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PHARMA: The Pharma company’s fear of the consumer

In an probably futile attempt to improve the literary tone here at THCB, I stole this post’s title from an early Wim Wenders movie.  But like the hero of the movie, the dual nature of the pharma companies’ relationship with consumers has been obvious for some time. (The Wender’s movie is about a soccer "Goalkeeper’s fear of the penalty"–the goalie knows that he’s likely to concede a goal, but he has a secret hope that he might save the penalty kick and become a hero).  Like the goalie, the pharma company hopes that by advertising directly to the consumer they may create a stronger bond and be less reliant on intermediaries like doctors.  But on the other hand the consumer might not want to pay so much for their drugs and the pharma company might lose a chunk of its margins.

In fact the rise of DTC advertising coincided with an explosion in pharmaceutical benefit plans that reduced the cost of prescription drugs for most consumers.  In 1990 59% of spending on pharmaceuticals was out of pocket for consumers.  By 2000 it was down to 32%.  Of course those were bonanza years for the pharmas, so third party payment meant high profits. The reaction from payers was to introduce three-tier formularies, and more cost sharing.  Late last year the NEJM published an article that basically said that this cost sharing worked to reduce utilization.  In other words you wouldn’t be so likely to take the drug if you had to pay for it.

Last week Harris Interactive released a poll that suggested that roughly half of those prescribed a drug discussed the drug with their doctor, roughly half of those discussed the cost, and roughly half of those got a different drug prescribed to them that was cheaper. The last category is equivalent to 20% of all patients prescribed drugs.

If I was a health plan/PBM I’d be flooding my patients with information about the different costs of different drugs. I doubt the pharma companies can do too much to respond aggressively.  Their fear of becoming a real consumer good with margins way lower than they’re used to is a real scenario they should consider.

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