Anyone concerned about unnecessary healthcare spending—and what system leader or insurer isn't these days?—should pay close attention to the drug industry's campaign to win the right to promote the off-label use of prescription drugs.
The pharmaceutical industry took another step toward achieving that goal earlier this month when a federal judge in New York, citing First Amendment freedom-of-speech rights, ruled that the Food and Drug Administration could not prohibit “truthful” off-label marketing.
The ruling not only raises quality concerns—off-label prescribing means a drug hasn't been approved for that use—it threatens to undermine the rest of the system's cost-control efforts. The FDA plans to appeal.
Let's not mince words about what's going on here. The off-label marketing issue is just part of a broader industry strategy to restore drug sales that have evaporated over the past few years after the patents for a number of best-selling medicines expired. The only way they can achieve that goal is at the expense of patients and the rest of the system.
The strategy has at least three major tactics. First, drug firms are slapping exorbitant prices on the new drugs they bring to market. Second, they are pursuing major legislation in Congress to reduce the standards of evidence for new drug approvals. And third, the pharmaceutical industry wants fewer restrictions on marketing those drugs for indications for which they haven't yet been proven effective.
Most of the new medicines coming to market these days are aimed at relatively small patient populations. Even the most widely used cancer drug may be taken by 200,000 people a year. Lipitor at its peak had well over 10 million users annually.
To make up the revenue difference, drug companies are charging $10,000 a month and more for new drugs, and their price has nothing to do with what it took to develop them.
Sensing that the shopworn argument is losing steam, the industry now claims its prices reflect value as measured by health outcomes. But even if one accepts the calculations behind those claims (usually produced by industry-funded studies), it's important to remember that drug costs are being incurred now, while their value is measured in implied reductions in future expenditures on people who will be living longer and healthier lives.
Put another way, the industry's argument says drug companies should be paid now for the value of every minute of every day of healthier life gained through use of their drugs. Imagine what would happen to healthcare costs if surgeons starting making such arguments, not to mention the housekeeping staff that disinfects rooms to prevent hospital-acquired infections.
In any case, is it fair, not to mention ethical, for the drug industry to charge for every dollar of that value—assuming its studies are accurate?
If one follows their lead and looks at these drugs as investments—which value calculations imply since they are based on future returns on health—don't physicians and health system leaders have a responsibility to judge whether this is the best use of current resources? They do that with every other investment they make. What we need now are comparative cost-effectiveness studies to make those choices.
Here's an example. Let's say a company comes up with a new lung-cancer or skin-cancer drug. The company generates billions of dollars a year with its new pricing strategy. It extends life for months or years for some patients, and the company justifies the drug's price based on studies of those gains.
But what if we took those same billions and invested them in smoking-cessation products, free sunscreen or weight-loss programs? (Obesity is closely associated with greater cancer risk.) The future savings to the healthcare system could be greater. There are studies showing that, too.
If this were about a handful of new medicines, it wouldn't matter much. But nearly every drug emerging from the industry's pipeline is now using this pricing model.
The 21st Century Cures Act recently passed by the House, which lowers the bar for approving new drugs, aims to turn the new-drug approval spigot into a fire hose. Less-restrictive off-label marketing aims to make it easier for industry marketers to expand the sales of new drugs based on the flimsiest of evidence—a peer-reviewed study in the medical literature that has never been submitted to the FDA.
The National Coalition on Health Care has organized consumer groups, health systems, insurers and employers to push back on the rising cost of drugs. They have their work cut out for them. Right now, they are losing on every front.