PMAD 385 Spring 07 Critical Analysis of Pharmaceutical Marketing, FLIP Drug Costs, Drug Pricing and Pharmacoeconomics Sayeh Nikpay Gordon Schiff PMAD 385.

PMAD 385 Spring ’07 Critical Analysis of Pharmaceutical Marketing, FLIP

Drug Costs, Drug Pricing and Pharmacoeconomics

Sayeh Nikpay

Gordon Schiff

PMAD 385 – April 16, 2007


Patient case study


Ms. C’s Drugs

• What have been costs?

• What has been burdens?

• How has managed to deal with it?

• Her thoughts about expensive drugs


Drug Costs are high and on the rise

• U.S. costs roughly double those rest of world

Overall Rising Costs-- 3 components: • 1. Increased per capita drug use

– Some related to aging population– But some pure increase in drug #s/use

• 2. Increased prices of individual drugs – Rising significantly higher than inflation rate

• 3. Shift to newer more expensive drugs


International Comparison Antidepressants & Antipsychotics

Drug HighestCost

Country

LowestCost

Country

Avg CostOther

Countries

U.S/AvgCost

Clozapine $317(U.S.)

$52(Spain)

$111 2.9

Olanzapine $324(U.S.)

$79(Spain)

$163 2.0

Risperidone $247(U.S.)

$123(France)

$148 1.7

Fluoxetine $72(U.S.)

$26(Spain)

$34 2.1

Sertraline $64(U.S.)

$30(Austria)

$37 1.8

Sasich, Public Citizen HRG 1998



March 2007




Brand-Name Prescription Drug Products with Highest Percentage Change inManufacturer Price, 2006


Index of Average U&C Prices for 96 Drugs Frequently Used by BCBS FEP

Enrollees, by Month, 2000 through 2004


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Out of Pocket Prescription Drug Spending 1960-2005

Proportion of Total Prescription Drug Spending

Per Capita Spending


Drug expenditure per capita, public and private expenditure, OECD countries, 2004


Indexes of Average U&C Prices for 50 Brand and 46 Generic Drugs

Frequently Used by BCBS FEP Enrollees, by Month, 2000 through 2004


Market “Logic”Drugs are Under-priced

“Because the patients who used the drug had no alternative, the drug company had a fiduciary responsibility to its shareholders to raise the price to the highest level the users considered their lives to be worth. Because the drug’s current price was clearly below this amount, the company was in fact under-pricing the product.”

-quoted in Korten, Post Corporate World, 1999


Arguments for high drug prices

“The cost of medicines reflects their enormous value to patients, to society, and to the health care system. If we focus too much on cutting the cost of medicines without recognizing the growing role that medicines play in creating affordable health care, we may lose sight of their value and jeopardize future pharmaceutical research and development.”

What goes into the Price of Prescription Drugs, PhRMA, June 2005


Justification for High Drug Costs

1. New drugs innovative and valuable to society

2. Drug R&D costs are high

3. Producing drugs is risky

4. Drug companies donate millions dollars of free drugs

5. Good value; impossible to put a value on good health


1. Are drugs that innovative?


Mostly “Me-Too” Drugs

• FDA categorization of new drugs– Priority vs. Standard Reviews

• Priority = significant improvement over currently marketed products

– NME vs. new dosage, formulation, combination etc..

• What is innovation?– Angell: new compound (NME) that is a significant improvement over

marketed products (Priority Review)

• 123 drugs approved in 2006– 11 priority review 9%– 18 NME 15%– 6 Priority + NME 5%

Source: CDER Drug and Biologic Approvals for Calendar Year 2006, http://www.fda.gov/cder/rdmt/InternetNDA06.htm


23 Years Ratings New Drug “Advances” by Prescrire (1981-2003)

Rating # %Bravo 7 0.2%

A real advance 77 2.7%Offers an advantage 217 7.6%

Possibly helpful 455 15.8%Nothing new 1,913 66.6%

Not acceptable 80 2.8%Judgment reserved 122 4.2%

Total 2,871 100


2. How much does Pharma really spend on R&D?


Drug Companies Claim:Spend more on R&D than on Promotion

What goes into the Price of Prescription Drugs, PhRMA, June 2005


The Evidence 2004 U.S. Pharmaceutical Firms in the Top 200 Corporations

Dollars in MillionsSource: The Choice: Health Care for People or Drug Industry Profits, Families USA, 2005


The Evidence 2004 U.S. Pharmaceutical Firms in the Top 200 Corporations

Dollars in MillionsSource: The Choice: Health Care for People or Drug Industry Profits, Families USA, 2005


Marketing, Advertising and Administration

32%

14%18%

36%

Research & DevelopmentProfits (net income)

Other

Source: Families USA, The Choice: Health Care for People or Drug Industry Profits, 2005

2004 Revenue Allocation for Top 7 US Pharmaceutical Companies


Questions about $$ spent on R&D

• 14% may be an overstatement• Based on proprietary information

– Categorization of spending is unknown

• Marketing infiltrates other categories– R&D includes Phase IV, seeding trials, other?

• Tax-payer’s contribute heavily – Through publicly-funded research– Tax breaks


Industry Estimates for R&D• Tuft’s Center for the Study of Drug Development

– Non-profit, 55% funded by industry– Strong industry bias

• “Classic” 2003 paper by DiMassi et al – Analysis to determine cost of R&D for a new drug– Conclusion…

$802,000,000• Widely quoted for 2 years before methods released


Tufts Study Biases• Confidential, voluntary data

– 10 firms and 68 drugs – who? It’s a secret!

• Focuses exclusively on most expensive and least common type of drug – Self-Originated, New Molecular Entities

• Uses unusually high rate of return for opportunity costs of investing in R&D – 11% compounded

– Some debate whether it is appropriate

• Fails to account for significant tax deductions and credits for R&D


Other Estimates

• Public Citizen $110 million

• Marcia Angell $266 million

• Earlier Tufts estimate $237 million

• New Tufts estimate for biologicals $1.2 billion


3. Is the drug industry that risky?


PROFIT “FEVER” CURVE


Drug Industry Concerns about risk and profitability

• Generic competition

• Reduced patent protection time

• Rising costs to produce

• High #s of failed compounds

• Possible re-importation from abroad • Rising regulatory costs


Patent Protection: Billions in Profits for Drug Companies and high Prices for Consumers

• The longer the monopoly rights the higher revenues for branded manufacturers.– 1999, Claritin® sales topped $2.2 billion– 2000, Cipro® sales were $1 billion– 2000 Paxil® sales were $1.4 billion

• No incentive for branded manufacturers to lower prices

• Results in higher drug prices

Patent Protection Means Billions for the Industry and High Prices for Consumers, Families USA, 2002


Benefits to Generic Market Entry

• Increases consumer choice• First marketed generics typically priced 20 to 30

percent below branded comparators• On average, branded drugs cost 3 times more than

generics• Generics accounted for approximately 42 percent of

all prescriptions dispensed in 2000• The more generics in market, the lower prices drop



Generic Competition and Drug Prices, FDA CDER, 2006


Extended Patent Life

• Brand name patents increased by 50 percent in the last 20 years

• Average of 8.1 years in 1980s

• Between 13.9 and 15.4 years 1990s



Extension of Exclusive Marketing Rights

• Drug companies take advantage of key legislation granting extended patent time– Bayh Doyle Act, Hatch-Waxman Act, Orphan Drug Act, Pediatric

Equity in Research Act etc..

• Drug companies exploit key loopholes to gain extra patents time– Filing for multiple patents on active and non active ingredients

(staggered over time)– Use aggressive legal tactics to discourage the competition

• Drug Companies use anti-competitive deal-making to keep competitors out of the market– Pay offs to generic companies to delay production


4. Are the drug companies that generous?


Medication Assistance Programs

• In 2003, PhRMA members provided free drugs to 6.2m U.S. patients.

• Saves County ~ $7.5m bureau-wide– At the CORE ~$30,000/month


Free Samples: Real StoryMostly given to Higher Income Patients

• Analysis of 2002 Medical Expenditure Panel Survey (MEPS)– 39,165 U.S. residents

• 125 million samples given to 37.2 million Americans• Poor people were least likely to receive free samples

– Only 10.3% of recipients below 100% poverty level– 14.6% earned 4400% poverty level

FREE PHARMACEUTICAL SAMPLES: CHARACTERISTICS OF US RECIPIENTS IN2002, Cutrona et al. 2003


Pitfalls to relying on samples/MAP

• Promotes new expensive drugs over drugs of choice• Financially jeopardizes patients

– Stuck paying after initial sample period

• Facilitates drug rep entry, exposure• Makes MDs and institutions beholden to drug cos• Tax write-off means not free because public pays• Serious patient safety issues• Makes it easier to rely on drug vs. non-drug therapy




Norvasc at County-“Free” Drug Ends Up Costing Millions

• #1 prescribed antihypertensive nationally • Forced its way onto Formulary

– Manipulation/interference w/ formulary decision-making– Argued “it’s free” under Pfizer Share-the-Care Program – Previously Committee had decided expensive and unnecessary

• Only for Pfizer branded products– Cook County-largest “free clinic”– Drugs not actually free--credits for future Pfizer drugs– Massive free sampling

• Left holding bag for millions (>5) of $$– When demanded individual bills/proof


5. Drugs are a good value;plus good health doesn’t have a $ value?


What is the value of the smile of a child no longer feeling the pain of cancer?

What is the value of giving a grandfather with congestive heart failure the energy to go camping with his grandson?


Pharmacoeconomics


Pharmacoeconomics -Useful Tool

• Takes into account broader costs beyond just the acquisition costs

• Allow modeling of clinical variables to make more choices more transparent and informed

• Important policy tool to ensure money is not wasted– Allows comparisons to other government expenditures

that are most valuable for society

• Western European nations, Canada and Australia use pharmacoeconomic analysis – 2003 Medicare Modernization Act included provisions for

comparative efficacy and cost-effective analysis– Efforts were thwarted


Pharmacoeconomics- Biases FLIP Side of Claims


Frequency distribution of 1433 incremental cost effectiveness ratios for health interventions


Australian Pharmaceutical Benefits Scheme: Problems & Biases Encountered in Submissions

• Evaluated 326 major applications to the Australian Pharmaceutical Benefits Scheme 1994-1997

• Problems w/ submissions were regarded as “significant” if both the evaluators and technical subcommittee considered that problem could have a serious bearing on the decisions made

• Serious problems found in 218 (67%) submissions– 31 had more than one problem, giving 249 serious

problems in total.

Hill JAMA 2000


Hill JAMA 2000


•No randomized trials •Identification of additional trials contradicting claims •Trials of poor quality •Trials too small •Trials too short •Trials not appropriate for indication •Inappropriate sub group analysis •Surrogate rather than actual outcomes •Choice of comparator •Economic models based on inadequate information •Calculation errors

Australian Pharmaceutical Benefits Scheme Examples of problems encountered 1994-97


Although the rules for cost-effectiveness analysis have been widely disseminated in the medical literature since 1977. Udvarhelyi et al in 1992, showed that these rules were widely flouted and the fundamental principles usually ignored.

Pharmacoeconomic Analyses Making Transparent & Credible Rennie & Luft JAMA 2000


Hillman based on their experience conducting 33 economic analyses for 15 pharmaceutical companies over 13 years, were the first to come to grips with the problems of bias posed by cost-effectiveness analyses funded by makers of the drugs being analyzed. They noted that pharmaceutical companies sponsored most such research, which was unregulated, unstandardized, and prone to subjective bias. The researcher often had the design of the analysis, choice of the comparison drug, and selection of what confidential proprietary data they were allowed to see decided in advance by the sponsoring company.



The companies, which considered such analyses to be marketing tools to promote sales, had studies supervised by marketing divisions that had no trouble with the idea of selecting ineffectual drugs for comparison, making investigators accept favorable assumptions, terminating unfavorable studies early, blocking publication, and putting pressure on investigators to produce favorable results.




Common Methodologic Flaws in Economic Analyses

• Omission of important costs or benefits

• Inappropriate selection of alternatives for comparison

• Problems in making indirect comparisons

• Inadequate representation of the effectiveness data

• Inappropriate extrapolation beyond the period observed in clinical studies

• Excessive use assumptions rather than data

• Inadequate characterization of uncertainty

• Problems in aggregation of results

• Reporting of average cost-effectiveness ratios

• Lack of consideration of generalizability issues

• Selective reporting of findings

Drummond Med Care 2005


Drummond Med Care 2005


Discussion QuestionsWhat to Do About High Drug Costs

• What can you as a pharmacist do to help your patients?

• What can our institution do to better control costs? • What policies could help moderate drug costs?• What role can the formulary play in these efforts?



Formularies as the frontline of Cost Issues


Many People Involved in Pharmaceutical Supply-Chain

Wholesalers

Generics

Branded Drug Cos

PBMS

Insurers

Clinicians

Patients

Providers

Employers

Govt’Govt’



Relevant County Example

• Give example from county of manipulation – glaucoma drugs switch around (tie to patient?)


Fischer, M. A. et al. N Engl J Med 2004;351:2187-2194

Trends in the Use of NSAIDs and Spending for Coxibs by Medicaid from 1999 through 2003


Cook County COX2 Approval Mechanism (via Pharm HELP Desk)

• GI Assessment Tool Scoring • Age (1-18)• Health Status (0-4) • RA (2)• Prednisone (5) • Ever GI Bleeding (8) • GI Side effects (2)

Score• > 20 Automatic OK 16-20 Trial Salcylate



Medicaid Cook County1999 20% NA2000 46% NA2001 52% 2.50%2002 52% 4.10%2003 50% 3.40%2004 NA 2.80%

COX2:NSAIDs %’s Cook County vs. Medicaid

2001 N=431/17,259



Total Dollars Saved

If 30% Ratio $1,074,560.21If 50% Ratio $1,870,530.73

Total Cardiovascular Events Prevented assuming 30% ratio

APPROVE Excess

7.5 43.81

VIGOR 4 23.36


• Slide of walgreens’ guy or Bill’s list of tricks or manipulations


Annual Change in Average Usual and Customary Prices for BrandGeneric Drugs Frequently Used by Enrollees in BCBS FEP, January

through June 2004


Hill et al, 2000


PMAD 385 Spring 07 Critical Analysis of Pharmaceutical Marketing, FLIP Drug Costs, Drug Pricing and Pharmacoeconomics Sayeh Nikpay Gordon Schiff PMAD 385.

Documents

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