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politics, profits & pharma by johnathan cohn

The pharmaceutical industry is one of the most powerful interest groups in Washington -- one that has rarely shied away from wielding its influence with Congress and the FDA. But are the industry's lobbying efforts always good for business?

Nov. 13, 2003

In 1906, when Congress was about to pass the first federal law to protect food and drug safety, a trade group representing companies that made medicines (or what passed for them back then) warned darkly: "Such a law would practically destroy the sale of proprietary remedies in the United States."

The relationship between drug manufacturers and those who would regulate them had not improved much by the 1930s, when Congress was on the verge of passing the first law requiring drug makers to demonstrate that their products were safe before selling them. The bill, industry groups wrote in a letter, "will put thousands of men and women out of work. It will close dozens of manufacturing plants and hundreds of stores. … It will help none." And in the 1960s, when Congress was about to pass a law requiring drug companies to demonstrate that drugs were not merely safe but were effective as well, the pharmaceutical industry once again warned of dire consequences -- specifically, that drug prices would rise, innovation would slow, and millions would lose their jobs.

Lack of innovation. Misleading claims about products. Unsafe drugs on the market. These were exactly the sorts of conditions that led the federal government to create the FDA and then strengthen it over the years.

As we all now know, none of these dreadful consequences ever materialized. On the contrary, as Philip Hilts recounts in his sweeping history of the Food and Drug Administration, Protecting America's Health (2003), the American pharmaceutical industry not only survived the efforts at regulation during the 20th century, it actually thrived as a result of them. Every time the government demanded something more of the drug industry -- every time it raised its standards for safety or efficacy -- the industry responded by making better products that enjoyed more consumer confidence, which ultimately meant not just better medicines for patients but bigger profits for the drug companies. "The regulations and the government shepherding of the drug business did what the free market failed for at least sixty years to do," Hilts wrote of the 1938 law, although he might well have been writing about any one of the major drug safety acts during the last century. "It weeded out the brutal, the stupid, and the needless that prevented the pharmaceutical industry from becoming a great engine of discovery and sales."

It's worth keeping that in mind when looking at some of the more recent battles pitting the drug industry against its regulators. Although drug company executives and representatives speak in genial tones when they talk about the FDA publicly, they have also lobbied to make the agency more docile and business-friendly. Because the pharmaceutical industry is one of Washington's most powerful interest groups, many of these efforts have succeeded. But given the history of pharmaceuticals in America, it's fair to ask whether, in the long run, these successes will help the drug industry or hurt it -- by undermining the outside watchdog that guarantees the credibility essential to its financial survival.

• • •

Probably the single most important shift in the FDA of the last decade has been the change in how the agency approves new drugs -- or, more precisely, how quickly it approves new drugs. In the late 1980s, the pressure to speed up drug approvals was rising. And it wasn't just the drug makers complaining. It was doctors and patients who were agitating, too, over everything from why the FDA hadn't approved the chicken pox vaccine (even though European nations had approved its use for years) to why it wasn't moving faster on potentially life-saving AIDS treatments -- a grievance that famously led to mass protests outside FDA headquarters in Rockville, Maryland. These public displays of disaffection, combined with behind-the-scenes lobbying by pharmaceutical manufacturers and their trade groups, finally produced the Prescription Drug User Fee Act (PDUFA) of 1992.

Under the terms of PDUFA, the drug industry agreed to help finance the approval process -- through "user fees" accompanying each new drug application -- in exchange for an FDA promise to speed up its deliberations. Widely considered one of the most significant pieces of legislation in FDA history, it would effect a remarkable transformation: In 1992, it had been taking the FDA an average of 30 months to approve a new drug. By 1996, the agency had cut the time nearly in half, to 16 months, prompting outgoing commissioner David Kessler to announce (accurately) that "the U.S. is now a world leader in drug review."

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Naturally, not everybody was so enthusiastic about this shift. Consumer advocates and other watchdogs had never been entirely comfortable with the user-fee arrangement, since it seemed to make the FDA financially beholden to the very industry it is supposed to regulate. More important, critics feared that the haste to approve drugs would let more unsafe drugs get into the market -- a fear that did not dissipate in subsequent years. A 2002 report by the General Accounting Office showed that the rate of drug recalls had increased in the years since PDUFA's passage. Among the GAO's recommendations were that the FDA do more to monitor drugs even after they've been approved -- a sensible idea given that, according to one study in the Journal of the American Medical Association, more than half of the dangerous side effects of drugs are detected only after they've been on the market for seven years or more.

But the drug industry sees things a little differently, disputing, among other things, the results of that GAO study. If they have a complaint about the drug approval process, it's precisely the opposite one: that the FDA is still too slow. By 2002, the average approval time for a standard application had risen to 19 months, up from a low of 13 months in 1998, prompting Pfizer's CEO, Henry McKinnell, to complain to Business Week that "The FDA has become more risk-averse." And while the approval time was still far less than what it was before PDUFA's enactment, drug industry executives began calling attention to another figure: the average "development time" for a drug, including the time invested before a company even applies formally for approval. According to studies by Tufts University researchers, it now takes more than seven years to develop a new drug -- up from six a decade ago. A major reason for this increase, say the drug makers, is that the FDA demands too much scientific information about a new drug before granting approval -- far more information, the drug makers say, than is necessary to guarantee efficacy and safety.

Earlier this year, these complaints produced at least a rhetorical response. Upon taking office in 2003, new FDA commissioner Mark McClellan pledged to reduce the average drug approval time by 10 percent. As a practical matter, though, even industry allies concede there's only so much more the FDA can do to compress a process that's already relatively compressed -- particularly since the types of drugs companies now produce, and the types of diseases they seek to treat, are inherently more complicated than they were a decade ago. As Wayne Pines, a former FDA official who now consults for the pharmaceutical industry, explains, "Drugs being developed now are much harder to assess than previous ones. Measuring an antibiotic, that's easy: it either works or it doesn't. Now we're treating heart disease, producing quality-of-life drugs. It's much harder to assess. I don't think the standards have changed so much as the drugs have changed."

• • •

Precisely because the prospects for further accelerating the approval process seem slim, the industry in the last few years has expended considerable lobbying efforts on other issues. Many of these efforts have taken place through PhRMA, Pharmaceutical Research and Manufacturers of America, one of Washington's most powerful trade groups. PhRMA is a well-financed, well-staffed operation: according to a report by Public Citizen, the liberal watchdog group, PhRMA alone employed 50 lobbyists in 2001. (The drug industry as a whole used more than 600 lobbyists that year, the report said.) But the reason drug lobbyists have had so much clout is that the pharmaceutical industry has spent a great deal of money financing political campaigns, devoting dramatically greater sums each year. According to the Center for Responsive Politics, the pharmaceutical industry spent $22 million on campaign contributions in 2002 -- or more than nine times what it did in 1990. Given that the industry spends untold millions more on advertising and other forms of issue-oriented public relations, it's no wonder Illinois Senator Dick Durbin, a Democrat, recently declared that PhRMA "has a death grip on Congress."

That may be overstated. But one case study that demonstrates the industry's power is the issue of so-called "pediatric exclusivity."

Prior to the 1990s, drug companies rarely tested their products on children, in part because testing on children is more complicated than testing on adults (for ethical reasons) and in part because it was just plain expensive. But by the 1990s, with studies showing that some 80 percent of all children's medications hadn't actually undergone specific pediatric testing, the pressure to run more clinical trials for children had become almost irresistible. So rather than fight the inevitable, the industry settled for a compromise: it agreed to drop its objections as long as Congress agreed to compensate the companies. Specifically, if a drug company voluntarily tested its product on children, the government promised to extend the company's patent on that drug by six months.

The law succeeded, in the sense that it increased pediatric testing. But the reformers who'd pushed for the measure quickly came to rue the cost. Pediatric testing may be more expensive than regular adult testing, but the price pales in comparison to the amount of money a drug company makes from extended patent protection for an extra half-year. (This is particularly true since the exclusivity applies to every form of the drug, not just the one tested on kids.) According to the FDA's calculations, pediatric exclusivity will bring brand-name drug makers a net windfall of about $30 billion over 10 years -- $14 billion of it out of the pockets of consumers paying higher prices than they would have otherwise. (Carl Seiden, a well-regarded industry analyst with JP Morgan Chase, has estimated that the six-month extension on Prozac alone brought Eli Lilly an extra $1 billion in sales, $700 million of it pure profit.)

Mindful of these figures, and the fact that millions of Americans have been struggling to pay for their expensive prescription drugs (see FRONTLINE's recent report "The Other Drug War"), industry critics in Congress such as Rep. Henry Waxman, a Democrat from California, tried in 2001 to renegotiate the arrangement. Under Waxman's proposal, instead of extending patents, the government would simply pay industry twice the cost of actually running the pediatric studies. But the drug lobby would have nothing of it. Warning that cuts in the financial incentive would leave the industry with little choice but to abandon pediatric testing, drug makers lobbied Congress to preserve the arrangement unaltered. It even hired two former congressional staffers, who had worked on the committees with jurisdiction over the legislation, to help make the case. The industry prevailed, and the law was renewed with no substantial changes.

• • •

A case where the industry has more clearly fought the FDA itself -- and largely won -- is the area of "off-label" promotion and advertising. Few mandates are more fundamental to the FDA's mission than its duty to police what drug companies say about their products. (As Hilts documents in his book, it was misleading claims about medications that sparked the very first attempts to regulate drugs back in the 19th century.) And in theory, anyway, the 1962 drug safety act very explicitly prohibits manufacturers from promoting drugs for uses other than those specifically sanctioned by the FDA during the approval process. The reason? The architects of the 1962 law suspected that in the absence of such rules, drug companies would make unsubstantiated boasts just to enhance their sales, potentially sacrificing safety. "The initial claim would tend to be quite limited," supporters of the 1962 bill said at the time. "Thereafter, the sky would be the limit. … Extreme claims of any kind could be made."

The drug industry has long protested these regulations, saying that requiring such extensive proof has led -- as Pfizer attorneys recently put it -- "to a regime where manufacturers are precluded from using advertising for its intended purpose." And the industry position has a certain logic to it. After all, a drug that treats indoor allergies like dust probably works well against outdoor allergies like pollens, too. Why force the companies to stage a whole new set of clinical trials, then force them to wait -- losing valuable patent time -- while the FDA takes a year or more to review the data? As long as a manufacturer has demonstrated that a drug is safe, the argument goes, shouldn't it be free to promote the drug however it wants, and allow physicians to determine -- based on their own reading of any available studies -- whether it's appropriate in certain cases? Physicians already have that freedom, and use it all the time, particularly in specialties like psychiatry where the boundaries between different disorders are blurry in the first place.

Unfortunately, doctors rarely have the time (or, in many cases, the desire) to keep up with the latest clinical data. As such, they are basically at the mercy of the drug companies, some of whom have promoted their drugs beyond approved uses, despite safety concerns.

During the mid-1990s, for example, executives at Parke-Davis, a Warner-Lambert subsidiary at the time, allegedly marketed an epilepsy drug called Neurontin for such unapproved uses as migraines, social phobia, and manic-depressive disorder. Their methods: staging continuing medical education classes noting these uses, financing speeches by doctors who would promote off-label treatments, even hiring public relations firms to help physicians write up journal articles touting the medication's alternative uses. These techniques came to light after a former Warner-Lambert scientist named David Franklin came forward as a whistleblower, prompting a federal investigation that uncovered internal memos documenting the campaign. In an interview with The New York Times, Franklin said he was told to exaggerate the results of favorable studies and to suppress evidence contradicting the company's off-label claims. "We were truly experimenting on patients, which put them at risk," Franklin said. "I was involved in this, trained and asked to deceive physicians and take advantage of their trust, and I'm embarrassed by that." (Franklin has brought a whistleblower lawsuit against Parke-Davis and its new parent company, Pfizer. But because Pfizer acquired Parke-Davis well after the alleged conduct occurred, its spokesman declined to comment on the case -- except to say that Pfizer itself does not promote off-label usage.)

This doesn't appear to be an isolated incident, or the most egregious one. During the 90s, Wyeth promoted the drug Cordarone for "early use" against heart disease -- even though the FDA had approved it only as a last-resort medication. At the same time, according to an investigative story by Lee Scheier in the Chicago Tribune, Wyeth failed to warn U.S. physicians and consumers about some of the drug's potential side effects on eyesight, even as it was printing such warnings on drugs that were being sold in Canada. Years later, the company -- already in legal trouble over the Fen Phen diet drugs -- ended up paying more than $30 million to two men who developed permanent blindness after taking the drug (although the company has denied any wrongdoing, and says their drug didn't cause the eye problems). A recent series by Knight-Ridder reporters Chris Adams and Alison Young documents several other incidents of off-label promotion. For example, the FDA twice warned Bayer that it was improperly promoting the antibiotic Avelox for unapproved uses -- although Bayer has denied doing so. Back when the drug was first approved by the FDA, one reviewer speculated that "This is exactly the kind of place that you get into trouble. ... I am absolutely convinced that the drug will be used differently once it's marketed frequently."

Despite publicity over episodes like these, efforts by the FDA to clamp down on off-label and other instances of inappropriate advertising have been pretty ineffective. To some extent, the problem is largely a practical one, since so many of the promotions take place beneath the FDA's radar. "In any given year, you have 400,000 dinner meetings with doctors," says industry consultant Wayne Pines. "Who's regulating that? Nobody can." But even in those cases where the FDA has evidence of wrongdoing, it doesn't seem to be pursuing them with the relish it once did. Last fall, Waxman's office wrote a letter to the FDA documenting a precipitous drop in so-called "enforcement actions" against companies that use misleading advertising. From 1999 to 2001, the FDA had issued one warning letter for every 2.8 complaints of improper or false advertising; in the first few months of 2002, the rate fell to one letter for every 13.5 complaints.

One likely reason for the slow-down is that all such letters must now be reviewed by the FDA's chief counsel, Daniel Troy. Before coming to the FDA in 2001, Troy was a lawyer representing the pharmaceutical industry who spent much of his time filing lawsuits challenging FDA advertising regulations. Since his appointment, he has steered the FDA in a more cautious direction. For example, as The New York Times reported this summer, it took 78 days for Troy's office to approve a letter warning Tap Pharmaceuticals to withdraw ads making misleading claims about the heartburn drug Prevacid -- this despite an admonishment, just months before, from government auditors that the FDA was taking far too long to follow up on complaints. (Troy says he simply wants to avoid legal challenges that might undermine his agency's authority. As he told The American Lawyer, "The public health cannot abide an FDA that lacks credibility in court.")

• • •

It's easy to see why the pharmaceutical industry might want a freer hand to advertise its wares -- and why, in the short run, it might even make more money that way. But in the long run, allowing the industry to make misleading claims about its products could also serve to undermine its credibility with consumers. The same goes for efforts to speed up the drug approval process. Getting medicines to market faster obviously helps the drug industry's bottom line. But if, as consumer advocates charge, it ends up putting more dangerous products on the market, it is the industry's own revenues that will fall as a result of falling confidence (and rising litigation costs). Even the extension of pediatric exclusivity could come back to bite the drug industry. One can argue that the more quick-and-easy opportunities drug companies have to increase profits from today's products, the less incentive they will have to invest in research to generate tomorrow's blockbusters.

That might all seem rather hypothetical -- until you consider just how the drug industry has been doing lately. On Oct. 23, three major drug companies published disappointing financial reports. Merck said it wasn't going to meet its profit projections -- and would be eliminating more than 4,000 jobs -- partly because it had no promising new drugs in development. Schering-Plough and Wyeth had to revise their own profit forecasts downward, in each case citing (among other reasons) millions of dollars spent defending themselves in lawsuits alleging that they made false claims about their products or put unsafe products on the market. Wall Street responded accordingly, with the Standard and Poors' pharmaceutical index falling to 3 percent below its level at the beginning of the year. (By contrast, the broader S&P 500 index was up 17 percent by that date.) Assuming the next two months bring no improvement -- and nobody seems to think it will -- 2003 will go down as the third consecutive year of declining stock prices for the drug industry.

Lack of innovation. Misleading claims about products. Potentially unsafe drugs on the market. These were exactly the sorts of conditions that led the federal government to create the FDA and then strengthen it over the years. The pharmaceutical industry should keep that in mind the next time it tries to stop the agency from meddling in its affairs.

 

Jonathan Cohn, a senior editor at The New Republic and a Media Fellow at The Kaiser Family Foundation, is writing a book about the U.S. health care system.

 

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posted november 13, 2003

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