Medical Device Companies and Physician Specialty Societies

Today’s Managing Health Care Costs Indicator is $6.7 billion

I’ve been traveling late this week –and there was a copy of USA Today waiting outside my door this morning. Today’s business section has a front page article (penned by the nonprofit journalism group Propublica) on the influence of medical device companies on medical specialty societies.

The article focuses on the Heart Rhythm Society, which is having its 2011 convention in San Francisco this week.  The HRS has about 5000 cardiologists and others – and they implant $6.7 billion of automatic debrillators each year (domestic and international sales).

HRS gets half of its $16 million annual budget from selling “promotional opportunities” to big medical device companies at this annual meeting. The promotional opportunities include advertising on hotel keys, nightstand displays, mobile sidewalk billboards and “promotional booths the size of mansions.”  The majority of directors of HRS get fees from medical device companies as well.

Jack Lewin, the chief executive of the American College of Cardiology, is quoted as saying that the advertising doesn’t influence cardiologists’ decision to implant devices or choice of devices.  The direct quote:  "I don't buy a soft drink just because of the advertising. … I buy it because I like it."

Don’t believe this for a minute.   Advertising unequivocally works.  Very smart companies wouldn’t spend billions of dollars if advertising wasn’t effective. 

The vast quantities of bling at specialist conventions is a real concern.  Marketing is critical to companies to differentiate their products, and the attention that medical device companies purchase leads to higher use of their products. 

Part of the problem is that physicians, like everyone else, like things that are free.  Medical journals would cost far more were it not for the pharmaceutical advertisements, and national conferences like the soiree in San Francisco this week would be prohibitively expensive to attend were it not for commercial sponsorships.   Frankly, these conferences would be less fun without the bling –so fewer physicians would attend. 

Some specialty societies have had internecine conflict over the issue of commercialization, and USA Today quotes a former president of the American Society of Hypertension (ASH), who resigned from ASH over this issue and calls sponsorships an “obscenity.” . 

What should we do that would not impede the important commercial speech of the pharmas and the medical device companies, yet better protect the public and medicine’s professionalism?

I favor dramatic expansion of transparency.

Nonprofit physician specialty societies should open to the public the full range of all financial dealings with suppliers of medical goods and services.    Reporting of honoraria and other inducements to practicing physicians and researchers should be expanded.   All reports should be available to the public in formats that allow downloading and data mining – we see how valuable this has been in Minnesota and elsewhere.  Charles Grassley has been working to gain access to this information – and this effort deserves our support.

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Health Advocacy Organizations: A Lot of Undisclosed Pharmaceutical Cash

Today’s Managing Health Care Costs Indicator is $3,211,144

This month’s American Journal of Public Health  has an article by researchers at Columbia University reviewing disclosure practices of health advocacy organizations.

In 2007, Eli Lilly gave grants totaling over $3.2 million to 161 health advocacy organizations across the country.  Many of these do educational programs and advocacy which encourage use of medications, and Lilly’s donations parallel the clinical areas of the pharmaceutical company’s sales.   

The biggest health advocacy organizations are household names, like American Lung Association, American Cancer Society, American Heart Association, and American Diabetes Association.  Many health advocacy organizations have state and local chapters, so that Lilly ultimately donated to a total of 161 organizations, 40% of which acknowledged the donation on their website, in their annual report, or elsewhere. That number was a mere 20% for the 114 neuroscience health advocacy organizations, while it was 59% for endocrinology organizations and 67% for oncology.    

The researchers looked at Eli Lilly’s 2007 calendar year disclosures because they were the first available, and they felt that there would be little sentinel effect from the disclosures.           

Should we care?  The amount of dollars here are small – it’s nothing like the huge influence that unnamed donors can have on political races since the Supreme Court’s Citizen’s United decision.  When I looked at the Lilly registry for 2010, I couldn’t locate “astroturf” organizations that looked like their entire reason for existence was to promote (Lilly) medications.

I think this is another area where transparency is better than opacity, and I suspect that drug company sponsorships will be better disclosed going forward as a result of this research.   The National Care Foundation, a league of health advocacy organizations, changed its policies prior to this article to encourage full reporting.

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"Me Too" Drugs

Today’s Managing Health Care Costs Number is $121

The FDA approved a seventh statin, Pitavastatin (Livalo) – a “me-too” drug to lower cholesterol.  Newly approved drugs can increase competition and lower prices, and in some instances they can be downright better than existing drugs. The benefit to society of "me too" drugs tends to be very low in a class where generics are already in place, though.

The Medical Letter,  a non-profit, noncommercial organization that evaluates medicines, says:

Recommended doses of pitavastatin (Livalo) have not been shown to decrease LDL cholesterol more than recommended doses of other statins with longer safety records and, unlike other statins, no data are available on clinical outcomes with pitavastatin. In addition, pitavastatin has a worrisome potential for clinically significant drug interactions. There is no good reason to use it.

This new medication costs $121 per month, while generic statins cost under $30 per month. 

A commentary in JAMA last week suggests that the FDA should only approve “me too” drugs in classes with existing generics if those drugs are frankly superior to existing drugs, rather than non-inferior, which is required by the current regulations.

I think that’s a great idea. This could help us increase the value of pharmaceutical spending, and help the FDA focus its attention on meaningful innovation.     Alas, the likelihood of passing this kind of revision of the FDA’s role is very low.

My colleague Craig Shelley has pointed out that my last post suggesting that the FDA should consider cost-effectiveness when approving medical devices would also require new legislation. This is also very unlikely.

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The AARP Faults Drug Companies for Price Increases

Today’s Managing Health Care Costs Indicator is 8.5%

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The AARP  reported last week that brand name prescription drug prices rose 8.5% last year.    That’s substantially more than the total increase in the cost of pharmaceuticals - which was 3.2% for 2008 (last publication of National Health Expenditures  or 5.7% (CVS-Caremark- figure above).

What’s the difference?

The overwhelming majority of prescriptions (about 70%) are for generic medications.  However, the overwhelming majority of costs (about 80%) are for that minority of medications that are available in brand name formulations only.  So – generic substitution can lead to giant savings, but these can also be wiped out quickly when brand name prices go up.

The big pharmas aren’t in an enviable position.  Many ‘blockbuster’ drugs have gone generic over the past few years, and Pfizer is preparing itself for Lipitor (atorvastatin) going generic at the end of next year.   The AARP study shows that drugs about to go generic have had large cost increases in recent years.   Why is this?

It’s not to fund the research (long since paid for), but it could help underwrite new research.  It’s not to pay for marketing – the pharmas cease large-scale promotion of a drug in the months before it goes generic.  Brand name price increases are certainly not to address additional production costs – generic manufacturers will be able to produce these for pennies a pill in just a few months.  

The pharmas cannot suggest an increase in ‘value’ provided by a brand name as it nears patent expiry which could justify an increase often over 10%. 

Once again –what causes the prices of drugs about to go generic to increase?

There are a few different underlying reasons.  The first is revenue maximization.  The ability to get a high margin is about to evaporate – make hay while the sun shines!  A darker potential reason is that  the pharmas are seeking to make drugs about to go off patent look as unattractive as possible.  When  Lipitor is about to lose its patent protection, even while a similar drug simvastatin is available for pennies a pill , Lipitor goes up in price by 24%.  Sure, that will move some patients to simvastatin.   But that will diminish profits for the ‘first mover’ generic competitor, as some patients will switch to another statin medication that retains patent protection.   Flomax went up 92% over 5 years; most of that price increase was in the two years before patent expiration.   

Many pharmacy benefit managers would move drugs about to lose their patent protection to a “preferred” tier to gain savings after the drug goes generic.  However, the manufacturers would like patients to move away from drugs about to lose their patent protection – preferably to a medication that will retain patent protection for a number of additional years. 

There aren’t perfect answers here.   Most other developed countries have rigorous price controls for pharmaceutical agents, but this can stifle innovation.   Clearly, “me too” drugs can offer an opportunity to create some price competition, which helps improve value.  The pharmas used to introduce controlled release formulations for a drug about to lose patent protection; we have seen fewer of these end-runs around generic substitution recently.  New regulations to make it more difficult for the brand name pharmas to pay a generic manufacturer for a delay can drive some additional volume to the lower-cost generic earlier.

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Pharmaceutical Detailing

The Wall Street Journal just published an overview of pharmaceutical company detailing - or provision of samples to physician offices. The report the WSJ reviewed is required by the new health care reform bill.

The main participants:
Pfizer: 101 million prescriptions worth $2.7 billion
Merck: 39 million prescriptions worth $356 million
Wyeth 52 million prescriptions worth $64 million
(Wyeth was acquired by Pfizer)
Abbot: 16 million prescriptions worth $32 million

Of note, different companies accounted differently for prescription value (retail vs. acquisition cost) or prescription unit (per pill or per package).

What do the drug companies get for their samples?

They offer samples for high margin medicines.  In most cases, physicians could prescribe lower cost (and therefore higher value) alternatives.   Once a patient starts on the high-cost brand name, it's unlikely he or she will switch to a generic.

The two brand name drugs are mentioned in the WSJ article as samples that are often provided by Pfizer and Lilly cost around $5 per day.  Generic medications cost as little as 50 cents per day (Source: Drugstore.com.)  There is no evidence of increased efficacy of the (expensive) brand name medications.

Many physician offices have eliminated pharmaceutical detailing altogether.   Those offices prescribe more generics, and leave their patients with lower overall drug bills.  This disclosure, along with disclosure of pharmaceutical and medical device company payments to physicians for consulting and other services, can help drive public policy and ultimately decrease medical trend. 

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