July 10, 2011


Attack of the Generics and Counter-Sex Attack from Big Pharma

By Melvin J. Howard

The heartburn drug Nexium gave many people their first good look at what’s haunting the pharmaceutical industry. You must know the Nexium ads, with a bunch of middle aged folks standing around in some canyons that presumably represent an eroded esophagus, all mumbling "I didn't know, I didn't know, I didn't know". Well, I bet they didn't know this the only reason Nexium exists is that its predecessor, Prilosec, which is almost exactly the same was coming off patent. This eroded esophagus business is all about making the new patented drug Nexium seem different to the one that will now be copied by the generics.

Sales versus time graph of a patented drug. It looks like an upside-down "V". As soon as a patented drug is launched, revenues generated by it shoot up over time like the rising edge of a shark fin. But the minute it comes off patent they plunge just as quickly as they rose, as the generic companies come in, copy the drug, steel market share and force prices to drop. During the roaring 90s the pharmaceutical industry always seemed to be topping the charts as the most profitable. We are all familiar with the Blockbuster Drugs who made this dream a reality and have become celebrities in their own right there's Viagra, Vioxx, Celebrex, Claritin, Nexium, Prilosec, Lipitor, Rogaine, Zocor, Zoloft, Prozac, Paxil and Lamisil  to name few.

Some will be on patent for many more years but others are soon scheduled to come off patent. Many patented drugs are simply 'me-too' drugs, designed to achieve the same effect as other patented drugs, but really add little value to society as a whole. To overcome lost revenues from patent expiries and the me-too drugs, each drug giant needs a certain number of new blockbuster drugs emerging from the R&D pipeline every year. Massive advertising campaigns are then designed to sell enough of the drug at a high enough price to recoup the R&D and advertising costs plus a target profit level.
But big pharmaceuticals, much to their dismay, are finding that the blockbuster drug cabinet is bare, even after throwing piles of dough into the R&D bucket. Despite the extensive range of illnesses for which blockbusters can be made to remedy, big pharma is still finding that it can't find enough new drugs to bring to market. This makes them more desperate to maintain high revenues on existing patented products, so they pour more and more funds into advertising and into fighting the generic companies in court. End Result: Profits are down in the pharmaceutical industry and the near future looks glum. And we get to see even more drug ads in America!

Add to all this the following pressures on the drug giants. European governments regulate prices of their Blockbusters, U.S. State Governments are now cracking down on some of Big Pharma's desperate practices to shut out the generics. Drug companies use to get pressure from managed-care companies to lower prices. Drug companies also face a whole set of giants a coalition of corporate giants called "Business for Affordable Medicine" - whose healthcare expenses have been shooting up with the cost of prescription drugs. This coalition includes such behemoths as General Motors and Wal-mart (for example General Motors pays over $70 million a year just to buy the heartburn drug Prilosec for its employees and they are not happy). True to form, however, the pharmaceutical industry is not one to take all this lying down. It's fighting back on all fronts, in a series of vicious attacks, coupled with some say consumer manipulation.

Before we study the attack strategy of big pharma, lets get to know the industry a little better and the regulation that defines its operating parameters. Nowadays, barely an hour can go by on the TV without us hearing from Big Pharma. Meanwhile, in other industrialized nations, the provision of universal healthcare means that drug prices are largely controlled by governments. Drug companies have not been allowed such freedom to either set prices for patented drugs or to advertise directly to the consumer. Consequently the US consumer ends up not only paying for the privilege of being propagandized by the drug companies at home, they also subsidize lower drug costs abroad where prices are regulated by the government. Put all these factors together and there's little mystery as to why prescription drug costs are spiralling out of control in this country.

To understand where some of this  behaviors of the branded drug companies come from, it is instructive to look at several case studies. Case Study #1 Blockbuster Nexium: The marketing of the heartburn drug Nexium by AstraZeneca to counter the expiry of its patent on the similar drug Prilosec. Schering-Plough currently used similar tactics to convert people from the allergy drug Claritin coming off patent, to the almost identical branded drug Clarinex. Case Study# 2 - Blockbuster Taxol: The tactics of Bristol-Myers Squibb to keep its monopoly on the cancer drug Taxol, originally a  from the taxpayer funded National Institutes of Health.

Case Study #1: Blockbuster Nexium, by AstraZeneca Thanks toour bad eating habits, American are notorious for stomach related problems, and this has proved to be a gold mine for the drug industry. Stomach ulcer and heartburn drugs like Prilosec, and Zantac before it, were the largest selling blockbusters of their time. In 1995 AstraZeneca drew up a battle plan as its 6 billion-dollar-a-year heartburn drug, Prilosec, was going to lose its patent in April 2001. After years of work, the attack team came up with a solution of launching a successor drug that was basically the same as Prilosec, but would be under patent when Prilosec lost its patent. They also used every loophole available in the Hatch-Waxman Act to construct a legal minefield for would-be copy-cats, to extend the Prilosec patent as long as possible, and give AstraZeneca more time to convert Prilosec users over to Nexium. The related legal battles over the Prilosec patents continue to this day and are closely watched by those that follow drug prices.

To convert post-patent Prilosec users to its patented sibling Nexium, AstraZeneca spent about $0.5 billion a year in adverting of this single drug, making it at the time the most advertised drug in the US (taking over from Prilosec). And, so far that's paid off handsomely, as 60Nexium. Nexium is one-half the Prilosec molecule and works pretty much the same, but it is just chemically different enough to win a patent of its own. The marketing spin that Nexium is better at dealing with eroded esophagus is good for converting Prilosec users that watch prime time TV over to Nexium but, according to the an article in the Wall Street Journal, is built on very shaky scientific foundations. According to the article, four studies were commissioned to see if Nexium was better at healing eroded esophagus. Two studies found it wasn't any better at all and the other two found it was better only by a little. Based on that little bit of evidence we all got to hear about eroded esophagi and purple pills on a daily basis! Such tactics form a common strategy for maintaining revenue as drugs come off patent. A similar strategy was being employed to convert users of the allergy drug Claritin to the new patented Clarinex.

Case Study #2: Blockbuster Taxol, by Bristol Myers Squibb Bristol-Myers Squibb was  being sued by 29 states for illegally delaying generic competition of its blockbuster cancer drug Taxol and costing governments and consumers billions of dollars, as well as costing lives. The basis of the suit is the claim that Bristol-Myers Squibb misled the U.S. Patent Office to delay generic competition on Taxol. But there is more! You see, Taxol is derived from the bark of the Pacific Yew tree and its pharmaceutical benefits were discovered not by Bristol-Myers but by the taxpayer-funded National Institutes of Health. The NIH handed Taxol over to Bristol-Myers in 1991 as a big gift. In return Bristol-Myers, who charges a hefty price for Taxol, has acted like a badly spoiled child not wanting to share this gift with anyone, even ten years later. Bristol-Myers Squibb, similar to what AstraZeneca did in setting up its minefield around Prilosec, has used the trick of staggered patents of every technique and methodology used to serve up Taxol to maintain its monopoly on the taxpayers' gift to them. That’s like your stockbroker taking your watch to tell you what time it is.

This is such a common strategy of counter-attack by the brand name companies against the generics that state governments, consumers, companies and health insurers that end up footing the bill for prescription drugs are themselves challenging it at every turn. In addition to these lawsuits and angry governments, the planned heir to the cancer drug throne, a drug known as Erbitrix, developed in a joint venture with ImClone Systems, was rejected by the FDA and wound up in that scandal with Martha Stewart. These case studies were selected to give an idea of the  tactics used by the drug industry to boost sales revenues. But, of course, the tactics dont stop there. Following is a small sampling of other techniques employed to keep sales revenues and drug prices high. Marketing to the medical profession. Drug companies spend the vast majority of their direct marketing budgets (about 85% of them) not on marketing directly to the public, but on marketing directly to doctors. This consists mostly of giving doctors buckets full of free samples by very attractive female reps (HEY SEX SELLS) about $9 billion worth noting that patients who start on free samples often convert to paying customers. It also includes giving doctors free dinners, sports tickets and other gifts, sponsoring conventions for them, and advertising in medical journals. In all, marketing to the medical profession costs the drug industry about $16 billion a year. Advertising to consumers through pharmacies. This newest form of direct-to-consumer advertising comes in the form of what looks like an educational booklet from the pharmacy about various treatments for your particular condition. It's provided for free when you purchase your prescription drugs, and looks like a public service provided by your trusted pharmacy. The targeted consumer would have to get their magnifying glasses out to see that these are actually advertisements from the branded drug companies. The trusted pharmacies are, of course, amply compensated for their distribution efforts and access to their databases for target marketing purposes. Advertising Agencies Participating in Clinical Trials. Believe it or not, those same drug agencies that bring us the subliminal messages of eroded esophagi using big canyons, are entering the business of performing clinical trials for their clients. This should lower both advertising costs and expenses of clinical trials, for there is every incentive for the advertising agency to find that their tested drug is just fantastic. After all, they will have an exclusive on the advertising account once the product is launched. As noted, these case studies and other techniques are just a small sampling of the techniques the branded drug companies use to stay alive and profitable in the face of competition, decreased innovation and increasing opposition from many quarters. It is remarkable that the granting of 20-year monopolies and the gifts of publicly funded research can't help this industry solve its profitability problems, let alone that it increasingly fails to provide value-added service to the public. Surely it is time to re-think the viability and sustainability of the branded drug sector in its current form.