About this Author
DBL%20Hendrix%20small.png College chemistry, 1983

Derek Lowe The 2002 Model

Dbl%20new%20portrait%20B%26W.png After 10 years of blogging. . .

Derek Lowe, an Arkansan by birth, got his BA from Hendrix College and his PhD in organic chemistry from Duke before spending time in Germany on a Humboldt Fellowship on his post-doc. He's worked for several major pharmaceutical companies since 1989 on drug discovery projects against schizophrenia, Alzheimer's, diabetes, osteoporosis and other diseases. To contact Derek email him directly: Twitter: Dereklowe

Chemistry and Drug Data: Drugbank
Chempedia Lab
Synthetic Pages
Organic Chemistry Portal
Not Voodoo

Chemistry and Pharma Blogs:
Org Prep Daily
The Haystack
A New Merck, Reviewed
Liberal Arts Chemistry
Electron Pusher
All Things Metathesis
C&E News Blogs
Chemiotics II
Chemical Space
Noel O'Blog
In Vivo Blog
Terra Sigilatta
BBSRC/Douglas Kell
Realizations in Biostatistics
ChemSpider Blog
Organic Chem - Education & Industry
Pharma Strategy Blog
No Name No Slogan
Practical Fragments
The Curious Wavefunction
Natural Product Man
Fragment Literature
Chemistry World Blog
Synthetic Nature
Chemistry Blog
Synthesizing Ideas
Eye on FDA
Chemical Forums
Symyx Blog
Sceptical Chymist
Lamentations on Chemistry
Computational Organic Chemistry
Mining Drugs
Henry Rzepa

Science Blogs and News:
Bad Science
The Loom
Uncertain Principles
Fierce Biotech
Blogs for Industry
Omics! Omics!
Young Female Scientist
Notional Slurry
Nobel Intent
SciTech Daily
Science Blog
Gene Expression (I)
Gene Expression (II)
Adventures in Ethics and Science
Transterrestrial Musings
Slashdot Science
Cosmic Variance
Biology News Net

Medical Blogs
DB's Medical Rants
Science-Based Medicine
Respectful Insolence
Diabetes Mine

Economics and Business
Marginal Revolution
The Volokh Conspiracy
Knowledge Problem

Politics / Current Events
Virginia Postrel
Belmont Club
Mickey Kaus

Belles Lettres
Uncouth Reflections
Arts and Letters Daily

In the Pipeline

Category Archives

« Who Discovers and Why | Why Everyone Loves Us

August 15, 2014

Incomprehensible Drug Prices? Think Again.

Email This Entry

Posted by Derek

There's a post by Peter Bach, of the Center for Health Policy and Outcomes, that's been getting a lot of attention the last few days. It's called "Unpronounceable Drugs, Incomprehensible Prices", and you know what it says.

No, really, you do, even if you haven't seen it. Too high, unconscionable, market can't support, what they can get away with, every year, too high. Before I get to the uncomfortable parts of my own take on this, let me stipulate a couple of things up front: (1) I do think that the industry is inviting trouble for itself by the way it it raising prices. It is in drug companies' short term interest to do so, but long term I worry that it's going to bring on some sort of price-control regimen. (2) Some drug prices probably are too high (but see below for what that means). Big breakthroughs can, at least in theory, command high prices, but not everything deserves to be priced at the level it is.

I was about to say "see below" again, but this paragraph is below, so here goes. Let me quote a bit from Bach's article:

Cancer drug prices keep rising. The industry says this reflects the rising costs of drug development and the business risks they must take when testing new drugs. I think they charge what they think they can get away with, which goes up every year. . .Regardless of the estimate, the pricing of new drugs for cancer and now other common diseases has come unglued from the rationale the industry has long espoused. Instead, pricing is explained by a phenomenon of increasing boldness by the industry against a backdrop of regulators and insurers who have no legal authority to dictate or even propose alternative pricing models.

Bach's first assertion is correct: drug companies are charging what they think they can get away with. In that, they are joined by pretty much every other business in the entire country. I did a post once where I imagined car sales transplanted into the world of drug sales- you couldn't just walk in and buy a car, for example. No, you had to go to a car consultant first, licensed by the state, who would examine your situation and determine the sort of car you needed. Once they'd given you a car prescription, you could then go to a dealer.

Well, we don't have that, but what car companies do charge is, well, what they can get away with. The same as steel companies, soft drink companies, cardboard box companies, grocery stores, and people who are selling their houses. You charge what you think the market will bear. Even people selling basic necessities of life like food and shelter charge what they think the market will bear. It's true that health care does feel different from any of those (a point that I went into in that post linked in the last paragraph), and there's the root of many a problem.

And, some will say, a big difference is that none of these other sellers have patents on their side, the legal right to put the screws on. But remember the flip side of the patent system: the legal certainty that you will lose that pricing power on a set date. The pricing of new drugs is completely driven by their expected patent lifetimes, because almost all the money that the developing company is ever going to make off the drug is going to have to be made during that period.

And sometimes that period isn't very long. The patent clock starts ticking a long time before a drug ever gets on the market; there are often only five to ten years left when it's finally approved for sale. There are other factors, too. Everyone is talking about the price of Sovaldi for hepatitis C, but no as many people have thought about the fact that the drug is, in fact, so effective that it has blown two other recently approved Hep C treatments right out of the market, well before their patent lifetimes had even expired. There really is competition in the drug business, and that sector shows it in action.

Now, what there isn't so much of is competition on price, true. And that's what you do see in the other businesses I named above. There are grocery stores that occupy the "Wonderful Prestigious High Quality" part of the market, and others that occupy the "Low Low Prices Every Day" part. (And interestingly, if you Venn-diagram out what's on the shelves of those two, there's still some overlap, allowing you to watch people paying wildly different prices for blueberries that came off the same truck, not to mention even less perishable stuff like aluminum foil). You don't see this in the drug industry, partly because for patented drugs we're never selling the same blueberries. the same gasoline, or the same khaki trousers. Even the biggest "me-too" drugs still differ from each other to some degree.

And that brings up another point. Bach uses (as his example of pricing in the cancer field) two Alk compounds, Xalkori (crizotinib) from Pfizer and Zykadia (ceritinib) from Novartis. Xalkori was first, and Bach makes a lot of the fact that Zykadia is priced higher, even though he says that Pfizer ran bigger clinical trials, had to work out the associated diagnostic test with the FDA, and launch the new mechanism into the oncology market. Novartis, he says, got to piggy-back on all that, and yet their drug is priced higher. There can be no other reason for that pricing decision, Bach says, other than that they can.

Let's go into some details that Bach's article leaves out. Zykadia is indeed second to market. But the time gap between the two drugs means that Novartis was working on it before they knew that Xalkori worked in the clinic. Bach makes an error here made by many others who have not actually done drug discovery work: the time course of these things is longer than it looks. A screen had to be run against Alk, compounds had to be confirmed, a medicinal chemistry team had to optimize them and make lots of new structures, all of which except one fell by the side of the road. The compound had to go through animal tests for efficacy and safety, and it had to be scaled up and formulated. And so on, and so on. Novartis did not sit back, watch Xalkori succeed, and then decide "Hey, we should get us some of that action, too".

Now Zykadia is, as Bach says, a second-line therapy. But it's approved for patients who do not respond to, or have become intolerant to Xalkori. So this "me-too" drug is, in fact, different enough to work on patients for whom Xalkori has failed. In fact, most patients will start to show relapse inside of a year on Xalkori, so it would appear that most non-small-cell lung cancer patients with multiyear survival are probably going to end up taking both compounds. Cancers mutate quickly, and we need all the options we can get - and guess what, some of those options are going to be second to market, because they can't all be first.

Another point to note is that while Zykadia was indeed approved on the basis of a smaller clinical trial set, that's because it received "breakthrough" designation from the FDA for accelerated review and approval. Startlingly, it actually got approved after Phase I trials alone. (Not bad for what Bach characterizes as a simple copycat drug, by the way). Novartis has run the compound in more clinical trials than that, and they continue to do so. It's not like they slipped in with a mere 163 patients and then trotted off to the FDA while brushing the dust off their hands. To find this out, by the way, you'll want to use "LDK378", the internal Novartis designation for the drug, and I'm passing this information on to Bach for free. shows 13 trials in the US when you do that, and there are others outside the country as well.

Bach's article, as mentioned, plays down any differences between these two drugs, saying that "they have not been directly compared". But that's not accurate. Let me quote from that link in the paragraph just above:

As described by Shaw and colleagues in the New England Journal of Medicine, ceritinib has striking activity in ALK-rearranged NSCLC, both in treatment-naïve patients and in those who experienced tumor progression on crizotinib. . .The drug has clear pharmacological advantages over crizotinib. Its surprising level of activity in crizotinib-resistant tumors may be explained by its greater potency and its particular ability to inhibit ALK with gatekeeper mutations that confer resistance to crizotinib.

The two drugs have had a very important comparison: people who are going to die on Xalkori are going to survive longer if they switch to Zykadia. "Me-too" drug, my ass.

But rather than end on that note, tempting as that is, let me circle back to pricing once again. The price for these cancer drugs is not borne by individual patients emptying their piggy banks. It is borne by insurance, both private and government. And drug companies do indeed price their drugs at what the think the insurance plans will pay for them. This is not a secret, and should not be a surprise, and I continue to be baffled by people who react to this with horror and disbelief. Prices appear when you find out what the payers will pay. If Pfizer, Novartis, or Gilead priced their drugs at fifty million dollars a dose, no insurance company would reimburse. But the insurance companies are paying the current prices, and if they believe that they will be put out of business by doing so, they need to stop doing that. And they could.

They will, too, if we in the industry keep pushing them towards doing it. That's our big problem in drug development: our productivity has been too low, and we're making up for it by charging more money. But that can't go on forever. There are walls closing in on us from both sides, and we're going to have to scramble out from between them at some point. Pricing power can only take you so far.

Comments (42) + TrackBacks (0) | Category: Cancer | Clinical Trials | Drug Prices | Regulatory Affairs | Why Everyone Loves Us

July 21, 2014

The Hep C Field Gets Nastier By the Minute

Email This Entry

Posted by Derek

What a mess there is in the hepatitis C world. Gilead is, famously, dominating the market with Sovaldi, whose price has set off all sorts of cost/benefit debates. The companies competing with them are scrambling to claim positions, and the Wall Street Journal says that AbbVie is really pulling out all the stops. Try this strategy on for size:

In a lawsuit filed in February, AbbVie noted it patented the idea of combining two of Gilead's drugs—Sovaldi and an experimental drug called ledipasvir, which Gilead plans to combine into one treatment—and is therefore entitled to monetary damages if Gilead brings the combination pill to market. Legally, AbbVie can't market Sovaldi or ledipasvir because it doesn't have the patents on the underlying compounds. But it is legal for companies to seek and obtain patents describing a particular "method of use" of products that don't belong to them.

Gilead disputes the claims of AbbVie and the other companies. A spokeswoman said Gilead believes it has the sole right to commercialize Sovaldi and products containing Sovaldi's active ingredient, known as sofosbuvir. An AbbVie spokeswoman said the company believes Gilead infringes its patents, and that it stands behind the validity and enforceability of those patents.

You don't see that very often, and it's a good thing. Gilead is, naturally, suing Abbvie over this as well, saying that Abbvie has knowing mispresented to the USPTO that they invented the Gilead therapies. I'm not sure how that's going to play out: Abbvie didn't have to invent the drugs to get a method-of-use patent on them. At the same time, I don't know what sort of enablement Abbvie's patent claims might have behind them, given that these are, well, Gilead's compounds. The company is apparently claiming that a "sophisticated computer model" allows them to make a case that these combinations would be the effective ones, but I really don't know if that's going to cut it (and in fact, I sort of hope it doesn't). But even though I'm not enough of a patent-law guy to say either way, I'm enough of one to say, with great confidence, that this is going to be a very expensive mess to sort out. Gilead's also in court with Merck (and was with Idenix before Merck bought them), and with Roche, and will probably be in court with everyone else before all this is over.

This whole situation reminds me of one of those wildlife documentaries set around a shrinking African watering hole. A lot of lucrative drugs have gone off patent over the last few years, and a lot of them are heading that way soon. So any new therapeutic area with a lot of commercial promise is going to get a lot of attention, and start a lot of fighting. Legal battles aren't cheap on the absolute scale, but on the relative scale of the potential profits, they are. So why not? Claim this, claim that, sue everybody. It might work; you never know. Meanwhile, we have a line forming on the right of ticked-off insurance companies and government health plans, complaining about the Hep C prices, and while they wait they can watch the companies involved throwing buckets of slop on each other and hitting everyone over the head with lawsuits. What a spectacle.

Comments (43) + TrackBacks (0) | Category: Business and Markets | Infectious Diseases | Patents and IP | Why Everyone Loves Us

May 16, 2014

The Real Numbers on Tamiflu

Email This Entry

Posted by Derek

I've been meaning to cover this controversy about Tamiflu (oseltamivir). The Cochrane group has reviewed all the clinical data obtainable on the drug's efficacy, and has concluded that it doesn't have much. That's in contrast to an earlier review they'd conducted in 2008, which said that, overall, the evidence was slightly positive.

But as Ben Goldacre details in that Guardian piece, a comment left on the Cochrane paper pointed out that the positive conclusions were almost entirely due to one paper. That one summarized ten clinical studies, but only two of the ten had ever appeared in the literature. And this sent the Cochrane Collaboration on a hunt to find the rest of the data, which turned out to be no simple matter:

First, the Cochrane researchers wrote to the authors of the Kaiser paper. By reply, they were told that this team no longer had the files: they should contact Roche. Here the problems began. Roche said it would hand over some information, but the Cochrane reviewers would need to sign a confidentiality agreement. This was tricky: Cochrane reviews are built around showing their working, but Roche's proposed contract would require them to keep the information behind their reasoning secret from readers. More than this, the contract said they were not allowed to discuss the terms of their secrecy agreement, or publicly acknowledge that it even existed. . .Then, in October 2009, the company changed tack. It would like to hand over the data, it explained, but another academic review on Tamiflu was being conducted elsewhere. Roche had given this other group the study reports, so Cochrane couldn't have them.

And so on and very much so on. Roche's conduct here appears shameful, and just the sort of thing that has lowered the public opinion of the entire pharma industry. And not just the public opinion: it's lowered the industry in the eyes of legislators and regulators, who have even more direct power to change the way pharma does business. Over the years, we've been seeing a particularly nasty Tragedy of the Commons - each individual company, when they engage in tactics like this to product an individual drug, lowers the general standing of the industry a bit more, but no one company has the incentive to worry about that common problem. They have more immediate concerns.

So what about Tamiflu? After years of wrangling, the data finally emerged, and they're not all that impressive:

So does Tamiflu work? From the Cochrane analysis – fully public – Tamiflu does not reduce the number of hospitalisations. There wasn't enough data to see if it reduces the number of deaths. It does reduce the number of self-reported, unverified cases of pneumonia, but when you look at the five trials with a detailed diagnostic form for pneumonia, there is no significant benefit. It might help prevent flu symptoms, but not asymptomatic spread, and the evidence here is mixed. It will take a few hours off the duration of your flu symptoms.

I've never considered it much of a drug, personally, and that's without any access to all this hard-to-get data. One of the biggest raps on oseltamivir is that it has always appeared to be most effective if it could be taken after you've been infected, but before you know you're sick. That's not a very useful situation for the real world, since a person can come down with the flu any time at all during the winter. Goldacre again:

Roche has issued a press release saying it contests these conclusions, but giving no reasons: so now we can finally let science begin. It can shoot down the details of the Cochrane review – I hope it will – and we will edge towards the truth. This is what science looks like. Roche also denies being dragged to transparency, and says it simply didn't know how to respond to Cochrane. This, again, speaks to the pace of change. I have no idea why it was withholding information: but I rather suspect it was simply because that's what people have always done, and sharing it was a hassle, requiring new norms to be developed. That's reassuring and depressing at the same time.

That sounds quite likely. No one wants to be the person who sets a new precedent in dealing with clinical data, especially not at a company the size of Roche, so what we might have here is yet another tragedy of the commons: it would have been in the company's best interest to have not gone through this whole affair, but there may have been no one person there who felt as if they were in any position to do something about it. When in doubt, go with the status quo: that's the unwritten rule, and the larger the organization, the stronger it holds. After all, if it's a huge, profitable company, the status quo clearly has a lot going for it, right? It's worked so far - who are you, or that guy over there, to think about rearranging it?

Comments (12) + TrackBacks (0) | Category: Clinical Trials | Infectious Diseases | Why Everyone Loves Us

February 20, 2014

Pfizer Seeks Respect

Email This Entry

Posted by Derek

Here's Ian Read of Pfizer, on that company's reputation (and that of pharma in general):

. . .many people — including not only regulators but also legislators and their constituents — have a say in how we can conduct our business. At the same time, many have a great and sometimes emotionally charged interest in what our business produces, what we charge for our products and how we sell them, among other topics. And all of this together shines a brighter light on our business than most others, which makes our reputation all the more important to us. In fact, everything from government reimbursement for our medicines to protection of our intellectual property to our ability to continue innovating in our labs depends on our reputation. Indeed, our virtual license to operate depends on this. It depends on earning the respect of our regulators, legislators, healthcare professionals, patients, R&D partners and of our employees, current and future.

This is why we made “earning greater respect from society” one of our four business imperatives not long after I was named CEO of Pfizer in late 2010.

Without this respect and the consideration that comes with it we could not sustain our business, with its innumerable collaborative dependencies and its central place in an area of life so important to us all, our health. Making reputation and respect all the more important to us is knowing that we gain it in drops, but lose it in gallons.

True enough. Has Pfizer lost a gallon or two? He doesn't really say. His piece also does not say if there are any specific actions that Pfizer (or other companies) have taken that might have caused some of this respect leakage. Nor does it go into any detail about what steps might be taken to get any of it back, other than boardroom-speak like "connect better with our stakeholders". But it's a start, I suppose.

Comments (43) + TrackBacks (0) | Category: Why Everyone Loves Us

January 16, 2014

Should Drug Industry Research All Get Rejected For Publication?

Email This Entry

Posted by Derek

If you work in the drug industry, and for some reason you feel that your blood pressure isn't quite high enough today, a look at this debate at the British Medical Journal should fix that up for you. "Should journals stop publishing research funded by the drug industry?" is the title - there, doesn't that constrict your blood vessels already?

Taking the "Yes, they should" side are Richard Smith (former editor of the journal, now with a British organization called "Patients Know Best", and Peter C. Gøtzsche of the Nordic Cochrane Center. Here's their opening statement, and Gøtzsche's recent opinion piece in the same journal is a good harbinger, as it turns out:

The BMJ and its sibling journals have stopped publishing research funded by the tobacco industry for two main reasons: the research is corrupted and the companies publish their research to advance their commercial aims, oblivious of the harm they do. But these arguments apply even more strongly to research funded by the drug industry, and we suggest there is a better way to communicate the results of trials that would be safer for patients.

Prescribed drugs are the third leading cause of death, partly because of flaws in the evidence published in journals. We have long known that clinical trials funded by the drug industry are much more likely than publicly funded trials to produce results favourable to the company. The reason is obvious. The difference between an honest and a less than honest data analysis can be worth billions of euros, and the fraudulent trials of some cyclo-oxygenase-2 inhibitors for arthritis and selective serotonin reuptake inhibitors for depression are good examples

They're absolutely right about the financial motivations, and a first-rate moral hazard it is, too. But the comparison with the tobacco companies is a real pencil-snapper (as they no doubt intended it to be). They go on about prescription drugs being the "third largest cause of death", about "drug industry crimes", and so on. To be fair, and first let me brush these pencil fragments off my desk, the pharmaceutical companies have laid themselves wide open to these sorts of attacks, painting huge fluorescent bulls-eye targets on themselves again and again. But still.

This piece casually mentions that "olanzapine (Zyprexa), has probably caused 200 000 deaths", footnoting a book by one of the two authors. I seem to have missed that. Many antipsychotic drugs are associated with QT prolongation, which can lead to fatal heart arrythmias, but the worst of them have long been taken out of use. The FDA is investigating two deaths following injection of long-acting olanzapine, not two hundred thousand. Olanzapine has plenty of side effects, though, including weight gain (which can exacerbate Type II diabetes), and it has a warning label in the US about giving it to elderly patients under any conditions. But two hundred thousand deaths? I can't find any support for any such figure; it appears in Gøtzsche's book and apparently nowhere else, so citing it in this article as if it were a well-established fact is a nice move.

Taking the "No" side is Trish Groves of the BMJ itself. She rejects the analogy with the tobacco industry - as she should, because it's offensive and ridiculous. She goes on to detail the problems with industry-reported results and what the journal is doing about them. As opposed to the "Yes" side, it's a pretty reasonable piece. One of the things she mentions is that investigator-led trials have their own sources of bias. Very few people organizing an effort the size of a useful clinical trial will be disinterested in its results, unfortunately.

How much can we trust the evidence base for drugs in current use? It’s hard to tell, given the woeful legacy of widespread non-registration, non-publication, and selective reporting of clinical trials. Much of this reporting bias also applies to investigator led trials, and the many steps now being taken to mandate prospective trial registration, ensure reporting of all results, and access patient level data on interventions’ benefits and harms, as called for by the AllTrials campaign, must apply to them as much as to industry led trials. Moreover, new rules on transparency need to be applied retrospectively: laudable plans to provide access to data on new drugs aren’t enough.

That’s why the BMJ is keen to publish papers from the RIAT (Restoring Invisible and Abandoned Trials) initiative, through which academics who find previously unreported trials can write them up and publish them if the original investigators decline to do so. We also welcome “negative” trials that find no evidence of benefit, as long as their research questions are important and their methods robust, and we’re particularly interested in publishing trials of comparative effectiveness. Both these types of study can be much more useful to clinical practice than the placebo controlled trials that regulators demand. . .

It should be no great task to guess which side of this debate I favor - after all, I'm one of those evil drug company scientists who mow down the customers by the hundreds of thousands. I do wish that Groves' response had strayed a bit from the topic at hand and addressed those accusations of mass murder (that's what they are). I realize that it must be hard to tell a former editor to tone things down and go back for a rewrite. But still.

Comments (47) + TrackBacks (0) | Category: Clinical Trials | The Scientific Literature | Why Everyone Loves Us

July 26, 2013

More Behind-the-Scenes Maneuvering. How Wonderful.

Email This Entry

Posted by Derek

This is exactly the kind of headline the drug industry does not need. Via FierceBiotech, here's a story in The Guardian on the recent efforts to get companies to disclose more about the clinical trial results for investigational drugs. GSK is the company that seems to have done the most in this regard, but the European Medicines Agency (EMA) is proposing mandatory disclosure of trial results into a public database. That's a lot further than most companies are willing to go - so what to do?

The strategy was drawn up by two large trade groups, the Pharmaceutical Research and Manufacturers of America (PhRMA) and the European Federation of Pharmaceutical Industries and Associations (EFPIA), and outlined in a memo to senior industry figures this month, according to an email seen by the Guardian.

The memo, from Richard Bergström, director general of EFPIA, went to directors and legal counsel at Roche, Merck, Pfizer, GSK, AstraZeneca, Eli Lilly, Novartis and many smaller companies. It was leaked by a drugs company employee.

The email describes a four-pronged campaign that starts with "mobilising patient groups to express concern about the risk to public health by non-scientific re-use of data". Translated, that means patient groups go into bat for the industry by raising fears that if full results from drug trials are published, the information might be misinterpreted and cause a health scare.

That's what. Other parts of the strategy include "discussions with scientific associations" about the risks of data sharing and getting other companies in other industries that might be affected by similar proposals to lobby against this as well. None of this is to be done, it seems, under the banner of "Here's why the drug industry opposes this idea". It's all a spontaneous upwelling.

Now, I don't want to seem too shocked: this sort of thing is done all the time in politics. Every time some big regulatory or legislative idea comes along that might cramp some large group's style, you'll see all kinds of organizations pop up with serious-sounding names: "Public Coalition For XYZ" "United Citizens For QRS" and so on. Use of these "instant grassroots" fronts has earned the term "astroturfing" (which also means that any time some actual group of people comes together for real, their political opponents will always accuse them of being an astroturfed gang of shills).

Some of the patient advocacy groups the Guardian talks about are probably in this category. But many of them are real organizations that have been around for some time. There's an evolutionary dance going on, though: while the advocacy groups want to get enough influence with the drug companies to steer their decisions, the drug companies want to get enough influence with the advocacy groups to steer theirs, for just the reasons we're seeing now. And in that second half of the process, the pharma industry has a powerful offer to make: we'll fund you. At that point, every advocacy group (in any industry) has some big decisions to make about what they're trying to do and how best to do it. Will taking the money compromise them? Or will that be outweighed by what they can do with the funding?

But just because this is a common practice doesn't mean that it's right. Or a good idea. Or, at the very least, the sort of thing that the industry should be seen to be doing. Secret memos detailing a behind-the-scenes campaign of influence to avoid disclosing data? The people at PhRMA and EFPIA should apply a simple test to ideas like this: if it sounds like a bad movie plot, if it sounds like something made up by people who hate you. . .maybe it's not such a good plan.

Update: here's more on an effort to pull out unpublished clinical trial data. "Publish or be published" is their motto. The editors of the British Medical Journal and PLoS Medicine have endorsed the idea.

Comments (12) + TrackBacks (0) | Category: Clinical Trials | Why Everyone Loves Us

May 23, 2013

Another Look At Marketing Vs. R&D In Pharma

Email This Entry

Posted by Derek

FiercePharma has some good figures to back up my posts the other day on R&D spending versus marketing. I mentioned how many people, when they argue that drug companies spend more on marketing than they do on research, are taking the entire SG&A number, and how companies tend to not even break out their marketing numbers at all.

Well, the folks at Fierce had a recent article on marketing budgets in the business, and they take Pfizer's numbers as a test case. That's actually a really good example: Pfizer is known as a mighty marketing machine, and for a long time they had what must have been the biggest sales force in the industry. They also have a lower R&D spend than many of their peers, as a percentage of sales. So if you're looking for the sort of skewed priorities that critics are always complaining about, here's where you'd look.

Pfizer spent $622 million on advertising last year. Man, that's a lot of money. It's so much that it's not even one-tenth of their R&D budget. Ah, you say, but ads are only part of the story, and so they are. But while we don't have a good estimate on that for Pfizer, we do have one for the industry as a whole:

DTC spending is only part of the overall sales-and-marketing budget, of course. Detailing to doctors costs a pretty penny, and that's where drugmakers spend much of their sales budget. Consumer advertising spending dropped by 11.5% in 2012 to $3.47 billion. Marketing to physicians, according to a Johns Hopkins Bloomberg School of Public Health study, amounted to $27.7 billion in 2010; that same year, DTC spending was just over $4 billion.

That's a total for 2010 of more than $31 billion, the best guess-timate we can come up with on short notice. According to FierceBiotech's 2010 R&D spending report, the industry shelled out $67 billion on research that year--more than twice our quick-and-dirty marketing estimate.

So let's try for a Pfizer estimate then. If they stayed at roughly that ratio, then they would have spent seven times as much marketing to physicians as they did on advertising per se. That gives a rough number of $4.3 billion, plus that $622 million, for a nice round five billion dollars of marketing. That's still less than their R&D budget of $7.9 billion, folks, no small sum. (And as for that figure from a couple of years ago about how it only costs $43 million to find a new drug, spare me. Spare everyone. Pfizer is not allocating $7.9 billion dollars for fun, nor are they planning on producing 184 new drugs with that money at $43 million per, more's the pity.)

So let me take a stronger line: Big Pharma does not spend more on marketing than it does on R&D. This is a canard; it's not supported by the data. And let me reiterate a point that's been made here several times: no matter what the amount spent on marketing, it's supposed to bring in more money than is spent. That's the whole point of marketing. Even if the marketing budget was the same as the R&D, even if it were more, it still wouldn't get rid of that point: the money that's being spent in the labs is money that came in because of marketing. Companies aren't just hosing away billions of dollars on marketing because they enjoy it; they're doing it to bring in a profit (you know, that more-money-than-you-spend thing), and if some marketing strategy doesn't look like it's performing, it gets ditched. The response-time loop over there is a lot tighter than it is in research.

There. Now the next time this comes up, I'll have a post to point to, with the numbers, and with the links. It will do no good at all.

Note: I am not saying that every kind of drug company marketing is therefore good. Nor am I saying that I do not cringe and roll my eyes at some of it. And yes indeed, companies can and do cross lines that shouldn't be crossed when they get to selling their products too hard. Direct-to-consumer advertising, although it has brought in the money, has surely