E-drug: Pharmaceutical marketing techniques become controversial
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Drug Makers Battle Plan to Curb Rewards for Doctors
By Robert Pear, New York Times
December 26, 2002
ASHINGTON, Dec. 25 - Drug companies and doctors are fighting a
Bush administration plan to restrict gifts and other rewards that
pharmaceutical manufacturers give doctors and insurers to
encourage the prescribing of particular drugs.
In October, the Department of Health and Human Services said
many gifts and gratuities were suspect because they looked like
illegal kickbacks. Since then, a few consumer groups, including
AARP, have voiced support for the restrictions. But they are
outnumbered by the drug makers, doctors and health maintenance
organizations that have flooded the government with letters
criticizing the proposal.
In contending that the proposed federal code of conduct would
require radical changes, those opposing the change discuss their
tactics with unusual candor and describe marketing practices that
have long been shrouded in secrecy. Drug makers acknowledged,
for example, that they routinely made payments to insurance plans
to increase the use of their products, to expand their market share,
to be added to lists of recommended drugs or to reward doctors
and pharmacists for switching patients from one brand of drug to
another.
Insurers, doctors and drug makers said such payments were so
embedded in the structure of the health care industry that the Bush
administration plan would be profoundly disruptive. Moreover,
doctors said that drug companies were a major source of money for
their professional education programs, and that the administration
proposal could drastically reduce such subsidies.
"Without financial support from industry, medical societies would
most likely be forced to curtail or stop offering these important
educational activities," said Dr. Michael D. Maves, executive vice
president of the American Medical Association. Doctors of all types
echoed that concern. The arguments were made in a public
comment period. The administration said it was considering those
comments and expected to issue final guidelines in a few months.
In its guidance to the industry, the government warned drug makers
not to offer financial incentives to doctors, pharmacists or other
health care professionals to prescribe or recommend particular
drugs. The government said the industry's aggressive marketing
practices could improperly drive up costs for Medicare and
Medicaid, the federal health programs for 75 million people who are
elderly, disabled or poor. But a coalition of 19 pharmaceutical
companies, including Pfizer, Eli Lilly and Schering-Plough, said the
Bush administration proposal was "not grounded in an
understanding of industry practices." The payments and incentives
to which the government objects are standard in the drug industry,
they said. Merck & Company said it routinely gave discounts and
payments to health plans to reward "shifts in market share"
favoring its products. Merck complained that the administration
proposal would "criminalize a wide range of commercial conduct"
that the industry regards as normal and entirely proper.
The Pharmaceutical Research and Manufacturers of America, the
chief lobby for brand-name drug companies, acknowledged that
these payments created a strong incentive to prescribe certain
drugs, or to shift patients from one drug to another. But, it said,
that did not make the payments "illegal kickbacks." Solvay
Pharmaceuticals of Marietta, Ga., told the government: "We
understand that bribes and other hidden remuneration should be
prohibited. However, a policy statement that declares
well-established commercial practices potentially criminal creates a
chilling effect on commerce and ultimately harms all consumers."
The American Association of Health Plans, which represents most
of the nation's H.M.O.'s, said the proposed standards "cast doubt
on the propriety of many well-established practices undertaken by
health plans to develop and administer their drug benefits."
Drug manufacturers said they often encouraged the use of their
products by making payments or giving discounts to H.M.O.'s and
to the specialized companies that manage drug benefits for millions
of Americans. Such companies, known as pharmacy benefit
managers, can exert immense influence over what drugs are
prescribed and dispensed.
H.M.O.'s and pharmacy benefit managers said they typically
received money from the manufacturer of a drug if sales of that
drug reached a certain level - say 40 percent of all the prescriptions
for cholesterol-lowering agents. The manufacturer may agree to a
higher payment if the drug achieves a larger share of the market.
While describing such arrangements, the drug companies, doctors
and insurers did not divulge who received how much for promoting
a specific drug, nor did they provide details of individual marketing
campaigns. The Bush administration proposal received support from
one H.M.O., the Great Lakes Health Plan, which serves more than
90,000 Medicaid recipients in Michigan.
Eric J. Wexler, general counsel of the Great Lakes plan, said
pharmacy benefit managers sometimes sent letters to doctors
recommending that they shift Medicaid patients from generic drugs
to brand-name medicines. In many cases, Mr. Wexler said, the
brand-name drugs cost more, but are less effective.
For each letter sent to a doctor, Mr. Wexler said, "the pharmacy
benefit manager receives an administrative fee, and it may get
additional remuneration for converting patients from one drug to
another." AdvancePCS, a pharmacy benefit manager based in
Irving, Tex., confirmed that it received payments from drug
companies for letters sent to doctors and patients urging them to
use particular drugs. But it said the payments - typically a flat fee
for each letter - were for educational services that could help
control drug spending.
Kaiser Permanente, a nonprofit H.M.O. based in Oakland, Calif.,
said the administration plan would impair its ability to negotiate
lower drug prices for its 8.5 million members because it suggested
that discounts and rebate payments create "a prosecutorial risk"
under the kickback law. The Blue Cross and Blue Shield Association
said the proposal would impede what it described as legitimate
cost-control measures.
"Pharmaceutical companies may be less willing to offer large
discounts if those discounts cannot be tied to movements in market
share," said Alissa Fox, policy director for the association, whose
members insure more than 84 million people. LaVarne A. Burton,
president of the Pharmaceutical Care Management Association,
which represents pharmacy benefit managers like Express Scripts
and AdvancePCS, said that "manufacturers may cease offering
discounts," rather than run the risk of liability under the proposed
guidelines. But the Food Marketing Institute, whose members
operate 12,000 supermarket pharmacies, applauded the proposal.
"Pharmacy benefit managers routinely refuse to disclose their
financial arrangements with drug companies," said Tim Hammonds,
president of the institute, "and they do not wish to be subjected to
any kind of accountability, such as an annual audit." As a result,
Mr. Hammonds said, "it is not possible to know with any certainty
whether P.B.M.'s are helping to control drug costs for the federal
government or if these middlemen are contributing to skyrocketing
drug costs."
The administration proposal says that when drug executives
discover evidence of illegal conduct, they should report it to federal
authorities within 60 days. Also, it said, drug makers should
consider offering rewards to whistle-blowers and should
prominently display the phone number for reporting Medicare fraud
to the government (1-800-447-8477). The coalition of drug makers
objected to these recommendations, saying they would undercut
the companies' efforts to police themselves.
The American Medical Association said drug companies should not
be forbidden to give doctors pens, notepads and other items of
nominal value that have "no correlation to any service provided by
the physician to the pharmaceutical company." Such "giveaway
items" are harmless, it said.
But the Massachusetts Medical Society suggested that "these items
would not be so readily produced if they were not an effective form
of advertising." The society asked: "Is the physician who writes a
prescription with a company's logo on the pen more likely to write a
prescription for that advertiser? Are patients more likely to request a
certain drug because they see the notepad on the doctor's desk?"