Transcript National Health Insurance and the Drug Industry Why and How

National Health Insurance
and the Drug Industry
why and How Should Single Payer
Advocates be Critical of Drug Industry
Gordy Schiff MD
Senior Attending Physician Cook County Hospital
Professor of Medicine Rush Medical College
Sayeh Nikpay
Project Coordinator, Formulary Leveraged Improved Prescribing, Cook
County Hospital
Outline
1. Principles of Conservative Prescribing
Multiple principles directly conflict w/ profit imperatives
Why NHP is “good medicine;” need to chose sides
2. Drug Costs
Overview and ammunition
To understand and illustrate way violating public trust
3. Special Role Industry in Undermining NHI
Toxic links between NHI and pharmaceutical industry
Medicare Part D
4. Antidotes to best Treat Problem
24 Suggestions for More
Conservative/Cautious/Mindful/Careful Prescribing
Directly conflict with interests and
messages of pharmaceutical companies
Physicians need to choose sides
--their patients or the industry
More than personal moral ethical issue
Future of the profession and practice of
medicine
Need for collective action
Abdication by professional organizations
U.S. Deaths from Vioxx
More than Vietnam War
 1/1999--9/2004: 106.7 million rofecoxib prescriptions in US
17·6% were high-dose, mostly to older patients
 In 2 Merck-sponsored randomised trials: 2,25 relative risks for AMI
5x for high-dose rofecoxib and 2x for the standard dose
Background rate AMI control NSAID users varied from 7·9 per
1000 person-years in CLASS1 to 12·4 per 1000 person-years in
TennCare.
 Using Merck studies relative risks w/ these background rates
88,000– 140,000 excess cases serious coronary disease in US
 Using US national case-fatality rate-44%,suggests thousands of
deaths attributable to rofecoxib use (~38,000-61,000)
Graham Lancet 2005
COSTS HUMAN and
FINANCIAL
Sager FDA Testimony 4/04
Are Drug Costs Too High?
Drug Prices Too Low!
Academic economist defending monopoly pricing for
lifesaving drug:
“Because the patients who used the drug had no
alternative, the drug company had a fiduciary
responsibility to its shareholders to raise the price to
the highest level the users considered their lives to be
worth. Because the drug’s current price was clearly
below this amount, the company was in fact
underpricing the product.”
cited in Korten, Post-Corporate World 1999
Drug Costs Too High: Multiple Yardsticks
Any Way You Look at it…..too high to swallow
1 Too expensive for patients to afford
Much is out of pocket for sick, chronically ill.
2 Relative to inflation: general inflation, health inflation
3 Profits--extreme outlier compared to other industries
4 What it really costs to produce
% production, marketing, profits vs.”reasearch”
paying for therapeutic advances vs. “me-too” drugs?
Estimates for R & D costs
5 Relative to generic alternatives
6 Relative to other countries, VA
7 High social costs-harm from inadequately studied and
inappropriately over-prescribed medication
2004 Revenue Allocation for Top 7 US Pharmaceutical Cos
Marketing, Advertising
and Administration
Other
32%
36%
18%
14%
Research & Development
Profits (net income)
Source: Families USA, The Choice: Health Care for People or Drug Industry Profits, 2005
2004 Revenue Allocation for Top 7 US Pharmaceutical Cos
Marketing, Advertising
and Administration
Other
32%
36%
18%
14%
Research & Development
Profits (net income)
Source: Families USA, The Choice: Health Care for People or Drug Industry Profits, 2005
MEDICAL-PHARMACEUTICAL
INTERACTIONS
 GIFTS
 MEALS
 TRIPS
 HONORARIA
 LIMO RIDES
 TICKETS TO EVENTS
 SPA OUTINGS
 PROFESSIONAL SOCIETY
SUPPORT
 SAMPLES
 IMPROVING MD SELFESTEEM
 DETAILING
 CME EVENTS
 STAGE 4 TRIALS
 GRANT SUPPORT
 SPEAKERS BUREAUS,
CONSULTANCIES
 INVESTMENTS
 ACADEMIC-INDUSTRY
PARTNERSHIPS
 CONTRACT RESEARCH
ORGANIZATIONS
MD’s and Drug Industry
Summary of Evidence
1. MD’s are influenced by industry
promotion, although they believe they are
not and also believe their colleagues are
2. Marketing efforts are highly sophisticated
package of activities including educational,
surveillance, predictive, and ideological
measures.
MD’s and Drug Industry
Summary of Evidence
3. Extent and nature of relationships tying
MDs and Industry raise serious ethical and
public concerns.
4. Significant proportion of inappropriate
drug use linked to above 3 issues.
5. Problems are getting worse
2004 Revenue Allocation for Top 7 US Pharmaceutical Cos
Marketing, Advertising
and Administration
Other
32%
36%
18%
14%
Research & Development
Profits (net income)
Source: Families USA, The Choice: Health Care for People or Drug Industry Profits, 2005
PROFIT “FEVER” CURVE
Public Citizen Congress Watch 2003
Kaiser Family Foundation Health Poll Report Survey(conducted Feb. 3-6, 2005)
Kaiser Family Foundation Health Poll Report Survey(conducted Feb. 3-6, 2005)
2004 Revenue Allocation for Top 7 US Pharmaceutical Cos
Marketing, Advertising
and Administration
Other
32%
36%
18%
14%
Research & Development
Profits (net income)
Source: Families USA, The Choice: Health Care for People or Drug Industry Profits, 2005
Even this 14% ….
is a misleading drug claim
Up to 80% of “new drugs” are for “me
too” drugs: new formulations or products
developed to grab a share of existing
markets
Figures claimed for research and
development costs are grossly inflated
Ignores public dollars that contribute to
new drugs
The term “innovation” covers 3 concepts :
- the commercial concept
- the technological concept
- the concept of therapeutic advance
A clear difference between:
 newly marketed
substance, or
indication, or
formulation, etc.
 industrial
innovation
(chemistry,
biotechnology)
 therapeutic
advance :
« a new treatment
that benefits the
patient when
compared to existing
options »
(ISDB Declaration) -
ISDB Declaration on therapeutic advance
in the use of medicines (November 2001)
The 3 components of therapeutic advance
1- efficacy
2- safety
3- convenience
Prescrire’s rating system
BRAVO
The drug is a major therapeutic advance in an
area where previously no treatment was
available
A REAL ADVANCE
The drug is an important therapeutic innovation
but has certain limitations
Prescrire’s rating system
OFFERS AN ADVANTAGE
The drug has some value but does not
fundamentally change the present
therapeutic practice
POSSIBLY HELPFUL
The drug has minimal additional value,
and should not change prescribing habits
except in rare circumstances
Prescrire’s rating system
NOTHING NEW
The drug may be a new substance but is
superfluous because it does not add to
the clinical possibilities offered by
already available treatments
NOT ACCEPTABLE
Drug without evident benefit but with
potential or real disadvantages
Prescrire’s rating system
JUDGEMENT RESERVED
The editors postpone their judgement
until better data and a more thorough
evaluation of the drug are available
23 Years Ratings New Drug “Advances”
by Prescrire (1981-2003)
Rating
#
%
Bravo
A real advance
Offers an advantage
Possibly helpful
Nothing new
Not acceptable
Judgment reserved
Total
7
77
217
455
1,913
80
122
2,871
0.2%
2.7%
7.6%
15.8%
66.6%
2.8%
4.2%
100
Other Estimates Me-Too #’s
2002: FDA approves 78 drugs
17 new active ingredient (22%)
7 improved treatments (9%)
Over past 6 years FDA classification of
newly approved drugs
78% - “unlikely better than existing drugs”
60% - didn’t even contain new active
ingredients
Angell, AARP interview 2004
2005--No Better
Farnacia Hospitalaria 2006
But all these great
new drugs do cost
big bucks to research
and develop
?
$802,000,000
Tuft’s center study, DiMassi 2003
“Sophisticated” analysis
Industry Funded
“Evidence” for high prices and patent
protection
Widely quoted for 2 year prior to publishing data
Inflated by key biases
Capitalized (opportunity) cost included
Tufts Study Biases
 Confidential, Voluntary, Anonymous data
10 firms and 68 drugs
Don’t disclore which firms/drugs?
What is being called R&D?
Like drug pricing in general: lack of transparency
 Estimates costs only for Self-Originated, New
Molecular Entities
Most expensive kind of drug
Only 22% of branded-drug market
 Pretax $
Fails to include tax deductions and credits
As high to 50% in the 1990’s (OTA-1993)
Light Jl Health Economics 2005
Also Included Capitalized Cost
 Roughly doubles simple cost calculation
Like including interest on sticker price of car
 Widely misunderstood
Need to recognize that this is true cost
Commonly used financial tool
 But biases in applying this tool
DiMassi used unusually high rate 11% compounded
Higher than standard for commercial industries
Higher than official rates recognized by the government.
Light Jl Health Economics 2005
Alternative Estimates
Jamie Love - calculations vary based on
drug
Public Citizen $110
Marcia Angell - $266 million
Don’t factor in capitalized (opportunity) cost
U.S. Drug Companies Budget only 7.1% of Sales, Net to R&D
R&D
18.4%
R&D
11.8%
Net
Corporate
Cost 7.1%
Taxpayers’
Contributions
4.7%
PhRMA
Myth
NSF
Reality
D.Light
U.S. Drug Companies Budget less than 1.5 cents per dollar sales to
Basic Research for Breakthrough Drugs, after taxes
Applied
Research and
Testing, 5.8%
of Sales
Basic Research,
1.3% of Sales
Net R&D Budget
(7.1% of sales)
D.Light
Taxol - Taxing Us All
Rare glimpse into dealings NIH & Industry
Public Citizen sued, denied info; GAO finally got
Developed
@
taxpayer expense
NIH $138 million over 20 yrs
Plus NIH did 5/6 clinical studies used for FDA approval
Gave to Bristol Meyers Squibb
$35 million, w/ 0.5% royalty
vs. 4.5% Florida State Univ cut of Taxol sales
BMS sales from the drug $9 billion 1993-2000
Medicare spent $687 million 1994-99 on Taxol
M. Angell Truth About Drug Cos 2004
Public Citizen Health Letter 8/2003
Other public treasury rip-offs
Tax Pill-fering
How Merck Saved 1.5b paying itself for drug patents
Merck sets up subsidiary in Bermuda, in partnership w/ British bank
Quietly transfers patents for blockbuster drugs to new subsidiary
Merck pays royalties to subsidiary for licensing Mevacor, Zocor, etc.
Subsidiary loans money back to Merck to buy Medco.
Arrangement allows some of the profits to disappear into “Bermuda
triangle” between different tax jurisdictions.
 Merck avoids $1.5 billion in federal taxes over next 10 years.
 Later, Merck liquidates company & recovers its money





Drucker, Wall St. Jl 9/06
$1.5 Billion = 3 New Cook County Hospitals
Sager FDA Testimony 4/04
“The American situation shows that high drug
prices are not inevitable: they simply reflect
political choices which, by definition, can be
modified”
Prescrire-The Drug Price Explosion 2/05
How is this all related to Single Payer
National Health Insurance?
Haunting (and Daunting) Parallels
Affordable
Fair
Efficient
Publically accountable
Safe and high quality
2 Linked Challenges
Can't have national health insurance
without drug reform.
Can’t have drug reform without national
health insurance
Gridlock?
...or Opportunity for real progress
Connections NHI and Drug Industry
Lobbying, campaign finance corruption
>1/each member congress
~own full time deal-person
Industry actively opposing NHI
Keep government out of medicine cabinet
High drug costs obstacle affordable NHI
Medicare Part D
2004 Revenue Allocation for Top 7 US Pharmaceutical Cos
Marketing, Advertising
and Administration
Other
32%
36%
18%
14%
Research & Development
Profits (net income)
Source: Families USA, The Choice: Health Care for People or Drug Industry Profits, 2005
Drug Industry Lobbying
 $108.6m spent industry-wide- 2003:
 Total $750m spent 1997-2003
 Employed 824 lobbyists (2003)
8 lobbyist per member of senate
45% lobbying for Industry and HMOs have
“revolving door” connections
 Both sides of the aisle (2005-06)
No. 1 recipient R.Santorum (R-PA) $977,000
No.2 recipient H.Clinton (D-NY) $854,000
Shape Medicare
Block Medicare
Drug Benefit
Drug Benefit
Citizens for Better Medicare
 Sham grass-roots org
 $65m Television ads
 Director is former PhRMA
marketing director
 Multiple “independent” partner
groups largely industry funded
 Gave $10 phone cards to
seniors to call kids convey their
fears
 Weren’t citizens…..weren’t for
better medicare
“Worst Federal Health Legislation Ever to Pass”
Ted Kennedy
 Premiums
 Co-pays
 Deductibles
 Coinsurance
 Gaps
 CAPS
 Means tests
 Discount cards
Proven failures
 Formulary restrictions
 PBMs
 For many cost more
 Bans negotiation
 How it passed
Sorted details
Medical Economics
1/9/04
But Politicians Ones that Can Really Cheer
Paid Well to Protect High Prices
Particularly Problematic
Areas
Enrollment mass confusion
Website referral
Penalty
Forced/Involuntary plan assignment
Donut hole
Public hospitals penalty
Discount cards (remember them?)
Donut Hole: Not only Bad Now But…..
Keeps Growing
“Roller Coaster” Part D Bumpy Ride
 In 1st year under the standard drug benefit
-38% will be subject to no-coverage gap ("doughnut hole,”)
-14% will exceed the threshold of catastrophic coverage
 Over three years, enrollees, on average, will incur out-ofpocket costs of 44% of their total drug spending. Enrollees
with higher spending could pay as much as 67% of total
costs.
Commonwealth Fund "Riding the Rollercoaster: The Ups and Downs in Out-of-Pocket Spending Under
the Standard Medicare Drug Benefit” (Health Affairs, July/August 2005)
Lower Part D Drug Costs?
Represent Policy Failures
 Shifting costs drugs from Medicaid to Medicare for dually-eligible
has actually raised costs for government payers.
 Study top 25 prescribed brand drugs from 41 PDPs in one
Minnesota zip code 1/06
 Prices 14% -50% above those Medicaid would have paid.
 Most Medicare D prescriptions 20%-30% above Medicaid prices.
 Not just implementation failures, but policy failures
 Competing PDP providers not likely to lower drug prices
Patients shop for premiums; can’t shop for best drug prices
Schondelmeyer Congressional testimony 1/20/06
Editorial:
New England Journal of Medicine
“An industry so important to the public
health and so heavily subsidized and
protected by the government has social
responsibilities that should not be totally
overshadowed by its drive for profits.
There is a need for a better balance
between the interests of the
shareholders and those of the public.
M.Angell 6/22/00 NEJM
IOM Report on FDA & Drug Safety
Reform FDA conflicts
Panels
Approval funded by industry
Leadership revolving door
Shift emphasis toward post approval safety
More oversight re: advertising
No direct to consumer ads 1st 2 years
Black box warnings
More comparative efficacy information
Psaty NEJM 10/06
A few Simple Prescriptions
 Publish all the trials, not just + ones
Int’l Com Medical Jl Editors clinical trial registry
 Compare drugs with standard therapy rather than
just placebos
Are they really any better than what we have
 More meaningful trials and outcomes data
Efficacy vs. effectiveness
Full spectrum of patients and real interactions
 More transparency of costs
True cost of drug development
Less secrecy about negotiated prices