Time to Give Pharma a Break?

The pharmaceutical industry has been under attack again this week. It’s not unusual for people to complain about the price of medicines and the fat profits of pharma, yet even when the industry tries to reduce the payment burden, or provide educational assistance, it is criticized.

First, there was a series of lawsuits filed by several union health plans against eight large drugmakers. They charge that, rather than save consumers money, prescription drug coupons illegally subsidize co-pays for brand-name meds and can actually increase health insurance premiums.

Then the US Department of Veteran Affairs issued a tough ruling on how sales reps can promote drugs to VA medical facilities in the future. One of the new restrictions concerns educational programs. Starting next month, reps will have to submit educational materials for VA review 60 days in advance of any scheduled meeting.  Additionally, materials will be approved only if industry sponsorship is adequately disclosed; if industry-sponsored data is adequately compared with non industry-sponsored data and if materials do not contain a company name or logo.

Both of these developments are worrying.  The pharmaceutical industry is already the most regulated business in the world. Further restrictions will result in fewer incentives to bring new drugs to market and will further stifle innovation.

Not convinced that it’s time to give pharma a break?  Then consider this:

During the Super Bowl, a representative of Eli Lilly posted the on the company’s corporate blog that the average cost of bringing a new drug to market is $1.3 billion. A price that would buy 371 Super Bowl ads, 16 million official NFL footballs, two pro football stadiums, pay almost all NFL football players, and every seat in every NFL stadium for six weeks in a row. This is, of course, is ludicrous.

Ludicrous and wrong!   In fact, the average drug developed by a major pharmaceutical company costs at least $4 billion, and it can be as much as close to $12 billion.

Company N° of approved drugs R&D Spending Per Drug ($Mil) Total R&D Spending 1997-2011 ($Mil)
AstraZeneca 5 11,790.93 58,955
GlaxoSmithKline 10 8,170.81 81,708
Sanofi 8 7,909.26 63,274
Roche 11 7,803.77 85,841
Pfizer 14 7,727.03 108,178
Johnson & Johnson 15 5,885.65 88,285
Eli Lilly & Co 11 4,577.04 50,347
Abbott Laboratories 8 4,496.21 56,202
Merck & Co Inc 16 4,209.99 67,360
Bristol-Myers Squibb Co. 11 4,152.26 45,675
Sources: InnoThink Center For Research In Biomedical Innovation; Thomson Reuters Fundamentals via FactSet Research Systems

However, in all fairness to our Lilly rep, the drug industry has been tossing around the $1 billion number for years. It is based largely on an industry sponsored study by Joseph DiMasi of Tufts University performed 12 years ago. It’s always been a nice number for the pharmaceutical industry because it seemed to justify the idea that medicines should be pricey without making it seem that inventing new medicines is so expensive an endeavor as to be ultimately futile.

But as can be seen from the table above, that figure is badly outdated.

The range of money spent is stunning. AstraZeneca has spent $12 billion in research money for every new drug approved, as much as the top-selling medicine ever generated in annual sales. Bristol-Meyers Squibb spent just $3.7 billion. At $12 billion per drug, inventing medicines is a pretty unsustainable business. At $3.7 billion, you might just be able to make money –assuming it can keep generating revenue for at least ten years.

So, why is the cost of drug development so high?  Well, a single clinical study can cost $100 million, at the high end. But the main expense, and the main reason for the differences noted above, is failure of potential new drugs during their development.

Has this blog helped to change your views on the industry? As always, SRxA’s Word on Health would love to hear from you.

Pharma Pulls the Plug on Physician Travel

In what we believe is an industry first, AstraZeneca  just announced that it will no longer be paying for doctors to attend international medical conferences. Industry observers are already speculating that this move could put pressure on competitor companies to follow suit.

AstraZeneca’s Chief Executive Officer, David Brennan, announced the change of policy in low-key fashion at a recent industry conference earlier this month.

We have decided that we will no longer pay for doctors to attend international scientific and medical congresses but will instead focus our educational efforts on local educational opportunities for healthcare professionals,” he said.

In recent years, concern has grown about financial ties between doctors and the pharmaceutical industry and ever tighter restrictions have been imposed.  Gone are the lavish entertainment and free drug lunches of the past, gone too are the pens, mugs and clocks.

Nevertheless, AstraZeneca’s decision to stop paying for doctors to fly to international medical and scientific meetings has taken things to a new level.

It is a dramatic change,” Richard Bergstrom, Director General of the European Federation of Pharmaceutical Industries and Associations, said of the AstraZeneca move. “It is another sign that industry is changing its scientific education practices and I am sure you will see more moves of a similar nature by other companies,” Bergstom continued.

Brennan said he took the step because AstraZeneca should not do anything that could be seen as an inducement to prescribers to use its products. “We start from the position that our products stand on their own merits.”

Although the move will save money, the decision was not taken on cost grounds and any savings would have no significant impact on the company’s bottom line.

AstraZeneca’s move comes at a time of unprecedented regulatory pressure on the drug industry. In the past five years companies have paid more than $15 billion in penalties to the U.S. government alone for alleged violations of laws and regulations. This scrutiny has been ramped up with a wave of investigations under the U.S. Foreign Corrupt Practices Act (FCPA) and the introduction of a new bribery act in Britain.  Bribery legislation is an issue for pharmaceutical companies because doctors can be seen as government officials in those countries where they work for state-funded health systems. So, payments to them could trigger questions over corruption.

Just last month, Johnson & Johnson agreed to pay $78 million to settle British and U.S. charges it paid bribes and kickbacks to win business overseas, in the first settlement by a big drug company since the U.S. began scrutinizing the industry under the FCPA more than a year ago.

Last year AstraZeneca agreed to pay $520 million to settle claims over illegal marketing of Seroquel and is currently being investigated by the U.S. Department of Justice and the Securities and Exchange Commission in connection with the FCPA.

While SRxA’s Word on Health applauds this latest move from AstraZeneca, we can’t help wonder what it means for the medical conference industry.  If doctors have to pay for their own travel and attendance at international events will they simply stop going?

Let us know what you think.

FDA Gets Tough on Asthma Drugs

The U.S. Food and Drug Administration (FDA)  has ordered four drug manufacturers to conduct additional post-marketing clinical trials of their long-acting beta-agonists (LABAs).  LABAs to be studied are AstraZeneca’s Symbicort, GlaxoSmithKline’s Advair Diskus, Merck and Co.’s Dulera, and Novartis AG’s Foradil.

The clinical trials will examine the use of LABAs when used in combination with inhaled steroids. Each of the LABAs plus a corticosteroid will be compared with the steroid alone in patients 12 years of age and older. A total of 46,800 patients will be studied.  Another trial will include 6,200 younger patients, aged 4 to 11, using Advair Diskus.

Last June, the FDA issued warnings on LABAs, saying they should never be used on their own to treat asthma. Although LABAs relax the muscles of the airway to help patients breathe easier, they can cause an increased risk of asthma symptoms that can lead to hospitalizations and death.

The studies will begin later this year, but results are not expected until 2017.

The huge size of the studies signals that FDA wants to be completely sure about the safety profile of these drugs as they are used so widely.

Clearly however, such large study populations might pose financial challenges for the manufacturers.

As of now, Word on Health has heard that Glaxo plans to fully comply with the requirement and Astra Zeneca is finalizing their study protocol with the agency.

Novartis said it was still reviewing the post-marketing requirements issued by the FDA, while Merck said it would have a comment shortly.

We’ll of course bring you updates as they occur.