The obscene return on investment of pharma poisons

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Feature story from the Chicago Tribune

 

TV ads key front in drug price war

Health insurers strike back against marketers of expensive remedies

 

http://www.chicagotribune.com/business/chi-0411270321nov28,1,5244884.story

 

By Bruce Japsen

Tribune staff reporter

Published November 28, 2004

 

Not even NFL Hall of Fame quarterback John Elway can win against the

powers of managed care.

 

Known for his clock-chasing touchdown drives to win football games,

Elway this year became a television pitchman for the heartburn pill of a

Lake Forest drugmaker trying to gain more ground in the market.

 

Yet despite a $100 million-plus TV ad campaign with a spot featuring the

former Denver Broncos great, TAP Pharmaceutical Products Inc.'s

prescription Prevacid is rapidly losing sales to an over-the-counter

competitor.

 

Prevacid's slip is a rare victory for cost-conscious health insurance

companies and employers fighting the pervasive and persuasive television

advertising that has flourished since late 1997, when the U.S. Food and

Drug Administration eased restrictions on TV ads for prescription drugs.

 

Overall, the drug industry spends more than $3 billion a year--triple

what it did just seven years ago--encouraging consumers to seek certain

companies' remedies if they are feeling tired, anxious, gassy, in need

of more " confidence " or maybe just a purple pill.

 

Health plans say the TV spots are a key driver in the dramatic increase

in prescription drug costs because they prompt more people to demand the

latest, and often most expensive, brand-name prescriptions.

 

Health plan and employer spending on prescription drugs has risen at an

annual rate of 15 percent each of the last four years, far exceeding

inflation.

 

Experts attribute much of the rise to TV and other direct-to-consumer

advertising that end-runs doctor advice.

 

Still, sales of Prevacid, and others in its class of drugs known as

proton pump inhibitors, are either flat or falling, in contrast to

double-digit growth of other top-selling prescription drugs promoted on

TV in the United States.

 

Because Prevacid is therapeutically equivalent to other proton pump

inhibitors, the company's own studies show, health insurance plans are

removing it from preferred positions on their drug lists. Health plans

are encouraging the use of over-the-counter Prilosec, which sells for

less than 80 cents a pill, instead of prescription competitors Prevacid

or AstraZeneca PLC's Nexium, which sell for about $4 a pill.

 

" Managed care has had an impact when we have had extraordinarily similar

drugs, " said Dr. Allan Korn, chief medical officer for the Chicago-based

Blue Cross and Blue Shield Association, a trade group representing some

of the nation's largest health plans. " Managed-care plans have a tiered

structure to get people to think about this. People then sort of just

move on. "

 

Through use of up to four tiers, health insurers work with employers to

place more expensive drugs in a more expensive tier so health plan

enrollees think twice before paying a higher co-payment, especially when

a cheaper option is available.

 

HMO giant Humana Inc., for example, worked with interested employers to

raise health plan enrollees' monthly co-payments on Prevacid, Nexium and

other brand-name proton pump inhibitors to between $40 and $50 after

Prilosec became available over-the-counter last fall.

 

Humana and other health plans have also bombarded enrollees with

marketing blitzes, using direct mail and automated phone calls that

describe cost and price differences between over-the-counter Prilosec,

which is not covered, and the brand names.

 

Since last fall Humana has twice sent coupons for a free two-week supply

of over-the-counter Prilosec to its members who take prescription

heartburn drugs. And members appear to be using them. Humana said the

coupons, which may be sent again early next year, have had a 19-percent

redemption rate--sharply higher than those in the grocery store industry.

 

William Fleming, vice president of pharmacy benefit management for

Humana, said Humana is not reluctant to engage in direct-to-consumer

advertising of its own.

 

" We believe the consumer needs to be engaged in knowing what things cost

as well as what are the needs to the diseases they have, " Fleming said.

 

The strategy is working and saving health plans and employers tens of

millions of dollars.

 

Although Humana will not disclose specific savings, the Louisville-based

health plan has seen a 3.4 percent decline in prescriptions filled for

proton pump inhibitors from January through September of this year--in

sharp contrast to the 35 percent increase the year before.

 

For TAP and other makers of widely advertised brand-name heartburn

drugs, even additional spending on TV advertising cannot counter such

moves by health plans. TAP's Prevacid sales were down nearly 8 percent,

to $711 million, in the third quarter--a surprise to the company that

said in July 2002 that it did not " anticipate a significant impact on

Prevacid with the introduction of generic or over-the-counter Prilosec. "

 

TAP would not comment on its TV strategy for Prevacid, which is one of

the nation's most expensive pharmaceutical advertising campaigns,

industry analysts say.

 

Rival affected

 

TAP is not alone. Prevacid's even more frequently promoted rival,

Nexium, saw its U.S. sales plummet 17 percent to $651 million in the

third quarter.

 

What's more, Nexium's maker was hit last month with a consumer group's

lawsuit over some of the company's earlier ads promoting Nexium.

 

Members of the Prescription Access Litigation Project, a national

coalition of unions and consumer groups, sued AstraZeneca PLC, accusing

the company of a misleading ad campaign that claimed Nexium was

significantly better than Prilosec.

 

AstraZeneca makes both drugs, known in the older Prilosec ads and the

newer Nexium ads as the " purple pill. "

 

The consumer group says the two drugs are " nearly identical " and that

the drugmaker was trying to reap a higher price for essentially the same

drug. The suit alleges AstraZeneca sought to preserve its market share

and profits as the patent on its blockbuster drug Prilosec was set to

expire in 2002, by " initiating a massive and misleading advertising and

promotional campaign to deceive consumers into purchasing Nexium, a

nearly identical new drug, " the group said in a release.

 

For its part, AstraZeneca rejected the claims made in the suit and said

its U.S.-approved information for Nexium shows advantages over Prilosec

in " healing damage to the lining of the esophagus and heartburn control

in a larger percentage of patients, " company spokeswoman Rachel

Bloom-Baglin said.

 

AstraZeneca would not comment on its TV ad strategy for Nexium, but the

company stands by the need for direct-to-consumer advertising.

 

" It drives patients to go see their doctor for conditions that they

might not otherwise seek treatment for, and that is a good thing, "

Bloom-Baglin added.

 

But some doctors and insurers say Nexium is not a significant

improvement over Prilosec. Even AstraZeneca's own head-to-head

comparison shows Nexium is only about 3 percent better at controlling

and healing damage.

 

Meanwhile, Abbott Laboratories, which owns half of TAP, touted

head-to-head studies showing " Nexium offers no clinical benefit over

Prevacid. "

 

Other insurers have tried to combat sales of brand names advertised on

TV with similar strategies.

 

When the popular allergy drug Claritin began selling over-the-counter in

2002, rival brand-name drugs in the same therapeutic class, such as

Clarinex, Zyrtec and Allegra, became more expensive on insurers' lists

of medications.

 

In January 2003, health insurance giant Aetna Inc., for example, began

to require health plan members to " precertify " and obtain the insurer's

approval before members could take the more expensive non-sedating

antihistamines.

 

Brand-name sales hurt

 

Drugmakers have since bemoaned the deterioration of sales of their more

expensive brand names.

 

Schering-Plough Corp. said in its third-quarter earnings report that

U.S. Clarinex sales declined 8 percent to $118 million " due to the

continued contraction in the prescription antihistamine market, stemming

from the late-2002 introduction of over-the-counter Claritin and other .

.. . non-sedating antihistamines, coupled with a decline in market share. "

 

Drug benefit managers and health plans say their direct-mail marketing

and preferred drug lists can be effective, especially when prescription

drugs come off patent protection and either a generic or an

over-the-counter version becomes available.

 

Insurers say they will continue to pursue ways to combat rising costs

when drugmakers market higher-cost products that work only equally as

well as less expensive medicines.

 

" We have the unique responsibility of managing the resources of families

and companies who are trying to keep health insurance affordable, " said

Korn, of Blue Cross.

 

- - -

 

COMPARABLE HEARTBURN DRUGS

 

Over-the-counter

 

Prilosec

 

Below 80 cents per pill

 

Total sales (2004): $304.2 million

 

Prescription only

 

Prevacid

 

$4 per pill

 

Total sales (2004): $2.19 billion

 

Prescription only

 

Nexium

 

$4 per pill

 

Total sales (2004): $2.10 billion

 

Note: Total U.S. sales Jan. to July, 2004

 

Chicago Tribune

 

- - -

 

Spending millions to gain billions

 

Drugmakers are spending millions to market their more expensive brands

of prescriptions.

 

The leading medicines listed are based on total media advertising for 2003.

 

DRUG COMPANY HEALTH PROBLEM U.S. SALES

ADVERTISING

IN MILLIONS

Nexium AstraZeneca PLC Heartburn $3.1 billion $257.2

Clarinex Schering-Plough Corp. Allergy $685 million $129.2

Allegra Aventis Pharmaceuticals Inc. Allergy $1.6 billion $125.5

Viagra Pfizer Inc. Impotency $1.1 billion $112.5

Lipitor Pfizer Inc. Cholesterol $6.8 billion $109.2

Advair GlaxoSmithKline PLC Asthma $2.3 billion $101.7

Celebrex Pfizer Inc. Arthritis $2.6 billion $95.9

Prevacid TAP Pharmaceutical Products Inc. Heartburn $4.0 billion $95.3

Zocor Merck & Co. Cholesterol $4.4 billion $95.2

Zyrtec Pfizer Inc. Allergy $1.2 billion $95.1

Note: Sales figures are for 2003

Sources: IMS Health, Nielsen Monitor-Plus

Chicago Tribune

 

 

2004, Chicago Tribune