Study: Mismarketing Of Patented Drugs Has Cost Society At Least $380 Billion

from the time-for-a-change dept

Here on Techdirt we've written many times about the problematic nature of drug patents. They are harmful both directly, in terms of the price distortions they cause and seek to spread to new markets, and indirectly, through the lobbying that the pharma industry deploys to strengthen and extend them, notably in trade agreements such as TPP and TAFTA/TTIP.

The standard justification for these patents is that they are needed to provide incentives for costly research and development of new drugs, something that Techdirt has been questioning for many years. A fascinating new paper entitled "Patent Monopolies and the Costs of Mismarketing Drugs" (pdf), by Ravi Katari and Dean Baker at the Center for Economic and Policy Research, explores yet another problem with pharma patents:

in the case of prescription drugs, there are also major costs associated with the enormous asymmetry between the knowledge available to drug companies and the knowledge available to patients and their doctors. As a result of this asymmetry of knowledge, drug companies will often be in a situation to earn large patent rents by concealing information that show their drugs are less effective than they claimed or possibly even harmful.

One way in which drug companies take advantage of this asymmetry is with "off-label" promotion of their drugs. An off-label use of a drug is one which has not been approved by the FDA. While doctors are free to prescribe drugs for off-label uses, drug companies are prohibited from promoting their drugs for off-label uses. If they want to get a drug approved for additional uses then they have to clear a path by seeking FDA approval. However, they routinely avoid this independent assessment by finding ways to promote their drugs for unapproved uses. Promotion of drugs for off-label uses is harmful to the public because it diminishes drug safety regulation, discourages companies from conducting or revealing internal safety studies, and incentivizes them to seek FDA approval for narrow "label use" that is easier to push through the approval process.

The bulk of the paper is concerned with quantifying those costs by looking at five high-profile cases of mismarketing. Here's the final result:

The cumulative costs associated with the increased morbidity and mortality associated with these drugs was $382.4 billion over the 14-year period from 1994–2008. This comes to just over $27 billion a year, an amount that is comparable to what the pharmaceutical industry claims to have been spending on research at the time.

As the paper's authors emphasize, this is only a rough figure, and is likely to underestimate the total negative consequences of this kind of rent-seeking behavior, since it is based on only a small subset of drugs, and uses conservative estimates for key quantities. More important than the specific figure are the policy implications. For example, the deliberate mismarketing is only possible because data is kept secret:

If, for example, this research was all in the public domain and carried through by researchers who had no direct financial interest in the sales of a drug, it is unlikely that they would go to elaborate lengths to misrepresent or conceal research findings, or that they would be successful if they tried. In other words, the costs documented here are the result of the incentives provided by patent monopolies in the same way that the research itself is motivated by patent monopolies.

At the very least, that's an argument for requiring that all research data and clinical trial information should be made freely available for others to analyze. The paper also points out that there are implications for TPP and TAFTA/TTIP:

One of the major goals of the United States in these and other trade pacts currently being negotiated is to strengthen patent and related protections for prescription drugs. The justification is that increased patent rents will provide a greater incentive to the pharmaceutical industry, leading to more innovation.

But as the present study shows, strengthening those protections is likely to encourage more rent-seeking behavior, increased mismarketing, and thus unnecessary deaths and greater costs to society -- hardly something to promote through trade agreements. Finally, the new research adds further weight to the argument that we need to find better ways of funding research into new drugs:

The fact that incentives from patent rents lead firms to promote drugs in ways that impose large costs on patients and society should raise additional questions about the desirability of patent protection as a mechanism for financing research. Other mechanisms for financing research have been proposed, such as a prize system or direct public funding. Of course the U.S. government already spends $30.9 billion annually funding biomedical research through grants administered by the National Institutes of Health, so direct public funding is already an integral part of the drug development process. The proposal is to expand this funding and have NIH’s mission extend to the development and testing of drugs. By having all research in the public domain and taking away the patent rents associated with marketed drugs, direct funding would both remove the incentive and hugely lessen the ability to misrepresent research in order to promote drugs for uses that may not be appropriate.

When so many lives and so much money are at stake, it's surely time to look at this idea more closely.

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Filed Under: drugs, mismarketing, off-label, patents, pharmaceuticals

How Pfizer And The US Gov't Set Up A Fake Subsidiary To Take The Brunt Of Lawsuit Over Falsely Marketed Drugs

from the don't-you-feel-healthy-now dept

The pharmaceutical industry is a huge mess, which has little, if anything, to do with making people healthy. The way the system is currently designed, if it's more profitable for a pharmaceutical company to put you at greater risk, it will do so. And sometimes the US gov't will help them brush it under the rug. Reader Bill Pickett points us to a recent investigative report concerning the big, high-publicity lawsuit the US gov't filed against Pfizer, after the company blatantly went against FDA approvals and marketed a drug for all sorts of alternative uses, which the FDA had specifically noted could be dangerous and could put people at greater risk.

The FDA approved Bextra only for arthritis and menstrual cramps. It rejected the drug in higher doses for acute, surgical pain. Promoting drugs for unapproved uses can put patients at risk by circumventing the FDA's judgment over which products are safe and effective. For that reason, "off-label" promotion is against the law.

But with billions of dollars of profits at stake, marketing and sales managers across the country nonetheless targeted anesthesiologists, foot surgeons, orthopedic surgeons and oral surgeons. "Anyone that use[d] a scalpel for a living," one district manager advised in a document prosecutors would later cite.

A manager in Florida e-mailed his sales reps a scripted sales pitch that claimed -- falsely -- that the FDA had given Bextra "a clean bill of health" all the way up to a 40 mg dose, which is twice what the FDA actually said was safe....

Internal company documents show that Pfizer and Pharmacia (which Pfizer later bought) used a multimillion-dollar medical education budget to pay hundreds of doctors as speakers and consultants to tout Bextra.

Pfizer said in court that "the company's intent was pure": to foster a legal exchange of scientific information among doctors.... But an internal marketing plan called for training physicians "to serve as public relations spokespeople."

Where the story gets scary is in what happened when all this came out. Federal officials announced a criminal case over this, but they didn't actually sue Pfizer directly. Instead, they sued a (not kidding) subsidiary of a subsidiary of a subsidiary of a subsidiary of Pfizer, which was basically set up just take the brunt of this lawsuit:

According to court documents, Pfizer Inc. owns (a) Pharmacia Corp., which owns (b) Pharmacia & Upjohn LLC, which owns (c) Pharmacia & Upjohn Co. LLC, which in turn owns (d) Pharmacia & Upjohn Co. Inc. It is the great-great-grandson of the parent company.

But it was only that last one, Pharmacia & Upjohn Co. Inc., that was sued -- and the report also notes that this company just happened to be set up the same day that Pfizer and federal officials worked out a deal for it to plead guilty -- even though it, as an entity, hadn't done anything.

Why did they do this? Well, if Pfizer itself had been found guilty then it would be barred from Medicare and Medicaid, and prosecutors figured it would effectively close down Pfizer -- and Pfizer was deemed "too big to fail" like that. Why? I have no idea. If the company really did have to close down, it seems likely that others would have picked up the company's various products -- and perhaps done so without putting people's lives at risk.

Really, the problem here is the way the entire system is set up. The FDA requires expensive and involved clinical trials. This is very good, because we want to make sure that any drugs actually do what they're supposed to do, and don't have serious side effects or cause even worse problems. But, the system is currently set up so that the pharmaceutical company itself is in charge of paying for and running those clinical trials, which creates two very problematic situations. First, it gives the company all sorts of incentives to fudge the results or to pretend the results said something different than they really did (see the example above, or Merck with Vioxx) and second, it contributes to the "expense" that a drugmaker can claim comes from developing a new drug, which is part of why it demands patent rights. But if you break out the costs of the clinical trials, the marketing-hidden-ad-development-costs, and the amount of research that's actually funded by gov't grants -- you find that pharmaceutical firms really aren't spending nearly as much as they claim. A big part of the issue is the clinical trials, and that's leading to all sorts of questionable behavior. In the past, some have suggested that such trials should be conducted by the gov't, rather than by the pharma companies themselves. While I'm not sure that's the answer, it's pretty clear that the existing system is not working, if our end goal is to make people healthier.

Filed Under: off-label, pharma
Companies: pfizer