Phancy ads, Phancy prices, Phancy Pharma

Americans have been treated to a rash of advertising about health care lately. Many of them are homespun YouTube efforts, or distributed virally via mass emailing by grassroots (or faux grassroots - let’s call ‘em “weedroots”) organizations. They’re clever, to be sure, but mostly made on the cheap.

You can really tell the difference between these low-budget independent production efforts and the polished offerings we’ve become used to by the high class ad agency commercials from the Pharmaceutical Industry, flooding our airwaves since the FDA lifted the ban on Direct To Consumer (DTC) advertising in 1997.

Animation of tube-people strolling around a tube-town, or animation of cute little fungae playing around between your toes, or famous movie stars confiding that they had a problem but some drug made it go away -- you’ve seen them. Trust us, we’ve spent enough time in the television world to know these spots cost millions. And the national air time even more.

We’re sure you’ve heard the passionate explanations of why we can’t allow Medicare to negotiate drug prices with pharmaceutical companies. They go something like this: American drug companies do most of the research in the world, and they have to pay for that research by charging high prices for these miracle drugs; what’s more, patent protection runs out after a few years, and generics rip off the name-brand drugs and sell them for peanuts, so Big Pharma has to get the whole cost of all that research right away. So they do whatever they can to increase demand, and keep costs high.

Pharma will tell you they spend only a very small percentage of revenues on advertising. Their BIG money goes into research – and where will the new miracle drugs come from if they can’t get BIG money from selling the drugs they develop?

But wait. Apparently there is some figure fudging going on here.

A study by two York University of Toronto scientists, using publicly available data about the American pharmaceutical market from very well accepted and respected industry sources, tells us that Pharma spends about 13.4% on research, and 24.4% on promotion. That’s promotion, not just advertising. It includes all the “gifts” given to doctors who prescribe their products, free samples given away to get people hooked on their products, sales meetings held in the Bahamas for their top salespersons, detailed advertising in Medical Journals, and those fancy ads we’ve all come to love.

The study was released in January of 2008, but they based their study on 2004 data, since that was the latest year they could get complete information from the industry sources. The total: $57.5 Billion spent on pharmaceutical promotion in 2004. It amounted to $61,000 per physician in the US. It is safe to say those numbers have gone dramatically UP since 2004.

Other studies have shown that marketing efforts like Direct To Consumer Advertising and giving free samples aren’t having the impact the drug companies claim.

A Columbia University researcher and Tufts University professor surveyed the research which they say shows that giving "free" samples is "not effective in improving drug access for the indigent, does not promote rational drug use, and raises the cost of care." Apparently the sales reps use them themselves or give them to family, and doctors often do the same. The patients who get them are most likely to be patients with continuous health insurance coverage, not the indigent uninsured.

Now, as to advertising, you keep hearing the argument that TV can inform patients about things they really need to know, that they can’t get any other way. They don’t advertise to create an unnecessary new market for a slightly re-made existing drug. No, they do this as a public service. Guess they haven’t read the study that shows a 10% increase in advertising for a specific drug yields, on average, as of 2000, a 1% increase in sales. So $1 spent on ads yields $4.20 in sales. Not bad return, eh? Oh, but that wasn’t why they did it. No, really!

What does this mean for the cost of health care? National prescription spending increased
16% from 2000 to 2001, compared to a 9% increase for physician and clinical services
and an 8% increase for hospital care.

A November 2006 report by the U.S. Government Accountability Office report noted that "studies we reviewed found that increases in DTC advertising have contributed to overall increases in spending on both the advertised drug itself and on other drugs that treat the same conditions. For example, one study of 64 drugs found a median increase in sales of $2.20 for every $1 spent on DTC advertising. Consumer surveys suggest that DTC advertising increases utilization of drugs by prompting some consumers to request the advertised drugs from their physicians, who studies find are generally responsive to these requests. The surveys we reviewed found that between 2 and 7 percent of consumers who saw DTC advertising requested and ultimately received a prescription for the advertised drug….”

(So basically the patient is getting between himself and his doctor, deciding what disease he has and recommending treatment. That makes sense.)

(Please note that in 2000, the sales per dollar spent on advertising was $4.20, and in 2006 it fell to only $2.20. Maybe all that money they spend on the increasingly fancy ads isn’t even doing what it used to do when they were simpler!)

The report continues …“Many of the drugs most heavily advertised to consumers in 2005 were for the treatment of chronic conditions, such as high cholesterol, asthma, and allergies," it noted.

So if they can get us to start using these drugs, they have a good chance of keeping us as customers for the rest of our lives. Love it.

Just think: if we went back to banning DTC ads, and stopped free samples dished out to docs, big Pharma could save billions and billions of dollars every year. What are the odds they’d pass that on to us consumers?

And how many consumers would be spared from being treated for diseases some high-priced commercial convinced them they have, but they don’t?

JM