What Don’t We Know About the Pharmaceutical Industry? A Freakonomics Quorum

This blog has regularly featured items on the pharmaceutical industry, including posts here, here, and here.

It was this post in particular, highlighting an interview with the CEO of Genentech, that made me want to post a quorum on the subject. So we’ve gathered up some willing and able candidates — Dr. Stuart Apfel, Zola P. Horovitz, Dr. Harlan Krumholz, Ray Moynihan, and Dr. Cyril Wolf — and asked them the following question:

What’s something that most people don’t know, pro or con, about the pharmaceutical business, whether from an R&D, economic, or political perspective?

Here are their responses. I hope you will find, as I did, plenty of surprises and illumination. Thanks to all of them for their thoughtful contributions.

Dr. Harlan Krumholz, professor of medicine, epidemiology, and public health at Yale:

Science and the public good in a capitalist society depend on the free flow of unbiased information, but it doesn’t always work that way. Events are revealing that many pharmaceutical companies, along with their consulting academic physicians, have engaged in practices that obscure or misrepresent information about their products. Does the public realize the depth of these practices, and their implications for patient care? Most physicians continue their education and keep up to date with new science by attending lectures given by experts, with the assumption that the information they hear is unbiased. But pharmaceutical companies regularly pay high-profile scientists and physicians, either directly or indirectly, to speak on topics relevant to their products. At a scientific meeting in Europe, I watched an American colleague — a famous cardiologist who was being well compensated for his participation — practice his upcoming speech in front of drug company marketers. After his practice talk, they replaced some slides with ones that presented their drug in a more favorable light. The speaker initially resisted the change, but finally acceded, and his talk the next day was a strong endorsement of his sponsor’s drug. Another important way for physicians to learn about new therapies, and for scientists to disseminate the results of their studies, is through medical journals. The expectation is that these articles pass through rigorous review, and represent strong science. However, when I worked as an expert in litigation related to Vioxx, an anti-inflammatory drug marketed by Merck, I was surprised to discover that many of the manuscripts on Vioxx were prepared and written by Merck or medical writing companies that Merck had commissioned. The company then often paid academics to become authors, placing their names at the head of scientific studies that were already planned, performed, interpreted, and drafted by the company. Some of these articles had well known authors, and their impact was substantial. The authors’ lack of involvement was not revealed, and, in some cases, the involvement of the company was not even mentioned. Then there is the problem of company studies, often completed with academics, that never see the light of day. Some recent examples with Vytorin, a cholesterol lowering drug, and Avandia, a blood-sugar-lowering drug, have illustrated this point. Conscientious physicians seeking to learn about those drugs would not have access to all the information available. For Avandia, the information on the unpublished studies became available only because of litigation; even though the data were placed in the public domain, the location was not widely publicized. It was these unpublished studies, eventually uncovered, that led to concerns about the drug’s safety. Clearly, we are at a critical juncture in the history of the relationship between the pharmaceutical industry and physicians, and the health of patients hangs in the balance. Breaches in professional ethics, which can distort the knowledge upon which clinicians and patients depend, undermine trust in academic physicians and diminish the standing of the pharmaceutical industry. Academic medicine and the pharmaceutical industry are replete with ethical and talented individuals who dedicate their lives to fighting disease. The credit for many important advances in science lies with industry and its strong collaborative relationships with basic and clinical scientists. The current pattern of misbehavior that is exhibited by many, on both sides, is a pox on the profession and a danger to patients. A key question is: can industry and academics work together to cure this disease?

Zola P. Horovitz, Ph.D, pharmaceutical and biotechnology industry consultant, and member of the board of drug companies including Biocryst Pharmaceuticals, Phyton, Genaera Corporation, and Avigen:

My answer to this question is this: that the United States is subsidizing prescription drug prices for the rest of the world. Most people do not realize that when a prescription is paid for in the U.S., the payer (the patient, his or her insurance company, or the government) is subsidizing the cost of that same prescription in most countries outside the U.S. The pharmaceutical and biotechnology companies price their products to get a return that will support research and development to discover new products. Almost all major new drugs are discovered and developed by these companies, and most are located inside the U.S. We have a free market system here that supports this pricing, and helps sustain new R&D. However, countries like Canada, France, Germany, Australia, and others set the prices for prescription drugs sold in their countries, and for the most part they do not allow any premium pricing that can aid the industry in new R&D. The only solution to this problem would be for our government to force, through trade agreements, these countries to allow better pricing to help cover the cost of new R&D that their citizens will take advantage of, or for the U.S. pharmaceutical and biotechnology companies to refuse to provide the fruits of their discoveries to countries that do not allow a fair return. Unfortunately, these remedies never happen because of political roadblocks. As the downside pressures on U.S. prescription drug prices increase, and the lack of support continues from the rest of the world to participate in some help for new R&D, the future of finding new and unique lifesaving and quality of life pharmaceuticals appears bleak. As a result, future generations are likely to suffer from our shortsightedness.

Dr. Cyril Wolf, practicing physician and prescription sales researcher:

The best kept secret by the retail pharmaceutical industry is the obscene profits made on generic drugs by the large chain stores. Whereas brand name drugs are all purchased, and therefore sold, for around the same price, generics are obtained for a fraction of that cost. The price at which the generics are sold is determined by the sellers, who thus have the ability to make exorbitant profits on these drugs. It is for this reason that the chains are always encouraging the public to buy generic drugs “in order to save.” Do they save consumers money? The answer is “yes, but very, very little,” since these drugs are sold at prices not much lower than those of the branded products and are certainly priced well above their cost. The travesty is that it is those who can afford it the least (i.e., people without health insurance and Medicare recipients without drug coverage) who suffer the most from this. Below, I have tabled the prices of the commonly prescribed generic drugs at Costco, which does not mark its prices up excessively, compared to those charged by Walgreens and CVS in Houston, New York, and Los Angeles. These prices are current as of January 9, 2008. Metformin (500mg #180)

$14.08 (Costco)

$64.59 (CVS, Houston)

$27.99 (CVS, L.A.)

$56.89 (Walgreens, Houston

$38.99 (Walgreens, N.Y.)

$62.89 (Walgreens, L.A.) Atenolol (50mg #90)

$5.12 (Costco)

$13.49 (CVS, Houston)

$25.79 (CVS, L.A.)

$20.89 (Walgreens, Houston)

$23.89 (Walgreens, N.Y.)

$20.89 (Walgreens, L.A.) Methacarbomol (750mg #90)

$18.99 (Costco)

$46.89 (CVS, Houston)

$53.99 (CVS, L.A.)

$49.49 (Walgreens, Houston)

$53.99 (Walgreens, N.Y.)

$56.99 (Walgreens, L.A.) Lisinopril (10 mg #90)

$10.86 (Costco)

$44.39 (CVS, Houston)

$61.59 (CVS L.A.)

$41.89 (Walgreens, Houston)

$47.89 (Walgreens, N.Y.)

$41.89 (Walgreens, L.A.) Generic Prozac (20mg #90)

$10.96 (Costco)

$43.99 (CVS, Houston)

$52.59 (CVS, L.A.)

$49.89 (Walgreens, Houston)

$58.19 (Walgreens, N.Y.)

$49.89 (Walgreens, L.A.) Generic BactrimDS (#20)

$7.53 (Costco)

$11.19 (CVS, Houston)

$13.29 (CVS, L.A.)

$16.99 (Walgreens, Houston)

$17.99 (Walgreens, N.Y.)

$19.99 (Walgreens, L.A.) Generic Augmentin (875mg #20)

$31.10 (Costco)

$65.59 (CVS, Houston)

$75.59 (CVS, L.A.)

$69.99 (Walgreens, Houston)

$84.99 (Walgreens, N.Y.)

$89.99 (Walgreens, L.A.) Generic Zocor (40mg #90)

$11.66 (Costco)

$164.99 (CVS, Houston)

$180.99 (CVS, L.A.)

$194.19 (Walgreens, Houston)

$221.89 (Walgreens, N.Y.)

$194.19 (Walgreens, L.A.) When I show these prices to my patients, their reaction is always the same: “How can they do this?” The answer, of course, is: “Because they can.”

Dr. Stuart Apfel, founder and president of Parallax Clinical Research and chief medical officer at Elite Pharmaceuticals:

For the majority of people, the great appeal of biomedical science is the potential benefit it presents to human beings through curing disease, extending life, and improving the quality of life. As is generally well-known, biomedical science has achieved much in extending our knowledge of the complex biological processes that make up all living organisms, including ourselves. Take our understanding of cancer, for example. Over the past two decades, hundreds of billions of dollars have been spent successfully elucidating the genome, identifying genes that may lead to cancer, identifying tumor suppressor genes, defining the molecular mechanisms underlying cell proliferation, unraveling how and why tumor cells metastasize, and identifying molecules that can interact with all of these processes. Yet the survival rate for patients with most malignant tumors is not much improved over what it was in the 1980s. Consider, as well, neurodegenerative disorders such as Alzheimer’s disease or Parkinson’s disease. Over the past couple of decades, our understanding of the degenerative processes involved in these diseases on a cellular and molecular level has increased enormously, and so too has our understanding of the molecular factors that maintain and promote the survival of the affected population of neurons (nerve cells). Yet their management has not improved much, and the prospects of a cure remain just as they were: remote. While most people understand in a vague way that modern biomedical science is advancing at a remarkable pace, many people are less aware that we have been far less successful at translating science from the laboratory bench to the clinic. This is not to say that the pharmaceutical industry has been quiescent; total spending on health related research by the drug industry has increased from about $6 billion in 1980 to about $39 billion in 2004. During that period, basic science research has increased the number of potential drug targets (the biological site on which a drug is intended to act) from 500 to more than 3,000. Still, the total number of truly novel drugs approved each year has remained relatively constant. Part of this discrepancy may be due to the enormous costs associated with developing novel drugs, estimated to be about $800 million in 2002. It is far less expensive, and far less risky in terms of getting approval, to develop so called “me too” drugs that either modify the formulation of existing drugs (a process that often provides patients with important benefits), or developing alternative drugs with mechanisms of action similar to well established drugs. Market forces will always drive the actions of pharmaceutical companies, which are, after all, businesses like any other. However, society as a whole will benefit from greater risk taking and increased efforts to bridge the divide between laboratory science and the clinic. In recent years, we’ve made progress in closing this gap. Small biotechnology companies (many of which have been spawned as a result of an effort to develop discoveries made in an academic setting) are often less risk averse than the larger companies, and have been largely focused on advancing discoveries from the lab into clinical trials. There has also been an increased effort stemming from academic institutions (which tend to be short on resources, but where most of the basic science work is done) and the pharmaceutical industry (flush with cash but with limited incentive to focus research efforts on basic science) to work together and bridge this gap on a larger scale. The success of these efforts will be a determining factor in how successful we are at overcoming the most challenging medical problems that confront us today, and in the future.

Ray Moynihan, co-author of Selling Sickness: How the World’s Biggest Pharmaceutical Companies Are Turning Us All Into Patients: