FDA Backs Dendreon’s Provenge for Prostate Cancer

An FDA advisory panel has given the nod to Dendreon’s Provenge, an innovative new approach to treating cancer. The product is a therapeutic cancer vaccine that is designed to trigger the patient’s immune system into attacking the tumor.

As with all of the other therapeutic cancer vaccines, clinical trial results were mixed. Provenge was generally safe, however efficacy was a mixed bag. Provenge failed to meet endpoints for “time to progression” or tumor advancement. However, men in one trial lived about 5 months longer. So what is more important, survival or “time to progression”? Evidently the panel was moved by the survival data. I’m betting the FDA will give the drug the green light.

FDA Announces Drug Withdrawals (Zelnorm and Pergolide)

Yesterday, the FDA announced the voluntary withdrawal of the pergolide products due to “the risk of serious damage to patients’ heart valves.” The products, which are used to treat Parkinson’s Disease, are Permax, marketed by Valeant Pharmaceuticals and two generic versions manufactured by Teva and Par.

Eli Lilly’s Permax (pergolide) was originally approved in 1998. The link to adverse events in patient’s heart valves was first identified in 2002 and subsequent efforts to get physicians to utilize the product appropriately were unsuccessful (including stronger label language, black box warnings and “dear doctor” letters).

Next up for the FDA’s voluntary withdrawal hit list, Novartis’ Zelnorm. This one got yanked because of a minor, and NOT statistically significant, sub-population in an 18,000 person study. 13 people out of 11,614 (or 0.11%) had an increase adverse cardiovascular events. Every one of the patients had pre-existing cardiovascular disease and risk factors (i.e., the doctor never should have put them on the drug in the first place).

Zelnorm is personal for me. I have a very close friend who has lived for years with debilitating IBS. Zelnorm was a miracle drug for her and allowed her to live her life…a normal life. What does she do now?

The FDA needs to find a way to balance adverse events with patient benefits. It is a tragedy when a patient dies or is injured by an adverse event. It is also terribly cruel to deny a patient a medication that has changed her life because 0.11% of people in a study had an adverse event (patients who shouldn’t have been on the drug in the first place if the doctor was doing their job).

The Pharma Pipeline

Looking at the biotech and pharmaceutical pipeline, I can’t help but notice the innovation “bulge.” When drug companies were flush with cash in the 1990’s, they invested heavily in R&D.

That bulge of innovation is now reaching Phase II. In fact, Phase I and Phase II pipelines are up 46% in the last several years with over 1,000 compounds in Phase I and another 1,200 in Phase II. Most of this innovation shifts towards the specialty markets, biotech and oncology.

As this innovation bulge moves through the pipeline, I see a couple of trends emerging. The first is that attrition rates are rapidly increasing. The second is that pharmas are less willing to begin groundwork for Phase III and submission (i.e., less “at risk” efforts). The third is that companies have invested heavily in new technologies (genomics, proteomics, etc.) in the 1990s and those technologies have not paid off (and won’t pay off in the regulatory submissions until after this decade). It’s a long slow adoption curve.

I keep reading about the innovation draught. And, to be sure, some companies are really hurting. However, there’s more coming than meets the eye.

Biota Battles GSK for Relenza

Biota, a small Australian drug firm, has been trying to drum up support and interest in its lawsuit against GlaxoSmithKline (GSK). The suit alleges that GSK failed to promote the drug, therefore Biota deserves hundreds of millions of dollars. Namely, GSK, “failed to use best endeavors to market the drug.”

Needless to say, I’m skeptical. First, Biota is claiming that Relenza is not plagued with resistance issues or other problems associated with Tamiflu from Roche. Fair disclosure—maybe not, but Relenza has its own issues that almost kept the product off the market in the U.S. Biota is touting studies in Nature and Lancet showing Relenza’s superiority (I have been unable to review these directly, so can’t comment on the level of scientific rigor).

I’m fascinated by the idea that a company (GSK) should be liable for not achieving market share, which is what Biota is alleging. In information obtained from Biota, they could not point to any instances of GSK’s failing to promote the drug other than not achieving the desired level of market share.

To be fair to the Biota folks, this is not the only time GSK has failed to put its full muscle behind a product. After the merger, GSK found itself with two antidepressants—Paxil and Wellbutrin. GSK put its full muscle behind Paxil (plagued with adverse event problems and litigation), while Wellbutrin languished. A few short years later, Paxil is generic, GSK is settling Paxil lawsuits and Wellbutrin is one of the 30 largest brands in the land with $2.0 billion in sales.

Meanwhile, Biota’s attempts to gain interest in the lawsuit seem successful. Pharmalot, On Pharma, and the General Health Care Blog all covered the story.

This could be tilting at windmills, but worth watching…

J&J Blogger Outreach

As previously discussed on this blog and others, there has been quite a bit of discussion about the Johnson and Johnson meeting with bloggers earlier this month. However, nearly all of that discussion has focused on whether it was ethical for the bloggers to participate (I think it was).

Nobody has discussed J&J perspective. Stepping back and looking at this, it was either a waste of time or sheer brilliance. And since it was only one night (how much of time waste could it really be?), I’m leaning to brilliance.

J&J is the only one of the top drug companies to cut back on DTC advertising in the last year. Meanwhile, they launched a patient education movie called Innerstate. Then the blogger meeting. It’s no coincidence that J&J cuts back on major ad campaigns and is looking for other options.

The bloggers can discuss their own involvement (or lack thereof) all they want, but this was a shrewd move for J&J.

BIO Annual Meeting Preview

I received my session agenda for BIO last week. It looks to be a fantastic program this year, with a very global focus.

Keynoting is Michael J. Fox on “Driving the Development and Availability of Novel Therapies” on Monday, May 7. The vendor companies Burrill & Company and Ernst & Young each present their reports Monday and Tuesday respectively.

Across each day, there are a series of fantastic panels on global health. With all of the recent news out of Thailand, I’m looking forward to the Sunday session “Thailand: Investment and Collaboration in Agricultural Development and Medical Innovation.” The description reads, “In support of biotech investment opportunities, Thailand provides excellent infrastructure, hands-on professionals, existing world-class research, government incentives and biodiversity.” I wonder if ‘government incentives’ is a euphemism for ‘violating your patents.’ Strange things happen when you are looking down the barrel of the gun.

In the public relations program track “Too Much? Communicating Drug Costs to the Public & Media” sounds fascinating given the recent criticisms of high drug costs for biotech products.

The global focus should make this a really good meeting.

Pay-for-Performance (Double Dipping)

One major issue with pay-for-performance is that it is compensating physicians for something they should be doing anyway—taking care of their patients. Some pay-for-performance plans reward physicians for administering flu shots and some reward physicians for screening patients for diseases like colon cancer. So physicians receive compensation for the office visits as well as the outcomes—double dipping.

Most physicians reject pay-for-performance for introducing accountability into the practice of medicine—another dent in the armor of the physician-as-god complex. They claim that it is only being implemented to control costs, and some in the AMA support this view. Perhaps so.

Quietly, however, many physicians have realized that pay-for-performance can be their ticket to extra profits. Weekend conferences at ski resorts teach physicians how to milk the new pay-for-performance environment. Even the AMA has gotten into the game and published several papers to help physicians navigate the maze of pay-for-performance programs and maximize their participation in “incentive plans.” (Unfortunately, access to many of these papers is restricted to only AMA members.)

Everyone, including physicians, should favor improved patient care. Ultimately, aligning physician behavior with the actual clinical outcomes of their patients will improve care. As more studies are done, these results will become even more transparent. Years from now, we will look back on this time and wonder why so many physicians resisted this move. Perhaps, one day, we’ll see the end of those traditional compensation plans and physicians will only be compensated for the results they can achieve.

Where Doctors Go Wrong

Sometimes the biggest barriers to a patients’ health are the very doctors they seek out for treatment. Time Magazine ran an interesting article in the March 26 issue entitled “Where Doctors Go Wrong,” based on the book by Harvard hematologist Jerome Groopman, “How Doctors Think.”

In reading the article, I was again reminded of the fact that only person looking after your health is you. If you rely on your physician to take care of you, there’s a good chance he/she will miss something (for the reasons presented in this article).

Consumerism is slowly changing the face of healthcare. I say slowly, because I remember having conversations about the growing role of consumerism back in 1997. However, reflecting back on the last decade, I can say that consumerism has already altered the landscape and will continue to do so in the future. As cost containment efforts continue, however, there will undoubtedly be more conflicts between managing costs at a population level and the individuals need for the best care possible.

ClintonCare Part II

Presidential hopeful Senator Hillary Clinton (D-NY) has promised a universal health care system if she gets elected next year. I had this deja vu feeling listening to the highlights reel. So, here we go with ClintonCare Part II.

The only piece of the 1993/1994 ClintonCare Part I program that was actually implemented was Hillary’s “Vaccines for Children Program.” The program has had some interesting results. First, immunization rates among the poor which were increasing prior to the initiative, leveled off in the later years of the Clinton administration. Second, reimbursement rates to manufacturers were cut and manufacturers scaled back in production (one company getting out entirely) which directly led to the flu shortages in 2003 (a topic well chronicled in the Wall Street Journal).

Senator Clinton claims she’s learned her lesson from ClintonCare Part I, but only time will tell.

Senior Citizen Killed by Drugs from Canadian Internet Pharmacy

A coroner in British Columbia, Canada has determined that a 57-year-old U.S. resident living in the Vancouver Island area died from prescription medications she purchased over the Internet. The full news report is available here. The woman, Marcia Bergeron, passed away around Christmas, however the coroner has only recently completed the investigation determining that the Internet pharmacy was the agent of her death.

Bergeron bought sedatives and anti-anxiety medication from an Internet pharmacy that advertised itself as being in Canada. It is exactly these Canadian Internet pharmacies that groups like AARP are trying to enable access to for U.S. Senior Citizens. The pills that Ms. Bergeron purchased had traces of toxic minerals including arsenic, lead and even uranium (yes, uranium). Pharma Marketletter is reporting that the pills were believed to be counterfeits of Pfizer’s Xanax and sanofi-aventis’ Ambien.

It is only a matter of time before senior citizens in the U.S., even AARP members, start dying because of counterfeit medications sold by Internet pharmacies.

Ironically, I received an e-mail last Thursday in response to my previous posting which claimed that I wildly overstate the risk of importation and Canadian Internet pharmacies. The individual claimed in their note, “No single person has ever died from buying drugs from Canada. This is just a scare tactic from those drug companies.” Well dear reader, Marcia Bergeron would disagree with you.

The Week Ahead – March 26-30

March 26—Erickson Retirement Communities is hosting a “Bipartisan congressional briefing on Electronic Medical Records.” The results of a nationwide poll will be released during the briefing.

March 26—House Oversight and Government Reform Committee is having a committee hearing, "Safe and Affordable Biotech Drugs - The Need for a Generic Pathway.” The generics industry has been building a relationship with Chairman Henry Waxman (D-CA) for years in an effort to speed imitation biologics to market.

March 28—Senate Special Committee on Aging is presenting “Affordable Drug Coverage.” Full committee hearing on affordable drug coverage that works for Wisconsin, focusing on preserving senior care. Chaired by Herb Kohl (D-WI).

March 28—The Centers for Medicare and Medicaid Services is sponsoring “Skilled Nursing Facilities/Long-Term Care Open Door Forum.” The Skilled Nursing Facilities / Long-Term Care Open Door Forum (ODF) addresses the concerns and issues of both the Medicare SNF, the Medicaid NF, and the long-term care industry.

March 29—The FDA is holding an advisory committee meeting for the Anesthetic and Life Support Drugs Committee at the Doubletree Hotel Rockville, Rockville, MD.

March 29-30—“National Cancer Institute Consumer Policies” is being presented by Health and Human Services Department (HHS); National Institutes of Health. Meeting of the National Cancer Institute Director's Consumer Liaison Group, March 29-30. Agenda include: report from John Niederhuber, NCI director; reports on NCI budget; legislative activity; NCI scientific initiatives by NCI staff; reports of DCLG Working Group and member activity; report on NCI listens and learns evaluations; and public comment.

Blogger Editorial Dinners

Quite a lot of emotional energy has been devoted this week on the relationships between pharmaceutical companies (namely J&J) and bloggers. Evidently J&J invited a handful of bloggers out to dinner in New York to get a better understanding of how we cover the industry.

Only a handful of bloggers were invited (I was not one of them). However, it has been interesting to watch how some of the bloggers who were excluded got upset by this, which is just petty and childish.

What strikes me most about this drama has been the discussion of whether it was ethical for bloggers to accept a dinner from a drug company (one blogger paid his own way, but the others accepted). In a way, it mirrors the discussion of whether it is ethical to buy a physician a lunch. Why is it morally reprehensible for a physician to accept the $8 sandwich while the journalist/blogger who criticizes that physician can accept a $65 dinner? This makes absolutely no sense.

It takes more than a meal to buy loyalty in this world.

The Value of Life

What is the value of a human life? Australia puts the price tag at about $40,000 U.S. dollars (or $50,000 Australian Dollars). If you want to receive medical or pharmaceutical treatment, you better hope it costs less than this.

The UK not only values a life, but also the eyes, limbs and organs. If you’re over 45 and need an organ transplant, you better have deep pockets.

With the focus on controlling healthcare costs in Washington and state houses around the country, it will be interesting to see if someone is willing to consider such draconian measures in this country. I imagine that AARP’s legions of followers won’t take kindly to being told that their life isn’t worth saving because it is too expensive (or they are too old to matter). If AARP really wants to control healthcare costs, this would certainly do it.

Jamie Reidy Misses the Boat?

Jamie Reidy, the ex-Pfizer and ex-Lilly sales rep who wrote the book Hard Sell, disappeared for a while. But he’s back with a new push to sell the book.

So it came as no surprise that his name has been popping up in the media a lot lately for that “I was a bad rep and here’s why” quote. Yet, something in one of his recent interviews struck me. He talked about drug companies flying doctors to Maui and putting them at the Four Seasons to hear sales pitches. For a minute, it sounded like he was talking about bribing a Congressman.

There’s only one problem with Reidy’s assertions…it doesn’t happen. It did years ago, but company’s, including Reidy’s former employers, abandoned the practice as part of the PhRMA Code of Ethics. Think it still happens? Ask the doctors. Many of them will get that longing look in their eyes, talk about “the good ole days” and wish they could have those free trips again.

Sorry kid. If you’re going to talk about the industry, at least keep current so you don’t look like you’ve missed the boat.

In related news, there's a rumor floating around that one of the physicians that Jamie used to call on wrote an article about "My Life With The Drug Rep" that she is trying to get published. No word on what titilating details might be contained within.

The Realities of Importation

With AARP out lobbying Congress for importation from “Canadian” pharmacies, I thought it would be worthwhile to take another look at this practice and separate the political hype in Washington from the reality.

The news out yesterday from Canada is that importation plummeted in 2006, down 50% from 2005. Presumably this is due to the Medicare Part D prescription drug benefit, in which consumers are finding it cheaper to stay in the U.S., particularly for generics drugs, which remain cheaper south of the border. If consumers do not find the practice advantageous, why push for it (the free market system is a wonderful approach for telling us what consumers actually want)? However, the AARP lobbying juggernaut continues. This seems to be driven more by AARP's need to be perceived as "doing something" about prescription drug prices, than any real need that exists in the market.

In a study on “Canadian” Internet pharmacies presented during DCAT Week, over 11,000 Internet pharmacies represent themselves as being from Canada. The reality from the study is that approximately 250 were actually in Canada, or only 2.2%. Put differently, 97.8 percent of “Canadian” internet pharmacies aren’t really Canadian. So where are they from?

Of those internet pharmacies trying to pass themselves off as Canadian, countries included Mexico, Greece, Belize, China, Brazil and India. In fact, many of the countries were the same ones named in the recent United Nations report on counterfeit drugs. In many instances, it was impossible to tell the country of origin.

Physician Ties to Industry

A number of news outlets have recently written stories about physicians accepting payments from pharmaceutical companies for consulting engagements or research grants. These payments, which occur in nearly every other industry, are vilified as being unethical and manipulating physicians.

I agree with those who raised this issue—these payments must be disclosed! Ironically, these payments represent a free-market approach to ranking and evaluating physician quality. The drug companies aren’t hiring the worst doctors to do research or serve on an advisory board, they are hiring the best physicians. I want this disclosure so that when I chose my next doctor or assist a family member with this process, I know which doctors are the best and I’d start at the top of the list.

The naiveté of the anti-pharma crowd is astounding. In one media account, I couldn’t help but notice that a certain specialist was quoted. This same doctor was one of the first to sound the alarm on SSRI and Triptan interactions. This doctor also accepted several hundred thousand dollars in industry consulting contracts over the last decade. Is he a worse doctor because of industry ties? I would argue the opposite—he is a better doctor who was able to detect very subtle drug interactions because he worked closely with the pharmaceutical manufacturers.

Give me the doc who keeps up with the science over the darlings of Public Citizen any day.

Prescription for Bias – The Media’s Anti-Pharma Jihad

It won’t come as a surprise to anyone that there is an incredible anti-pharmaceutical bias in the media. However, the Business & Media Institute’s new report documents and quantifies this bias. In its new report, “Prescription for Bias,” the conservative think-tank demonstrates the considerable anti-pharmaceutical attitude in broadcast media.

“Prescription for Bias” looks at network broadcast coverage during the first three quarters of 2006. The report found that 80% of the stories offer a distorted or slanted view of the industry through completely excluding the viewpoint of the industry. In only 22% of the media stories was the name of the company who invented the new drug therapy even mentioned.

Usually when a group with a strong viewpoint puts out a report like this, it’s pretty easy to punch holes in the logic. However, the methodology is strong and I’m impressed with how this one stands up.

I would be really interested to see this group do a study on print media coverage of the pharmaceutical industry. Since print coverage does not have the same stringent 30-second soundbite rules, print coverage could be more balanced. Or not.

Pfizer Wins on Celebrex

Pfizer won another major patent challenge. A federal judge ruled three patents on Pfizer’s Celebrex were valid. Teva was the big loser on this one.

However, it doesn’t look like there is any hope for Pfizer on Norvasc, which goes off-patent later this year.

2006 Pharmaceutical Industry Performance

The 2006 reports are out from IMS Health—and it was a pretty good year.

Globally, IMS reports biopharmaceuticals are now $643 billion, up 7.0% in 2006. The story globally was oncology, with growth at 20.5%. Specialty products contributed 63% of the growth. Generic medications are now half of the volume in the big countries (except Japan)—U.S., Canada, France, Germany, Italy, Spain and the UK. The North American market was up 8.3% driven by the U.S. performance (more on this later). The Europeans showed another year of slowdowns, while Asia and Latin America showed double-digit growth.

Global drug launches were big with 31 NMEs in the major markets. The pipeline remains fairly strong. There are 2075 products in Phase and II, up 7% from 2005. With any luck, a couple of them might actually be approved! More intriguing, biologics now represent 27% of the Phase III pipeline.

In the other IMS report out earlier this month, the U.S. market now tops $274.9 billion, up 8.3% in 2006. The story here is Medicare Part D drove utilization and generic usage surged (prescriptions were up 4.6% thanks to those senior citizens). The report states that the Medicare drug benefit lifted pharmaceutical sales by just under 1% and prescription volume by 1-2%. Generics were 63% of prescriptions in the Medicare program.

The company noted the first approval of a biosimilar/biogeneric in the U.S. is Sandoz’s Omnitrope. But most intriguing is that the company has done nothing with it in over seven months—Omnitrope was not launched in the U.S. by the end of 2006. Makes you wonder what all this clamoring for imitation biologics legislation is all about.

The Truth of Medicare Spending

And we get another glimpse at what’s driving Medicare spending: Fraud (usually physician and institution/hospital):

Medicare’s Most Wanted

Bravo!

PhRMA Re-Elects Amgen’s Sharer; Vote of No Confidence?

The Pharmaceutical Research and Manufacturers of America (PhRMA) have re-elected Amgen’s Kevin Sharer as Chairman. This didn’t come as a surprise to anyone at the meeting.

However, what interests me is that Sharer has been quietly bringing Amgen people in to PhRMA to “help out” on some high profile projects. Given the current state and players at PhRMA, I can only assume this is a vote of no confidence in the PhRMA staff.

The Week Ahead

March 19 – The Alliance for Health Reform is “Health Coverage Revisited: Exploring Options for Expansion.” Speakers include Karen Davis of the Commonwealth Fund; Henry Aaron of the Brookings Institute; Katherine Baicker of the President’s Council of Economic Advisors; Dallas Salisbury of the Employee Benefit Research Institute; and, as always, Ed Howard of the Alliance for Health Reform.

March 19 – The Drug, Chemical and Associated Technologies (DCAT) group hosts their annual meeting in New York the week of March 20.

March 20 – Research! America is having a forum entitled, “U.S. Investment in Research." Participants are George Atkinson, science and technology adviser to the Secretary of State; Carolyn Clancy of the Agency for Healthcare Research and Quality; Susan Dentzer of the NewsHour with Jim Lehrer; Julie Gerberding of the Centers for Disease Control and Prevention (CDC); Freda Lewis-Hall of Bristol-Myers Squibb; Martin Mackay of Pfizer Global Research; Father Thomas Streit of the University of Notre Dame; Christopher Viehbacher of GloxoSmithKline; Elias Zerhouni, director of the National Institute of Health (NIH); and David Gergen of U.S. News and World Report.

March 20 – The American Society of Clinical Oncology (ASCO) and the National Coalition for Cancer Survivorship (NCCS) are holding their press briefing on “Cancer Policy Priorities in 2007: Patient and Physician Perspectives.” Presenters include Allen Lichter, CEO of ASCO; Ellen Stovall, CEO of NCCS; and Robert Sachs, chairman of NCCS.

March 21 – The Friends of Cancer Research will host a congressional briefing entitled “Drug Safety: Defining Safe.” Featuring Representative Diana DeGette (D-CO), the briefing will include expert panelists Dr. Robert Young, President of Fox Chase Cancer Center; Dr. Mark McClellan, Former Administrator of CMS & Former Commissioner of FDA; Dr. Janet Woodcock, Deputy Commissioner and Chief Medical Officer of FDA; and Dan Perry, Executive Director of The Alliance for Aging. Moderated by Susan Dentzer of The NewsHour with Jim Lehrer on PBS.

Takeda’s Advertising

Takeda’s Rozerem advertising has been much maligned lately. The FDA gave them a warning letter, to which the company and its advertising agencies have claimed they had no knowledge. The icon of the ads, a talking beaver, has been widely mocked in the blog world. Personally, I like beaver, but to each his own.

However, I was flipping through my Wall Street Journal this morning and about chocked on my muffin when I saw the Takeda corporate ad on page A3 (I’m going to try and get a scan of this ad up next week). “A proud heritage of enriching lives with quality medicines for 225 years” and continues with “Contributing to the Health of Individuals Worldwide.” Ok, so that’s pretty benign. However, the art is…well…look at it for yourself. It features a rendering of Chobei Takeda, Founder of Takeda. Maybe it is just me, but if I were doing an ad to honor the founder of my company, I would actually make him want to look good. Instead, this guy just looks lecherous.

A Tale of Two Pharmas

Today’s annual meeting of the Pharmaceutical Research and Manufacturers of America (PhRMA) serves as a reminder of what bad PR can get you. Everyone in America knows that the big drug companies have lavish meetings, eat Beluga caviar and have top-name acts perform at their meetings. Right?

PhRMA’s annual meeting in Washington D.C. today was not marked by the excesses attributed to the industry. Long gone are the days of the Breakers. It was professional, yet restrained.

This meeting stands in stark contrast to the Generic Pharmaceutical Association (GPhA) annual meeting earlier this month at a ritzy golf resort in Arizona (pictured). Generic drug makers who flew in on private jets rubbed elbows with Congresswomen and staffers. Men from the Indian generics firms were gleefully socialized wit young attractive women who didn’t seem to know much about pharmaceuticals.

Pharma is a victim of its own excesses. In the 1990s, we lived it up, and we are paying the price of bad PR. The generics industry would do well to take note of pharma’s mistakes and learn from them.

GPhA Gets Cozy in Washington

The Generic Pharmaceutical Association (GPhA) announced yesterday the hiring of two former Congressional staffers to its team. Gary Heimberg, former staffer for Edward Kennedy, has been appointed Vice President of Federal Affairs. Jason Money has been appointed as Director of Government Affairs.

Spitzer Caves to Special Interests

I thought a lot about this title, but it seems to fit. After thumping his chest on Medicaid spending (see previous post), it seems like Eliot Spitzer has caved in to special interest groups representing healthcare unions.

The New York Governor needs to shave more than half a billion dollars from the state’s Medicaid budget. Medicaid costs in NY have skyrocketed of late, primarily due to ineffective physician and hospital management requiring a $1.5 billion bailout of a failed system.

GSK Advances into Oncology (Tykerb)

GlaxoSmithKline won U.S. FDA approval for Tykerb, a once-daily pill for the treatment of advanced breast cancer in patients with HER-2 positive breast cancer who were unresponsive to Genentech’s Herceptin. Tykerb will be used in combination with Roche’s Xeloda.

This is the first of three or four oncology products that GSK hopes to launch in the next 2 or 3 years (depending on who is counting and the likelihood of the approval). In 2005 (the last year for which I could find data), GSK is nowhere to be found on the list of top oncology companies. So this is a good step forward for GSK.

Generics Aren't Cheap

Generic medicines have become the political salvation for the country’s perceived health crisis. Prescription drug spending accounts for only 10% of all healthcare spending, yet receives 100% of the congressional attention.

Congressmen who are unable to understand the complexity of the healthcare environment have latched onto generic drugs as the solution. Unfortunately, generic drugs aren’t cheap. And they aren’t as cheap as they used to be.

There’s a perception that generic drugs cost pennies, while branded drugs cost hundreds of dollars. That gap is shrinking fast. Branded price increases have slowed and the prices of generic drug introductions have escalated significantly. Gone are the days when a generic drug is introduced at a 70% discount. CVS sells a generic version of Merck’s Zocor (simvastatin) at only a 30% discount. And if you think “Internet pharmacies” are the solution, consider that Drugstore.com was selling simvastatin for only a 8.9% discount compared to the branded Zocor.

As today’s Wall Street Journal states, “At a time when policy makers are searching for ways to cut health-care costs, generic drugs are often viewed as one of the most straightforward solutions. But as the situation with generic Zocor illustrates, prices can vary wildly, and may not be nearly as cheap as expected. Generics of a number of other notable drugs that came off patent recently -- including the antidepressant Zoloft, the antibiotic Zithromax and allergy drug Flonase -- have also so far failed to deliver big savings in many cases.” (“Why Generic Doesn’t Always Mean Cheap” by Sarah Rubenstein)

In interviews with the Wall Street Journal, the pharmacy chains claim margins of only 2-3%. This is misleading. Margins on generic drugs are ten times those levels.

To confound the problem even more, generic drugs already account for more than half of prescription utilization in the U.S. When a generic drug comes on the market, it captures 60-80% market share within weeks. We are reaching the point of generic saturation. You can’t squeeze healthcare savings out of converting patients to generics from high-priced branded medications if the patients have already switched.

Patients and the healthcare system will still realize some savings as a result of shifting to generic medications, but the huge anticipated savings will not materialize. The generics industry would be wise to begin setting expectations of these cost savings (or lack thereof). Not managing expectations will result in an almost certain backlash when cost savings fail to materialize.

National Legislative Association on Prescription Drug Prices Meeting

So there is a group of about eleven state representatives that calls itself the “National Legislative Association on Prescription Drug Prices (NLARx).” Their purported mission is to make healthcare more affordable by reducing the costs of prescription drug prices. Despite evidence that pharmaceuticals only make up 10% of national healthcare spending, this organization is convinced that prescription drugs are the problem.

I was just speaking with someone in Hew Haven about this and learned something very interesting. This group held a meeting in Hartford in December 2006. They thought it would be a good idea to charge people to attend the meeting. However, they held it at the State Capitol Complex. Charging for a meeting in a government building is a big faux pas.

After being ridden out of the State of Connecticut, it seems they have been forced into New Hampshire for their next meeting this Friday (March 16). Having learned their lesson about charging for meetings in public places, they decided to host this one away from Concord. The Executive Director, Ms. Sharon Anglin Treat, may have missed that day at Georgetown Law, but at least she’s willing to learn from her mistakes.

Medicaid Spending is Increasing – And It’s Not Pharmaceuticals

Elliott Spitzer is taking aim at out of control Medicaid spending. But it’s not pharmaceuticals that are problem. Spitzer’s got it figured out and the real problem is hospitals, nursing home institutions and unions that are driving costs.

As reported in Sunday’s New York Times, “the messages from the governor that have resonated loudest are contentious, simple and blunt: First, that Medicaid spending, already too high, is rising dangerously fast; and second, that the blame lies primarily with the hospital and nursing home industry, and a powerful union of health care workers.”

And the truth about Medicaid spending comes out.

Schering-Plough buys Organon BioSciences

Akzo Nobel is dumping its Organon BioSciences unit instead of listing it on the stock market. Schering-Plough is forking over $14.4 billion for the firm to shore up earnings and diversify its U.S. business. Schering inherits Organon’s five Phase III development candidates, including asenapine, whose future is in doubt since Pfizer dropped out of a research agreement for the product.

Schering-Plough also acquires Organon’s marketed products, including NuvaRing and Implanon (contraceptives) and Puregon (infertifility treatment). These acquisitions will play nicely into Schering’s already established women’s health franchise. In the Wall Street Journal, Schering CEO Fred Hassan indicated that job cuts were in the works, but did not specify how many or where they would occur.

Akzo Nobel was Europe’s last chemical-pharmaceutical company. It will now focus on the chemicals business.

Generics’ Firm Admits Fraud

The good folks at First Word have reported that four former supervisors at Able Laboratories have pled guilty to conspiracy to distribute misbranded and adulterated drugs (read the First Word report). The timing of my previous Able Laboratories entry now looks rather prescient.

The Vice President of quality control and quality assurance, Shashikant Shah, admitted to altering and falsifying testing data for company. He also profited by nearly $1 million in insider trading of Able’s stock. As part of the deal, Shah had to return all of the profits.

The supervisors have fingered Able Laboratories CEO Dhananjay Wedekar in the conspiracy. Wedekar is not out of the woods yet as the U.S. Attorney is still investigating what transpired at the generics company and the nature and extent of the criminal conspiracy.

The Week Ahead

March 12 – The Institute of Medicine (IOM) is hosting a symposium on “The Future of Drug Safety: Challenges for the Food and Drug Administration (FDA)” with Former HHS Secretary Tommy Thompson; former FDA Commissioner Jane Henney; Ellen Sigal of the Friends of Cancer Research.

March 12 – The NIH is hosting “How Do You Do Medical Science: NIH and the Development of Clinical Research in the Mid-Twentieth Century” at the main campus in Bethesda.

March 12 – The Alliance for Health Reform is hosting a briefing on “SCHIP (State Children’s Health Insurance Program) and Beyond: Improving Health Care Coverage and Quality for Children.” Speakers include Jeanne Lambrew and Sara Rosenbaum of George Washington University; Nina Owcharenko of the Heritage Foundation; Debbie Chang of Nemours Health and Prevention Services; and Ed Howard of the Alliance for Health Reform.

March 14 – The Senate Finance Committee is schedule to hold a meeting on Universal Health Coverage. It is a full committee hearing on “Charting a Course for Health Care Reform: Moving Toward Universal Coverage.” Testifying is James Morgan, president and CEO of Partners HealthCare; Stuart Altman of The Heller School for Social Policy and Management at Brandeis; John Sheils, vice president of The Lewis Group; and Richard Frank, vice chairman of Citizens’ Health Care Working Group.

Eyeglasses Get Overhauled

A revolution is coming and a optician in New York is trying to revolutionize the eyeglass industry. Eyeglasses are not sexy like surgery or complex like pharmaceuticals and we often don’t think about this as part of the healthcare system.

Instead of paying hundreds of dollars for eyeglasses, NY optician Randy Appelbaum has gone online with EyeglassDirect.com (www.eyeglassdirect.com). Taking a lesson from Amazon.com and other online sellers, he sells the same quality eyeglasses, without the overhead of a storefront and salespeople. Stores like LensCrafters often have a 1,000% markup on their products. Applelbaum sells glasses for $28. The days of overpriced mall stores appear to be numbered.

Biosimilars Heat Up in Washington

Biosimilars. Generic Biologics. Biogenerics. Imitation Biologics. No matter what you call it, biosimilars are hot news in Washington. Yesterday, the Senate HELP committee held hearings on these imitation biologic drugs.

European regulatory officials advised the Congressional delegation that many of these biologics are too complex to be safely imitated. They stood behind the European Medicines Agency October 2005 policy statement: “Due to the complexity of biological/biotechnology-derived products the generic approach is scientifically not appropriate for these products.” Legislators are looking to compel the U.S. FDA to approve biosimilars, despite the agency’s legal inability to do so.

The Biotechnology Industry Organization (BIO) has opposed introduction of biosimilars given the likely implications to patient safety and the stifling of innovation these products will product. (Ironically, it is this latter argument that GPhA is using to combat authorized generics.)

This hearing of the Senate HELP comes only days after some Senate members and staffers, including Sen. Debbie Stabenow of Michigan (pictured at right), were wined and dined at the Generic Pharmaceuticals Association (GPhA) Annual Meeting in Arizona. The generics industry is spending millions of dollars to lobby Congress for imitation biologic legislation.

Market Research Consolidation

Last week, Cegedim announced plans to acquire Dendrite International. The “merger” (as its being characterized) will create a $1 Billion market researcher. The press release states: “The combination will create a major player in diversified sales, marketing, clinical and compliance solutions to the global life sciences and pharmaceutical industry. In particular, by combining CEGEDIM’s European strength with Dendrite’s US and Asia Pacific position, the combined group will be able to address the global needs of its customers and provide a unique suite of integrated, value-added products. The combined company is expected to have estimated pro forma annual revenues of $1.1 billion and operate in more than 75 countries throughout Europe, the Americas and Asia Pacific.” Perhaps this will finally enable Cegedim to get a foothold in North America.

And rumors continue persist of a purchase/acquisition/joint venture involving Wolters Kluwer and Versipan.

What Ever Happened to Mectizan?

The recent New York Times Editorial railing against the pharmaceutical industry and encouraging drug companies to donate their products made me ask the question – What Ever Happened to Mectizan?

If you read the recent New York Times Editorial on Sanofi-Aventis’ ASAQ, you’d assume this is the first time a pharmaceutical company ever did something philanthropic. However, in 1987 Merck began an ambitious program to treat people in Africa and Yemen with onchocerciasis (river blindness) and lymphatic filariasis (elephantiasis). Both are hideous diseases that ravage people in the developing world.

Twenty years ago (1987), Merck began the Merck MECTIZAN Donation Program to provide free medication to the developing world to treat these ravishing diseases. In the 20 years the program has been operational; more than 530 million total treatments have been distributed for river blindness and 150 million treatments for elephantiasis in 33 difference countries. The World Health Organization (WHO) estimates that over 40,000 cases of blindness were prevented. The company has donated nearly $400 million in this program alone. The Mectizan Donation Program is still alive and well!

The pharmaceutical industry continues to perform tremendous good works and benefits millions of people around the world. The industry needs to reinforce all of these good works at every turn, and not let Jayson Blair and the New York Times Editorial page detract from that.

Senate Backing Importation

The Senate is concluding several days of hearings on allowing importation of medicines from other countries. The legislation being advanced, and backed by AARP, would have legalized commercial importation from Canada and certain developing countries.

Ironically, at a time when Congress is looking to overhaul the FDA for ineffectively ensuring patient’s health, they will now pass this legislation which empowers the FDA to ensure the safety of imported medicines. If Congress believes the FDA is ineffective domestically, why does Congress think the FDA will be more successful internationally?

If this legislation passes, there will be several outcomes. First, an already overworked and underfunded FDA will be even more overworked and underfunded—a prescription for failure. Second, counterfeit medications, which are proliferating in the rest of the world (both developing and developed), will surely find their way into the U.S. supply. Finally, to combat the spread of counterfeit drugs, pharmaceutical companies will be forced to start restricting supplies (in fact we are already seeing the early signs of this in the UK).

If you don’t understand pharmaceuticals system, importation seems like the perfect choice—an elegantly simple solution to a very complex and politically charged problem. Unfortunately, the lesson in the rest of the world is clear—people die because of the importation of counterfeit drugs. Why will it be any different here?

GPhA Annual Meeting

GPhA had another titillating annual meeting in Phoenix over the weekend. The event was long on rhetoric and economics, and short on science.

David Snow, Medco’s CEO did an excellent job of teeing up the economic issues and previewing Medco’s new analysis on generic prescribing patterns. For every one percent increase in generic utilization, Medco figures the healthcare system saves $4 billion. Medco is not run by humanitarians and every one percent increase in generic utilization results in millions of dollars in profit for Medco. Snow highlighted that Medco’s strategy is to promote generics direct to consumers (DTC), while offering “incentives” (i.e., cash payments) to doctors who prescribe generic products instead of branded ones—all out of view from consumers. Since most states have mandatory generic substitution laws, Snow is referring to class substitution, such as the simvastatin for Lipitor (note entry on Lipitor outcomes).

Interestingly enough, David Snow was unwilling to criticize “authorized generics,” long a thorn in the side of the generic pharmaceuticals industry and a topic high on their legislative agenda. Why break ranks with the generics firms? Snow contends his focus is 100% on what benefits consumers. Put differently, if authorized generics reduce prices faster, increase competition and save patients money, then Snow/Medco have no objections. Interestingly enough, this is exactly what PhRMA have been saying.

Mark McClellan, former head of FDA and CMS, now a fellow at the American Enterprise Institute provided the best view of the generics market. He noted that the U.S. has the highest rate of generic utilization in the world and that generic drugs are also cheaper here. McClellan also noted that the FDA’s “limited steps” towards biosimilars, however the generics industry needs to do more than clamor for legislation. He strongly urged GPhA and the generics industry to bring its science forward for review and evaluation, noting that “a legal pathway is not a scientific pathway.” Put differently, a legislative victory in Congress is not scientific acceptance (or equivalence) for generic biologics.

Then a Lehmann Brothers analyst noted that the larger generics firms are consolidating at a record pace. This continues to still be benefit consumers, but for how long? It its limited survey of a handful of generic drugs, AARP has noted that prices declined 2% in 2006. However the Lehmann Brothers analyst noted that there is some upward pricing of generics these days, especially among older products. He also noted that “lower pricing does not ultimately lead to market share gains,” therefore generics firms are tending price in a narrow range and at higher-than-historical levels. Lehmann had an interesting take on authorized generics—the authorized generic product does not capture largest market share (this is still won by the generic product).

Many thanks to GPhA for serving up such good food and terrific golfing!

PhRMA Responds to AARP

PhRMA has decided to issue a media statement responding to AARP’s “study” (see my previous blog on the AARP study). In typical PhRMA fashion, they spend several paragraphs defending the status quo before vaguely addressing the inaccuracies of the AARP “study” – not exactly tackling it head-on here.

Since AARP does this publicity stunt every year, it wasn't like this was a surprise. Maybe next year PhRMA can step it up and have a thoughtful study of their own (hopefully with more than 193 brands and 75 generic products). But it is nice to see PhRMA trying to get in the PR game.

A Good Day for Lipitor

It’s a good day for Lipitor. And a good day for Pfizer.

This morning, Pfizer announced that the U.S. FDA had granted Lipitor (atorvastatin) five new indications, including, “reduce the risk of nonfatal heart attacks, fatal and non-fatal strokes, certain types of heart surgery, hospitalization for heart failure, and chest pain in patients with heart disease.”

This comes on the heels of a retrospective analysis using a managed care database showing a 14% reduction in the risk of cardiovascular events with Lipitor compared to simvastatin. This is real-world clinical outcomes.

The winds of change might be blowing, but it’s still not smooth sailing on East 42nd Street yet.

AARP Reports Prescription Price Increases (sort of)

AARP has released its annual report on prescription drug price increases. Well, sort of. First, AARP excludes all generic drugs (more than half of drugs dispensed to seniors are generics). Then AARP narrows the basket to only the Top 193 brand-name drugs, introducing even more selection bias into the “study.”

The report contends that prices for generic drugs fell 2 percent. Well, sort of. Not all generic drugs, only 75 of them. Why not the top 193 generic drugs? The report also fails to mention that the gap between branded prices and generic prices is narrowing (in other words, generics aren’t as cheap as they once were). Just like previous years, AARP scales the study and narrows the list of products to get the desired outcome. Only by introducing selection bias into the study, can AARP get to 6.2 percent. Credible sources report prescription drug price increases were actually closer to 4.2 percent.

The study is also flawed in that in rests on wholesale price increases, not the prices paid by actual consumers, nor the price paid by the wholesalers through negotiated discounts. Ironically, it is precisely these negotiated discounts that AARP is lobbying for within Medicare (because the government is so effective in negotiating). If AARP wants negotiated discounts, why not include them in the study? Answer: Claiming a higher price increase than actually exists is helpful in AARP’s lobbying war. This report is a brilliant PR move from AARP!

The Battle Over Malaria – Sanofi-Aventis Takes No Profit

French pharmaceutical outfit Sanofi-Aventis has announced that it will introduce a new treatment for Malaria called ASAQ, as reported by the New York Times. The pill combines artemisinin (a Chinese medicine using wormwood) with amodiaquine.

What makes this unusual is that the drug is the result of a partnership between Sanofi-Aventis and the Drugs for Neglected Diseases Initiative, a program run by the charity Doctors Without Borders (a.k.a. Médecins Sans Frontières). As it turns out, Doctors Without Borders has long been one of the harshest critics of the pharmaceutical industry, alleging that drug firms spend money researching drugs for lifestyle conditions (ED, insomnia, depression, overactive bladder, etc.) instead of researching diseases that kill millions of third-world poor.

As part of the agreement, Sanofi-Aventis will not sell the drug for a profit—a successful public relations move that received favorable play on the editorial pages of The New York Times. The Times editorial concludes with the statement “let us hope that many other big drug companies feel the same humanitarian impulse.” No word on when The New York Times will feel the same humanitarian impulse and start giving away copies of its newspaper.

However, while the New York Times extends backhanded compliments to Sanofi-Aventis and insults to everyone else (including Novartis, Merck, Pfizer and everyone else who already have programs like this…a fact missed by New York Times Editorial Staff), the original subject of the story – Doctors Without Borders – has recognized “that new drugs would have to come from the industry’s major players” and therefore they needed to be at the table with drug companies. This is a major recognition by one of the industry’s most vocal critics that the pharmaceutical industry in the developed world is subsidizing the medicines for the developing world and criticizing the industry is not likely to result in the desired outcome of new medicines for the world’s poor. So next time your unemployed neighbor wants to know why her drugs are so expensive, she should look at the kid in Africa covered with flies and feel better about not being able to afford her drugs.

This is stated more eloquently by Paul Tuns at Sobering Thoughts: “Selling malaria vaccines for no profit might warm the hearts of liberals, but it is only possible after the vaccine manufacturer has earned a sufficient return on investment.”

Meanwhile, the malaria battle continues with Nick Zamiska over at the Wall Street Journal in Hong Kong who wrote a stellar piece appearing on today’s front page about artemisinin manufactured by Chinese firms. The perception in China is that they are being forced from the market because of World Health Organization (WHO) initiative to stop companies from selling artemisinin as a monotherapy. As a monotherapy, the malaria parasite is able to become resistant to artemisinin, and therefore, the drug becomes ineffective. Chinese firms contend they will continue to sell the product as a monotherapy as a matter of Chinese pride. Artemisinin is one of the ingredients in the Sanofi-Aventis ASAQ pill.

FDA Approves Novartis’ Tekturna

The FDA announced this morning that it had approved Novartis’ Tekturna (aliskiren) tablets for the treatment of hypertension. Tekturna is a NME and is the first of its kind drug that inhibits rennin—the enzyme associated with blood pressure regulation. In an interesting twist, the drug appears to be less effective in African Americans.

Pay-for-Performance (Overview)

There has been considerable discussion of physician pay-for-performance in the news lately. The Journal of the American Medical Association (JAMA) published a study in its February 21 issue by Meredith Rosenthal and R. Adams Dudley that investigated the latest trends around pay-for-performance.

Currently, physicians are not financially motivated to help patients get better. In fact, the sicker you are (or you think you are), the more money the physician makes. I won’t go so far as to say that doctors are rewarded for keeping you sick, but in their study, Rosenthal/Dudley state, “the current repayment system thwarts high-quality care and needs to be reformed.” I believe that nearly all physicians want their patients to get better, but they don’t have any ethical problems administering a few extra tests and scheduling the patient for more follow-up visits than are probably necessary.

Physicians are currently compensated on the office visit as well as any fees they may take in for administering tests or procedures. Pay-for-performance is designed to improve patient health by rewarding physicians accordingly. According to the Rosenthal/Dudley study, more than half of HMOs are using pay-for-performance and the Centers for Medicare & Medicaid Services (CMS) is being compelled to move in this direction.

I will be taking up specific aspects of pay-for-performance in an upcoming series of postings.

Walter Reed Army Medical Center Implodes

Walter Reed Army Medical Center has finally imploded. Earlier today, military officials were flogged at Congressional hearings.

Maj. Gen. George W. Weightman (pictured at right in an Associated Press photo), the former head of Walter Reed, admitted he failed veterans and failed in his job. Nobody disagrees with his assessment. It is likely that Army officials just decided to let Walter Reed coast since it will be shuttered in a few years anyway. That’s not an excuse for the military’s failure to care for the veterans, just an explanation.

Massachusetts Democrat John Tierney, chair of the panel held by the House Oversight and Government Reform asked Weightman, “My question is, where have you been?” The question to Rep. Tierney is, have you ever been to a VA hospital?

Congressional Oversight of Medicare and Drug Pricing

Congress is laying the groundwork for future direct price negotiations in Medicare. About a month ago, the House Energy and Commerce Committee sent demand letters to the national Medicare Part D plans requesting large quantities of documents, specifically documents relating to pricing. These were due last Friday.

Given the large scope of the demand letters as well as the short timeframe, the Part D plans requested more time, which was declined. It seems as though most plans are delaying, so subpoenas will probably be issued.

But the fun is just beginning. The next round of subpoenas will likely be directed to the pharmaceutical companies. It looks as though the Democratic controlled Congress will play this out in the media, so look for a lot of press releases and media coverage through the spring and summer.

The goal will be to embarrass the pharmaceutical industry into direct price negotiations. (More on Medicare direct price negotiations.)

BIO Announces Michael J. Fox as Keynote Speaker

BIO, the biotechnology industry organization, has just announced that Michael J. Fox will the keynote speaker at the group’s annual meeting in Boston (May 6-9). The topic will be:

Driving the Development and Availability of Novel Therapies
There is a great need for creative approaches to speed translation of our significant investments in research and discovery into meaningful, patient-relevant advances in human health. This keynote and panel discussion will explore strategies and solutions to "de-risk" investment in novel therapeutics for the biotechnology industry and academia alike.

Bayer Announces Global Downsizing

In the latest pharma downsizing, Bayer has announced that it will cut 6,100 jobs worldwide (3,150 in Europe; 1,000 in the U.S.; 1,200 in Latin America and Canada; and 750 in Asia). This is part of Bayer's ongoing integration of Schering AG. Nearly half of the reductions will come from R&D and production, with the remaining coming from regional administration functions.

Court Upholds Pfizer’s Exclusive Distribution in UK

This has been story I’ve been following for a while. Pfizer recently named Alliance Boots in the UK as its exclusive distributor in that country. Pfizer contends the move was prompted by counterfeit Lipitor showing up in the UK pharmaceutical market. Opponents of Pfizer’s move contend that this designed to fight parallel importation—a practice in Europe where products are initially sold in one country with very tight price controls and then resold in more expensive/lucrative markets like the UK. Parallel importation is a way for wholesalers to maximize profits by shifting drugs to countries with the highest selling price.

Today, Ben Hirschler at Reuters is reporting that the high court in London dismissed a challenge by the British Association of Pharmaceutical Wholesalers (BAPW) to block the move.

This move has several implications for the U.S. market. First, it shows a company willing to take initiative against counterfeit medications in the developed world (see previous posts on counterfeit drugs and the UN report on drugs in the developing world). It also shows how and advanced country like the UK is vulnerable to the importation of fake medicines through legitimate channels. As organizations like AARP continue to lobby for importation, we should look to the countries of Europe to see how well such a program works (or does not work).

Second, it could signal a broader strategy for Pfizer in other parts of the world, including the U.S. Pfizer, the largest drug company in the U.S., has experience running its own distribution networks. For years, Pfizer Animal Health has maintained its own distribution infrastructure, including regional warehouses. It would be possible over time for Pfizer to scale this business and accommodate human pharmaceuticals. This would be a monumental undertaking, but could ultimately result in higher profits for the company, cheaper prices for consumers and a more secure distribution network of products.

Excerpts from the Reuters article:
Drug wholesalers failed on Friday to block a controversial arrangement making Alliance Boots Plc the exclusive distributor of medicines from Pfizer Inc, the world's biggest drugmaker.

The high court in London dismissed their application for an injunction to stop the deal coming effect on March 5.

Pfizer says it needs the new system to stamp out counterfeiting, following three cases of bogus versions of its top-selling cholesterol fighter Lipitor turning up in the British distribution chain since mid-2005.

Critics believe Pfizer's real aim is to fight parallel trade, the legal practice in Europe whereby medicines are imported for resale into places like Britain from countries in southern Europe, where prices are lower.

The success of its new arrangement with Alliance Boots is expected to be monitored closely by other big drugmakers, some of which are considering similar exclusive deals.

FDA Cracks Down on Generics Manufacturers

The FDA sent warning letters to 20 generics manufacturers on Monday. Evidently, the companies were manufacturing and selling an unapproved medication, ergotamine tartate, for the treatment of migraines. The generics companies have 180 days to cease distributing the products. This is the latest move from the FDA to crack down on older, unapproved medications. This FDA action does not effect the five legitimate, FDA approved formulations of ergotamine tartate.

Direct Price Negotiations for Medicare?

Among many pieces of legislation that the new Democratic-controlled Congress is expected to take up this year is a provision that would allow the U.S. Government to directly negotiate prices with pharmaceutical companies. AARP has weighed in with a survey that says 87% of respondents favored allowing the government to use its “bargaining power” to negotiate discounts. What this is really saying is that 87% of survey respondents have no understanding how the pharmaceutical and wholesale/PBM industries really work.

So, at first glance, this seems like a good idea that will save the government money on prescription drug costs. Unfortunately, the whole idea of direct price negotiations rests on a lack of understanding about how drugs are paid for in this country.

Perhaps the most succinct and articulate description of the economics of prescription drugs is Peter Keating’s column in the March 2007 issue of Smart Money. In the piece, he explains that “Drug makers don’t typically sell directly to insurance companies,” and that this role is filled by companies called Pharmacy Benefit Managers (PBMs).

Unfortunately, the PBMs chew up much of the discounts, so only a small part gets passed on. As Keating brilliantly articulates, unless Congress fixes PBMs, any direct price negotiations will likely not result in any significant prescription drug savings—for either the government or consumers.

I’m all for the free market system. If the government thinks it can successfully negotiate lower prices on prescription drugs, why not try? After all, this is the same government that was able to successfully negotiate a $600 toilet seat and a $400 hammer. Think that was just the 1980s? These days the government is successfully negotiating $20 ice-cube trays ($0.99 at the grocery store) or $22,797 mini-fridges ($135 at Sears). Still think that the government can successfully negotiate drug prices?

UN Report on Drug Counterfeiting

The International Narcotics Control Board, the drug control unit of the United Nations, released its annual report on the state of drugs in the developing world. The report has concluded that 25 to 50% of medicines in under-developed countries are counterfeit (as reported by Mark Heinrich at Reuters).

While this report would seem irrelevant to those in the U.S. since the FDA polices our drug supply, it also notes that the Internet is enabling trafficking and diversion of medicines. I mention this since organizations like AARP remain committed to making it easier for foreign drugs to be imported into this country (see previous entry on Counterfeit Drugs). It has to make you wonder what AARP is thinking and if the have some master plan to keep Americans safe.

Proponents of drug importation, like AARP, claim they will restrict it to Canada and developed nations. Unfortunately, what happens in those countries can’t be controlled. As we’ve already seen, drugs from Greece and Vietnam snake their way into the hands of unsuspecting U.S. consumers via “Canada.”