Monday, December 27, 2004

Pfizer exec tells all! and Fraud on the FDA?

Today we found a remarkable story in Sunday's Los Angeles Times (link may require free registration), written by Peter Rost, VP of marketing at Pfizer. We urge you to read the entire piece, but we'd like to point out a few items that caught our eye. For instance:

"A 2001 study by the consumer advocacy group Public Citizen found that drug companies' favorite customers paid just a little over half the retail price. This leaves the 67 million Americans without insurance to pay cash, with no rebates, at double the prices paid by the most-favored customer"

Most drug company execs would piss on any report created by Public Citizen, like this one that discusses the real cost of drug development. We find Public Citizen's quest to have every objectionable drug banned to be irritating, because they refuse to acknowledge the real-world benefits that some patients have with newer drugs like Celebrex, after the patient has failed older therapies that Public Citizen approves of. While aggregate efficacy is compelling, and older therapies should always be tried first, there are always outliers that have fantastic responses to new therapies, and their health should be considered, too.

But we digress. To find a Pfizer exec quoting Public Citizen is remarkable. To read him also dissing Pharma indigent programs, like he does two paragraphs later, is stunning: "If they really worked, the Kaiser Family Foundation wouldn't have reported that 15% of uninsured children and 28% of uninsured adults had gone without prescription medication in 2000 because of cost, and 87% of uninsured individuals with serious health problems reported trouble obtaining medication." Wow.

So, how far off the reservation is Mr. Rost? At Pharmablogger, we have no clue. We assume that marketing execs (we don't know any personally) come from the ranks of sales reps, and they generally have drowned in the Pharma Kool-Aid. Yet, we know several high-ranking drug development types who believe that dramatically lower prices will bring about much greater utilization, since there are so many under-medicated patients out there. Hard to believe, since Grandma seems to be popping her pills all day? It's true, though. So many people with untreated hypertension and hyperlipidemia, for example. That's why firms continue to get into these markets with me-too drugs - their advertising is designed not only to take away market share from competitors, but to get more people to have themselves examined for these conditions, and expand the market for everyone.

We would like to examine the issue of Fraud on the FDA in this space today, since we were prompted by an article on tort reform in the Philadelphia Inquirer. The article details the attempt to create tort immunity for Pharma firms whose drugs have passed FDA approval, and have met other "FDA standards." A Merck spokesman states that they support the proposal.

"Proponents of the bill and the pharmaceutical industry have contended that manufacturers should not have to pay punitive damages for an FDA-approved product unless it can be shown that they misled the agency or failed to follow FDA strictures."

What's the problem here? Several. This bill assumes a competent FDA, for example. We generally approve of the job the FDA does, but it is incredibly understaffed, particularly in the post-marketing surveillance area. So if the FDA fails to act on a drug that has several safety "signals" - warning signs, why should the manufacturer get a free pass for this? There isn't any comparable protection in other industries, as far as we can tell. The Consumer Product Safety Commission issues a number of recalls every year, for example. So any product that is not recalled should be held unaccountable for design flaws? Nonsense.

This also assumes that the Pharmas are fully diligent in reporting to the FDA all safety signals that it finds. Assuming that they're looking. In fact, this bill would encourage them to not look for safety problems in their data.

That leads us to Fraud on the FDA. This is a claim that was asserted in a seminal medical device case called Buckman Co. v. Plaintiffs' Legal Committee, 121 S.Ct. 1012, 148 L.Ed.2d 854, (U.S. 2001). The Supreme Court rejected the idea that there is a private action possible against companies regulated by the FDA (including device firms) for state-law fraud on the FDA cases.

"The conflict here stems from the fact that the federal statutory scheme amply empowers the FDA to punish and deter fraud against the Agency, and the Agency uses this authority to achieve a delicate balance of statutory objectives that can be skewed by allowing state-law fraud-on-the-FDA claims. "

So, you can't sue Merck on a claim that states that they defrauded the FDA by failing to provide timely safety data for Vioxx, for example. Perhaps Merck isn't the best example. How about the makers of Phen-fen, who actually stuffed safety reports in desk drawers concerning lung and heart problems? If the FDA fails to act against the manufacturers, and then this "tort reform" is passed, what kind of claim is left for those who have been harmed? Remember, the FDA has a "delicate balance of statutory objectives," only one of which is patient safety. The others are more like industry promotion. These can and do conflict, which was at the heart of David Graham's testimony.

There is an attempt to get around the Buckman ruling, by stating that a drug is not really approved if there was fraud in the approval process, thereby abrogating the FDA's right to punish fraud, since a drug or device should never have been approved to begin with. This is the Gilligan case in the Sixth District, but we are not optimistic. The same rationale in Buckman could be used here as well to shoot down this theory.

Lastly, we have a stark reminder of what we posted in the inaugural edition of Pharmablogger - that Pharma is first and foremost a business, with a fiduciary responsibility to maximize return to investors. Tom McKillop of AstraZeneca is learning that right now.


Anonymous said...

In the U.S., it is illegal to give private customers bigger discounts than the government (COBRA). So, pharma companies could not reduce prices for uninsured customers. The drug makers lobbied for a break, so they were able to launch Together Rx and other programs to give discounts. What good is it to a drug maker not to supply someone who cannot pay the full price for medicines? None at all. I know you're a lawyer, not an economist, but read Patricia Danzon of Wharton Business School on price differentiation in a free market (Ramsay pricing equilibrium). Virtually all the problems in this industry are caused by the fact that, even in the U.S., the government dictates how it conducts its affairs.

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