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Gordy Schiff MD

National Health Insurance and the Drug Industry w hy and How Should Single Payer Advocates be Critical of Drug Industry. Gordy Schiff MD Senior Attending Physician Cook County Hospital Professor of Medicine Rush Medical College Sayeh Nikpay

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Gordy Schiff MD

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  1. National Health Insurance and the Drug Industrywhy and How Should Single Payer Advocates be Critical of Drug Industry Gordy Schiff MD Senior Attending Physician Cook County Hospital Professor of Medicine Rush Medical College Sayeh Nikpay Project Coordinator, Formulary Leveraged Improved Prescribing, Cook County Hospital

  2. Outline 1. Principles of Conservative Prescribing • Multiple principles directly conflict w/ profit imperatives • Why NHP is “good medicine;” need to chose sides 2. Drug Costs • Overview and ammunition • To understand and illustrate way violating public trust 3. Special Role Industry in Undermining NHI • Toxic links between NHI and pharmaceutical industry • Medicare Part D 4. Antidotes to best Treat Problem

  3. 24 Suggestions for MoreConservative/Cautious/Mindful/Careful Prescribing • Directly conflict with interests and messages of pharmaceutical companies • Physicians need to choose sides--their patients or the industry • More than personal moral ethical issue • Future of the profession and practice of medicine • Need for collective action • Abdication by professional organizations

  4. U.S. Deaths from Vioxx More than Vietnam War • 1/1999--9/2004: 106.7 million rofecoxib prescriptions in US • 17·6% were high-dose, mostly to older patients • In 2 Merck-sponsored randomised trials: 2,25 relative risks for AMI • 5x for high-dose rofecoxib and 2x for the standard dose • Background rate AMI control NSAID users varied from 7·9 per 1000 person-years in CLASS1 to 12·4 per 1000 person-years in TennCare. • Using Merck studies relative risks w/ these background rates 88,000– 140,000 excess cases serious coronary disease in US • Using US national case-fatality rate-44%,suggests thousands of deaths attributable to rofecoxib use (~38,000-61,000) Graham Lancet 2005

  5. COSTS - HUMAN and FINANCIAL

  6. Sager FDA Testimony 4/04

  7. Are Drug Costs Too High?

  8. Drug Prices Too Low! • Academic economist defending monopoly pricing for lifesaving drug:“Because the patients who used the drug had no alternative, the drug company had a fiduciary responsibility to its shareholders to raise the price to the highest level the users considered their lives to be worth. Because the drug’s current price was clearly below this amount, the company was in fact underpricing the product.” cited in Korten, Post-Corporate World 1999

  9. Drug Costs Too High: Multiple Yardsticks Any Way You Look at it…..too high to swallow • Too expensive for patients to afford Much is out of pocket for sick, chronically ill. • Relative to inflation: general inflation, health inflation • Profits--extreme outlier compared to other industries • What it really costs to produce • % production, marketing, profits vs.”reasearch” • paying for therapeutic advances vs. “me-too” drugs? • Estimates for R & D costs • Relative to generic alternatives • Relative to other countries, VA • High social costs-harm from inadequately studied and inappropriately over-prescribed medication

  10. 2004 Revenue Allocation for Top 7 US Pharmaceutical Cos Marketing, Advertising and Administration Other 32% 36% 14% 18% Research & Development Profits (net income) Source: Families USA, The Choice: Health Care for People or Drug Industry Profits, 2005

  11. 2004 Revenue Allocation for Top 7 US Pharmaceutical Cos Marketing, Advertising and Administration Other 32% 36% 14% 18% Research & Development Profits (net income) Source: Families USA, The Choice: Health Care for People or Drug Industry Profits, 2005

  12. MEDICAL-PHARMACEUTICAL INTERACTIONS GIFTS MEALS TRIPS HONORARIA LIMO RIDES TICKETS TO EVENTS SPA OUTINGS PROFESSIONAL SOCIETY SUPPORT SAMPLES IMPROVING MD SELF-ESTEEM DETAILING CME EVENTS STAGE 4 TRIALS GRANT SUPPORT SPEAKERS BUREAUS, CONSULTANCIES INVESTMENTS ACADEMIC-INDUSTRY PARTNERSHIPS CONTRACT RESEARCH ORGANIZATIONS

  13. MD’s and Drug IndustrySummary of Evidence • 1. MD’s are influenced by industry promotion, although they believe they are not and also believe their colleagues are • 2. Marketing efforts are highly sophisticated package of activities including educational, surveillance, predictive, and ideological measures.

  14. MD’s and Drug IndustrySummary of Evidence • 3. Extent and nature of relationships tying MDs and Industry raise serious ethical and public concerns. • 4. Significant proportion of inappropriate drug use linked to above 3 issues. • 5. Problems are getting worse

  15. 2004 Revenue Allocation for Top 7 US Pharmaceutical Cos Marketing, Advertising and Administration Other 32% 36% 14% 18% Research & Development Profits (net income) Source: Families USA, The Choice: Health Care for People or Drug Industry Profits, 2005

  16. PROFIT “FEVER” CURVE

  17. Public Citizen Congress Watch 2003

  18. Kaiser Family Foundation Health Poll Report Survey(conducted Feb. 3-6, 2005)

  19. Kaiser Family Foundation Health Poll Report Survey(conducted Feb. 3-6, 2005)

  20. 2004 Revenue Allocation for Top 7 US Pharmaceutical Cos Marketing, Advertising and Administration Other 32% 36% 14% 18% Research & Development Profits (net income) Source: Families USA, The Choice: Health Care for People or Drug Industry Profits, 2005

  21. Even this 14% ….is a misleading drug claim • Up to 80% of “new drugs” are for “me too” drugs: new formulations or products developed to grab a share of existing markets • Figures claimed for research and development costs are grossly inflated • Ignores public dollars that contribute to new drugs

  22. The term “innovation” covers 3 concepts : - the commercial concept - the technological concept - the concept of therapeutic advance

  23. A clear difference between: newly marketed substance, or indication, or formulation, etc. industrial innovation (chemistry, biotechnology) therapeutic advance : « a new treatment that benefits the patient when compared to existing options » (ISDB Declaration) -

  24. ISDB Declaration on therapeutic advance in the use of medicines (November 2001) The 3 components of therapeutic advance 1- efficacy 2- safety 3- convenience

  25. Prescrire’s rating system BRAVO The drug is a major therapeutic advance in an area where previously no treatment was available A REAL ADVANCE The drug is an important therapeutic innovation but has certain limitations

  26. Prescrire’s rating system OFFERS AN ADVANTAGE The drug has some value but does not fundamentally change the present therapeutic practice POSSIBLY HELPFUL The drug has minimal additional value, and should not change prescribing habits except in rare circumstances

  27. Prescrire’s rating system NOTHING NEW The drug may be a new substance but is superfluous because it does not add to the clinical possibilities offered by already available treatments NOT ACCEPTABLE Drug without evident benefit but with potential or real disadvantages

  28. Prescrire’s rating system JUDGEMENT RESERVED The editors postpone their judgement until better data and a more thorough evaluation of the drug are available

  29. 23 Years Ratings New Drug “Advances” by Prescrire (1981-2003)

  30. Other Estimates Me-Too #’s • 2002: FDA approves 78 drugs • 17 new active ingredient (22%) • 7 improved treatments (9%) • Over past 6 years FDA classification of newly approved drugs • 78% - “unlikely better than existing drugs” • 60% - didn’t even contain new active ingredients Angell, AARP interview 2004

  31. 2005--No Better Farnacia Hospitalaria 2006

  32. But all these great new drugs do cost big bucks to research and develop ?

  33. $802,000,000 • Tuft’s center study, DiMassi 2003 • “Sophisticated” analysis • Industry Funded • “Evidence” for high prices and patent protection • Widely quoted for 2 year prior to publishing data • Inflated by key biases • Capitalized (opportunity) cost included

  34. Tufts Study Biases • Confidential, Voluntary, Anonymous data • 10 firms and 68 drugs • Don’t disclore which firms/drugs? • What is being called R&D? • Like drug pricing in general: lack of transparency • Estimates costs only for Self-Originated, New Molecular Entities • Most expensive kind of drug • Only 22% of branded-drug market • Pretax $ • Fails to include tax deductions and credits • As high to 50% in the 1990’s (OTA-1993) Light Jl Health Economics 2005

  35. Also Included Capitalized Cost • Roughly doubles simple cost calculation • Like including interest on sticker price of car • Widely misunderstood • Need to recognize that this is true cost • Commonly used financial tool • But biases in applying this tool • DiMassi used unusually high rate 11% compounded • Higher than standard for commercial industries • Higher than official rates recognized by the government. Light Jl Health Economics 2005

  36. Alternative Estimates • Jamie Love - calculations vary based on drug • Public Citizen $110 • Marcia Angell - $266 million • Don’t factor in capitalized (opportunity) cost

  37. U.S. Drug Companies Budget only 7.1% of Sales, Net to R&D R&D 18.4% R&D 11.8% Net Corporate Cost 7.1% Taxpayers’ Contributions 4.7% PhRMA NSF Reality Myth D.Light

  38. U.S. Drug Companies Budget less than 1.5 cents per dollar sales to Basic Research for Breakthrough Drugs, after taxes Applied Research and Testing, 5.8% of Sales Basic Research, 1.3% of Sales Net R&D Budget (7.1% of sales) D.Light

  39. Taxol - Taxing Us All • Rare glimpse into dealings NIH & Industry • Public Citizen sued, denied info; GAO finally got • Developed @ taxpayer expense • NIH $138 million over 20 yrs • Plus NIH did 5/6 clinical studies used for FDA approval • Gave to Bristol Meyers Squibb • $35 million, w/ 0.5% royalty • vs. 4.5% Florida State Univ cut of Taxol sales • BMS sales from the drug $9 billion 1993-2000 • Medicare spent $687 million 1994-99 on Taxol M. Angell Truth About Drug Cos 2004Public Citizen Health Letter 8/2003

  40. Other public treasury rip-offs

  41. Tax Pill-fering How Merck Saved 1.5b paying itself for drug patents • Merck sets up subsidiary in Bermuda, in partnership w/ British bank • Quietly transfers patents for blockbuster drugs to new subsidiary • Merck pays royalties to subsidiary for licensing Mevacor, Zocor, etc. • Subsidiary loans money back to Merck to buy Medco. • Arrangement allows some of the profits to disappear into “Bermuda triangle” between different tax jurisdictions. • Merck avoids $1.5 billion in federal taxes over next 10 years. • Later, Merck liquidates company & recovers its money Drucker, Wall St. Jl 9/06

  42. $1.5 Billion = 3 New Cook County Hospitals

  43. Sager FDA Testimony 4/04

  44. “The American situation shows that high drug prices are not inevitable: they simply reflect political choices which, by definition, can be modified” Prescrire-The Drug Price Explosion 2/05

  45. How is this all related to Single Payer National Health Insurance? • Affordable • Fair • Efficient • Publically accountable • Safe and high quality Haunting (and Daunting) Parallels

  46. 2 Linked Challenges • Can't have national health insurance without drug reform. • Can’t have drug reform without national health insurance • Gridlock? ...or Opportunity for real progress

  47. Connections NHI and Drug Industry • Lobbying, campaign finance corruption • >1/each member congress • ~own full time deal-person • Industry actively opposing NHI • Keep government out of medicine cabinet • High drug costs obstacle affordable NHI • Medicare Part D

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