Atlas Shrugged: The Mocking

Thursday, January 14, 2010

Death Comes For The Blogger

It seems that once again the Grim Reaper rests its cold, bony hand on the shoulder of our silent, brave asthma sufferer, Megan McArdle. Unfortunately McArdle does not tell us if her most recent doctor visit was paid for by her poor, put-upon employer, unfairly coerced by his socialist government to pay for the majority of Megan McArdle's health insurance payment, or if McArdle happily paid the full amount out of her and P. Suderman's own pockets, going Galt good and proper, the way good Galts go. Alas and alack, we shall never know.

Back to McArdle's bed of pain---
On the Pharma Gravy Train
Today, I became a big beneficiary of the enormous marketing budgets of pharmaceutical companies. I know many of y'all suspected it all along. But sadly, there was no massive check waiting for me in the mail today.

I don't think her readers think anything of the sort. Most tend to agree with everything McArdle says and disagree with anyone who contradicts her. Most liberals ignore her except when she is more egregiously and amusingly wrong than usual. If she is reading the two or three blogs that regularly call her corrupt, she is performing feats of self-absorption usually reserved for the likes of Ann Althouse. Why read unpleasant rebuttals when you refuse to respond to them or learn from them? To validate your existence, to feel important, to enjoy the sensation of attention being paid, no matter how negative? How awful.
No, what happened is, I went to the pulmonologist for a lung function test, because my asthma has been steadily getting worse for months.

And she is telling us this because---?
The bad news is what I already knew--I am no longer well controlled enough with Singulair and a rescue inhaler, and I need to go on inhaled steroids. The good news is that I left with an armful of free samples, so that I can figure out which inhaled steroid works for me most cost-effectively. That's courtesy of those bloated marketing budgets you hear so many complaints about, more than half of which go to free samples.

I hate to butt in and be a hater, but based on past experience I'm going to have to ask McArdle for a cite on her health care numbers. Remember when McArdle said that health care innovation will be destroyed if we have national health and then was forced to admit she made up her statistics? It's rather dispiriting to see McArdle pull out the same trick again but it is not surprising. What happened to innovation in hack journalism?
The authors focused their study on the United States because it is the only country in which information is available for all of the major promotion categories, and it is also the largest market for pharmaceuticals in the world, representing approximately 43% of global sales and global promotion expenditures.

Gagnon’s and Lexchin’s new estimate of total promotional costs is also consistent with estimates of promotional spending by the U.S. pharmaceutical industry from other sources they scrutinized, including reports by Consumers International, a non-governmental organization which represents consumer groups and agencies worldwide; Office of Technology Assessment, which extrapolated results from the cost structure of Eli Lilly, a global pharmaceutical company; Marcia Angell, former editor-in-chief of the New England Journal of Medicine, who extrapolated data from Novartis Inc., a company which distinguishes marketing from administration expenditures in its annual reports; and the United Nations Industrial Development Organization.

As well, note the authors, the number of meetings for promotional purposes has dramatically increased in the U.S. pharmaceutical industry, jumping from 120,000 in 1998 to 371,000 in 2004, further supporting their findings that the U.S. pharmaceutical industry is marketing-driven.

Thus, the study’s findings supports the position that the U.S. pharmaceutical industry is marketing-driven and challenges the perception of a research-driven, life-saving, pharmaceutical industry, while arguing in favour of a change in the industry’s priorities in the direction of less promotion, according to Gagnon and Lexchin.

Their study, “The Cost of Pushing Pills: A New Estimate of Pharmaceutical Promotion Expenditures in the United States,” appears in the January 3, 2008 issue of PLoS Medicine, an online journal published by the Public Library of Science.

The Push Strategy: Promotion to Physicians and health-care professionals [pdf]
“Despite the boom in consumer ads, doctors are still king” Maguire (1999)
However enormous the implications of DTCA of drugs and the budgets devoted to this, the issue of physician targeted promotion is significantly greater on all fronts, both financially and in terms of eventual outcomes. Komesaroff and Kerridge (2002) state that promotion and marketing to doctors makes up a quarter to a third of their annual budgets “… totaling more than US$11 billion each year in the United States alone).There are no comprehensive figures available, but it is estimated that, of this, about US$3 billion is spent on advertising and US$5billion on sales representatives, while expenditure per physician is believed to be over US$8000.” As mentioned earlier in this article the Canadian Medical Association Journal in 2002 estimated the US promotional spend to be even higher at approximately $19 billion dollars. This activity includes advertising, gift giving and support for medically related activities such as travel to meetings and support for conferences.
Why do firms spend so much on promotion to doctors? Essentially because they rightly see that doctors are the gatekeepers to the success of individual brands. To quote Barnes (2003) “Prescribing ‘events’ such as a physician swapping one brand for another …. Can make or break a brand’s success.”
Doctor-targeted promotion takes a variety of forms:
• Gifts, such as free samples, small stationery (Riccardi 2002), travel to conferences and educational events, and, some argue, cash (Medical Marketing & Media 2003, Prawirosujanto 2001, Strout, 2001)
• Sponsorship of conferences and educational events
EJBO Electronic Journal of Business Ethics and Organization Studies Vol. 9, No. 2
(Moynihan 2003, Hayes et al 1990, Komesarroff and Kerridge 2002)
• The use of key opinion leaders – i.e. senior clinicians and medical educators as speakers at learned conferences Lerer (2002) Burton and Rowell (2003)
• Funding of medical journals through advertising. Pharmaceutical companies use medical journals to advertise their products, and frequently advertising revenue is the only source of funding of these journals, which are often sent free to doctors. Smith (2003), the editor of the British Medical Journal, writes thus of advertising by Big Pharma “To attract advertising these publications have to be read by the doctors whom the advertisers want to reach. So the free publications work hard at making themselves attractive, relevant, interesting, and easy to read – in contrast to journals, which are often delivering complex, difficult to read material of limited relevance.” Davidoff et al 2001 write of a decision among the editors of some of the world’s largest medical journals to adopt a common policy of disclosure of information about the source and validity of articles submitted for publication, and possible conflicts of interest. Hence, for example, contributors to the British Medical Journal must disclose any potential conflicts of interest that might arise. This policy does not however apply in the non-medical press and women’s magazines, and many of the world’s broadsheets carry thinly-veiled info-mercials for medical conditions, such as Revill’s coverage of female testosterone deficiency in the United Kingdom national newspaper The Observer in Jan 2003.
“ We doctors are shamelessly manipulated by drug companies in all sorts of ways. ..the methods cover the whole spectrum from subliminal to brazen, from little pens that don’t work to pushy reps” (Farrell 2000).

McArdle tells us that the scrappy little drug companies are willing to do what it takes to win her heart.

This isn't such a great deal for the pharmaceutical industry, since otherwise I'd be paying full freight for one of their products. All it does for the pharma firms is buy them a seat at the table--a chance to win my business. But it's a great deal for me, and millions of consumers like me who get a chance to try multiple products before we commit to one.

McArdle looks at the free sample in her hand and is filled with a warm glow at the thought of drug companies' beneficence. Then she stops thinking. Everything else is unimportant, for McArdle has what she wants.
About 90 percent of the pharmaceutical industry's $21 billion marketing budget is directed at physicians, according to JAMA. There are more than 90,000 pharmaceutical representatives that visit U.S. physicians, providing free lunches, gifts, marketing paraphernalia and free medication samples. These enticements are designed to influence doctors to prescribe more drugs and more expensive drugs and have often become a substitute for objective medical evidence.

"These marketing practices, including the growing number of "ask your doctor" commercials, has led to over-medicating of the U.S. population," says Michael Ehlert, M.D., AMSA national president. "There is substantial evidence that marketing shapes physician prescribing habits. By eradicating pharmaceutical companies from all medical schools, hospitals and academic medical centers, physicians will be able to go back to practicing evidence-based medicine."

Over the last decade, 70 percent more prescriptions have been written; though the population has only grown by nine percent. By "creating" illnesses, the pharmaceutical industry remains one of the most profitable industries on the Fortune 500.

As marketing to physicians and consumers increases, so does the price of medications. The pharmaceutical industry claims that high priced pharmaceuticals are essential to offset the expense of research and development, yet the number of research jobs has remained virtually the same since 1995, while the marketing staff has increased by more than 50 percent.

"AMSA wants to cure healthcare's addiction to the pharmaceutical industry and envisions a day when drugs are used because they are effective in treating disease, not because they are successfully marketed," says Anthony Fleg, AMSA PharmFree coordinator. "Our patients deserve the best care; and that means not prescribing a specific drug because the drug rep was attractive or because the physician's closet is full of free samples."

Back to McArdle:

One of the things that bugs activists about this practice is that the pharmaceutical companies record the cost of the marketing as the full price of the product, not the cost of producing it.

Yes, that's what enrages activists--accounting rules. I have no idea what she is saying here.

But this is actually the right accounting rule, precisely because of what I outlined above: the samples cost them a full price sale. One could argue that it should be slightly lower, because I might have insurance which would pay a discounted rate for the product. But whatever the exact right price is, it's closer to the market price of the product than to the production cost. Keep that in mind the next time you hear someone complaining that pharma spends more on marketing than development; if it weren't for all those free samples, and the reps who bring them to the doctors, they'd spend considerably less.

What? The cost of a sample is the cost of manufacturing a sample. They are pills made by the millions and given away by the thousands. You won't sell millions of those pills unless thousands of doctors decide to prescribe them. The free sample is a tiny part of the co-option of the doctor.
Drug companies spent more than $7 billion (not including drug samples) in 2003 on one-on-one marketing to doctors. This works out to about $8,400 to $15,400 per doctor per year. Studies show that such marketing works: interaction with drug company representatives were associated with changes in doctor’s prescribing patterns. There are several problems with this type of marketing. First, drug marketing emphasizes the latest and most expensive drugs even though these drugs may not be the best in their category according to the medical evidence. When marketing rather than objective and unbiased information shape prescribing patterns, the cost of prescription drugs for consumers, government and health insurers will continue to rise far faster than the general rate of inflation. Second, gifts to doctors also undermine the doctor-patient relationship by creating the appearance of impropriety.


The Problem:

The $7 billion drug companies spent in 2003 on one-on-one marketing to doctors represents a 78% increase over 1999 levels. This amount includes direct gifts to doctors, such as expensive meals, entertainment, tickets to sporting events and travel, as well as the practice of “detailing.” “Detailing” refers to the practice of pharmaceutical companies sending representatives – essentially lobbyists for their drugs – into doctors’ offices. In 2001, the industry employed 90,000 drug company detailers – a ratio of 1 salesperson for every 4.7 office-based physicians. The purpose of detailing is to influence prescribing behavior. Companies often buy data about the prescribing patterns of individual physicians, and then use detailers to shift those patterns.

A former detailer explained that gifts:

“buy you time with a doc, time that might change his mind. . . .Money is the big resource. The pads and pens are great for access, but the dinners and what costs money—CDs, handheld computers, everything given in the name of research—this is what's thrown at docs to get them to change their minds."
A New York Times article reported that gifts can include five- and six-figure checks that arrive unsolicited in doctor’s offices.

These marketing efforts do influence behavior. In an analysis of several studies, drug company marketing efforts were associated with changes in prescribing patterns and requests to include particular medications on formularies, sometimes counter to existing efficacy evidence. In a study of residents, 84% thought that their colleagues were influenced by drug company detailing. In a June 2003 report, Forrester Research provided results from its survey of physicians who have expressed an interest in online detailing. Of respondents indicating they had participated in some kind of e-detailing, 67% had ordered samples and 58% prescribed more of the featured drug – all as a result of direct-to-physician marketing.

I read six articles and a report to refute these miserable four paragraphs. It's like pushing against the tide.


Downpuppy said...

Megan does love her drugs.

On Survivor 19, the winner, Natalie White, was a drug rep. She got 7 votes, Russell the troll 2, & Dr Mick 0.

I think a previous winner, Dannielle, was also a rep. It's one of the few professions where gorgeous, whip smart young women can make massive amounts of money legally, more or less.

Just mentioning it, in case Megan doesn't understand marketing.

Dillon said...

I think being whip smart would allow a person (even a female!) to be financially successful in any number of professions.

Batocchio said...

Then she stops thinking. Everything else is unimportant, for McArdle has what she wants.

This is almost every McArdle post - except those where she never starts. Glibertarian glossolalia.

Rick said...

I am no longer well controlled enough with Singulair and a rescue inhaler, and I need to go on inhaled steroids.

Meanwhile in more medically backward locales (Canada, Japan, for example), it's been pretty common practice for about 20 years to get asthmatics on inhaled steroids, which are therapeutic and reduce or eliminate the need for the other two inhalers. This, at least, has been my experience.

I think you see where I'm going...

Mr. Wonderful said...

Is she really claiming that the drug companies "are out" the SALE price of the samples they so generously give away for free?

Does anyone at The Atlantic read her column? The above assertion is either an outright lie or a demonstration of terminal incompetence. I know, I know: it's the eternal question with the right.

Lying or stupid? It's so hard to KNOW.

Mr. Wonderful said...

There's a lot of discussion at Megan's site among the faithful about accounting practices. In any case, here's the footnote in the source Megan used:

"The retail value of samples is used to approximate the economic cost to the pharmaceutical
companies of giving away free samples. Because samples presumably crowd out at least some
sales, using production costs would understate the cost of samples to the manufacturers. Using
the retail price to value all free samples, however, probably overstates the opportunity cost to the manufacturer, so this approach may well overvalue the cost of sampling to manufacturers."

Ya think?

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Downpuppy said...

Just steal stuff & put your name on it.

It's what all the kewl kidz are doing.

Ken Houghton said...

Downpuppy replies to Spam; Spam made more interesting.

I'll say again what I think I said a couple of days ago: if McMegan were an actual economist, or have any training in economics that would justify her writing an Economics blog for The Atlantic (or, indeed, any place other than a semi-respectable high school newspaper), she wouldn't be making such stupid statements.

As noted above, Pharma Reps make good six-figure salaries; those are also fully-deductible against the "cost" of the drug(s) sold. Any Economist worth her salt would talk about "physician-induced demand" and principal-agent issues that resulted in her getting those Nice "Free" Samples.

But McMegan gets A Free Lunch, and doesn't ask cui bono. She gives economists a bad name.