Industry check-up

A couple of weeks ago, during a hospital conference, I got a crash course in provider-industry relations from a doctor who spends serious amounts of time researching pharmaceutical companies’ influence on physician behavior.

He prefaced his talk by emphasizing that he doesn’t hate the pharmaceutical companies. I guess I’ll do the same.

All things considered, pharmaceutical companies know how to make their shareholders’ money, just like any other successful, publicly traded company. But the peculiarities of the marketplace – that drugs are inelastic products, that their potential for public health influence, good or bad, necessitates a regulatory body, that only a licensed group of providers can prescribe them, among others – have birthed businesses that, while startlingly good at turning a profit, aren’t as committed to innovation and research and development as you might believe.

Maximizing profits for shareholders doesn’t necessarily mean providing a better product – innovative drugs that have a real therapeutic effect with minimal side effects – at a market-determined price.

They can innovate. I certainly don’t doubt that. But they haven’t been coming up with more effective drugs, despite increased R&D expenditure.

In fact, many of the drugs approved by the FDA over the past several years have been me-too drugs, modified versions of drugs already on the market and, in some cases, advertised for different indications.

Consider Sarafem, Lilly’s drug marketed for premenstrual dysphoric disorder. It has the exact same contents as Prozac, but in different, more feminine colors (purple and pink).

The FDA only requires that a drug perform better than placebo – nothing, in other words – not better than the currently used treatment.

In other words, the best way to profit, big pharma has found thanks to a flawed regulatory system designed to encourage innovation, has less to do with innovation and much more to do with taking advantage of patent laws and marketing, especially directly to physicians.

Any close examination of a pharmaceutical company’s expenditure profile, despite what its press releases might say to the contrary, reveals spending skewed toward marketing and promotion, mostly in the form of drug detailing, which is direct promotion of drugs to physicians. That means drug reps in normal-speak.

They do it for a reason, too: It works. Numerous studies examining the determinants of physician prescribing behavior back this up. Physicians surveyed overwhelmingly believe that their colleagues are influenced by drug-company-sponsored conferences and they alone remain immune, for example.

On Thursday, two senators reintroduced a bill from last December, the Physician Payments Sunshine Act, designed to increase transparency in the relationships between physicians and manufacturers of drugs, medical devices and medical supplies.

The buzzword these opening days of the Obama administration seems to be transparency. And physician groups, academic medical centers, drug companies and manufacturers of medical devices and supplies seem to be jumping in on it as well.

I’m hoping increased transparency is merely the first step moving us toward a more common-sense drug and device regulatory apparatus.