Pharmabiz
 

Healthcare in USA: Drugs, Markets, Prices and Margins

Dr M D NairWednesday, December 8, 2004, 08:00 Hrs  [IST]

Some of the recent developments in USA. in the Pharmaceutical industrial sector have a major impact on the quality of Healthcare services in the Country. As the World leader in this industrial segment, events affecting the industry in U.S. have a major bearing on the rest of the World. Countries like India which are making a mark in the global scenario need to take stock of these emerging trends and evolve corrective steps to avoid the pitfalls of the prevailing U.S. systems of healthcare delivery. A recent visit to U.S.A gave an opportunity to study the latest developments affecting the healthcare scenario in the Country. The U.S. healthcare scene is going through an unprecedented period of turmoil. Costs of healthcare have skyrocketed during the last decade, including expenses on Hospitals, Medical Assistance, Insurance Premia and Drugs. Around 15% of the populations have no insurance cover even to meet the minimum medical expenses. The system is largely administered and controlled by the Health Maintenance Organisations (HMOs) and Medicare Agencies which are the final arbiters of who should be treated, what the right interventions are with respect to Doctors, Hospitals and Drugs and what is reimbursable and what is not. For the State, the burden of expenditure on health has reached around one sixth of the Country's GDP. The R&D based Pharmaceutical Companies find it difficult to cope with the increasing costs of new drug discovery and development, with figures being quoted as high as over $ 1.5 bio for every new drug which enters the market place. Through parallel imports, potential Compulsory Licenses and other TRIPS compliant measures, global patent protection systems are under threat. Cost containment has become the buzz word for all activities connected with Healthcare. Regulatory standards are getting ever so stringent. Liability suits related to product quality, effectiveness and safety put a heavy burden on pharmaceutical Companies. What are some of the recent developments in U.S. in these areas? Story of Vioxx The recent Vioxx debacle starting with the abrupt withdrawal of the drug in September 2004 by Merck has raised many fundamental issues related to standards of evaluation of drug safety, The drug was withdrawn from the market because it increased the risk of cardiovascular diseases. And the irony is that when Vioxx and other COX 2 inhibitors were cleared by US FDA, the main argument was its supposedly increased safety compared to other non-steroidal anti-inflammatory drugs. Drug Companies promoted COX 2 inhibitors heavily through consumer marketing highlighting their safety over other established agents But the reality was different. A report published in Lancet based on 29 studies found that people who took it had more than double the risk of heart attack than those who were on earlier generation pain killers. The U.S. FDA's report that has many as 27,885 heart attacks or deaths from 1999-2003 could be attributed to Vioxx are indeed alarming. Sales of the Merck brand of Rofecoxib, Vioxx reached. over $ 2.5 bio in 2003 and in that year alone, the Company spent $500 mio for promoting the drug to patients through advertisements in medical journals, free samples and detailing. Apart from the impact on further reviews of similar class of drugs including the popular Celebrex and Bextra, the damage to the Company is perhaps irreparable. Estimates of Wall Street Analysts place final jury awards or settlements of the order of $ 100,000 to $ 300,000 for each of the lawsuit which would come up from users of the drug. Additional claims from others who have not suffered the adverse effects, but merely used the drug, could be as high as $1 to $ 2 bio. While similar instances of drug withdrawals have been known in the past, including the gastric drug Mexaform, anti-diabetics Phenformin and Troglitazone, anti-cholesterol drug Baycol and diet drugs, Redux and Pondimini, the impact of these was by no means of the same order of magnitude as the withdrawal of Vioxx. Even then, it has been reported that Wyeth, the makers of the diet drugs paid as much as $ 13.6 bio in legal fees and damages. While only 6 mio Americans had taken the Wyeth drugs before it was withdrawn, the number quoted for Vioxx was over 20 mio in U.S. alone. Additional revelations indicating that Merck had suspected the potential danger posed by Vioxx much earlier than September 2004, but had not published that information cast further shadows on the way Pharmaceutical Companies operate, particularly since Merck has been one of the most respected, productive and ethical Pharmaceutical Companies in the World. While 5 more drugs have been put under investigation by the FDA, including (Celecoxib), it is likely that this is just the beginning of many such investigations on a variety of well-established drugs. The coming years will usher in a tremendous degree of uncertainty regarding the safety of many other drugs, in spite of the most rigorous testing procedures that all these drugs have been subjected to, before they were approved by the most stringent regulatory agencies in many countries. The story of Vioxx has raised important questions regarding the future quest for 'newer and better' drugs by pharmaceutical companies in order to ensure staying ahead of competition. Since R&D for new drugs constitute the life line of the Industry, the entire model of drug development for new therapeutic interventions better than available alternatives will be challenged. This is notwithstanding the evolution of genomics and proteomics as more rational approaches for new drug discovery modalities. Impact of direct promotion of drugs through the Media The US is today the only country, which allows prescription drugs to be advertised in public media, including TV, newspapers and lay journals. Perhaps the argument for this is based on the premise that in any case, the internet has made it possible to have easy access to information of any kind including on drugs. The high sales of drugs, which border between ethical and O.T.C have also been attributed to this practice. The companies, which advertise these drugs absolve themselves from liabilities if any, by resorting to the small print which says "as per Physicians advice". It is not uncommon to see patients recommend the course of treatment to the physician based on information gathered from the internet or the advertisements in lay journals. There has been no study available to determine the impact of this practice on prescription patterns, patients' acceptance of treatment and faith in the Doctor himself. Drug prices in the US In spite of free market economy playing its legitimate role, drug prices are determined by a number of other factors the most notable one being the exclusivity in the market place offered by the strong patent system prevailing in the US. However, there are some major developments, which threaten the system in the country. The new phenomenon of parallel imports through the internet or mail orders, notably from Canadian suppliers has started eating into the margins of innovator companies. This applies not only to generic drugs, but also to some of the drugs for which the patents are still valid. Many states in US have made it legitimate to import of drugs from across the border for non-commercial personal use, particularly for senior citizens and persons who have little or no insurance cover. The savings for patients when the drugs are procured through the internet or through mail orders from Canadian pharmacies who regularly advertise the drugs are enormous. For example, for three months supply of Plavix (Clopidogrel), it costs $397 in USA, while the price in Canada is less than half at $172, Lipitor (Atorvastatin) in US costs $214 while it costs $ 162 in Canada, the price of Celebrex (Celecoxib) is $271 against $ 149 in Canada. If parallel imports are allowed, even prices of the same brand in the UK is only 40-60% of prices in USA. The PhRMA the organization representing the R&D based US pharmaceutical companies argue that parallel imports result in high risks to patients since the quality of those products are never guaranteed. Also, many of the products, which are supplied by Canadian Pharmacies are indeed manufactured in other countries such as Brazil, China, Israel, India etc. The MNCs feel that import from such sources encourage production and marketing of counterfeit drugs in the international market. Trading through the internet also exposes buyers to increased danger of spurious drugs. One report mentions that the Drug Enforcement Administration has identified over 530 sites selling controlled drugs globally. In July 2004, the FDA investigators purchased drugs from a website advertising 'generic' Lipitor, Viagra and Ambien three blockbuster branded products, for which there are no generic equivalents in the US. The FDA found the drugs counterfeit and the owners of the website were traced not to Canada, but to China and Belize. Several other instances of counterfeit drugs moving in the US market including anti-HIV and anti-cancer drugs have been unearthed in recent times. To control the internet pharmacies, the Verified Internet Pharmacy practice Sites run by the National Boards of Pharmacy certifies pharmacies that meet licensing requirements for their States. Internet sites, which require prescriptions signed by qualified Doctors is another safeguard to make the system somewhat more reliable. Retail prices of drugs Wide variations in drug prices are noticed among various retail pharmacies in USA, sometimes within the same state or even the same city. In a recent special report by US News and World Report, it was mentioned that in Grand Rapids, Michigan, the price of 30 tablets of Ciprofloxacin, 500 mgms at a CVS Pharmacy, one of the most popular retail chains in the Country is $ 175.99 while in an independent Pharmacy the Medicine Shoppe, it is as low as $ 24.99. In Sacrementio, California, the price of 90 tablets of Lipitor (Atorvastatin) 10 mg is $ 321.95 while the same brand of the drug cost only $173.90 in a neighborhood Pharmacy, Costco. Such tremendous disparities are clearly unacceptable in any equitable system of healthcare even if it is attributed by Pharmacists to the fact the same drug is supplied to them at different prices by different wholesalers. The retailers themselves on their part add different margins to the products while selling the drugs to the patients. The consumers in US very often are unwary of such steep price differentials since unlike other commodities patients do not search for bargains while buying drugs. The real impact is felt more by those who have no reimbursement facilities through Insurance or other schemes. Erosion of patents While R&D based pharmaceutical companies try to extend patent life of their products, by a combination of many strategies, there is increasing counter pressure to ensure that generic drugs reach the market at the earliest possible time frame. The Hatch Waxman provisions to encourage generic introduction is just one such example. Decreased pipe line of new drugs, longer gestation periods for new drug approvals, higher costs of pre-clinical and clinical investigations and the risks of drug drop-outs (post-marketing) due to adverse drug reactions all are major constraints to recouping the high R&D costs incurred by companies. The threat of compulsory licenses being granted by countries within the parameters permitted by original TRIPS Agreement or through the DOHA Declaration of 2001 are yet other concerns for the innovator companies, which rely largely on patented exclusive products for their survival and growth. In the past, the industry had shown a lot of resilience in managing the environment which at times looked intolerant or even hostile and the US Pharmaceutical Industry hopes that once again it will meet the challenges it faces from a variety of quarters and ensure continued growth and profitability, apart from providing new products for underserved diseases and patients. - The author is a senior research scientist and industry observer

 
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