BUSINESS OF HEALTHCAREIFM III
Michael S. Weingarten, MD, MBA, FACS
Professor of Surgery
Chief, Division of Vascular Surgery
Drexel University College of Medicine
Today’s Topics
DRUGS, THE FDA, AND YOU
The Pharmaceutical and Device Industry in the US
n 2006 $300 billion in revenue (15% of US health care dollars
n $280 billion in drugs
n $36 billion in devices
n Since 2004 drug prices have risen 7.4% per year - inflation rate 2.5%
The US Drug Industry
n Responsible for major advances in hypertension control, diabetic care, cancer therapies
n At the same time vilified by the politicians and the public
Advertising and the Pharmaceutical Industry
n In 1997 the FDA approved direct advertising to consumers
n Industry spending on advertising
n 2001 - $2.5 billion
n 2005 - $4.1 billion
n 2002 - one out of every 7 dollars taken in spent on promotion
Advertising and the Pharmaceutical Industry
n Pfizer - $2.84 billion
n 4th behind GM, Proctor and Gamble, and Time Warner
n Bristol Myers-Squibb $778 million
n Maker of AIDS drugs
n Advertising slightly less then Mars Co (M&M’s)
Advertising and the Pharmaceutical IndustryThe “Purple Pill”
n The Purple Pill
n Prilosec 20 mg tabs $131.03 for 30 pills
n Nexium 20 mg tabs $153.17 for 30 pills
The Purple pill
n Prilosec a major cash cow for AstraZeneca in the 1990’s
n The patent was due to expire in 2001
n The company then came up with a mirror image of the drug – an isomer – called Nexium – marketed as the PURPLE PILL
n Similar efficacy
n Higher costs to patients
n A new patent issued
The Tale of the Purple Pill
n The purple pill succeeded because of
n Clever marketing
n Consumer apathy to costs
n This would not happen in most other industries
The Pharmaceutical Industry in the US
n 2002
n $19 billion in research and development
n $45 billion in marketing, advertising and administration
n $31 billion in profits
Cancer Care and the US drug Industry
n Cost of new generation of cancer drugs have skyrocketed
n Avastin
n Lung $46,600
n Colorectal $56,300
n Revlimid (multiple myeloma) $67,000
n Erbitux (colorectal) $40,000
n Cost of treatment per patient
n WSJ 3/15/07
Cancer care and the US drug industry
n Cancer drugs accounted for 22% of US drug spending in 2006
n Many plans have a 20% co-pay – that is still $8000 per year
n Genetech – maker of many of these drugs
n Net income rose 64% in 2006 to $2.1 billion
n Rise in stock value 7% – happy investors
Cancer Care and the US drug Industry
n Democratic proposals to push back prices through government negotiated drug prices
n Consumer backlash
n Generic genetically formulated drugs
n Quality issues
n WSJ 3/15/07
n WSJ 6/5/07
The Economics of Cancer Therapy
The Business of Anti-Cancer Drugs
n Physicians buying injectable drugs in high volumes can make a profit through Medicare billing
n Rebates offered by Amigen on Aranesp allow physicians to make a $47 profit per dose with Medicare re-imbursement of $309 per 100 microgram dose
n Drugs are injected in the physician’s offices
n Chemotherapy administration a profit center for many practices
n WSJ 5/25/07
The Economics of Cancer Drugs
n Oncologists have to buy drugs themselves that they are going to give intravenously in their offices
n Doctors then bill the patient and wait for the insurance companies and patients to pay
n Co pay (20%) = $11,200
n Cancer drugs now up to $100,000 per year
n Avastin for lung cancer - $56,000/year
n Issues of costs and rationing now a problem
n WSJ July 8, 2008
The Economics of Cancer Therapy
Cancer Care and “Specialty Drugs”
n High priced drugs used to treat small groups of patients
n Spending has soared in this category 21%
n Use of generic drugs have held spending increases on other drugs to a 6% increase
n ~25% of the $275 billion in 2006 spent on specialty drugs
n By 2010 - 30% 0f the $350 billion spent on drugs will be for specialty medications
Specialty drugs for AIDS
n Annual wholesale price per patient
n Atripia - $14,650
n Lexiva - $14,050
n Aptivus - $10,750
n Truvada -$9350
n Kaletra - $7950
n Sustiva - $5300
n AIDS pts usually take a mixture of 3 drugs at once
n co-pays vary
n WSJ 10/11/07
The Business of Cancer Care
n Patients with BRCA 1 or BRCA 2 gene mutations
n Have a 56% to70% chance of developing breast cancer by age 70
n general population 7% risk
n Have a 27% to 44% risk of developing ovarian cancer by age 70
n general population 2%
The Business of Cancer Care
n Recommendation for testing for the presence of BRCA gene mutations
n Families with multiple pre-menopausal women developing breast or ovarian Ca
n Families with 1 member having the mutations
n Patients with bilateral breast cancer
n Male relatives with breast cancer
The Business of Cancer Care
n Myriad Genetics
n Marketing their BRCA test kit directly to the consumer
n TV, radio, spas newspaper and magazine ads
n Women urged to talk to their primary physician about the test
n Cost of the tests run from $300 to $3000
n The Genetic Information Nondiscrimination Act before Congress
n Misleading ads – company subpoenaed by the Attorney General in Connecticut
n WSJ 9/11/07
The Business of Cancer Care
n Research characterized by the failure to share promising data
n Intellectual property
n Grant competition
n Race for publications
n Venture capital funds set up to award competitors with a $1 million prize for ideas leading to cancer treatments
n Gotham Prize for Cancer Research
n WSJ 9/18/07
The US Drug Industry
n Consumers do not pay directly for the medications they consume
n Costs are higher but outcomes may be no better
n The FDA has been criticized for demanding to much proof of safety and uniqueness – thereby driving up the cost of drugs
n Drug approval usually takes 2 ½ years
n Limited post approval follow-up is done
n Threats of law suits often led to drugs being withdrawn from the market, not scientific studies
Suggestions for managing the US Drug Industry
n Importation of drugs from Canada
n Concerns over quality
n Concerns over quantity
n Price controls
n Decrease profits and thereby slow innovation
n Canada with government controlled prices has had few innovations in drug therapy since the development of insulin
Suggestions for managing US DrugCosts
n Use of generics
n Was the centerpiece for controlling the $270 billion prescription drug bill (2006)
n Switching to generics opposed by specialty groups
n Epilepsy Foundation claims there will be an increased risk of seizures if generic anti-seizure drugs prescribed
n Wants a carve-out for seizure drugs
n Heavy lobbying of state legislatures for a $5billion/year business
n Epilepsy Foundation receives money from the drug manufacturers.
n WSJ 7/13/07
THE FDA
The Pharmaceutical Industry in the US and the FDA
n Food and Drug Administration -
n Primary purpose is to protect the public
n decisions re approval of a drug based on evidence of efficacy, safety, innovation +
n Delay in approval of medications and devices leads to stifling of innovation
n High cost of research and development
n approximately 10 - 15 years and $900 million to bring a drug to market
The Device Industry and the FDA
The demise of VIOXX
n Released in 1999 by Merck as a new COX-2 inhibitor class of analgesia
n Alleviated pain without the GI complications
n 100 million prescriptions
n $2.5 billion in annual sales by 2003
The Demise of VIOXX
n Concerns over an increased risk of cardiac and neurologic complications led to it sudden withdrawal from the market in 2004
n Merck stock dropped by 1/3 in one day
n FDA questioned over its drug approval policies
The FDA and Cancer Drugs
n From 1995-2005 26 new cancer drugs approved
n Largely due to the efforts of AIDs activists pushing for early approval under an accelerated approval process
n Since 2005 only a few cancer drugs have been approved and 5 sent back for more testing
n A return to the pre-AIDS era??
n WSJ 8/1/07
The FDA and Cancer Drugs
n FDA is being challenged by drug manufacturers to approve cancer drugs which:
n Only benefit a subset of cancer patients
n May only offer a slight improvement in survival or tumor shrinkage
Cost of Chemotherapy Drugs – is it worth the price?
n Bevacizumab (Avastin) used for advanced breast cancer
n $8000/month
n Extends life by 7 weeks in protocol trials
n Erlotinib – used for pancreatic cancer
n $4000/month
n Extends life by 12 days in protocol trials
n Gen Surg News 9/2010
Limiting Cancer Care and the FDA
n Drugs used for “off label” treatments are not being covered by insurance companies
n Avastin
n Approved for colon cancer
n $8000/dose
n Coverage denied by Wellpoint when used as a primary treatment for brain tumors
n Approved after publicity and when used as part of a protocol with other drugs
n WSJ 9/18/07
The FDA – An Expanding Role??The case of Warfarin
n Warfarin (coumadin)
n An antagonist of vitamin K (co-factor used in the synthesis of clotting factors II, VI, IX, X, Protein C and S by the liver)
n Used in patients with deep vein thrombosis, pulmonary embolus, atrial fibrillation, certain types of heart valves
n Dosage monitored by frequent blood tests (International Normalization Ratio – INR)
The FDA – An Expanding Role??The case of Warfarin
n Warfarin
n Comes in generic form
n 30 million prescriptions written last year
n Bleeding a major complication
n Warfarin complications second only to insulin as cause of ER visits (at least 43,000 last year)
Warfarin and the FDA
n Two gene variants may affect the metabolism of Warfarin - CYP2C9 and VKORC1
n May lead to Warfarin staying in the system too long
n Bleeding issues – 85,000 per year and 17000 strokes – at a cost of $1.1 billion
FDA and Warfarin
n FDA now has stated that the Warfarin label must state that “a lower initial dose be considered in patients with certain variations”
n WSJ August 16, 2007
FDA and Warfarin
n No randomized prospective study
n Currently Medicare covers the genetic testing ($300-$500)
n Many major private insurers don’t
n When covered tests take from 1-3 days up to 10 days
n IS THIS AN APPROPRIATE ROLE FOR THE FDA?
The Role of the FDA
n Traditionally has served as a regulator of the drug industry
n New Role: to promote the use of genetic factors to predict how patients will react to drugs
The FDA and Experimental Drugs
The Device IndustryNew Technologies
Information Technology - the Electronic Medical Record (EMR)
n A standard in every other industry
n allows tracking of medical history, medications, laboratory values, x rays
n Critical for continuity of care between health care providers
n Allows for data collection
n Epidemiological data
n “Evidence based medicine”
Quality of Care
n Critical to this is electronic medical records
n “Few industries are so information – dependent. But today, isolated systems make it impossible for your doctor to see your complete medical picture” Bill Gates WSJ 10/5/07
n Microsoft, Google, and others coming out with internet based personal health information records
n Public resistance an issue
EMR
n A ‘no brainer”
n the current paper medical record is useless
n fragmented care
n patient care silos
n medication errors (5% of the population)
n data collection expensive and completely impractical
Lack of an EMR
n New, proven technologies and medications take on average 17 years from introduction to becoming adopted as the standard of care
n Only 55% of patients receive standard of care in Diabetes and asthma management
n “I’ve been doing it this way for 35 years”
n not what our patients expect
n Institute of Medicine (2001)
EMR and the Explosion of Knowledge
n 1975 - 200 clinical trials published
n 1985 - 2000 clinical trials published
n 1995 - 10,000 clinical trials
n 2005 - 30,000 clinical trials
n NO ORGANIZATION IS ACCOUNTABLE FOR THE COLLECTION AND DISSEMINATION OF THIS MATERIAL
Barriers to the EMR
n Cost $115 billion
n In the United Kingdom with one health care system - $10 billion budgeted
n In the US -
n President Bush’s goal - EMR by 2015 for every American - $125 million budgeted for 2006
n Hillary Clinton proposal - $125 million 2006, $155 million 2007, and “other sums as needed 2008-2010”.
n The Obama stimulus plan allocates $20 billion with standards proposed
Barriers to the EMR
n Time - 15 years
n Failure to adopt the same standards
n Insurance companies with proprietary programs
n Hospitals with proprietary programs
n Different programs in the same institution
n ER different from the floors and the ICU
n Firewalls
n Drexel-Tenet
The Electronic Medical Record
The Electronic Medical RecordProposed Eligibility Guideposts
Current Status of the EMR
n Of 3000 acute care hospital surveyed only 1.5% have a comprehensive EMR
n 8 out of 24 functions defined as comprehensive
n Only 11% have a basic system
n Only 7.6% had a system for physicians and nursing records
n Most don’t talk to one another
n Main issue is economic
n NY Times 4/2/09, NEJM 3/25/09
Electronic Medial Records“Meaningful Use”
E Prescriptions
n July 2008 – physicians prescribing electronically for Medicare D will an incentive payment equal to 2% of all Medicare services they provide that year – will start in 2009 and phase out in 2014
n Starting in 2012 physicians not using e prescribing will see a cut in Medicare payments 1% increasing to a 2% cut by 2014.