+ Argument 4. Unethical marketing
to consumers and doctors
The fourth major charge against the drug companies is that they indulge in wasteful and unethical marketing practices. The drug companies don't directly report the amount they spend on marketing but I heard average estimates from 9% to 31% of revenue, as compared with the roughly 13% allocated to R&D. These marketing practices, critics say, distort and demean the practice of medicine.
A much quoted example is Merck's 167 million dollar television campaign starring former Olympic skater Dorothy Hamill which promotes the virtues of the anti-arthritis drug Vioxx. For state politicians like Oregon's John Kitzhaber struggling to manage dwindling Medicaid budgets, such direct-to-consumer (DTC) advertising campaigns are an abomination. According to Kitzhaber, Merck spends more advertising Vioxx than "Anheuser-Busch spends to advertise Budweiser. It's more than PepsiCo spends to advertise Pepsi Cola, it creates a demand for a particular brand name drug, without any consideration of the fact that there may be other drugs to treat the same condition, that are just as effective or more effective, but less costly."
Evaluating this argument:
Every American will have noticed that in recent years (since 1997 to be precise) pharmaceutical companies have been promoting their drugs directly to consumers in television advertisements. What justification is there for this commercialism of medicine? According to Eli Lilly CEO, Sydney Taurel, direct-to-consumer advertising has some very important public health benefits, because most advertisements deal with under-treated conditions "such as depression, such as diabetes, such as hypertension, such as high cholesterol...direct-to-consumer advertising helps educate patients and bring them to doctor's offices." Taurel fails to mention that drugs for allergies (like Clarinex) and sexual function (Viagra) are also among the most heavily advertised medicines on television. But his argument, to the extent it is true, raises an important question, should it really be the job of the drug companies to educate patients or should that be left to their doctors?
In principal, says Princeton economist Uwe Reinhardt, doctors should be the informed actors in the pharmaceutical market place. "They should tell the patient 'yes, it's a good drug' or '[no] actually let me show you I have a study here that (says) that drug for the money isn't worth it'. But in fact even doctors tell you that most of their information about drugs comes from the people who are trying to sell a drug."
Therein lies the problem. Drug companies spend more, far more, marketing direct to physicians than they do to consumers. Tens of thousands of "drug detailers" provide free samples and "educational materials" to primary care physicians. The drug companies also advertise extensively in medical journals and sponsor conventions and conferences. The industry argues that that these various activities provide a valuable function educating physicians about new drugs.
Few reasonable people buy this argument. The First Amendment might protect such marketing practices, but as a system of imparting objective medical information to doctors, it is flawed. As Angell puts it, "there is a conflict of interest there. It's as though you look to beer companies to educate you about alcoholism." Of course, the real purpose of marketing is not "education" but to persuade consumers and physicians to choose your brand in preference to a competitors' (or to a much cheaper generic product). While the current system might suit the drug companies, critics argue that it exacerbates the fiscal woes of the American health care system. For if patients and doctors are "persuaded" to make unnecessarily expensive purchases then valuable medical resources will be wasted.
Oregon Governor John Kitzhaber told me a story to illustrate the downside of drug marketing. "I have a young man who works for me that had pain in his wrist and he went to see his doctor and came back with a prescription for Celebrex, which is an enormously expensive anti inflammatory drug that costs about 75 dollars a month. There's no clinical reason to suggest that Celebrex is any more effective than across the counter Ibuprofen, Advil, at 7 dollars a month, for an otherwise healthy young man with no history of gastrointestinal problems. So the difference is 68 dollars, 68 dollars that contributed to the escalation of health care costs but didn't produce a health benefit."
Even supporters of healthy private sector drug industry concede that modern marketing practices are wasteful. Richard Evans, an industry analyst from Sanford Bernstein and Company claims that "there's just way too many sales people. The best thing to do for the industry model is to pull back on sales and marketing 5% and spend it on R&D."
So why don't they do it? It would certainly improve their image. The obvious difficulty is that if one company did it alone it would rapidly lose market share. All companies would have to agree to act together. "It's not that the industry loves having a lot of sales reps," says Evans, "I don't know a single CEO that wouldn't prefer to trade sales people for research, but you can't unilaterally disarm. It's a pathway to putting yourself out of business."
Of course, the industry might have less incentive to spend money "educating" physicians if the medical profession did a better job of educating itself. One might ask why the American Medical Association or the Academic Medical Colleges do not provide physicians with "objective" information and continuing education about pharmaceuticals. Why has the medical profession ceded this function to the drug companies? In exasperation, some states have taken matters into their own hands. In 2002, Oregon set out to perform an objective, scientific analysis of the cost, efficacy and price of prescription drugs--a kind of Consumer Reports--to guide physicians' Medicaid drug choices.
The idea of objective head-to-head product comparisons is commonplace outside medicine. Says Kitzhaber, "Imagine how difficult it would be for you, as a consumer, to buy a toaster or a car or an appliance without Consumer Reports. It gives you objective information to compare those products. That doesn't exist in the drug market today. Really all we're trying to do in Oregon is to create a Consumer Reports for prescription drugs, for providers and for consumers."
Absolutely right. This argument definitely goes to the critics.
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2 The 9% figure is from IMS Health. Richard Evans of Sanford C. Bernstein reckons it's 16%. Marcia Angell and Arnold S. Relman argue that the true figure is even higher. In their article, "America's Other Drug Problem", New Republic, December 16, 2002, they contend thatăif one includes the cost of medical "education"--the drug company's spend about 31% of revenue on marketing.
3 In 2002 Oregon passed legislation to set up a so-called "preferred drug list." Already some major blockbusters e.g. Lipitor, Vioxx, Celebrex, Prilosec and Nexium have failed to make the list.