One fundamental challenge of the next period in our healthcare system concerns drugs. We know that they are very useful in combating disease and reducing costs. We also know that, as the AP reports, drugs cost too much. The political ramifications of this will continue. For instance, Time reports on the high costs of drugs and increased Canadian smuggling. We know that those who take drugs, but are worried about the costs, are less compliant.

However, Pharmetrics is a company that has a huge database of matched Rx and medical claims, and so can tell about the impact of drugs on treatment. Their latest report concerns their study of a huge database of diabetics, and it shows that type 2 diabetics with high degrees of persistence have total healthcare costs 20% lower than others. So if you can get people to take their drugs it will save money. But if they can’t afford it, and they don’t take their drugs, then these patients will cost more in the long run.

That is the national problem with pharmaceuticals in a nutshell.

Just in case you were overly concerned about all the problems that pharma companies were having, (yes, I thought you were!), you might need reminding what a strong overall business this is.  IMS reports that US prescription drug sales were over $216 billion in 2003.  That’s up over 11% from the previous year and continues a run of strong double-digit growth since the mid-1990s. The biggest single class, the statins reached $13 billion. Imports from Canada were only around $1 billion.

The Pharma Veteran points me towards this story surrounding some slightly tawdry business in creation of the Pennsylvania state formulary.  The Veteran says:

This furthers the conviction that healthcare is either tragedy or farce.  It reinforces several conclusions we’d already  developed.  First of all, it illustrates how the function of "greasing" healthcare providers has moved from office/hospital reps to higher positions within the companies.  It also shows that while the industry grapevine places one of the companies mentioned below (Pfizer) as reputedly the most aggressive transgressor, even a self-proclaimed good corporate citizen (high science Janssen, a part of Harvard-case-study-on-Tylenol-recall-J&J) swims in the same water.

The third thing this article suggests is the increasing, chain-of-influence approach that companies are adopting with respect to greasing organizational decision makers.  Many office reps perceive their companies are paying less attention to office-based practitioners and are more aggressively targeting government, MCO and PBM decision makers whose choices, the companies hope, will trickle down to the offices.  The potential for this trickle down marketing, some believe, can increase enormously when the Medicare legislation goes into effect in 2006.

The fourth lesson here appears at the bottom of the article.  A director of a mental health policy association makes the point that at least at the state level, decision makers are so dependent upon Big Pharma for vital information that there is a complete asymmetry of knowledge and power in the relationship.

My only comment here is that these numbers are so relatively small ($14,000 over a few years), and were clearly not used as straight bribes.  So shouldn’t the state find some way to pay for the educational trips and information that its officials need, without shortchanging them to the point that a few thousand from a pharma makes a difference?

Health Affairs has a new study on the web that confirms the blindingly obvious. People with better insurance coverage will use more health services than those without insurance.  What’s interesting about this study is that it looked at the difference by comparing those with drug coverage to those without in Cox-2 Inhibitor use (that’s Celebrex and Vioxx to you) in the Medicare population.

As you may know Cox-2s are painkillers that are supposed to kill pain without the adverse side effects to the GI tract that some 35% of the population gets from NSAIDs and ibuprofen.  But they don’t do more to end pain and they cost a whole lot more than NSAIDS, so theoretically the health care spending wonks think that their use should be limited to those patients with demonstrated GI problems from using alternatives.  But of course real life isn’t like that, and as a study from Express Scripts showed last year, patients are getting prescribed Cox-2 inhibitors whether or not they have GI problems.  There’s also been contention that Celebrex isn’t as safe for the GI as it’s been made out to be, but that’s another story.

The new study shows that although GI problems are a pretty good predictor of increased COX-2 use among the senior population, good drug insurance coverage is twice as good a predictor. And then, noting that even more seniors are going to be getting a drug benefit soon, in my favorite part the authors conclude in academic-ese:

All together now, "Duh!".  That’s what the legislation was supposed to create, although the authors might find that they and PhRMA have a different definition of the word "overuse"!

The Wallenberg family of Sweden own some 5% of Astra-Zeneca via their Investor AB fund.  Last week they sold some 30% of their holdings. As you’ll recall A-Z’s future performance and the performance of its new statin Crestor have been the subject of several posts on THCB. The Dow Jones story (can’t find link but it was on Feb 11) reported that

Investor decided to reduce the holding in order to strengthen its finances, company spokesman Fredrik Lindgren said.

"We have decided to reduce our leverage and strengthen our financial flexibility. We continue to believe strongly in AstraZeneca and the company is still our largest holding," Investor President Marcus Wallenberg said in a statement. With the sale, Investor’s holding in AstraZeneca falls to 3.75% of the voting rights and share capital. The stake amounted to 5% of the votes and shares at the end of December.

Lindgren said Investor is constantly looking at its holdings and the risk profile of its portfolio. He declined to comment on widespread speculation the proceeds from the sale would be used to fund the acquisition of a larger stake in truck maker Scania AB (SCV-A.SK).

While the speculation concentrates on the Wallenbergs’ need for the money elsewhere, a new correspondent for THCB, PharmaWatcher, has some speculation about the motives for this sale. He writes:

What is actually driving Investor to sell its stake in AstraZeneca?  If it truly seeks to "strengthen its finances," why is it selling AZ?  His suspicion is that someone at Investor AB/Wallenberg must be looking at:
a) The stock run-up in ’03;
b) The analysts’ downgrades during January;
c) The sales decline in the US, both yr/yr and Q4/Q4;
d) The questionable prospects going forward for 2 of the 4 alleged saviors, Nexium and Crestor (never mind Iressa) and;
e) Perhaps someone at Investor/Wallenberg knows something about (anti-coagulant) Exanta, or at least may have caught wind of the views at the EMEA/French regulatory authorities.

This is of course all pure speculation.  But the stock trader in me thinks that  A-Z’s stock has had a pretty nice run over the last 18 months, and the prudent money might just be looking for safer waters right now.

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.

The Washington Post reports on a story about the journal Dialysis & Transplantation allegedly pulling an article critical of the use of the drug Epogen.  Apparently the commercial staff over-ruled the editor, fearful that the negative article might cost them future advertising revenue.  This all strikes me as very strange.  Amgen (who make Epogen) certainly don’t want the publicity this generates as it implies it’s their fault.  And for that matter, even if the article was published, would Amgen really stop advertising in one of the main journals aimed at its core prescribing specialists? There is indeed cause for concern about the relationship between academia, medicine, journals and pharma companies.  But this seems to be a storm in a tea-cup, or a case of one magazine unnecessarily self-censoring. 

On the other hand maybe the author of the offending article welcomed the free publicity. It’s not exactly new to suggest that new uses for drugs (in this case higher doses of Epogen) sometimes have undesirable effects.  And pharma companies spin the results while they can, but generally in these niche cases (even though there are a fair few of them), the medical science will get a good hearing before the payers will pay up.

You may remember the story from the Industry Veteran a few weeks back about the massive price increase in Abbot’s HIV drug, Norvir. Well the Sacramento Bee notes that things are close to going thermonuclear now.

Also today there was an editorial in Eye for Pharma which suggested that the reason for pharma’s poor levels of public trust were to do with its opaque practices:

Perhaps the industry simply hasn’t revealed enough of its inner workings to adequately earn the public’s trust. What lurks behind the manicured lawns and lights in the windows of pharma campuses is largely a mystery to most of our customers.

There is no easy answer. But maybe it’s a matter of working hard to push the black curtain aside and help the public better understand complicated matters like R&D costs and effort and how that translates to retail drug prices. Perhaps "open houses" and public outreach events would give the communities we live and work in a glimpse of the "inside" of pharma.

 Nice try, but it’s price gouging like the Norvir incident and the blocking of imports from Canada that is really riling the public.  And this is in advance of the Democrats taking on the Medicare bill as a big give away to Pharma. MoveOn is already starting to run those ads, that clamor is sure to grow.  If I was in pharma, I’d be quickly thinking about what good things I could do to improve my image.  Enhanced DSM and drug programs for poor kids might be one place to start and publicize what was being done.

The latest Harris Interactive/WSJ poll compares various ratings of the trust of the public in institutions and professions "to do the right thing" versus their trust in specific people, products and companies "to do the right thing for you".  They then lay out the difference between the trust in the profession/the individual etc.  The results make rough reading for many groups (including health plans) but the worse is for the pharmaceutical industry which has been losing the public over the re-importation issue for a couple of years. There’s a 34% difference between those who don’t trust the Rx they take versus those who don’t trust the pharmaceutical companies (and yes more people trust the drug rather than the companies). So in general we’re OK with the product but hate the producer, or perhaps we love the sin but hate the sinner!