Transcript [Presentation title]

DRAFT—Preliminary work product
Marketing and Advertising of
Prescription Drugs
An Economic Perspective
May 3, 2012
Richard Manning, PhD
DRAFT—Preliminary work product
2
Some Economic Concepts
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Information is a good much like any other: the higher the price, the
less people consume
Price
Demand for
Information
Quantity
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How much information do you consume?
•
Do you know:
 Names of your great grandparents?
 Causes of death for grandparents?
 What does Medicare cover (Parts A, B, C and D)?
 What are the implications of the Affordable Care Act for Medicare part D?
 Age you will qualify for Social Security/Medicare?
 The name of your U.S. House Representative?
 His/her views on vouchers for education?
 What was on the agenda at your last City Council meeting?
•
Because information is costly, people are “rationally” unaware of a wide
range of information
•
The level of “rational ignorance” varies
 Cost of information gathering and retention
Time cost/foregone income
Difficulty of concepts
 Perceived value/importance of information
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Some pros and cons of marketing and advertising
• Marketing and advertising can lower the cost of information for
consumers and reduce the level of “rational ignorance.”

More and better information typically allows consumers to make
choices that enhance their well being
• Marketing spending may lead to higher prices, but also may lead
to lower prices through increased competition


Both theoretical and empirical literature are ambiguous on the
relationship between price and marketing
What does seem clear is that marketing and advertising costs are not
simply “added” to prices that would be lower if marketing were
prohibited
• Marketing typically leads to increased utilization of marketed
goods

Increased utilization can be either good for consumers or bad,
depending on a variety of factors
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Because information is costly, potential conflicts of interest abound
• Auto mechanics recommend and provide auto repair service
• Auto dealers describe the characteristics of a new – or used(!) car
and sell the car
• Builders recommend construction materials, negotiate prices and
then decide on the materials to use
• Dentists examine teeth and tell patients how many fillings/other
procedures they need
• Physicians decide whether to treat a patient or to refer him/her to
someone else
• Surgeons recommend whether to have surgery or to seek medical
alternatives
• Pharmaceutical sales representative compensation may depend
on prescriptions written for the drugs he/she promotes
• Real estate agents provide advice on prices and earn
commissions based on transacted prices
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Can potential conflicts of interest be eliminated?
Eliminating all situations in which conflicts of interest
might arise would be very costly
• No auto mechanics, no dentists, no attorneys, no sales people,
etc.
Mechanisms exist to limit conflict of interest problems
• Government regulation/anti-fraud measures

FDA and OIG oversight roles in prescription drug industry
• Professional societies establish standards
• Entities have a real incentive to self-police

Repeated interaction makes behaving badly today costly tomorrow – a
good reputation has value
• Competitors provide alternative sources of information and/or
service
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Common perceptions
• Doctors are scientists who learn all they need to know about what
is new and important from medical journals
• Doctors know what patients need and will tell them when they
need it
• Patients understand what their doctors prescribe and take their
medicine according to direction
• Companies spend too much on marketing and promotion
• Marketing drives up the cost of medicines
• Stimulation of demand for medicines is inappropriate and
encourages unnecessary spending
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What about studies that show contact with sales professionals
affects physician behavior?
 Several of these studies suffer from severe limitations
 Absence of control groups
 Prior assumptions about negativity of impact
 Ignore potential information component of interaction between
physicians and representatives
 Don’t evaluate health impact on patients
 Nirvana fallacy
 When the real world is compared to an imagined perfect
world, the real world always looks bad
Source: Paul Rubin, PhD, Pharmaceutical Marketing: Medical and Industry Biases, J of Pharmaceutical Finance, Econ & Policy 2004
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Potentially productive impacts of marketing activity
• Improved access to health care and
appropriate utilization
 Reduced underutilization
• Improved patient adherence
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Under treatment is an important problem for US health care
Prevalence, Diagnosis, and Treatment
Selected Disease Categories
Prevalence
(Millions)
24 M
48 M
100%
20 M
79 M
62 M
4M
8M
7M
1M
1M
8M
2M
80%
60%
40%
20%
Undiagnosed
Diagnosed but Untreated
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ep
r
II
0%
Diagnosed and Rx-Treated
Source: Internal analysis, completed March 2006, based on the following references: Decision Resources, Datamonitor, Mattson-Jack,
NHANES, Cogent, JAMA, DDC Consumer Prevalence Survey, Synovate HIV Therapy Monitor, Verispan, National Osteoporosis Risk
Assessment, Centers for Disease Control and Prevention
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People tend to discontinue therapies for important conditions
Figure 2.
Source: Ellis JJ, Erickson SR, Steveson JG, et al. Suboptimal Statin Adherence and Discontinuation in Primary and Secondary Prevention
Populations. Journal of General Internal Medicine. 2004; 19:638-645.
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Patients’ reasons for not taking medicines appropriately often
involve issues related to information
70%
60%
64%
50%
40%
30%
36%
35%
33%
31%
28%
20%
25%
20%
20%
19%
10%
I forgot I had no I wanted
to take symptoms to save
or the
them
money
symptoms
went away
I had
I didn’t
I had The drugs Nobody
The drugs
I didn’t
think I
painful or prevented reminded difficulty
tasted or
believe
the drugs needed to frightening me from me to keep getting the smelled
doing
taking prescription unpleasant
take them
side
were
things
filled
or refill it
effects
effective
33 percent were often or very often noncompliant for any reason.*
Source: The Wall Street Journal Online/ Harris Interactive Health Care Poll (Vol.4, Iss. 6). Prescription Drug Compliance a Significant Challenge for Many
Patients, According to New National Survey. Mar. 29, 2005.
*Includes those with any drugs prescribed in the last year. N=2508 adults.
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Trends in pharmaceutical
industry marketing
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Annual growth rate of Rx drug expenditure in National Health
Expenditures 1961-2010
20%
18.4%
18%
16%
14%
13.9%
12%
10%
8%
6%
4%
2%
Broadcast DTC
begins, 1997
1.2%
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
0%
Source: http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/index.html
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Total industry promotional spending and growth
$34
+17%
+4%
$33.0
$32.9
Promotional spending ($ billions)
$33
+1%
-3%
$32
$31.9
-4%
-1%
$31.6
$31.5
$31
$32.1
$30
-8%
$29.6
$29
+16%
$28
$28.3
$27
$26
$25
2003
Source: SDI/HPSA, IMS
2004
2005
2006
2007
2008
2009
2010
DRAFT—Preliminary work product
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Total industry promotional spending by type
$18
15.5
$16
14.8
Promotional spending ($ billions)
14.4
$14
13.5
13.5
14.0
14.1
9.9
10
4.4
4.4
3
3.2
13.8
$12
9.6
$10
9.4
9.4
9.6
9.7
8.3
$8
5.7
$6
4.5
$4
4.9
5.4
3.6
2.4
2.8
2.7
2.6
2.8
4.1
1.7
$2
0.4
0.4
0.4
0.4
0.4
0.4
0.3
0.3
2003
2004
2005
2006
2007
2008
2009
2010
$0
Dollarized Samples
Dollarized Physician Details
DTC
PMEA
Journal
Source: SDI PSA/HPSA Dollarized Details IMS Retail Value of Samples. CSD Meetings, SDI Journal Corol/Nielsen DTC SDI ePromo SDI PSA/HPSA
Detail Count. SDI PSA/HPSA Package Count.
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Industry Rx DTC spending
2008
Share
Branded
4,172,433
94.4%
Disease
specific
196,747
2009
($000)
2009
Share
-7%
4,218,529
95.0%
4.5%
-24%
174,540
51,382
1.2%
-38%
4,420,563
100%
-9%
Corporate
image
Total
% Change
(‘08 vs. ‘07)
% Change
(‘09 vs. ‘08)
2010
($000)
2010
Share
+1%
3,886,521
94.8%
-8%
3.9%
-11%
147,923
3.6%
-15%
45,988
1.0%
-10%
64,518
1.6%
+40%
4,439,056
100%
+0%
4,098,962
100%
-8%
$5,661
DTC spending ($MM)
$6,000
$5,000
$4,518
51%
$4,000
40%
45%
$4,865
$2,506 $2,707
$894
$4,833
$4,421 $4,439
27%
6%
10%
0%
8%
7%
-15%
$0
1999
2000
2001
2002
2003
DTC Spending ($MM)
Source: Nielsen Monitor Plus
40%
20%
24%
16%
$1,254
1998
$4,099
30%
0%
2004
2005
2006
2007
YoY Spending Growth
2008
-10%
-8%
-9%
1997
50%
$2,982
$1,823
$2,000
60%
$3,637
38%
$3,000
$1,000
% Change
(’10 vs. ’09)
2009
2010
-20%
YoY spending growth
2008
($000)
DRAFT—Preliminary work product
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U.S. pharmaceutical sales force trends
120,000
99,418
+11%
Number of sales reps
100,000
99,626
+0%
105,176
+6%
109,128
+4%
109,596
+0%
102,022
-7%
97,609
-4%
89,724
+20%
87,641
-10%
80,607
-8%
80,000
60,000
40,000
20,000
0
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
The SDI data are as of the end of 2010 and may not reflect internal numbers. Total includes all reps other than management, contract and part time reps.
Source: SDI 2010 Q4 Sales Force Structures and Strategies
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Evolving issues involving
marketing
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Fraud settlements and judgments, as reported by Civil Division of
US DOJ
$3,500
Health and Human Services
$3,000
Department of Defense
Other
Million dollars
$2,500
$2,000
$1,500
$1,000
$500
$0
1987
1989
1991
Source: http://www.taf.org/FCA-stats-2010.pdf.
1993
1995
1997
1999
2001
2003
2005
2007
2009
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Nearly 60% of top 137 settlements involved health care entities
PBMs/pharmacies
5%
Health insurers Clinical labs
5%
3%
Medical device
mfrs/whlslrs
8%
Non-health care
entities
41%
Health care providers
17%
Pharmaceutical mfrsbrand
19%
Pharmaceutical mfrsgeneric
1%
Source: http://www.taf.org/statistics.htm.
Health care
consultants
1%
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Off Label Promotion:
What distinguishes these two hypothetical cases?
Case 1
•
•
•
•
ACME Air Traffic Inc. (AAT) manufactures and sells devices that facilitate communications between commercial
airliners and their maintenance centers.
Beta Airlines (BA) mechanics have learned through their experience that if they do X with the device (an action not
included in the manufacturer’s specified uses) they will be able to track Y more effectively, identifying when parts
need to be replaced in a more timely way, saving BA inventory costs, down time on planes and perhaps enhancing
passenger safety.
AAT looks into the BA mechanics claims and decides they are right. They instruct their sales team to start telling
other customers about the modified use of the device.
The new use of the device becomes widespread. ACME profits rise from additional sales, airplane maintenance
around the world improves and accidents are reduced.
Case 2
•
•
•
•
•
InjectaTherapy Inc. (IT) manufactures and sells a medicine (Z) that has been approved for a rare lung function
disorder.
Dr. Jones, a respiratory specialist, uses Z to treat several patients with this condition, that happens to frequently be
co-morbid with type II diabetes. Over time, Jones notices that some of his overweight patients that are using Z
lose weight and see reduced blood sugar levels.
Jones mentions this observation to Mike, a sales rep for IT. Not remembering his training about off label
promotion, Mike tells Dr. Smith, also a respiratory specialist, and Dr. Johnson, an endocrinologist, about Dr. Jones’
experience with Z.
Dr. Johnson is intrigued so she starts talking to some of her patients about this interesting new use of Z. Some
patients want to try it so she prescribes it. She sees no adverse effects, but some of her patients experience
dramatic weight loss and such improved blood sugar levels that they are no longer considered diabetic.
Over time, Dr. Johnson tells her colleagues and the use of Z becomes widespread for the treatment of diabetes.
Treated patients have better energy, and happier lives, and IT’s profits increase due to increased sales.
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Questions for thought
• Evolving information environment


How will companies, regulatory authorities and the courts deal with
information demand and supply through social media?
Will broadcast DTC be relevant in 10 years?
• False Claims, Off-label promotion, etc.





Why is the pharmaceutical industry disproportionately involved in such
cases?
What is the appropriate role of demonstrating patient harm as part of
an off-label promotion or other related claim?
Does it make sense that an insurer can require a covered patient to
fail on a medication for an off-label indication before covering a
different medicine on-label?
How (if at all) to address potentially perverse incentives provided to
disgruntled employees by Qui Tam litigation opportunities?
Do current trends endanger patient health?
24
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BACK-UP SLIDES
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FDA physician survey reported largely positive impact of
advertising on interaction with patients
Did the fact that this patient
saw an advertisement...
Have beneficial
effects?
Cause
problems?
41%
18%
Had Benefits
 When a patient asked about a drug,
88% of the time they had the
condition that the drug treated
 80% of physicians believed patients
understood what condition the drug
treats
 The vast majority (91%) of
physicians said patients did not
attempt to influence their treatment
in a way that would be harmful
Caused
Problems
Source: FDA Talk Paper, FDA Releases Preliminary Results of Physician Survey on Direct-to-Consumer Rx Drug Advertisements, January 12, 2003.
note: sample n=500
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Share of US National Health Expenditure
45%
40%
35%
30%
25%
20%
15%
10%
5%
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
0%
Total Hospital Expenditures
Total Physician and Clinical Expenditures
Total Prescription Drug Expenditures
Source: http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/index.html
DRAFT—Preliminary work product
28
Marketing expenditures, by type, for prescription drugs
$14
Billions of 2008 dollars
$12
$10
$8
$6
$4
$2
$0
1999
2000
Detailing
2001
2002
Direct to Consumer
2003
2004
Meetings and Events
2005
2006
2007
2008
Journal Advertisements
Source: Congressional Budget Office based on data from SDI’s promotional audits.
Note: Detailing refers to the practice in which pharmaceutical representatives make sales calls to physicians and other health care professionals to discuss
the uses of a particular prescription drug and its benefits for patients.
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29
DTC advertising expenditures for newly approved drugs as a share
of all promotional expenditures for those drugs
40%
35%
30%
25%
20%
15%
10%
5%
0%
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Source: Congressional Budget Office based on data from SDI’s promotional audits.
Notes: For this analysis, drugs are considered newly approved during the first two years following approval by the Food and Drug Administration.
DTC = direct to consumer
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30
Number of retail prescriptions of brand-name drugs, by DTC
advertising use and age of drug
600
500
(Millions)
400
300
200
100
0
2004
DTC, not newly approved
2005
2006
No DTC, not newly approved
2007
DTC, newly approved
2008
No DTC, newly approved
Source: Congressional Budget Office based on data from SDI’s promotional audits.
Notes: For this analysis, drugs are considered newly approved during the first two years following approval by the Food and Drug Administration.
DTC = direct to consumer
DRAFT—Preliminary work product
Excerpts from PhRMA Marketing Code
Adopted July 1, 2002; Updated January 1, 2009
•
•
•
In interacting with the medical community, we are committed to following the
highest ethical standards as well as all legal requirements… This Code is to
reinforce our intention that our interactions with healthcare professionals are
professional exchanges designed to benefit patients and to enhance the
practice of medicine. The Code is based on the principle that a healthcare
professional’s care of patients should be based… solely on each patient’s
medical needs and the healthcare professional’s medical knowledge and
experience.
Our relationships with healthcare professionals are intended to benefit
patients and to enhance the practice of medicine. Interactions should be
focused on informing healthcare professionals about products, providing
scientific and educational information, and supporting medical research and
education.
No grants, scholarships, subsidies, support, consulting contracts, or
educational or practice related items should be provided or offered to a
healthcare professional in exchange for prescribing products or for a
commitment to continue prescribing products. Nothing should be offered or
provided in a manner or on conditions that would interfere with the
independence of a healthcare professional’s prescribing practices.
Source: http://www.phrma.org/sites/default/files/108/phrma_marketing_code_2008.pdf