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Drug Firms’ Marketing
Criticized
AstraZeneca spends more on ads than
on innovation
Critics call Nexium
a triumph of marketing over medicine
When consumers complain about the
high price of medicines, drug
makers often respond by citing the high cost of developing those drugs.
But
AstraZeneca, which has its U.S.
headquarters in Fairfax
, spends about twice as
much on marketing and overhead
as it does on drug
development.
That
ratio is not unusual among big drug
makers. AstraZeneca executives say spending on marketing is necessary to educate
doctors and patients about an array of complex products - and to compete in a
highly competitive market.
But
AstraZeneca's marketing practices, like those of its competitors, have sparked
controversy. Industry critics cite heartburn drug Nexium, the company's top-selling
drug, as the quintessential
example of a triumph of marketing
over medicine. Many physicians say Nexium is
virtually the same drug as
some competing drugs that cost
much less. A lawsuit filed last month by insurance pro viders
claims AstraZeneca has deceived customers into
wasting billions on "the new purple pill."
And AstraZeneca's
cholesterol-lowering drug Crestor is being marketed as the most effective of its
kind despite the concerns of some physicians that it lacks its competitors'
track record for safety and effectiveness.
Drug advertising may seem like
a fact of life for consumers bombarded with information about cholesterol,
arthritis and impotence treatments. But industry critics say the billions of
dollars spent on marketing
unnecessarily jack up the price of drugs,
ultimately increasing the cost of health care for everyone. In some cases,
they say, companies use aggressive marketing
to convince doctors and consumers to pay more for new drugs that may be little different - and less tested - than
their predecessors. They argue that these companies should be spending more
on research for new drugs that
save lives and fill unmet needs.
"AstraZeneca
is a striking example of how large pharmaceutical companies have moved so far
in the direction of pouring money into promotion at the expense of innovation
and the actual development of new products," said Dr. Jerry Avorn, an
associate professor of medicine at Harvard
University
.
Drying drug pipelines
During the 1990s, the pharmaceutical
industry was a reliable money machine. Breakthrough drugs like Lipitor, Prozac and Viagra held the promise of
fabulous returns as well as better lives. In those halcyon days, U.S.
regulators approved more
than 20 drugs a year that were
classified as a "significant improvement" over older drugs.
But the gusher of blockbusters in
companies' pipelines has slowed to a trickle. Since 2000, regulators have
approved on average only 13 new drugs
a year with that classification, according to the Food and Drug Administration's Web site.
Wall Street analysts have gone sour
on most drug stocks. The
American Stock Exchange's Pharmaceutical Index, a weighted index of major pharmaceutical
companies, is down 1.43 percent over the past year. Standard & Poor's 500
index, by contrast, has risen 6.44 percent.
Meanwhile, AstraZeneca's
stock has declined 17.1 percent in the past year. Some of the decline can be
traced to the FDA's rejection of the company's Exanta
stroke medication in September. The stock declined again late last week after
a controversial federal regulator told Congress that Crestor
might not be safe despite FDA approval.
The seeds of the pharmaceutical
industry's current woes were planted back in the boom years, said Wilmington
Trust analyst Susan Cross. Drug
companies didn't invest enough in research, and because drugs typically take a decade or
more to develop, the result is fewer new drugs today.
"They just sat back on their
fat profit margins," Cross said. "It's pretty much inexcusable not
to be investing in their own survival."
Even as pipelines dried up, marketing spending was on the rise.
Total spending has doubled in the past six years, to $31 billion for the year
ending in June, according to consulting firms IMS Health and Verispan. And the number of pharmaceutical drug representatives selling
directly to doctors has grown 30 percent since 2000, according to Verispan.
Nearly half of the promotional
spending goes to the free samples physicians give to patients. Much of the
rest is paid to the sales representatives. The companies also sponsor a
variety of events - often at resorts and exotic locales - and hire doctors as
consultants.
David Brennan, chief executive of AstraZeneca's U.S.
operations, said doctors
must be updated frequently on new clinical results, dosages and indications
for existing drugs, as well as
on new drugs.
"It's really about
conveying information in a competitive marketplace," he said. "There
are multiple products in a given category, and we want to make sure that
products are used properly."
Selling to patients
Marketing spending rose quickly
early in the decade with the launch of drugs aimed at primary care physicians, Brennan said.
The most visible change in drug marketing, however, has been the rise of advertising to
consumers. In the mid-1990s, drug
makers realized the patents of many popular drugs were expiring, Cross said. Health insurers would be
pressuring doctors to prescribe generic drugs that would replace their brand-name drugs at a much lower cost. So, in
1997, the drug industry
convinced the FDA to loosen restrictions on television advertising.
"The ads want you to
go ask your doctor for [brand-name] drugs,"
Cross
said. "And it doesn't matter what the price is."
The FDA's decision unleashed a flood
of TV and print advertising. Drug
companies spent about $3.2 billion on consumer advertising in 2003, a 24
percent increase from 2002, according to marketing research firm
TNS Media Intelligence/CMR.
Mary Toy, a retired secretary from Wilmington
, said she believes
"all ads spike up the cost of drugs."
But she's glad she saw an ad for an arthritis injection she received, because
it mentioned side effects that hadn't been explained by her physician. She
discussed them with her doctor, and decided to continue the Remicade injections.
Brennan said drug companies have increased consumer advertising because
consumers now have more responsibility for out-of-pocket spending on health care.
The advertising spurs consumers to seek treatment for diseases they may not
have recognized before, he said.
Research and development spending
also has increased along with spending on marketing. But at most large drug companies, R&D spending is about half of the spending
on marketing and
administration, according to a review of financial statements.
Most companies lump marketing and administration in one
budget line and do not disclose marketing
costs alone. The only major drug
company that does, Novartis, shows the cost of
administration at less than one-fifth the cost of marketing.
Avorn,
author of "Powerful Medicine: The Benefits, Risks, and Costs of
Prescription Drugs," said
marketing will be at best a
short-term solution to the industry's troubles.
"Savvy analysts on Wall Street understand that
pouring a lot of money into marketing
in the absence of a strong pipeline is a bit like using ‘speed' to improve
your athletic performance," Avorn
said.
"It's a quick-fix, next-fiscal-quarter mentality that does not get you where
you want to be over the long haul."
How ‘new' is purple pill?
AstraZeneca's
heartburn drug Prilosec was once the world's top-selling drug, with $6 billion in sales in
2000. In 2001, the drug's
patent was set to expire, and the company was facing the inevitable arrival
of cheaper generic versions.
AstraZeneca
took action. It sued generic drug
makers planning to manufacture Prilosec imitators,
delaying a generic release of Prilosec until the
end of 2002. It forged a licensing agreement with Procter & Gamble to
issue an over-the-counter version of Prilosec. But
more significantly, it developed a new drug, Nexium. Nexium
is made by essentially splitting the Prilosec molecule
in half, removing one of two similar elements called isomers.
Soon, "the new purple
pill" became the most heavily advertised drug in the United States
. In 2003 alone, AstraZeneca spent $429 million on consumer advertising
for Nexium, more than the total consumer
advertising spending of some major drug
companies, according to TNS Media Intelligence/CMR.
For AstraZeneca,
the gambit may have paid off. Nexium is the
company's top-selling drug,
bringing in $3.4 billion in U.S.
sales in the 12 months ending
in June, according to IMS Health.
But consumers were the losers, says
an alliance of unions and seniors groups that is suing AstraZeneca.
"As a result of this
misleading [advertising] campaign, hundreds of thousands of patients have
taken Nexium and continue to do so when they should
not, and billions of dollars in unnecessary prescription costs have been
paid,"
said the lawsuit, filed Oct. 18.
At about $4 a pill, Nexium costs about six times more than over-the-counter Prilosec. Claims that Nexium is
superior are based, in part, on clinical trials in which larger doses of Nexium were compared to smaller Prilosec
doses. The comparison spurred Dr. Tom Scully, former head of the federal
agency that administers Medicare, to tell doctors at a conference last year,
"You should be embarrassed if you prescribe
Nexium."
Dr. Joseph Hacker, a
gastroenterologist and president of the Medical Society of Delaware, said Nexium is the most potent drug of its class by "a small margin,
" but not enough to make a difference in most patients.” Hacker
said “patients frequently request
Nexium
after having seen its TV ads.” But he says drug advertising "
isn't fair to patients and it isn't fair to health care providers. I want to
use in my patients what I think is the best medicine. It shouldn't be slanted
by which company is the best marketer."
Industry critic Dr. Marcia Angell, a former editor of the New England Journal of
Medicine and author of "The Truth About the
Drug
Companies," said newer, more expensive and more advertised drugs are often no more effective
than older, generic drugs.
But because trials are usually
financed by the drug
companies, they usually compare drugs
to inactive placebos, not to the older drugs.
"I think the creation of
Nexium, along with the massive promotional campaign
to switch
Prilosec
users to it, was one of the more cynical of
drug
company gambits, but I don't think
AstraZeneca
is unique. They were just unusually successful," Angell
said.
Some consumers, however, say they're
glad they saw the Nexium ads. Judy Martin, a
clerical worker from Bear, said double doses of over-the-counter Zantac
weren't effective in treating her heartburn. After she saw a Nexium ad, she went to her doctor, who prescribed it. The
drug "made a world of
difference," she said. “And it was
better than
Prilosec, which made her feel dizzy.
Nexium, she said, is worth the high co-pay her
insurer charges.
“Crestor
positioning “
AstraZeneca's
latest big marketing push has
been anti-cholesterol drug Crestor, launched in September 2003. The company spent
$126 million in consumer advertising for Crestor
this year through August, according to marketing research firm
Nielsen Monitor-Plus. Crestor's print, TV and Web ads trumpet clinical trials
in which the drug lowered
cholesterol more than its competitors. Buoyed by new federal guidelines
lowering recommended maximum cholesterol levels, AstraZeneca
is seeking 20 percent of the global statin market,
estimated at $14 billion in the United States
by IMS
Health.
Analyst David Moskowitz
said AstraZeneca will likely spend even more to
compete against established drugs
like Pfizer's Lipitor.
"They're fighting against the giants of the industry," said Moskowitz, of investment firm Friedman Billings Ramsey in Arlington
,
VA.
But Crestor has
run into problems in its first year. The advocacy group Public Citizen has
petitioned for the drug's
withdrawal, claiming higher incidences of kidney failure and muscle damage
than from competitors. AstraZeneca denies the
charges, and many analysts believe they will not hurt Crestor's
sales in the long term.
But some physicians hesitate to
prescribe the drug due to the
lack of so-called "outcome data" for Crestor.
Crestor has
been proven to lower bad cholesterol, a predictor of heart disease. But there
are no long-term studies to show the drug
actually reduces heart disease. Dr. Edward Goldenberg, a Wilmington
cardiologist, said he
prefers Crestor competitors such as Lipitor that
already have outcome data.
Last year, the British medical
journal The Lancet called the Crestor marketing campaign
"unprincipled," given the
lack of safety and outcome data, and the existence of alternatives. AstraZeneca chief executive Sir Tom McKillop
responded that requiring outcome data for all drugs before approval would slow the path of vital drugs to market. AstraZeneca is
sponsoring outcome studies for Crestor, with some
results expected in 2007, spokeswoman Emily Denney said.
It remains to be seen whether AstraZeneca and other companies can successfully use marketing clout to push new or
revamped drugs into large but
crowded markets. Cross, of Wilmington Trust, predicts drug companies will put a stronger emphasis on developing
specialized drugs for which
margins may ultimately be higher.
Angell
calls for a variety of reforms intended to shift drug companies' focus from marketing to research. They include changing patent laws,
eliminating consumer advertising and decreasing physicians' reliance on drug companies for
"education" that is really marketing.
In a contrary view, New Yorker
magazine writer Malcolm Gladwell wrote that
controlling prescription drug
prices requires wiser choices by all.
"It's up to us; it requires
physicians, insurers, patients and government officials to reach some kind of
consensus about what we want from our medical system, and how much we are
willing to pay for it."
Excerpted from News Journal 11/21/2004 with approval
from Mr. Richard Sine
Richard Sine at 324-2878 or
rsine@delawareonline.com.
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