Miltown and Valium were pharmaceuticals of the decade in the 1950s and 1970s, respectively. In the hyperkinetic 1990s, a pharmaceutical for the season seems a more appropriate title.
But this being the '90s, everything is a little more complicated. Consumer awareness about drugs is far higher, but managed care is forcing a greater concern over costs. So there's a great deal of head-scratching as to who will pay the ever-ballooning bill for all these designer drugs.
The pharmaceutical darling for this spring is obvious: Pfizer's $10 blue triangles. Although Viagra's role in treating male impotence indicates it should have a limited demand, its purpose plays right into the hands of a sexually preoccupied American culture. As of May 1, five weeks into what must be one of the most successful drug launches ever, physicians had written nearly 270,000 prescriptions for Viagra and refilled more than 16,000 others, according to IMS Health, a Plymouth Meeting, Pa.-based pharmaceutical industry tracking company.
Meanwhile, Viagra is being sold on the black market in foreign countries and potent men take it too-in some cases despite dangerous heart conditions-to increase their performance.
While the rest of the country might chuckle at such hyperbole, health plans can only scream. For them, Viagra amounts to a run on the bank. Some are making unpopular decisions as a result.
Kaiser Permanente, the country's largest HMO, was among the first to take such a step. It announced on June 19 that it would not cover the drug, citing estimated annual costs of $100 million. Kaiser spent only $59 million last year on anti-viral drugs, including the $15,000 to $18,000 per year it costs to provide protease inhibitors for a single AIDS patient.
"We could, of course, build the cost of Viagra into everyone's premium, but is that the right thing to do?" asks Francis Crosson, M.D., executive director of the Permanente Federation, Kaiser's physician branch.
Some consumer advocates have condemned the decision. Not surprisingly, the most vocal HMO critic, Santa Monica, Calif.-based Consumers for Quality Care, issued a harsh statement almost immediately after the Kaiser announcement.
"Erections will come and go, but whether HMOs live up to their coverage obligations is the enduring issue Viagra raises," says Consumers for Quality Care director Jamie Court. Court promises that Kaiser's decision "will be an issue much the same way mental health (coverage) became an issue when insurers began cutting back on that."
How is it drug costs have become so prohibitive that health plans are moved to selectively exclude coverage? One of the biggest factors, observers agree, is that pharmaceutical manufacturers have become far more aggressive in marketing to consumers. Television commercials for such costly prescription drugs as Claritin and Prilosec have become nearly as prevalent as those for Nike and Burger King.
Myron Holubiak, general manager of the Plymouth Group, a Somerset, N.J.-based consulting wing of IMS Health, estimates that drugmakers spent a whopping $1 billion in direct-to-consumer advertising last year.
"There's been a fairly impressive investment on the consumer, and DTC ads have convinced people to see their physicians," he says.
Holubiak notes that Lamisil, a toenail fungus drug, is a perfect example of marketing success: "In the past, there was no reasonable therapy; you'd just pull out the toenail, and no one wanted to deal with it," he says. "Now, the patient goes to the doctor and says, `I saw an ad, and it looks like there's something that can clear my fungus.' "
Indeed, Woodland Hills, Calif.-based HMO Health Net has seen its costs for topical toenail fungus medicine skyrocket virtually overnight from nothing to $7 million a year. The sum represents 2% of its $350 million-a-year pharmaceutical budget, according to William Drake, Health Net's director of pharmacy.
"The ads are killing us. We now spend as much on toenail fungus as we do on migraine medications, and migraine is a major productivity issue for employers and members," Drake says.
In a way, HMOs such as Health Net appear as much a victim of their own policies as they are of the pharmaceutical industry. A capitated environment pressures physicians to spend less time with patients in order to guarantee cash flow, leaving little time for discussions on drugs, a fairly liberal benefit among most plans. For years Health Net had a mere $5 co-payment for prescriptions. Its largest employer group's enrollees pay just $3, and that group's drug costs are 20% higher than average, according to Drake.
"Patients are not educated about treatment modalities, and they come in with a demand for the physician. The physician has a very busy schedule, and it's difficult to maintain a relationship with a patient. It's easier to prescribe than challenge therapies," Drake says.
The result: Rising pharmaceutical costs have been affecting earnings at Health Net's parent company, Health Systems International, for the past couple of years.
However, Health Net is beginning to take back the initiative. Citing studies that show prolonged use of the anti-heartburn drug Prilosec can cause cancer in laboratory animals, it is requiring that doctors re-evaluate each patient's use of the drug every 12 weeks. Some 75% of Health Net's annual $28 million expenditures on gastrointestinal drugs goes for Prilosec, and Drake believes the new protocols can save up to $6 million a year.
Observers anticipate that health plan enrollees will start paying more out of their pockets for nongeneric drugs-a compromise between limiting choice and costs.
"HMOs are having a difficult time politically now, and the issue of choice is becoming so important that you're seeing a lot of plans offering three-tier copayments: one for generics, one for branded products and a third for drugs out of the formulary," Holubiak says.