So it may be that the doyen of American drug companies when I entered the business may be falling into a death spiral. Merck’s withdrawal of Vioxx from the market combined with its major statin Zocor going off patent in 2006 may relegate it to the second tier of international pharmas, falling well behind Pfizer, GSK and the new Aventis/Sanofi. The new Aventis/Sanofi combo has its anti-smoking anti-fat pill Acomplia coming out in a couple of years, which may end up being the biggest selling Rx product of all time.

Merck’s Vioxx had certainly had its problems. Today’s New York Times article details the very recent history of Vioxx. As THCB noted back in August, a Kaiser study suggested that there were instances of heart attack and stroke among Vioxx patients, though not for Pfizer’s Celebrex. Once Merck’s own clinical study (which was trying to extend the indication to stomach polyps) showed the same thing, the company in consult with the FDA and no doubt its legal staff and investment bankers decided to take the enormous step and bite the bullet.

Not since the withdrawal of Baycol has there been such as tizzy in big pharma land, and Vioxx was not a 5th in class drug like Baycol. However, the Cox-2’s are a interesting case where a drug that has a benefit for some patients was probably being used too widely anyway. The Cox-2s are no more effective at reducing pain but were introduced and marketed as being better for those 30-40% of NSAID and ibuprofen users who had stomach pain. Express Scripts has shown in its studies that many if not most of those using Cox-2s were not suffering that stomach pain in advance and should have been on a cheaper drug first. Another Expresss Scripts study showed that over half of older Cox-2 patients were taking aspirin anyway, which meant that they were still probably getting the pain relief and also stomach problems of aspirin, probably negating the value of the Cox-2 in the first place–if the Cox-2’s even worked for those stomach problems in the first place (and there’s some evidence that Celebrex doesn’t). As a PBM, Express Scripts of course wants its customers to take OTC ibuprofen and an OTC PPI for their associated stomach problems. And of course there are plenty of alternatives beyond the aspiring/PPI combination. Even the NY Times Editorial page weighs in on overuse of Cox-2s. All this of course will make the already delayed FDA approval of Merck’s delayed replacement for Vioxx, Arcoxia, and Prexige from Novartis, much trickier.

Longer term this is all very grim for Merck. Below (purloined from the Times and IMS) is a list of 2003’s top Rx sellers (by $$) in the US. Note that Merck has only Zocor, Fosamax and Vioxx on the list. (The list says that it has Nexium too, but of course that’s Astra-Zeneca’s).

1. Lipitor, $6.8 billion, cholesterol,Pfizer Inc
2. Zocor, $4.4 billion, cholesterol, Merck & Co.
3. Prevacid, $4.0 billion, heartburn, TAP Pharmaceutical Products Inc.
4. Procrit, $3.3 billion, anemia, Johnson & Johnson
5. Zyprexa, $3.2 billion, mental illness, Eli Lilly & Co.
6. Epogen, $3.1 billion, anemia, Amgen Inc
7. Nexium, $3.1 billion, heartburn, Merck & Co.
8. Zoloft, $2.9 billion, depression, Pfizer Inc.
9. Celebrex, $2.6 billion, arthritis, Pfizer Inc.
10. Neurontin, $2.4 billion, epilepsy, Pfizer Inc.
11. Advair Diskus, $2.3 billion, asthma,GlaxoSmithKline PLC
12. Plavix, $2.2 billion, blood clots,Bristol-Myers Squibb Co.
13. Norvasc, $2.2 billion, high blood pressure, Pfizer Inc.
14. Effexor XR, $2.1 billion, depression, Wyeth
15. Pravachol, $2.0 billion, cholesterol, Bristol-Myers Squibb Co.
16. Risperdal, $2.0 billion, mental illness, Johnson & Johnson
17. Oxycontin, $1.9 billion, pain, Perdue Pharma
18. Fosamax, $1.8 billion, osteoporosis, Merck & Co.
19. Protonix, $1.8 billion, gastrointestinal reflux disease, Wyeth
20. Vioxx, $1.8 billion, arthritis, Merck & Co.

So soon they’ll only have Fosamax on the list. Forbes has a hard hitting article suggesting that both the CEO Gilmartin’s days are numbered and that Merck itself will become a takeover target. For a company that was the leading pharma company in the world in the early to mid-1990s, that would be a mighty fall.

Of course, if this can happen in as big a market in Cox-2s, can it be long before there’s more analysis of the biggest market of all, the statins, to see if any share Baycol and now Vioxx’s fate? There are already (as reported by Medpundit) some dissident physicians questioning their value.

More on this later but this is a stunner. Merck hits 8-yr. low on worldwide withdrawal of Vioxx, its Cox-2 inhibitor. No word on its direct competitor Celebrex (from Pfizer) as yet, but there have been criticisms in the recent past that it’s ineffective in reducing stomach complaints compared to ibuprofen and NSAIDS as was originally claimed.

Following the revival of the “taxpayer pays for the drugs twice” line by Marcia Angell, there’s an excellent article and series of comments in Derek Lowe’s In the Pipeline blog on the subject of paying for R&D. Derek has somewhat talked down the role of the NIH–and was kind enough to mention my comment on that aspect of the subject in a subsequent post. He was further taken to task for it by the (new to me) Bedside Manners blog. All posts well worth reading.

And there is no doubt that we are on the edge of much more spending and much more great results from all this medical research (do the words genome or nanotechnology ring a bell). But right now, that’s not the point. What is the point is the relationship between who’s spending what on what and the political result out of it.

Broadly, with the NIH (i.e. the taxpayer) doing mostly big basic R and some D and the for-profit sector doing mostly applied R & D, here’s the spending score.

NIH $27 billion on Research in 2004 (corrected to $23 billion in 2003 in update below)
Pharma $33 billion on R&D in 2003 (according to PhRMA’s numbers)

Both these numbers have been going up rapidly, and there are lots of arguments about what’s in it, but the overall issue is that they are pretty much the same. No one cares about the distinction between R &D; people only care about what’s spent to get the drug onto the market, and you need basic R, applied R and D to get that done. But that total is around $60 billion and we spend more than that marketing the drugs. The government’s report on the pharma industry from which I pinch this chart shows the real issue, and that issue is mostly a political and business issue.

And of course the political issue is how to deal with the fallout of these three numbers — the 13% of revenues spent on R&D, the 20% going to profit and the 31% going to sales and marketing. So long as the public gets to see that industry’s R&D spending only just exceeds the taxpayers’, yet they have to pay more in profit (i.e. higher prices) than big Pharma is paying in R&D, and that nearly three times what is spent developing the drug is being used to market it, this problem is not going away for pharma. Of course it might help their cause if they stopped being at war with their best customers.

UPDATE: Contributor Joe Crea informs me that:

The $27 billion dollars on research by the NIH is a very common misconception. That figure + or – a $billion is the OPERATING BUDGET or BUDGET AUTHORITY for the NIH; and, not all research at, by, or for the NIH is pharmaceutical-related.

I have attached OMB breakdowns of the budget for the NIH as well (Ed note: shows total Gov spending on Health R&D at $23bn in 2003) as a report that breaks down how that research budget is spent. Remember, the NIH has multiple institutes, centers, as well as the Library of Medicine. As can be seen from the report, about 10% of R&D is done by the NIH (intramural) — the rest is “farmed out” in the way of grants and Cooperative Research and Development Agreements (CRADAs).

Here is an explanation of this system by PhRMA. Take it for what it is worth (it was a readily available summary), but likewise, is the report by The American Association for the Advancement of Science (not exactly a bunch o’ FReepers). Just keepin’ things in perspective!

Joe may well be right, much of the money allegedly spent on research by NIH may not get to the lab bench, but on the other hand my colleague Bob Leitman tells a story of his visit to an R&D facility owned by very big pharma company. When he commented on the acres of marble in the halls and the restrooms, his host told him “Well we’ve got to hide the money somewhere!” So I think it’s fair to say that the big numbers on both private and public side have a fair bit of bureaucracy tucked away in there. It’s also fair to say that the NIH farms out much of its research, but that’s irrelevant. The point is how much gets spent by whom on what and not who gets it.

My point is that there is a lot of money spent, and both types of spending on research is necessary to create drugs, but the political issue is simple. The pharma industry makes more on profit than it spends on R&D, and spends nearly 3 times on marketing than it spends on R&D and gets some large level of help for its R&D from the taxpayer. And it prices drugs at a level that makes its consumers very angry. So big pharma can either continue its present course of trying to tough this out (which I believe has a significant long term risk of vicious price controls or regulation) or try to figure out a middle way. I’ve put my proposals for that middle way here, but I believe that they have to take a small hit now or a huge hit later.

Today THCB gets turned over to some contributors who may not agree with me on much but do have sensible arguments. First off Terry Nugent wasn’t too impressed by the pleas of the Canadian businesses (reported by Paul Krugman) echoed by their US counterparts about getting health care off their banks onto that of the government. Terry writes:

This is yet another case where what’s good for GM may not be good for the country. Of course big business would like to unload its healthcare costs on the taxpayer. But one wonders why Canadian officials are forced to cite this benefit to big business to the supposed beneficiaries of Canadian monopsony–the proverbial little guy. It’s because like all politicians they’ve written checks they can’t cash.

What if there were only one car company or one grocery store or one clothing emporium? You would take what you get, like the old Soviet GUM store. That’s how it is with Canadian healthcare. If you done like it, lump it. The safety valve is the land of the free south of the border.

If we go single payer, you will see Medicaid-like rationing because gutless politicians will make Social Security like promises without raising taxes to pay the freight.

Nonetheless, the system is imperfect and needs to be improved. Kerry, Clinton, and Frist have some good ideas. Bush has some too. But what makes America different from the rest of the world is what makes her great–free enterprise and free speech. Let’s not forget that. Perhaps, as in Britain, the world ought to change to become more like us.

And then in response to my piece on the way out
for pharma companies Terry writes this on reimportation:

Reimportation is just a straw man for price controls. Here in the State of Illinois, USA, our governor and his pal Rahm Emanuel (a Democratic Congressperson and once and future Clinton operative) are having great fun setting up a reimportation scheme that will allow intrepid residents to personally import drugs from Ireland and the UK. This plan has a few flaws–e.g., it’s limited to 100 drugs, it’s borderline illegal domestically and internationally, it’s subject to pharma supply constraints, there are labeling issues, etc.

But what’s nice about it is that it doesn’t cost the quasi-bankrupt state government a dime and it makes great political hay with the unsuspecting electorate. Meanwhile, the state is being sued for violating federal law by massively underfunding Medicaid, which actually does pay for prescription drugs for those who need them. The hypocrisy involved with this sophistry boggles the mind.

What the industry should do is publicize its own access programs for the uninsured and economically needy, and expose charlatans like our governor for the political opportunists that they are. Based on a recent FDA study of prescriptions ordered from sites linked to the State of Wisconsin Web site, I think there is more of a safety issue here than most informed observers suspected. As the companies squeeze Canadian supplies based on diversion, the Canadian outlets are reaching out internationally for supply. Who’s to say they won’t compromise their standards to take advantage of the windfall business they are getting from the US with the free promotion provided by the sovereign states? As time goes by, I believe safety will become more and more of an issue, and the states that promote this route will potentially assume more and more liability for adverse outcomes. Now those drugs don’t look so cheap, do they? Especially when you can in some cases get a better deal at Costco.

And then we get a new piece on the same topic from new contributor Joe Crea. Joe had a version of this letter published in the Moonie Washington Times, but it was so brutally edited that he asked me to give the unexpurgated version a forum.

The oft quoted examples of U.S. drug prices being several times higher than those in Canada is misleading. The reports that make this claim “cherry-pick” the top selling brand-name drugs only, and value them at AWP (full price) in order to suit their agendas. No doubt that if you choose the most demanded doses of the most demanded brand-name drugs and only look at AWP (which relatively few people pay), and compare them to controlled prices in Canada, this disparity indeed exists. However, this is analogous to comparing the price of cars, or any other product, based on “sticker price” rather than what is actually paid by consumers.

The more disturbing matter is that this demagoguery continues to go popularly unchallenged, and now has become lore. A study by Patricia Danzon at the University of Pennsylvania’s Wharton School compared a representative sample of all drugs in nine countries, and adjusted for pertinent variables including relative purchasing power (apples-to-apples); this true economic analysis showed, in particular, that Canada’s prices were generally 4% higher than those in the U.S.

Another issue, reimportation, or parallel trade, of pharmaceuticals is feasible and should be legal in a free market, but: 1) Even in Europe, where reimportation is legal, most countries get less than 10% of their drugs this way (of course, price and practice controls make it less efficient), 2) About 10% of the U.S. demand would exhaust Canada’s entire drug supply, 3) Not all drugs from Canada originate in the U.S., hence 4) We would have to legislate reciprocal licensing agreements with other countries as exist in the E.U. whereby foreign testing, manufacturing, and distribution standards would have to be equivalent to those in the U.S. Frequently, either theirs would have to be raised, ours lowered, or both.

Thirdly, regardless of whether pharmaceutical companies spend too much on marketing, the fact is, at least in part, that the refusal by other countries to help pay for research and development is what allows them to fix prices. The pharmaceutical sector does have larger profit margins than other industrial sectors; however, this is not prima facia evidence of price gouging, but an insurance policy against future costs in an increasingly hostile and unpredictable global regulatory environment. Like it or not, it is this subsidization of innovation and profit by U.S. and, frankly, Japanese consumers that allows for newer if not always better drugs to come to market. Only about 1 in 3 patented drugs ever recover their full investment, hence the reliance on “blockbuster drugs”. Granted about half of that investment is opportunity costs, which is legitimate, as in any other industry. As can be seen, to the extent that prices are high in the U.S., it is a function of more than just profit motive, despite what most wish to believe- and don’t even get me started on intellectual property rights (patents).

In economic terms, a major driver of these price differentials (apart from government interventions) is consumer demand. While policy and the markets continue to grapple, there are two easy ways to decrease drug expenditures: insist on generic drugs whenever feasible (which is most of the time), and when you receive a prescription or service, ask your physician, “Is this the most cost-effective treatment?” It is such consumerism and the adoption of evidence-based practices that will most affect health care costs, along with prudent lifestyle choices.

In the long run, it will be market demand vis-à-vis consumer behavior and revealed preferences that determine health care costs. Until we stop agreeing to more expensive drugs and services that provide little in return, and accept unaccountable tort and inefficient regulatory systems, we will continue to get what we pay for.

These arguments will run and run, but as with everything the truth is in a murky place in the middle. It is though a pity that big pharma’s advocates have to be individuals writing in THCB, while the head of PhRMA is writing letters about me-too drugs for his mother to the LA Times.

A couple of days ago I posted a long piece about what big pharma might do to get itself out of the bind it’s in over reimportation. My suggestions included bending somewhat on reimportation and taking the high road on patient safety by helping to certify limited sources of imported drugs. Last week, the second biggest drugmaker GlaxoSmithkline decided to take, shall we say, an alternate approach. It’s running ads bascially echoing Jeb Bush’s point of a while back that Canadian drugs are going to kill you.

Actually if you read the ads carefully, they really are saying that drugs of unknown origin purchased over the Internet are going to kill you. So perhaps if you buy them from a certified Canadian pharmacy regulated by the Canadian government, then perhaps not only will they not kill you, but they may even be the exact same drugs as sold in American pharmacies, made in exactly the same factory in Puerto Rico or Ireland.

Pharma companies claim to think long term about their R&D. We’re not seeing a lot of evidence of long-term thinking in their current public policy stance. For instance, what if either HHS/FDA changes its rules or the bill sitting in Congress for reimportation passes before, oh say, November this year. Do they really think that the President will do something 80% of seniors oppose if the election is coming down to the wire in Florida and Pennsylvania? And if pharma loses here, what’s Plan B?

Meanwhile, talking of allegedly unsafe drugs GSK is now facing its first lawsuits over the use of Paxil in kids.

So to continue from last week’s rant on reimportation, I got an email from the subject of the rant Stephen Chang. (And correcting something I said in my original post Stephen’s group does have a website Cures California.org (I just couldn’t find it easily on Google). Stephen wrote to me saying:

My you get upset easily! I certainly understand your points and the panels and probaly agree on some of them. However, uncontrolled illegal importation from Canada via trans shipments is not the answer. This will potentially make the issue worse as we will jeopardize our own fragile drug supply. I too have been looking for that answer in how to increase access to drugs and fully agree that something needs to be done. Do you have a sensible plan/policy that could be a win-win for everybody? Would love to hear about it

So I thought about this for a while, but before I spell out my ideas it’s worth noting that many people within the pharma business have serious problems with the industry’s stance. Don’t believe me? Take a look at this thread on the pharma-marketing list-serv about pricing, and look at this opinion piece by Pharma Marketing editor John Mack. John says correctly that ‘Pharma needs to realize that it just can’t “win the argument.” ‘ John also has two excellent articles on both the crisis in professional detailing and (on p 10) about better models to target physicians. There are also stories in the Pharma professional press on how high prices are hurting compliance (i.e. sales). This is all by way of showing that the industry has many sympathetic friends and even big-time supporters who feel that it has lost its way. So this is my reply to Stephen–it’s the closest I’ll ever come to trying to get big pharma to find a “Third Way” out of the mess it’s in.

Stephen–I don’t mean to get angry with you in particular, but you said one or two things on the show that I’m afraid were the straw on the camel’s back, following a year or two of me listening to PhRMA fail to make a serious argument in this debate. I don’t think you did yourself or your organization any favors by a) not speaking to the profit level of pharma companies, and — when countered with two GAO reports by your opponent on the show brought up — b) stating that only that research is expensive (“costs hundreds of millions of dollars”) without producing any evidence of its effectiveness or that pharma actually spends that much on R&D, especially when I’d already said in my call that marketing costs are nearly 3 times those of R&D.

However, you are not a professional PR person, you have a real job and a sincere position, so let me try to tell you why I think that your current position is counterproductive.

1) A simple executive order could allow the FDA to investigate and certify as safe a number of Canadian pharmacies, or a number of US based pharmacies that import from certified European pharmacies. Everyone knows that and that’s why the safety argument (or, worse, now the “terrorism” argument) is so disingenuous. Failing to do this when people are importing pharmaceuticals anyway is in fact increasing the risk of safety violations and means that the government’s position (bought and paid for by a short-sighted PhRMA) is actually increasing the risk to the American people.

2) The reimportation issue cannot be that big a deal for the US pharma market. Currently it’s less than $1 bn of a $200 billion market. Even if it went up tenfold it would be less than 5% of the market. PhRMA’s stance does two things. It stops some seniors getting drugs at a decent price (not that many are stopped I admit, but there are some who don’t want to break the law and it means that reasonable people are forced to flout the law). More importantly, it gives the anti-Pharmaceutical left a huge stick with which to beat the industry. More than 80% of seniors are opposed to the ban. Sometimes when you’re that outvoted you have to realize that your position is untenable.

3) The likely consequence of this is that there’ll be a backlash either in 2005 or 2007 or 2009 against big pharma, and severe price controls will come in shortly thereafter. The only people within pharma who don’t care about this are the senior executives of the big pharma companies who are judged on their current quarterly profits. People who care about the creation of new drugs and the availability of those drugs five to ten years out (i.e. you and your coalition) should be concerned about creating an environment in which those drugs for which the efficacy and cost-effective can be proven are available to patients. Currently big pharma’s only trump card is the vast amount of cash it has spent with the Republicans (even if some of them haven’t stayed bought as they can read polls too). That luck will run out sometime –and this November is my guess as to when.

OK, you asked how we get to a better place? I propose three quick measures which wouldn’t cost pharma companies much and would put them in a much better spot.

a) Help the FDA set up a safe channel for drugs from Canada and commit to supplying a decent amount of drugs in a safe import market. I suspect the amount would be smaller than PhRMA fears, and this would remove the number 1 image problem that pharma has.

b) Announce a voluntary reduction in the size of sales forces and marketing budgets, and transfer some of that money into R&D spending, and some into price cuts. This will have to happen anyway, and by getting ahead of the game pharma will be able to control it. Having the CEOs of Schering, Pfizer, GSK, Amgen, etc take a public salary reduction down below $5m from their current stratospheric levels wouldn’t be a bad idea, although it would alert the public to the obscene amounts they get now.

c) Realize that there is a long-term cost problem with health care and set up a system to deal with it. Expecting the rest of society to keep paying more and more into the bottomless pit of health care costs is not only heads-in-the-sand foolish, but it ends up denying access to health care insurance and basic care to millions of Americans. Pharma R&D has some potential to actually alleviate health care costs (the success of Tagamet in reducing ulcer surgery is a prime example, but the replacement of bone-marrow transplant with Gleevac is another). Pharma should be starting a real debate about how as a society we are going to deal with a future of genomics-inspired drugs, and which ones we should be funding. Again if pharma doesn’t lead that debate, the government will in a few years, and it’ll be much less pretty that you and your group would like.

This morning I lost my cool somewhat and called into the local KQED Forum radio show, where they were discussing reimportation. One of the guests, Stephen Chang, a biotech CEO and head of a new group called Californians United for Research, Economic Development and Saving Lives (which I’d never heard of and that doesn’t seem to have a web site) was making my blood boil.

He claimed that he had patients in his group and that they opposed reimportation on safety grounds. I congratulated him on getting patient support for this canard as poll after poll shows 80% of seniors are massively opposed to the ban on reimportation. He then said that the FDA is non-political. Yet the FDA could very easily certify pharmacies in Canada or in the US that import drugs from Europe. The only thing stopping them is the absence of instruction from their political bosses, which might actually arrive soon anyway.

OK. Then after I spoke — and included the share of revenue of pharma companies given to sales and marketing (c. 30%), R&D (11%) and profits (c.18%) in my talk — Chang went on a long rant about the fact that R&D was really expensive and cost “hundreds of millions of dollars”. Actually the real number is tens of billions of dollars, but he never referred to the percentages of revenue pharma spends on what –it was just empty rhetoric. There was a similarly uninforming letter from the President of PhRMA in the LA Times last week. Chang’s opponent on the show, Jerry Flanagan, a lefty consumer advocate from the Foundation for Taxpayer and Consumer Rights, was overly kind to him. Jerry knew his stuff but hardly knew how to answer the bombast coming from Chang–I think he was looking for something more traditional to get his teeth into. He did though quote some GAO studies on how much current R&D amounts are overstated.

Big pharma was best represented on the show by a caller who said that he wanted pharma margins to stay high and that he thought foreigners should pay higher prices and Americans should pay lower prices. Well at least there’s the basis of a rational argument. He also pointed out that pharma stock prices have fallen in the last few years. True enough, but that’s because of the relative lack of success of all that R&D in producing replacement blockbusters for those going off patent–sorry, Schering!

This all drives me mad. I don’t mean to be critical of any one individual, but big pharma is in real trouble over this reimportation issue and has to get its PR into shape. Pharma innovation is responsible for curing many previously debilitating and fatal diseases and has reduced other health care costs. But no one, including Chang, even mentioned that on the show. (Note: not true, on relistening, I did!) So I’m not a basher of the industry but I do think it has to take a long hard look at itself, and the more I see of its current behavior the more self-destructive it seems to be–especially given the political vulnerabilities of the Republicans in Florida and Pennsylvania.

Somehow big pharma has to in the short-term get better PR out there — being at war with its main customers (the elderly) is no place to stay. Longer term, big pharma has to work out how to reorganize itself so that it’s spending less on marketing (but doing it more efficiently), spending the same or more on R&D and still maintaining decent margins. That’s a real challenge, and for the good of itself and the greater good too, it needs to get working on it.

UPDATE: The audio archive of the show is here. My dulcet tones appear about halfway in. You’ll notice that I was put off from my main point by something Stephen Chang said while I was on hold, and if you’re very attentive you’ll notice that I’m stalling while I try to remember what that main point was! (It was that pharmas could maintain margins by reducing marketing spending)

Meanwhile to add fuel to this fire, a group of pharmacists are suing the drug companies for overcharging them–while they claim they are losing business to pharmacies in Canada and Mexico.

It’s worth having a quick look at this USA Today article about the increasing trend of clinics and health systems keeping drug reps away from their doctors. For example:

The University of Wisconsin and their clinics in Madison also have developed a common disciplinary database. Drug representatives with three violations — for offenses such as giving out food or loitering outside doctors’ lounges — may lose their hospital access across the city for six months.

In my day “loitering with intent” meant something altogether different. But there’s still no question that physicians get most of their information about new drugs from their detail reps, and counter-detailing is still in its infancy. But for most of America, unlike those systems who are at risk for their drug budget, there is no incentive for physicians to keep out the drug reps. And samples are a key part of the reason why drug reps are in general welcome.

However, the back-up of detail reps queuing to get into the physicians’ office will have to be cleared up. Pharma is spending too much on its sales teams and with a combination of using technology for remote detailing, and better understanding of targeting of sales reps, expect the number of drug reps to be reduced over time. But bear in mind that the number of detail reps has quadrupled over the last 10 years, as everyone has fought to catch up with Pfizer. Don’t expect a repeat of that.

Cox-2 inhibitors (Merck’s Vioxx and Pfizer’s Celebrex being the leading products) were introduced a few years back as being as effcective as older painkillers but without the stomach problems that affect about 30% of aspirin, ibuprofen or NSAID users. The most common ailment these drugs are targeted at is arthritis, but any long term low-grade pain is a candidate. Of course, they have been widely prescribed and used by people who either hadn’t been proved to have stomach problems on non-Cox-2 painkillers or are taking aspirin anyway. Additionally Celebrex has been alleged to actually not be as helpful for those with GI problems as it has been marketed to be. None of that news, almost all based on studies by PBM Express Scripts, seemed to affect the sales of Cox-2 inhibitors much, and it reamins a $6bn market.

But today a study from Kaiser Permante has a study out based on its own members data that suggests that Vioxx creates a three-fold risk of heart attacks compared to other NSAIDs and Celebrex. Merck’s stock price is down nearly 2% as a consequence, as presumably if this study gets come currency with physicians they might start switching patients to Celebrex or one of the newer Cox-2’s coming on the market later this year. If Merck is lucky those Cox-2s will include Arcoxia, Meck’s replacement for Vioxx which is undergoing FDA approval here, but is already on sale in Canada and Europe.

New contributor Gregory D. Pawelski writes for THCB about the changes in oncology and chemotherapy reimbursement. TCHB has posted several articles about those changes, notably from regular contributor Matt Quinn. Gregory writes from a slightly different viewpoint with considerable passion. As he wrote in this heartfelt article on the Johns Hopkins site, he nursed his wife through the agony of chemotherapy, and has since researched into chemotherapy and cancer treatment in depth. Passionate he may be, but Gregory has some important things to say that are well worth considering:

Some irate oncologists are angry and hope to turn patients into lobbyists, warning patients that they may face a return to hospitalization. And yes, some of them are threatening to refuse treating Medicare patients altogether. These kinds of threats are abhorrent! Even Medicare officials have denounced some of these oncologists as alarmist and untrue.

Some of them are telling their patients that because of the new reimbursement system, patients might have to “switch to older medications”. That may not be a bad idea! Presently used chemotherapy drugs have a high rate of failure, according to January 10, 2002 issue of the New England Journal of Medicine. Oncologists at a single institution may obtain a 40% – 50% response rate in a tightly controlled study, but when these same chemotherapy drugs are administered in a real world setting, the response rates decline to only 17% – 27%.

Real world setting after real world setting has been showing that presently used chemotherapy drugs have failed to show clinical advantage over standard (older, less toxic drugs) regimens. According to a multicentre Southwest Oncology Group study, there is no significant difference in survival, response rates or quality of life between standard (cheaper) regimen and dose-intense (more expensive) treatment arms.

The results of years of clinical trials on patient populations are considered enough indication on how an individual will respond. The percentage of patients that must respond to a drug before it is approved varies from as low as 20% to as high as 80%, depending on the type of cancer. Thereafter it is used routinely for all patients with the same form of cancer, though unfortunately a drug that helps one person does not necessarily mean that it will help all people with the same diagnosis.

One of the commonest methods to test a new drug is not against an already effective treatment but against a placebo. However, what matters most to patients is not whether a company’s drug is better than nothing, but whether it is better than established treatments. European regulators already require drug makers to compare new drugs with older ones (comparative drug testing), while the FDA simply asks that drug makers compare new drugs with placebos. When you look at the results, there is almost never a difference between active treatments.

Oncologists long avoided cuts forced on other specialists because the government allowed them to bill Medicare for cancer drugs in amounts that often far exceeded their actual costs. The system was widely criticized and the General Accounting Office found that doctors were able to get discounts as high as 86% on some drugs.

Even the American Society of Clinical Oncologists say, “we did not like the old system, even the perception that it set up inappropriate incentives we did not support.” Some studies suggest that American oncologists overuse cancer drugs, particularly in the last months of patients’ lives after the patients have failed to respond to treatment. Advocates for cancer patients say that Medicare’s reimbursement system encouraged overtreatment.

The January 1, 2001 issue of the Journal of Clinical Oncology revealed that in 1999 the average annual income of oncologists in private practice was $253,000. By comparison, oncologists in academic medicine earned “only” $142,000. Where does the bulk of a private oncologist’s income come from? The Journal of the National Cancer Institute (JNCI) commented that “private-practice oncologists typically derive two-thirds of their income from selling chemotherapy” (JNCI 2001;93:491).

An editorial from Dr. Larry Weisenthal, one of the very first medical oncologists to call attention to this issue at a Medicare Reimbursement Executive Committee meeting held in Baltimore, Maryland on December 8, 1999 states, “the new law was simply concerned about the indisputable fact that the ‘structure’ of the old reimbursement system was indefensible. It rewarded oncologists for administering chemotherapy. It did not reward oncologists for spending a half hour explaining to the patient why she/he is more likely to be harmed by chemotherapy than to be helped by it.”

The new system still has major flaws, in that it continues to provide incentives to administer chemotherapy, in the same way that surgeons have a financial incentive to recommend surgery. Additionally, it is a certainty that there will be large differences between the profit margins of administering different drugs, providing continuing incentives to base drug selection on profit margin. However, the new system is clearly an improvement from the standpoint of cancer patients, taxpayers, and advocates of basing drug selection on individual tumor biology, rather than on a least common denominator approach which invites conflict-of-interest medical decision-making.”

Office-based oncology practices derive most of their revenues from treating patients with chemotherapy. The practices are compensated both for delivering the drugs and for the drugs themselves. The Journal of the National Cancer Institute (JNCI) states that private-practice oncologists typically derive two-thirds of their income from selling chemotherapy.

Reimbursement of any kind is often lacking with oral-dose drugs because the patient purchases them directly. The oncologist simply writes a prescription and the patient goes to a pharmacy and obtains the product. There are no administration fees for office-based oncology practices unless they also dispense the drugs, because there is no involvement in their purchase.

The practice will realize almost no revenue from those patients who are treated entirely with oral-dose agents. The core activity in medical oncology is the provision of infusional chemotherapy. The entire structure of office-based practices revolves around this activity and is what distinguishes medical oncology from most other specialties.

Oral-dose chemotherapeutic agents are easy to use and offer the promise of less frequent visits to the physician’s office and their infusion rooms. This promise is not trivial, especially as we have come to realize that many forms of cancer may be managed with these drugs, especially when they offer the equivalent outcome as intravenous drugs.

The fact that medical oncologists receive no reimbursement for providing oral-dose therapy to patients had been the principal barrier to the availability of oral-dose protocol. The advent of oral agents ultimately means that medical oncology will need to change its identity, prior to the chemotherapy drug concession.

They will be reimbursed for providing evaluation and management services, making referrals for diagnostic testing, radiation therapy, surgery and other procedures as necessary, and offer any other support needed to reduce patient morbidity and extend patient survival.

Because oral-dose drugs ultimately deliver on their promise of combining equally efficacious therapy with better adverse event profiles and easier administration, they will rightfully gain their appropriate share of the marketplace, again.