PHARMA FIGHTS BACK: Public perception of escalating drug prices isgiving pharmaceutical firms a major headache. Allen Houston discovershow the industry is trying to change the arguments to win the debate

The baby boomer generation is starting to show its age. As the

post-war generation enters its golden years, the need for prescription

drugs has dramatically increased, and pharmaceutical companies have been

working overtime to develop drugs to combat the various ailments of the

moment.



Global pharmaceutical sales rose 10% from June 2000 to May 2001,

according to an IMS Health report. But along with an increase in revenue

and major breakthroughs in drugs that treat asthma, AIDS, and diabetes,

the pharmaceutical industry has come under withering public scrutiny

over the cost of prescription drugs.



The price of breakthroughs



A report released in June by consumer advocacy group Families USA, which

received significant play in the media, found that the prices of the 50

prescription drugs most frequently used by seniors rose an average of

22% over the past year, with the annual cost of these drugs now $956.



In addition, two-thirds of these drugs that have been on the market for

five years have had at least five price rises over that period.



Trying to explain why prescription drugs cost so much is front and

center for PR practitioners trying to change media discourse.



"Our prices reflect what it costs to research and develop a drug," says

Merck spokesman Gregory Reaves. "People are under the mistaken

impression that the pharmaceutical industry just plucks an arbitrary

number out of the air to charge for our drugs."



As the pharmaceutical industry is so keen to point out, their spending

on research and development has grown 19% this year, to an estimated

$30 billion (Health Care Financing Administration).



PhRMA, the organization that represents the drug companies, has been

active in talking about the rising levels of the companies' own

costs.



It can require from $200-$500 million for a drug to go

from the drawing board through clinical trial, with the process of drug

approval taking anywhere from 12 to 15 years.



Furthermore, the competition from generic drugs and the shrinking window

of time that pharmaceutical companies have to recoup their investments

have also become factors in the rising costs of prescription drugs. Of

every 5,000 drugs that are tested, only about 5% make it to the clinical

trial stage. In other words, the successful drugs must carry the weight

of the failures tested along the way.



"Our side of the story doesn't fit a convenient sound bite," explains

Jeff Trewhitt, spokesperson for PhRMA. "Wanting to have a dramatic story

has caused reporters to make mistakes."



But consumer groups are always ready to counter the idea of a

necessarily large R&D budget. "(The drugs firms) will tell you that the

money goes on research and to make a profit after a long approval

process," says Jennifer Laudano, director of corporate communications

for Families USA.



"The truth is that there are plenty of drugs that have been around for

30 years and have made back their profit, yet the prices still keep

rising."



In response, the industry's major message is that prescription drug

costs have risen so much in the last five years because people are using

new drugs to treat sicknesses that weren't formerly treatable (like

drugs to treat arthritis and lower cholesterol).



Also, say the drugs firms, a growing proportion of the rising number of

seniors are taking medications. PhRMA says the reason for the increase

is that consumers are becoming more educated about illnesses, and

because medicines are less invasive than a hospital stay, they are

increasingly becoming the choice for treatment.



"Thirty-five years ago you didn't have certain medicines that you have

today." says Reaves. "The drugs today are better and they combat

problems such as cholesterol and diabetes in new ways."



Major drug manufacturers are also addressing the prescription problem

proactively. Schering-Plough, maker of Claritin, has combated the issue

of drug pricing by working with patients and physicians to determine

patient eligibility for other forms of public and private financial

assistance.



"We're committed to responsible drug pricing and finding mechanisms to

ensure access to necessary medicines for uninsured patients," says

Roland Asinari, spokesperson for Schering-Plough. "We also strongly

support modernizing the Medicare program."



Medicare



Tackling the Medicare issue is one of the highest priorities for the

pharmaceutical industry. Getting Medicare to cover more drug costs means

the public is shielded from the actual expense (even if they ultimately

pay via taxes).



"The key to changing the debate on drug pricing is to show that you are

doing something," says Reaves. "Pharmaceutical companies are involved in

ideas and actions, and are trying to do something substantive. We need

to show the public that pharmaceutical companies are taking an active

role in getting Congress to pass responsible Medicare coverage."



PhRMA has also taken a high profile in this debate. "The real issue is a

lack of Medicare coverage," says Trewhitt. "Because seniors and others

lack Medicare, the only cost they know is the pharmaceutical

industry.



Medi-care will cover hospital charges, but it won't pay for prescription

drugs. Since seniors have to pay out of their pockets, they believe that

they are being overcharged. It actually cost the system much more to put

people into the hospital than to pay for their prescription drugs. I'm

constantly pointing out to the media that PhRMA wants Congress to pass

expanded drug reform."



Industry giants tackle the issue



One initiative that PhRMA has taken to show the pharmaceutical company's

commitment to the problem of drug pricing is to make a list of

state-by-state pharmaceutical discount programs for needy patients

available on the group's website.



PhRMA has also been active in the UN AIDS pilot program; corporate

philanthropy has been even more relevant to the pharmaceutical industry

since the African AIDS drugs saga earlier this year.



GlaxoSmithKline, maker of Paxil, has addressed the critics by

undertaking various activities in Africa, including working with UNICEF

on a program to help prevention and treatment of HIV transmission from

mother to child. Its oldest program, "Positive Action," is an

international program of HIV education care and community support. Glaxo

also welcomes "preferential pricing," where the prices of patented

medicines are reduced for developing countries.



"People are under the mistaken impression that drug pricing is soaring,

when in fact it's really expenditure and how much people are relying on

these drugs that is growing," says Marry Anne Rhyne, GlaxoSmithKline

spokesperson. "There is an increasing reliance that people have on

medications, and the best medicines in the world can't help you if you

can't afford them. So we believe in working to address the concerns that

many Americans have about drug pricing."



Merck, the maker of Zocor, a blockbuster cholesterol-reducing drug, is

also involved in a number of philanthropic initiatives to address drug

pricing and the shadow it has cast across the pharmaceutical

industry.



It has started a program to provide discounts for people in the US

without drug coverage. It also donates Mectizan to countries in central

Africa, where river blindness is a major health problem. Merck has

reduced prices on AIDS drugs in sub-Saharan African countries, and,

since July 2000, has worked with the Bill and Melinda Gates Foundation

to provide anti-retral virus drugs to HIV-positive people in

Botswana.



Pfizer, which has three of the top 10 blockbuster drugs - Lipitor,

Celebrex, and Zoloft - has been sensitive to allegations of drug

gouging. The pharmaceutical company has started giving away Diflucan, a

drug that treats fungal infection complications that arise in AIDS

patients, in 50 of the world's least-developed countries. Pfizer also

works on a program called "Sharing the Care" with the National Governors

Associations to make Pfizer drugs available to the working poor.



"No one plans to be sick, and when they are, they don't plan on spending

lots of money," says Andy McCormick, VP of media relations for

Pfizer.



"It can seem excessive when you have to fork over $70 for 10

pills. About a third of seniors lack drug coverage, and when they are on

fixed incomes, they don't have the means to pay for drugs. If we want to

dissolve the issue of drug pricing, we must find a way to have expanded

drug coverage. Modern pharmaceutical are going to only play more of a

role in our lives as the baby boomer generation ages."



More than just the cost



McCormick adds that pharmaceutical companies need to change the focus of

the story to showcase the economic and societal benefits of the

drugs.



"But there's always going to be some resentment by people who have to

spend money on an illness that they didn't think they were going to get.

Our job is to work harder to tell the public about the competitiveness,

the research, and the other factors that go into making pharmaceutical

drugs."



Michael Durand, EVP of Porter Novelli's global healthcare practice,

believes that the issue of drug pricing and the criticism it has caused

could be put to rest if pharmaceutical companies would come together and

push for Medicare drug pricing for seniors. "Every 'western' developed

country provides healthcare to its people," says Durand. "It should take

precedence over missile defense and stem cells, because it's of more

immediate need.



This is an issue that we have to face now." He also says that he sees a

distinct lack of leadership to address the problem of drug pricing.



"Instead, the pharmaceutical industry tends to be defensive and doesn't

take the lead and say, 'This is what we're going to do.'"



PhRMA is working to change the mindset from justifying the cost of drugs

from research to value. Instead of saying, "This is how much our

research cost," they are saying, "Look at the health benefits this drug

will give you and how it will save your life."



"Pharmaceutical companies did a good PR job giving drugs to developing

countries and explaining why drugs were more expensive here in the US,"

says C. Daniel Mullins, associate professor of pharmacology at

University of Maryland. "But their argument falls apart when they try

and explain why drugs in Canada cost half as much as they do in the US.

They need to work on that side of things better."



An anonymous source who works with many top pharmaceutical firms gave a

more ominous pronouncement:



"Drug pricing is not a winning proposition. There is a lightning rod

that centers around that topic, and no matter how well-intentioned,

there is always going to be a certain segment of the population that

doesn't believe the pharmaceutical industry when they say drugs cost

what they do for a reason."



TOP SELLING PRESCRIPTION DRUGS

Drug 1999 2000 Increase

Name (Type) Price Price (%)

(dollars)* (dollars)*

1 Prilosec (antiulcerant) 130.18 138.57 6.4

2 Lipitor (cholesterol reducer) 78.72 82.58 4.9

3 Prevacid (antiulcerant) 119.98 125.98 5.0

4 Prozac (antidepressant) 103.68 109.87 6.0

5 Zocor (cholesterol reducer) 105.40 112.36 6.6

6 Celebrex (antiarthritic) 80.14 88.93 11.0

7 Zoloft (antidepressant) 78.14 80.55 3.1

8 Paxil (antidepressant) 74.01 78.62 6.2

9 Claritin (oral antihistamine) 64.45 68.06 5.6

10 Glucophage (oral diabetes) 55.28 63.00 14.0

Source: American Institute for Research analysis of Scott-Levin

prescription auditors.

NOTES: *Prices are average per prescription.



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