thinking about. The drug companies have become a giant me-too industry, turning out the same drugs over and over and over again. You have the six cholesterol-lowering drugs of the Lipitor type. You have five anti-depressants of the Paxil type - big families of drugs. These families of drugs are pointed toward large markets. That means that the population for which they are intended has to be relatively affluent - they don't make drugs for malaria because the people who need them are not very affluent - and it has to be an expandable market. Also, you have to remember that there are more healthy people in this country than there are sick people. What they want to do is convince healthy people that they only seem to be healthy. They are all potential patients. They are trying to persuade people in affluent countries that they are suffering from conditions - essentially normal people - that need long-term treatment. They promote the condition as well as the drug.
Thus millions of otherwise normal Americans come to believe that they have dubious or exaggerated ailments like generalized anxiety disorder, erectile dysfunction, premenstrual dysphoric disorder, gastro esophageal reflux disease or acid reflux disease. It used to be that if you had heartburn you bought an over-the-counter antacid or you took a glass of milk or you lost some weight or you stopped eating two Big Macs in a row. Now you are encouraged to think that this is a proteome of cancer of the esophagus - that this is a serious disease that should be treated to keep dreadful things from happening to you in the future. Now, sometimes that may be true, but not nearly as often as they would like us to believe. Or take erectile dysfunction disorder (incidentally, these are all-new words, they are coined for the drug); this started out when it was just Viagra and not the me-too drugs Cialis and Livetra. It was directed towards Bob Dole, towards older men who were debilitated, where you could make a case that maybe this was a good idea. But now, Livetra is directed toward young athletes, Cialis to young, very good-looking couples on getaway weekends. The message is clear: If you have anything less than 110 percent performance at all times, you need one of these drugs; it's a lifestyle drug now.
Generalized anxiety disorder, the makers of the anti-depressants of the Prozac type. Here is another family of the me-too drugs where you can see the move from older drugs to newer drugs. Prozac was the first of the SSRI (Selective Serotonin Reuptake Inhibitor) anti-depressants, a genuinely innovative drug owing primarily to publicly funded research done in universities and done abroad. That came in the market in 1987. It's now available as generic Fluoxetine, much cheaper than Paxil or Zoloft, but nobody buys Fluoxetine because it's not being promoted.
Not only are the newer drugs being promoted more, but the indications had been expanded with the FDA's agreement. So, instead of just being for the treatment of depression, they are now sold to treat things like generalized anxiety disorder, social anxiety disorder, obesity - all kinds of things that might be related to depression. They are being sold for social anxiety disorder, which is another word for shyness. Who hasn't been shy at some time? I walk into a cocktail party and I'm very shy; I hate them. You are supposed to think, It's not a problem with the cocktail party, or it's not one of these things in life, this is a disorder and I better take something for it; I better take Paxil. That's what the drug companies are doing in promoting their me-too drugs. They are expanding the market by promoting the conditions as well as the drugs.
The part of the FDA that approves new drugs receives over half of its support from drug companies. The FDA reviews drugs for safety and effectiveness before they are allowed on the market, but drug companies pay large user fees in return for quick reviews. That means this agency is now dependent on the industry it's supposed to be regulating, and it's become quite friendly to the pharmaceutical industry. It's been too quick to approve drugs of dubious value and perhaps too slow to remove drugs that are shown to have serious side effects. New drugs are not required to be any better than old ones. And there is usually no way to know whether they are, one way or the other.
Drugs do have to be tested before the FDA can approve them. The manufacturers are required to carry out clinical trials to show that the drugs are reasonably safe and effective. But in those clinical trials they don't have to compare the new drug with older drugs for the same condition at comparable doses. They only have to compare their new drugs with sugar pills, with placebos. That's a very, very low standard. I would submit that doctors and patients are not all that interested in whether a new drug is better than a sugar pill; they want to know whether it's better than what they are already using, but there is no way to find that out. For all we know, new drugs may be worse than old drugs. It could be that each successive generation of drugs is actually worse. I suspect that they are very similar, that they are the same. They are promoted as though they were better; they could be worse.
Drug companies have enormous influence over what doctors are taught about drugs and what they prescribe. The companies support the great majority of continuing medical education courses, medical conferences, meetings of professional societies; in fact, wherever doctors gather there is drug company money. They have armies of sales representatives to visit doctors in teaching hospitals to tout their wares, hand out free samples and provide meals and other gifts. There is ample evidence that this huge investment in medical education - they call it education, but it comes out of their marketing budgets - pays off in terms of the prescriptions doctors write.
Doctors are taught a very drug-intensive style of medicine. They are taught for every ailment, no matter how minor every discontent, reach for a drug, and the drugs they reach for are the free samples left with them by the drug companies. This is really a very false economy: Nothing is free to begin with, but these drugs are for the newest, most expensive drugs with long patent lives ahead of them. They are not for generics; they are not for older drugs about to go off patent. When the free samples run out, both you and your doctor are hooked on the most expensive drugs.
Drug companies have a lot of control over clinical trials of their drugs, which make drugs look better than they are. They support much of the drug research done in academic medical centers by facility researchers. In return, they insist on designing the studies that increase the likelihood of a favorable result. There is good reason to believe that much of the companies-supported research on prescription drugs is biased as a result. I saw that during my years at The New England Journal of Medicine.
There are many ways to bias a study. One obvious one is to compare a new drug with the placebo rather than with an old drug at equivalent doses; that makes the new drug look good, even though it may be worse than the old drug. Facility researchers go along with carrying out these studies that are designed in a way that almost certainly will make a drug look better than it probably is. There are other ways to buy research studies. For example, drug companies will do studies of drugs in young, relatively healthy people even though the drugs are meant to be used in older people who often have multiple other conditions at the same time. Why? By testing the drug in young, healthy people they are less likely to have problems, they are less likely to have side effects. And so the drug is going to look relatively risk free. But when it's then used in an older population with multiple illnesses, the matter might be quite different.
What we have been hearing about recently is the studies that don't get published at all. The attorney general of New York sued GlaxoSmithKline because it turned out that some of the studies of Paxil, the anti-depressant, had not been published. These studies showed that the drug was, first of all, not effective in children and adolescents; and, second, there was a hint that it may have led to suicidal thoughts. This is fairly standard practice. Drug companies don't have to publish their research. What they choose to do is publish the research that shows favorable results and not publish the trials that show unfavorable results, so that doctors and the public come to believe that the drugs are much better than they probably are and have fewer side effects.
The pharmaceutical industry portrays itself as a model of American free enterprise; it's anything but that. Of the top 10 companies in 2002, fully half are European. While the industry is free to decide what drugs to develop and to price them as high as the traffic will bear, it's utterly dependent on government-funded research and government-granted monopolies in the form of patents and FDA-conferred exclusive marketing rights.
Let me go back to this European issue, because that's interesting. These are really multinationals; this is not an American industry. I've spent a lot of time in the past year or two reading annual reports of drug companies. I recommend it. Go to their web sites; it's all right there to see. If you look at these top 10 companies - half European, half American - you find out that their annual reports look very similar, their profit margins are about the same, they spend about the same percentage of sales on marketing, they spend about the same percentage on research and development. About the only difference is that the European companies have been slightly more successful in bringing innovative drugs to market in the past few years, but none of them is very successful at doing that. They sell their drugs all over the world; they manufacture them all over the world. Pfizer, for example - the largest company - has 60 manufacturing plants in 32 countries, some in the Third World.
Drugs are flying across borders all the time. That makes it kind of quaint that our government should worry so much about the Canadian border. Somehow drugs cross the Canadian border and they turn to poison, even while these drugs are flying across borders all the time. Even while the pharmaceutical industry turns out whole families of me-too drugs for relatively mild conditions and affluent people, it pays almost no attention to major scourges in poor people, like malaria. It also gives short shrift to less profitable drugs that it might be discovering and developing here. For example, it's been a long time since we've had a good antibiotic that would help the growing problem of antibiotic resistance in infections. We have been hearing recently about shortages of the flu vaccine. There are now shortages of some vaccines because they aren't very profitable for drug companies. There are shortages of other life-saving drugs such as anti-venoms for poisonous snakebites because few companies want to make them. They do much better with the me-too drugs.
Let me touch on the excuses the companies give for the me-too drugs. They make two justifications. They say, If you have a lot of drugs of the same type, like a lot of cholesterol-lowering drugs of the Lipitor type, that introduces price competition, that probably makes your prices lower. It's a nice theory, but there is no evidence of price competition in this industry. They act more like an oligopoly. Prices never go down, never ever, ever go down. Even if a new me-too drug comes on the market slightly lower than those currently on the market, if it can get a foothold, it quickly jacks up the prices. When you watch television ads, do you ever hear Lipitor advertised as being cheaper than Zocar or vice-versa? No. You hear the implication that it's somehow better, even though there is no evidence on that score. They push it as better; they don't push it as cheaper.
Second, the drug companies make the argument (and this has been made with the Vioxx withdrawal in the last couple of days), Lucky we have Celebrex and Bextra, we had to take Vioxx off the market because it doubled the risk of heart attacks and strokes. We've got these other me-too drugs, and so people who criticize me-too drugs should see that they do have a function in being a backup for drugs that didn't work in some patients or caused unacceptable side effects. Well, until they test that proposition, it's simply an assertion. It would be very easy to test. If you had a me-too drug, you would do a clinical trial in people who had not responded to the earlier drug; they don't do that. They just make the assertion. An educated guess would be that it's more likely that if a drug causes side effects in one patient, a me-too drug is very likely to cause the same side effects because they are so similar - but it has to be tested and it hasn't been. As far as the Vioxx case goes, I want very much to see longer-term, larger trials of Celebrex and Bextra. I would not bet my ice skates that they don't turn out to have similar side effects if longer studies were done.
So back to the original question: Are we getting our money's worth? Not by a long shot. This is an industry that in some ways is like the Wizard of Oz, still full of bluster but now being exposed as something far different from its image. Instead of being an engine of innovation, it's a vast marketing machine; instead of a free market success story, it lives off government-funded research and monopoly rights. Yet this industry occupies an essential role in the American health care system and it performs a valuable function, if not in discovering important new drugs, at least in developing them and bringing them to market. But big pharma is extravagantly rewarded for these relatively modest functions. We get nowhere near our money's worth. The U.S. can no longer afford the pharmaceutical industry in its present form. The question is, Will the industry realize this and agree to real reforms that will curb its appetites but preserve its strengths? One thing is sure: it can't continue on its present course.
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