Thank God for the tobacco and oil companies for without them the health care industry’s reputation would be bottom of the heap. Harris Interactive is out with its latest scores on reputations and the pharma industry continues its fall from having 79% of the public thinking they’re doing a good job for consumers to 44%. Managed care companies fell to 30% from 51% in 1997. Only the oil, tobacco and health insurers rate worse than pharma.

So the tale of managed care’s woes is well understood–once they were well known they were despised, and probably will be better off trying to get themselves known as health insurers (which is sort of what they are anyway). The pharma case is a little more curious. Americans love medical technology and the pharma industry has delivered great new technology in spades. And although the pricing of drugs is well known to be out of control, not that many people have to bear those high prices directly.

My suspicion is that this means that the Democratic rhetoric about the Medicare bill and the stonewalling on the reimportation issue are really getting through to the public. It’s been in the past 18 months that the pharma industry’s reputation has really gone into freefall.

Ernst and Young (hattip to Don at BusinessWord) seem to think that the pharma companies really need to fight their corner on reimportation and pricing. They seem to be doing so via the Administration in their negotiations with the Australians at least. (Thanks to the Industry Veteran for that link). I disagree. Imports are and will remain a small part of the market. The pharma industry can afford a drop in revenues and pricing and keep pretty decent margins(hint to CFOs: there’s a ton of fat in sales and marketing to be taken out), and this short-term thinking increases the likelihood of price controls and greater government intervention in the future.

Sidebar: The Aussies went to Iraq despite the opposition of 90% of their population because they were promised a free-trade deal to get their agricultural products into the US. They continue to be horrified that free-trade according to the US means that the Australian government has to give up its role as monopsony for drugs in that country! Meanwhile, what did Bushco offer the UK government go to war in Iraq with it? Guesses on a postcard to me please, as I have no clue and my British friends are now being fingerprinted at US immigration.

(Hat-tip to Sydney at Medpundit for this one). The FDA late last week issued a new advisory for Crestor, Astra-Zeneca’s blockbuster statin. THCB readers not suffering from medium term memory loss might remember a series of articles from various interested contributors late last year that were started mostly by the British medical journal The Lancet. That journal was highly critical of Astra-Zeneca’s stance in getting the drug through the FDA. I’m not enough of a pharmacy expert to interpret the FDA’s latest advisory, but the key section says:

FDA has received reports of rhabdomyolysis in association with Crestor, as it has with other drugs in the statin class. In ongoing fashion, we are evaluating these reports of adverse muscle effects with regard to clinical severity and apparent relationship to the drug. FDA is comparing the frequency of reporting of muscle injury with Crestor to that with other statins, given differences in prescribing rates for the different drugs. Pending the evaluation of the recent Crestor safety experience, FDA is not proposing to change the US labeling for Crestor, but does want to re-emphasize to physicians to the importance of carefully following the recommendations in the current product label. Analysis of accumulating safety data in the U.S. and worldwide will be considered in any future labeling changes for Crestor, and to make recommendations on risk management plans for Crestor.

Crestor’s removal from the market is still an extremely unlikely wildcard, and those who suggested shorting AZ’s stock last year have seen it stay in a tight $45-50 range since the Crestor launch. I’ll try to raise more information about the statin market, but given that in 2003 Lipitor and Zocor had $16 billion in sales between them, you understand that developments like this in the statin market are very serious business. But like everything else these days you can bet on it in an online idea futures market.

Meanwhile, if you were concerned that high cholesterol may not be a sufficiently nebulous condition to demand all this attention, don’t worry. Metabolic syndrome has been pushed by the pharma press for a year or so now and it makes its first appearance (at least first one that I’ve noticed) in a mainstream business publication (Forbes)today. The article is appropriately enough called Inventing a New Heart Disease.

It’s for long been a somewhat dirty little secret of the pharma world that not all drugs work for not all patients. That goes for statins too, despite the best medical advice saying that we should all be on them. Forbes has an interesting little article showing some developments in the combination of genomic diagnosis with therapy to figure out which statin works best for which genome. Some farsighted pharma professionals (notably Kim Slocum at Astra Zeneca) have been preaching for years that the combination of genomics, information systems and better targeted pharmaceuticals will not only improve health, but also improve the financial health of big pharma.

Of course the corresponding fear of many within big pharma is that as a result of this trend there will be no such thing as a blockbuster, because genomic testing will show that most drugs should be restricted to a smaller segment of their target population. So instead of 3-4 leading statins, we’ll need 20-30 — each with their own need for clinical trials, $800m development costs and expensive outreach programs.

Whether Kim’s right or the nay-sayers are right, it looks like we’re going to a world where genomic testing, drug delivery and outcomes information will be better linked. And that will be a different world for pharma and doctors, and hopefully a better one for patients.

In a vain attempt to clear THCB’s backlog — I tend to save every interesting story and lately there have been too many — I’m just posting a quick link to the Kaiser Family Foundation’s recent focus groups with Medicare recipients. Lots of good stuff here which the wonks among you will dive into (if you haven’t already) but the top line is that seniors think the new law is confusing and a bad deal. Seems to be proof that while Tom Delay and Denny Hastert can please the drug companies, PBMs and HMOs all at one, it indeed could all cause their good friend George W. Bush some dis-pleasure come November. Not that he hasn’t got his hands full elsewhere.

Note another senior (Ted Kennedy)’s line on the matter–(I can’t find it so I’m paraphrasing…please send it to me if you have it) "Who do you trust, the Republicans who fought against Medicare every step of the way and are now giving your money to the drug companies and the HMOs, or the Democrats who founded Medicare and will fight every day until it covers every senior completely"

The Industry Veteran has a quick contribution to the Paxil story, gathered from the home town press of GSK.

The London press claims that the British Healthcare Regulatory Agency is too cozy with GSK and that it took an outsider such as Eliot Spitzer to initiate a probe of the company’s Paxil malfeasance. It looks to me as if the Brits are already less inclined than the American press and government to swallow Big Pharma’s propaganda. If they decide to really get off their asses, the industry better set aside billions in litigation reserves.

I’ve refrained from getting too much into the Spitzer versus Glaxo legal shenanigans over Paxil, and whether results were withheld deliberately or not. However, suffice it to say that yet again Pharma’s PR is not exactly going to be helping the Republicans in an election year when you see editorial pieces like this from The New York Times.

In case you were worried that Pfizer was losing some lead from its pencil–and there have been some rumors about new scripts for Levitra and Cialis doing pretty well– MedAdNews reports that apparently Viagra is staring down its rivals. Of course, there is some controversy, as has been replayed (to excess) over at the Pharma Marketing News list serv, that the number of men with ED in the US seems to be expanding to meet the number of men over 16 (100m was one number quoted!) but it does seem as though this "lifestyle" drug will remain a cash cow for Pfizer until it comes off patent.

It looks like the Senate is going to pass the re-importation bill and then try to force the House to come on board. If, as I’ve been saying for a while, the Republicans are going to cave on this and do something before the election to preserve what little credibility the Medicare PDIMA bill has left with seniors, it’s worth thinking through what might happen next. Luckily for me and you, The Industry Veteran has already done so, so strap yourself in for a typically meek analysis of what’s going on. (Note that this piece is a couple of weeks old, as it was lost in my inbox mess on my vacation, but it holds truer today than when it was written!)

Republicans in Congress have finally acceded to the public’s demand for ready access to pharmaceuticals reimported from Canada and other countries. HHS Secretary Thompson said he will advise George Bush not to oppose the effort. This means the President must focus his pharisaical, malevolent gaze at Hank McKinnell, Fred Hassan and the other plutocrats of Big Pharma and tell them that despite their $100 million contributions to his cloak-fascism-with-Christ administration, he has to look out for himself. In the short run this will provoke wounded howls and threats about the loss of high paying jobs, but Big Pharma is apt to remain one of the world’s most profitable industries. Organized medicine, for example, resisted Medicare from the 1940s through the mid-60s with shrieks about socialized medicine. As a result of LBJ finally getting the legislation through, physicians annual incomes rose from $50,000, respectable at the time, to the point where today, oncologists earn a median income of $450,000 and leave respectability behind them in the dust.

The Republicans intent to actually permit some form of reimportation appears from the fact that their proposal was drafted by the Chairman of the Senate s Health, Education and Labor Committee, Judd Gregg, at the behest of the Senate Majority Leader, HCA’s Bill Frist. The legislation would permit transhipment from other countries, through Canada, providing: (1) the FDA can approve facilities through which the drugs pass and; (2) the tracking (or "pedigree") of shipments can be maintained.

Some features in Gregg’s bill include:

— Individuals can receive their prescription medications (a maximum 90-day supply at a time) from licensed pharmacies in Canada or up to 15 EU countries approved by the FDA. All businesses involved in reimportation must register with the FDA, submit to FDA inspections and must permit the agency to detain or suspend shipments in theinterests of public safety;

–Internet pharmacies must comply with all current, federal, state and local regulations governing pharmacy practice;

–Importers must identify entry ports, provide advance notice of incoming shipments, and grant the FDA authority to mark suspected shipments in order to prevent their entry into another port;

The details in which Republican devils (a tautology if there ever was one) may lurk involve the requirement that pharmacies, wholesalers and others in the distribution channel must maintain a pedigree of a shipment’s s immediately prior source and subsequent recipient. Shipments from Canada would need to identify all previous entities in the supply chain. The import system would establish a user fee for all participating businesses, the money presumably enabling the FDA to discharge these oversight responsibilities.In principle the facility approval and tracking provisions appear desirable as measures for controlling the drug counterfeiting that occurs even today in the U.S.’ loosely monitored landscape of mom-and-pop wholesalers. It remains an open question, however, whether a Bush-influenced FDA that orders its top reviewer not to comment about a drugs hazards at an advisory committee hearing can capriciously seize upon ambiguous situations to logjam the entire process.

UPDATE: Gregg was reported to be introducing the bill by the Washington Post this morning

You may notice some slightly funky publishing schedules this week as I’m on the east coast confirming that Boston is cold in May, that the Big Dig is never-ending, and that Amtrak can make the trains run on time. Meanwhile in the better late than never category I wanted to make sure that THCB readers didn’t miss (and of course you saw it elsewhere) the RAND report about pharmaceutical formularies and their impact on Rx consumption. In yet more proof that in my earlier life I hung around with intellectuals way above my station, this study was led by Dana Goldman, who was a mere Econ grad student when I was at Stanford, but has certainly moved on since then! (He’s now head of Health Economics at RAND).

Goldman’s team linked a huge dataset of Rx claims with pharmacy benefit design for over half a million lives from a wide variety of plans and employers. (Incidentally the brain and data crunching required for this study–given that these things are not usually correlated in that way–must have been immense and makes me glad that I didn’t try to emulate his success!). The results mirror a study in the NEJM last year, which looked at 3-tier formularies. The bottom line in both studies is that if you increase the co-payment at point of dispensing, people take fewer drugs. RAND found that a doubling of the co-pay caused up to a 45% decrease in use of NSAIDs and antihistamines–presumably because cheaper OTC products were substituted. That’s a win for the payer and probably not too much of a loss for the consumer. But at that point things get a little less clear. “Reductions in overall days supplied of antihyperlipidemics (34%), antiulcerants (33%), antiasthmatics (32%), antihypertensives (26%), antidepressants (26%), and antidiabetics (25%) were also observed.” And even more disturbingly “patients with diabetes reduced their use of anti-diabetes drugs by 23%.”.

Presumably having one in four diabetics reducing their maintenance drug use isn’t the type of health promotion that all the PBMs’ marketing materials claim they are aiming for. And of course as Harvard’s Steve Soumerai showed years ago in looking at restrictions on schizophrenia drugs in Medicaid, a modest saving in one place often causes a much bigger loss in another. Although it’s not in the abstract, the Modern Physician story about the report quotes author Geoffrey Joyce:

While the drop in usage is not nearly so high with drugs for chronic conditions, “we find significant price sensitivity in this population,” Joyce said. “We think there are adverse health consequences.” For patients with diabetes, asthma and gastric acid diseases, emergency room visits climbed 17% and hospital stays rose 10% as the use of prescription drugs dropped, according to the research.

What to do is a question of balance when creating a formulary, according to Joyce, who warned against using increase in copays as a “blunt tool.” “I think there is this herd mentality to control drug costs without fully considering their overall healthcare costs,” Joyce said. “You can design it to make people price-sensitive without creating adverse consequences.”

Now bear in mind that not only are the health consequences of these serious, but the DCCT study over a decade ago proved that a combination of testing and drug use could maintain diabetics in a stable state, whereas poor compliance increased both the incidence of hospital visits and overall costs for the diabetic population. It seems that those lessons haven’t been learnt. Of course having a drug budget separated out from the overall health budget doesn’t easily allow a payer to make that connection. Consequently you have to be concerned about the way that Medicare is administratively separating off its drug coverage from its overall care system.

BMS is pulling its poorly selling anti-depressant Serzone off the market. BMS blames poor sales for the move, but the drug has been blamed for liver problems and the folks at Public Citizen have been suing to force a full recall (rather than just stopping sales) and the cessation of sales of generics.

Overall this will have modest effect on BMS attempts at revival–the way the company deals with the patent expiry of Pravachol will be much more important. As mentioned last week in THCB, Forbes believes they’ll do OK.