Life Science Compliance Update

December 08, 2017

Drug Pricing Report Released by NASEM


The most recent example of drug marketing being caught in the crossfire of the drug pricing debate can be found in a report by the National Academies of Sciences, Engineering and Medicine, which included suppression of consumer marketing in a set of recommendations on how to lower the cost of prescription drugs for patients. One recommendation was that advertising costs should no longer be considered tax deductible as a business expense.

The report offers eight recommendations with twenty-seven different actions for their implementation (a sample of actions in each area appears below) to improve the affordability of prescription drugs without discouraging the development of new and more effective drugs for the future.

“Over the past several decades, the biopharmaceutical sector in the United States has been successful in developing and delivering effective drugs for improving health and fighting disease, and many medical conditions that were long deemed untreatable can now be cured or managed effectively,” said Norman Augustine, former chairman and CEO of Lockheed Martin Corp., former chairman of the National Academy of Engineering, and chair of the committee that conducted the study and wrote the report. “However, high and increasing costs of prescription drugs coupled with the broader trends in overall medical expenditures, which now equals 18 percent of the nation’s gross domestic product, are unsustainable to society as  whole. Our report seeks to address the market failures that currently permeate the biopharmaceutical sector, such as lack of competition due to distortions in the application of the patent protection process, the imbalance between the negotiating power of suppliers and purchasers, and the convoluted structure of the supply chain. Although changes within the current system will be demanding, they are likely to better serve the nation.”

One recommendation was that governmental purchasing power should be consolidated and applied to strengthen formulary design and improve drug valuation methods. The report recommends that to achieve that end, Congress modify current legislation to allow the United States Department of Health and Human Services (HHS) to directly negotiate prices with producers and suppliers of medicines, including acting on behalf of any relevant state agency that chooses to participate in the process. The report also recommends that Congress authorize HHS, related federal agencies, and associated private payers to expand flexibility in formulary design, including very selective exclusion of drugs, such as when less costly drugs provide similar clinical benefit.

As alluded to above, the report recommends that actions be taken with respect to marketing, including promoting the adoption of industry codes of conduct and discouraging direct-to-consumer advertising of prescription drugs as well as direct financial incentives for patients.

The report recommends,

Congress should disallow direct-to-consumer advertising of prescription drugs as a tax-deductible business expense. In addition, manufacturers and suppliers should adopt industry codes of conduct that reduce or eliminate direct-to-consumer advertising of prescription drugs and should increasingly support efforts to enhance public awareness of disease prevention and management. Clinicians, medical practices, and hospitals also should substantially tighten restrictions on pharmaceutical companies’ direct visits to clinicians, the acceptance and use of free drug samples, special payments, and other inducements paid by biopharmaceutical companies.

According to the New York Times, the “report is significant for several reasons,” including that a “respected national organization” has given a “searing critique of the way drugs are bought and sold.”

Two members of the panel that created the report filed dissents, including Dr. Michael Rosenblatt, who opined, “Allowing all government health plans to negotiate as a single block would establish a near monopoly” and could have a “devastating effect on long-term, high-risk investment” in drug research and development.”

July 11, 2016

Industry Expresses Concerns About FDA DTC Study

AbbVie, Eli Lilly, and Merck are all raising questions about the Food and Drug Administration's (FDA) plan to investigate the impact on consumer perceptions of prescription drugs when efficacy claims are included in advertisements. The Office of Prescription Drug Promotion (OPDP) conducted a study of direct-to-consumer (DTC) print advertising of drugs in 2015. OPDP plans to continue grappling with a better understanding of how consumers make choices and whether or not they really focus on efficacy claims or not.

The study, along with several others, follows the introduction of a bill by Representative Rosa DeLauro that would place a three-year moratorium on DTC ads of newly approved prescription drugs to fight rising drug prices and protect consumers from misleading information.


Prior research has found that marketing cues can have an influence on perceptions of drug quality and that patients and consumers may rely on those cues in the absence of quality information.

According to the FDA,

The objective quality of prescription drugs is not easily obtained from promotional claims in direct-to-consumer (DTC) ads; thus consumers may rely upon extrinsic cues to inform their decisions. Market claims such as '#1 Prescribed' and 'New' may act as extrinsic cues about the product's quality, independent of the product's intrinsic characteristics. Prior research has found that market leadership claims can affect consumer beliefs about product efficacy, as well as their beliefs about doctors' judgments about product efficacy.

FDA Study Plans

OPDP will run a main study, along with a follow-up, that will analyze consumer responses to fictitious prescription drug ads for a diabetic neuropathy treatment. There are two variables of interest to OPDP: the type of market claim (i.e., "#1 Prescribed," "New," etc.) FDA notes that the efficacy information will be in the form of realistic quantitative information (think, "46 percent of patients felt their nerve pain reduced by at least half, compared to baseline").

In the follow-up study, participants will complete a fifteen-minute paired choice experiment and will be asked to choose between two hypothetical drugs based on print advertisements, one of which includes a market claim from the Main Study. Participants will be provided with 48 sets of choices, with varying levels of efficacy information and market claims, and will be asked which drug they prefer based on them.

Industry Reaction and Comments

AbbVie raised concerns with questions in the study being biased by attitudes toward advertising in general that "may go well beyond the pharmaceutical ad" and that ads that present numeric efficacy claims and safety information may be susceptible to interpretation by participants.

Eli Lilly, on the other hand, has concerns with one of the research objectives for the main study, believing that it "suggests that the study will measure perceptions of the doctors' acceptance of the drug by respondents. Since respondents will only be seeing a print ad and not interacting with a doctor, we believe the research setting will be too artificial to gain meaningful insights into this topic."

Merck takes issue with several aspects of the study and would like for the FDA to "focus their efforts and research first on improving the health literacy of approved patient labeling and then on DTC print advertising. In addition, FDA should consider exploring the inclusion of benefit information in patient labeling, which may help improve consumer understanding and comprehension of patient labeling." Merck further suggests that for the follow-up study, the FDA reduce the number of trials for respondents across health literacy levels, as respondent fatigue can occur. Respondent fatigue is concerning because it can result in a reduced focus and unreliable responses.

The FDA somewhat responded to these concerns, noting that prior research has shown that consumers can actually reach numeric judgments about efficacy and risk despite the fact that no numeric information has been presented in an ad and that the FDA worked with an expert reviewer at OPDP to "produce efficacy claims that are realistic for this drug class."

The FDA agreed with Merck's concerns about the follow-up study and respondent fatigue, noting that pretest data "may reveal that the experiment can be shortened without loss to validity."

March 16, 2016

Senate Introduces Bill Eliminating the Tax Deduction for DTC Advertising

Four Democrats have introduced a Senate companion bill to the House bill to ban nearly all direct-to-consumer (DTC) advertising. The Senate bill, "Protecting Americans from Drug Marketing Act," would prevent pharmaceutical companies from writing off the money that they spend on advertising and marketing as a tax deduction, as they currently can do.

The bill was introduced by Senators Al Franken, Sheldon Whitehouse, Sherrod Brown, and Tom Udall, and defines DTC as any advertisement "primarily targeted to the general public," specifically: print, radio, television, telephone communication systems, and social media.

Critics of DTC advertising often repeat the same messages, constantly reminding us that the United States and New Zealand are the only two countries that permit pharmaceutical companies to market directly to consumers.

Senator Franken's Viewpoint

Senator Franken, who had previously introduced this bill in 2009, argued that increased spending on advertising contributes to higher drug costs, since many ads feature newer and pricier medicines. Franken issued a statement, saying that drug makers are "trying to encourage Americans to buy the most expensive drugs, even when cheaper, equally effective drugs are on the market...This is just a common sense measure to help cut down health care costs."

In his statement, Senator Franken stated, "doctors and medical professionals are in the best position to provide information to patients, not drug company advertisers aiming to make a profit."

Senator Franken hopes that without the tax benefits provided through advertising, pharmaceutical companies will stop focusing on advertising, and instead turn their focus and resources to developing new drugs.

Senator Franken's argument follows the argument that the American Medical Association made back in November when they called for a ban on DTC advertising and promotion.

Analysis and Reaction

It has been mentioned that the four senators who introduced the bill would like to have it added to the health care reform legislation, possibly even offering it as an amendment when the full Senate considers the proposed bill. Such a move would put a previous "handshake deal" between pharmaceutical companies and the Obama administration and Senate Finance Committee leaders in jeopardy. That deal called for drugmakers to pick up an estimated $80 billion in health care costs in exchange for no further crackdowns on the industry.

John Kamp, executive director at the Coalition for Healthcare Communication, believes that laws "that ban truthful messages are a violation of the First Amendment and an insult to patients seeking information to enrich their discussions with their doctors and empower their medical decisions."

A spokeswoman for the Pharmaceutical Research and Manufacturers of America (PhRMA), stated that criticisms about DTC advertising "are being drive by the false notion that DTC plays a direct role in the cost of new medicines and ignores the positive impact of health care communications." She also enforced the idea that advertisements "provide scientifically accurate information to help patients better understand their health care and treatment options.

The bill was introduced on March 3, 2016, was read through twice, and has been referred to the Committee on Finance.


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