The Exorbitant Pricing of Pharmaceuticals is in the News. Again.
Katie Gottschalk | Leave a Comment
This week the pharmaceutical pricing discussion centers on Mylan, and its 548% boost in the price of EpiPens. The press coverage and industry promises are a familiar scene: a large drug company buys a well-established medication or technology, and then raises the price. There is outrage, there are statements of promises and remedies, and then there is silence.
In September 2015 the discussion focused on Turing Pharmaceuticals and its 5,455% price increase of Daraprim. In May 2015 it was Valeant Pharmaceuticals and its 300% and 700% of Nitropress and Isuprel, respectively. And the list goes on and on.
As we see this process repeat itself again and again, the public health community must look past the reactionary promises and situational remedies currently offered by pharmaceutical companies, and seek a solution to the larger problem. We need to better understand and adjust the factors which contribute to the pricing of drugs in the United States.
Although this is clearly a complicated and multifaceted issue, there is an element of pricing in the United States which stands out: direct to consumer advertising. Direct to consumer advertising (or DTC) for pharmaceuticals is marketing which is directed toward patients, rather than healthcare professionals who diagnose illness and prescribe medication.
A primary issue with DTC in the US is that the ability to advertise directly to the consumer gives pharmaceutical companies an incentive to make healthy people feel unhealthy. By creating a group of people who think they have a specific illness, or even demand from their doctor a precise medication, these companies create a market for their product. And as a basic principle of economics, when demand goes up, price goes up.
Encouraging is the fact that DTC advertising for pharmaceuticals in the US is a relatively new phenomenon. Until 1997, the Food and Drug Agency governed pharmaceutical advertising under a standard that required ads to contain a “true statement of information in brief summary relating to the side effects, contraindications, and effectiveness.” Although these regulations did not mention DTC specifically, they stated that any broadcast advertisement must “include information relating to the major side effects and contraindications,” essentially prohibiting the advertisement of pharmaceuticals in any other format than print, as the side effects, contraindications, and effectiveness are to onerous to be relayed verbally.
In 1997, the FDA amended this constraint, only requiring that companies meet an “adequate standard” when it came to describing risks to consumers. Under these new regulations, so long as advertisements referred the viewer to a location where they could access all the information, companies were free to market without a complete summary (this is why you find telephone numbers and references to print advertisements at the end of commercials).
As you would expect, the use of DTC advertising has expanded exponentially in the twenty years since this change. Prior to the 1997 regulations, pharmaceutical companies spent around $12 million a year on DTC advertising, however, by 2015, companies were spending $5.4 billion per year, and five of the ten fastest-growing ad spenders in the world were pharmaceutical companies.
But it is time for a change. It is time to return the market creation for the consumption of pharmaceuticals to the trained professionals who understand illness, drug interactions and all products available for treatment. As endorsed by the American Medical Association just under a year ago, we need to return to highly regulated direct to consumer advertising. “Some of the more thoughtful people in the USA recognize that part of the reason they have a drug expenditure bill that is completely out of control is this kind of advertising,” says Suzanne Hill, a scientist working on rational drug use and drug access at the World Health Organization.
If we are serious about changing the cost of drugs in the United States, we need to increase regulation on direct to consumer advertising. Although this action will not be a simple cure-all to the complex problem of drug cost, reducing the market demand for branded drugs is a great start.