Pharmaguy's Insights Into Drug Industry News
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Pharmaguy's Insights Into Drug Industry News
Pharmaguy curates and provides insights into selected drug industry news and issues.
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Discount Rx Drug Coupons Lower Price of Drugs, But Not How You Think They Do

Discount Rx Drug Coupons Lower Price of Drugs, But Not How You Think They Do | Pharmaguy's Insights Into Drug Industry News | Scoop.it

Consider [Rx drug] coupons. Over the past several years, drug makers have used these to entice consumers to fill their prescriptions, since coupons defray or eliminate copay costs. In 2009, coupons were available for fewer than 100 prescription medicines, but the number exceeded 700 by last year, according to the analysis released on Tuesday by the Tufts Center for the Study of Drug Development. The study was funded by Pfizer.

 

Drug makers contend coupons help consumers who might otherwise have difficulty affording their medicines as insurance requires them to shoulder a greater share of the cost. This “can be a real barrier to patient access to medicines, and coupons can help break that barrier down,” the Pharmaceutical Research and Manufacturers of America, the industry trade group, wrote in a 2012 blog post on its web site.

 

Studies have shown, however, that coupons are a mixed bag.

 

A 2013 analysis in The New England Journal of Medicine found that 62 percent of coupons were available for brand-name drugs for which lower-cost options existed. But a 2014 study in Health Affairs found coupons reduced consumer costs for expensive specialty drugs to less than $250 a month, suggesting patients may be less likely to forego their medications.

 

Pharmacy benefit managers, which negotiate deals with drug companies and manage lists of covered medicines called formularies, argue that coupons are a ruse. As Tufts notes, pharmacy benefit managers and insurers believe coupons are increasingly used by drug makers to negate the exclusion of certain drugs from formularies, and other efforts in order to weed out less effective drugs and to lower costs.

 

So over the last few years, the nation’s two largest pharmacy benefit managers have been excluding more drugs from their formularies. CVS Caremark excluded 124 drugs in 2016, a 63 percent increase since 2014, while Express Scripts excluded 80 drugs in 2016, a 67 percent rise since 2014, according to Tufts. Significantly, coupons were available for more than 90 percent of the drugs that were excluded.

 

“The leverage gained by pharmacy benefits manager, by way of exclusions, puts downward pressure on prices of (certain) drugs,” said Joshua Cohen, a health economist at Tufts who coauthored the analysis.

Pharma Guy's insight:

The FDA is concerned that the use of sales promotions such as free trial offers, discounts, money-back guarantees, and rebates in direct-to-consumer (DTC) prescription drug ads "artificially enhance consumers' perceptions of the product's quality" while also resulting in an "unbalanced or misleading impression of the product's safety." (read "Drug Ads & Coupons"; http://bit.ly/fdacouponstudy). Also: "Rx Drug Coupons: Lower Costs at First, But You Pay More Later"; http://sco.lt/4jpt0z 

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Pharma Marketing Blog: Tufts New Estimate of Costs to Bring a Drug to Market & Beyond

Pharma Marketing Blog: Tufts New Estimate of Costs to Bring a Drug to Market & Beyond | Pharmaguy's Insights Into Drug Industry News | Scoop.it

The pharmaceutical industry is currently struggling to defend the high cost of drugs. It is using advertising and lobbying to reach lawmakers and payers (read, for example, "#Pharma Ramps Up Ads & Lobbying to Fend Off Rx Pricing Regulation").

PhRMA's multi-million dollar "From Hope to Cures" campaign, for example, pulls the heart strings by featuring a 5-year-old boy with Type 1 diabetes. This is part of PhRMA's pledge to spend several million dollars this year, and 10% more than in 2015, on digital, radio and print ads that emphasize the industry’s role in developing new drugs and advancing medical science. It also plans to spend more money lobbying and donated to political campaigns.

In these campaigns, the strategy is less focused on defending drug costs to pay for the cost of developing new drugs and more focused on the benefit of new drugs in fighting intransigent diseases such as diabetes, rare cancers, and Alzheimer's Disease.

Nevertheless, many pharma CEOs still speak of "return on capital" to defend high drug prices.

So capital expenditures (R&D costs) are still a big deal for pharma executives. I have been reporting on various estimates of the costs to bring new drugs to market for several years now. Most of these estimates come from the Tufts Center for the Study of Drug Development.

Tufts has a new estimate of these costs that includes a new cost item.

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Multi-Millionaire Ex-Pfizer Exec's Effort to Defend Pharma Drug Pricing is "Transparent Jive"

Multi-Millionaire Ex-Pfizer Exec's Effort to Defend Pharma Drug Pricing is "Transparent Jive" | Pharmaguy's Insights Into Drug Industry News | Scoop.it
The Forbes columnist and pharma cheerleader, John La Mattina, left Pfizer in 2008 as their R&D head with a $22.6 million package after spending $1 billion of the company's money on an HDL-cholesterol enhancer that never got past the FDA. This week he wrote an item attacking two members of the Harvard Medical School faculty because they dared to criticize the industry's basis for pricing its drugs.


The interesting fact here is the only thing Drs. Jerry Avorn and Marcia Angell did, was show that pharma's lobby, PhRMA, has been using phony evidence to justify exorbitant pricing for over 50 years.  During this time the industry tried justifying high drug prices by claiming they were necessary for the R&D to develop better, new drugs.  Avorn and Angell merely made the case that pharma wildly exaggerates its real R&D expenses.  Yet La Mattina claims their criticisms miss the mark entirely because, in his view, drug prices are justified by their value, not their ability to recoup R&D costs.


If La Mattina's efforts to exonerate pharma weren't such transparent jive, they would be quite amusing.  Think about it.  Avorn and Angell show that pharma's explanation of R&D costs as the basis for high drug prices is baloney, so La Mattina accuses them of pursuing a wrong direction in trying to understand drug prices.  According to La Mattina, pharma is not wrong when it uses an irrelevant argument supported by phony cost numbers.  Instead he claims that Avorn and Angell miss the point behind drug pricing.  That's like saying traffic cops are at fault for excessive speeding by motorists.


With a writer less disingenuous it would be reasonable to ask whether he has thought through the consequences of his position. 

Pharma Guy's insight:


The debate continues! I was wondering how long it would take to rebuke Tufts estimate. Read La Mattina's piece: "Do R&D Costs Matter When It Comes To Drug Pricing?" http://onforb.es/1JGqtKr 


Here's Avorn's NEJM Perspective piece: "The $2.6 Billion Pill — Methodologic and Policy Considerations"; http://bit.ly/1ISWv5l 


And Tufts rebuttal: "The Cost of Drug Development"; http://bit.ly/1Hyrfqv 

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Cost to Bring a New Drug to Market Is $2.6 Billion According to Tufts - 3X More Than in 2003!

Cost to Bring a New Drug to Market Is $2.6 Billion According to Tufts - 3X More Than in 2003! | Pharmaguy's Insights Into Drug Industry News | Scoop.it

According to a new study by the Tufts Center for the Study of Drug Development (CSDD), which receives funding from the pharmaceutical industry, the estimated cost to develop a new Rx drug for marketing in the U.S. is $2,558 million or $2.6 billion (see press release). That 3.25 times the $800 previously estimated and frequently cited by the pharmaceutical industry, pharma trade publications, and the general media.

I have tackled the estimated $800 million drug develop cost gorilla before and garnered a lot of comments from readers, including Dr. Joseph DiMasi, whose team at Tufts came up with that number way back in 2003 (for more on that, read "Tufts Hangs Tough on Opportunity Cost Analysis").

It's about time CSDD threw out the old number and came up with a new, much larger number! But Tufts is not the only academics who have tackled the problem. As I reported in 2011, the London School of Economics and Political Science (LSEPS) cam sup with quite a different - much lower! - estimate of $59 million (see "A New Estimate of Drug Development Cost") and the Office of Health Economics (OHE) at the University College London estimated the cost to be $1.5 billion in 2013 (see here).

These various historic estimates are summarized in the accompanying chart.


You'll never guess who said the oft-cited 2003 Tufts estimate was  "one of the great myths of the industry". To find out who, click here.

Pharma Guy's insight:


PhRMA is already reaping the PR value from this study: "The road to bringing a new FDA-approved medicine to patients is long and the costs are formidable" (see PhRMA's comments here).

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Tufts' Joseph A. DiMasi Debunks the Andrew Witty R&D Cost Meme

Tufts' Joseph A. DiMasi Debunks the Andrew Witty R&D Cost Meme | Pharmaguy's Insights Into Drug Industry News | Scoop.it

I read with interest your article in FiercePharmaMarketing on pharma pricing debates (March 16, 2016). I have been the principal investigator for the Tufts Center for the Study of Drug Development studies on pharmaceutical R&D costs (including the latest one which is available now in the Journal of Health Economics). It is your reference to that work that I wish to address.

In particular, I would like to correct what I believe is a misinterpretation of something that GSK CEO Andrew Witty stated at a healthcare conference in 2013. Some industry critics have picked up on a comment he was reported to have made, taken it out of context, used it to try to discredit our work and repeated it so often that it has become a meme. The quote that the critics use, without context, is "one of the great myths of the industry," referring to a $1 billion R&D cost figure.

 

The original reporting on Mr. Witty's comments is from Reuters. An explanation by the reporter of what Mr. Witty meant immediately follows the quote in question ("since it was an average figure that includes money spent on drugs that ultimately fail"). That, of course, is what we measured, and our estimates rightfully consider the costs of failures.

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Drug Effectiveness Should Determine Drug Prices, Not Drug Discovery Costs

Drug Effectiveness Should Determine Drug Prices, Not Drug Discovery Costs | Pharmaguy's Insights Into Drug Industry News | Scoop.it

Ever wonder how much it costs to develop a new drug? The independent, non-profit research group, The Tufts Center for the Study of Drug Development, estimates US$2.6 billion, almost double the centre’s previous estimate a decade ago. But how accurate is this figure?


While the details of the study remain a secret, a press release, slideshow and background document on the Tufts website provide some insight into how this figure was calculated. Interestingly, only slightly more than half of this cost is directly related to research and development (R&D). US$1.2 billion are “time costs” – returns that investors might have made if their money wasn’t tied up in developing a particular drug.


So why is this debate important and why does it matter whether or not these estimate are correct?


These costs are used to justify high drug prices. These prices increasingly have the potential to disable health-care systems, create enormous opportunity costs (as funds that could be spent on other goods and services are diverted to purchase more and more expensive drugs), and place medicines out of reach of all but the most wealthy individuals or governments.


This is a reminder that the real issue is not how much it costs to develop a drug, but whether or not these drugs are worth the high prices pharmaceutical companies charge for them.


While advocates of a completely free market might see “just” pricing and all forms of price control as “medieval”, “socialist” or as suppressing innovation, others worry that drug prices bear little, if any, correlation with actual clinical value.


Rewarding innovation is necessary, but allowing drugs to be priced according to whatever the market will bear, rather than according to their benefits and cost-effectiveness, leads to inefficiencies, inequities and dramatic global inconsistencies.

Pharma Guy's insight:

The debate continues! I was wondering how long it would take to rebuke Tufts estimate. Read La Mattina's piece: "Do R&D Costs Matter When It Comes To Drug Pricing?" http://onforb.es/1JGqtKr 


Here's Avorn's NEJM Perspective piece: "The $2.6 Billion Pill — Methodologic and Policy Considerations"; http://bit.ly/1ISWv5l 


And Tufts rebuttal: "The Cost of Drug Development"; http://bit.ly/1Hyrfqv

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The Drug Industry's Eroom's Law: Diminishing Returns on Investment - But Don't Sell Short Yet!

The Drug Industry's Eroom's Law: Diminishing Returns on Investment - But Don't Sell Short Yet! | Pharmaguy's Insights Into Drug Industry News | Scoop.it

In technology there’s Moore’s Law, which says that semiconductors will keep getting cheaper and better. In drug development there’sEroom’s Law (Moore spelled backward, get it?), which posits that:


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the number of new U.S. Food and Drug Administration (FDA)-approved drugs per billion U.S. dollars of R&D spending in the drug industry has halved approximately every nine years since 1950, in inflation-adjusted terms.

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That’s from an article by three securities analysts and a venture capitalist that was published in the journal Nature Reviews Drug Discovery in March 2012 and got a lot of attention in the industry.


Just as it was published, though, the tide seemed to turn. The number of FDA new-drug approvals rose a lot in 2012 and stayed high in 2013. Last year it exploded. By the count of the Boston Consulting Group,2014 was the biggest year ever for new therapeutic drug approvals:


There’s a happy way to look at this: Eroom’s Law has been repealed, the pharmaceutical industry is back, and the so-called biotech bubbleis entirely rational exuberance.


Then there’s the other way. BCG estimates that peak sales from the drugs approved last year will actually add up to less than those approved in 2013, and much less than those approved in 1996, the previous high point for drug approvals. That is, more drugs are being approved, but most are aimed at smaller targets -- rare diseases, very specific cancers.

In fact, the authors of the Eroom’s Law article -- Jack W. Scannell, Alex Blanckley and Helen Boldon, then all of Sanford C. Bernstein in London, and Brian Warrington of Phoenix IP Ventures -- predicted back in 2012 that this might happen, in part because researchers were getting better at developing narrowly targeted drugs.


That’s better than not developing any drugs at all. But it’s an indication that diminishing investment returns on  drug R&D  may persist, even if Eroom’s Law doesn’t hold up in coming years. In their article, Scannell & Co. gave four main reasons for the poor return on investment: Read more here.

Pharma Guy's insight:


According to a new study by the Tufts Center for the Study of Drug Development (CSDD), which receives funding from the pharmaceutical industry, the estimated cost to develop a new Rx drug for marketing in the U.S. is $2,558 million or $2.6 billion (see press release). That 3.25 times the $800 previously estimated and frequently cited by the pharmaceutical industry, pharma trade publications, and the general media. Read more here: http://bit.ly/tuftsnewdata

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Tufts Again Will Estimate How Much it Costs to Develop a Drug. Will It Be Forever Quoted in the Press?

Tufts Again Will Estimate How Much it Costs to Develop a Drug. Will It Be Forever Quoted in the Press? | Pharmaguy's Insights Into Drug Industry News | Scoop.it
The Tufts Center for the Study of Drug Development tomorrow will release a report that will take yet another stab at determining the true cost of developing a medicine.


Drug makers maintain the true cost should reflect the investment in not only the hits, but the misses. In other words, the pharmaceutical industry says the expense needed to successfully concoct any one medicine should incorporate the costs of the many failures that occur along the way.


Conversely, consumer advocates and some academics, among others, regularly contest industry estimates, which have been rising over the years. As they see it, the numbers proffered by drug makers mask a combination of irrelevant and overstated expenses. And these estimates, they go on to argue, are unfairly used to justify rising prices.

For these reasons, arguments are likely to continue. Nonetheless, the Tufts Center for the Study of Drug Development on Tuesday will release a report that will take yet another stab at determining the true cost. The last time the think tank offered an estimate was in 2003, when it calculated the cost to develop a drug at $802 million.

Pharma Guy's insight:


"After years of debate over the cost of developing a drug, GlaxoSmithkline ceo has uttered a sentence that might resolve the issue once and for all – or reignite the argument," reports Pharmalot (here). "Speaking at a healthcare conference in London ... Andrew Witty explained that the $1 billion cost to develop a drug, which is often cited as the reason why some medicines have high price tags, is actually 'one of the great myths of the industry.'”


I have tackled the estimated $800 million drug develop cost gorilla before and garnered a lot of comments from readers, including Dr. Joseph DiMasi, whose team at Tufts came up with that number way back in 2003. Since then, the number has been adjusted upward to over $1 Billion due to inflation/increased costs.


A report  published in Biosciences entitled "Demythologizing the high costs of pharmaceutical research" (BioSocieties 6, 34-50; March 2011) claims the MEDIAN cost to develop a new drug is $59.4 million, which is more than an order of magnitude LESS than the DiMasi estimate. Fore more on that, read A New Estimate of Drug Development Cost

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