Millions of aging American men have been given relief from the low energy, diminished sex drive, lax muscle tone and weight gain associated with low-T, thanks to treatment with testosterone. There’s only a couple of problems. First, low-T is not a disease — the term was invented by marketers at drugmaker AbbVie predecessor Abbott Laboratories and describes the natural decrease in testosterone associated with aging. Second, even when medically necessary to treat the very real endocrine disorder hypogonadism, these drugs increase men’s risk of cardiovascular disease by 50 percent or more, leading the Food and Drug Administration to establish new rules earlier this year that make off-label prescribing of testosterone for low-T a no-no.
“We’re spending money treating something we don’t even know is a condition, using drugs we don’t know help and might even hurt,” says Dartmouth’s Geisel School of Medicine professor Lisa Schwartz, noting that 25 percent of men treated for low-T never even have their testosterone checked. “That’s worse than a low-value spend; it’s negative value,” she says. Schwartz is part of a growing number of consumer advocates, providers, politicians, insurers and even drug companies that are pushing to better align the cost of pharmaceuticals with their value in treating real conditions.
Schwartz and other doctors believe one way to get prices down without hindering innovation is to stop pushing drugs so hard on the public. Since Abbott launched its “Is It Low-T?” campaign back in 2007, there has been a tenfold increase in testosterone prescriptions for products such as North Chicago, Illinois–based AbbVie’s AndroGel and Indianapolis-based Eli Lilly & Co.’s roll-on Axiron, making it a $2.1 billion industry last year (though it’s shrinking since the FDA’s warning of heart risks). To fight such marketing-driven demand, the American Medical Association voted last month to recommend a ban on direct-to-consumer advertising, saying the ads drive patients to push for new, expensive treatments despite the clinical effectiveness of cheaper alternatives. Although there is little chance of such a ban in this political climate, the FDA is studying whether DTC ad claims such as “No. 1 prescribed” and “new” are skewing patients’ decision making, given a dearth of objective information in the ads. “If you have a miracle [drug], you probably don’t have to advertise it that much,” Schwartz says.
Yet pharmaceuticals companies pumped $4.5 billion into ad campaigns last year, an 18 percent jump from 2013 and 30 percent higher than 2012, according to market research firm Kantar Media. (Spending on pharmaceuticals was up 13 percent in 2014, to $374 billion.) Valeant Pharmaceuticals International spent huge on its “Tackle It” ads for Jublia foot fungus treatment during last February’s Super Bowl and even a red carpet spot during September’s Emmy Awards postshow, and despite the ads being widely panned, they have helped launch Jublia to Valeant’s No. 2 seller. A clinically comparable product developed by Palo Alto, California–based Anacor Pharmaceuticals, Kerydin, was released three months later but has flopped in sales with a weaker marketing effort from Sandoz, the generic drug unit of Switzerland’s Novartis, which acquired the exclusive rights to market it in the U.S. Controversially, 44 percent of Valeant’s Jublia sales were through the company’s now-shuttered specialty pharmacy, Philidor Rx Services, which mainly dispensed its dermatology products and contributed 6.8 percent to Valeant’s third-quarter revenue.
The pharmaceuticals industry argues that DTC advertising provides scientifically valid information, motivates patients to visit their doctors to engage in important health care conversations and even leads to appropriate prescribing. “Beyond increasing patient awareness of disease (including undiagnosed conditions) and available treatments, DTC advertising has been found to increase awareness of the benefits and risks of new medicines and encourage appropriate use of medicines,” executive vice president of public affairs at PhRMA Josephine Martin wrote in a recent blog post.
The most expensive drugs driving runaway spending are not even advertised to consumers. They are so-called orphan drugs, used by very small patient populations, and complex specialty drugs that often require special handling and delivery mechanisms and treat chronic or life-threatening diseases such as hepatitis C, diabetes, cancer and autoimmune disorders. Some doctors argue that the prices of these drugs should be based on the increased quality of life given to patients by their use, because some of them offer marginal — or no — improvement over their competitors.
Writing in August’s JAMA Oncology, doctors and researchers told Lilly it should charge lower prices for its low-performing experimental lung cancer medicine, going so far as to outline how the company should calculate the price. The authors reasoned that, given weak study outcomes, the price of necitumumab should be no more than about $1,745 a month per patient, whereas most cancer drugs cost upwards of $10,000 a month. The previous month 118 oncology doctors had signed a letter claiming the problem was widespread, seeking grassroots support for new regulations to control spiraling cancer drug prices.
For their part, insurers are giving health care providers financial incentives to prescribe high-value specialty medicines only through initiatives like Anthem’s Cancer Care Quality Program, wherein doctors are rewarded with a payment for each month they stick to prescribing approved drug regimens. Whereas many high-cost drugs are on its list, Anthem says it only includes those that have clinically proven value, and the program has ballooned from three pathways to 18 in only a year.
Some manufacturers are negotiating outcomes-based contracts, such as Merck & Co. for diabetes drug Januvia and Novartis for heart drug Entresto. Kenilworth, New Jersey–based Merck offers payors a rebate if its drug does not perform as well as it did in clinical trials, and Novartis has them pay in two installments: one low payment up front and a larger payment down the line if the drug proves effective.
Express Scripts Holding Co., the U.S.’s largest pharmacy benefit manager, has rejected Novartis’s plan but developed one of its own for cancer medications. As a negotiator with manufacturers on behalf of insurers and employers, the St. Louis–based PBM seeks to pay for drugs approved for a variety of different cancer types, based on how well the treatments work in each indication. In JAMA last year, Peter Bach, director of Memorial Sloan Kettering’s Center for Health Policy and Outcomes, suggested that paying by indication could save patients money, positing that head and neck cancer patients should pay only $470 for Lilly’s Erbitux because it is far less effective in treating their disease than it is in colorectal cancer, for which it would deserve its $10,320 price tag.
From payor to provider to patient, the market is wising up and demanding better outcomes for its money. Take the reaction to Valeant’s Addyi, the female Viagra that the Laval, Quebec–based drugmaker acquired when it bought Sprout Pharmaceuticals for $1 billion in August. Valeant priced Addyi — which had been approved by the FDA two days before the deal was announced after a massive PR campaign — at a little under $800 a month, twice the cost of Viagra. As of mid-November only 227 women had filled prescriptions for the drug, not surprising, given its dangerous side effects and nominal effects over placebo. As IMS Health’s vice president of industry relations, Douglas Long, told listeners at an Obama administration forum on drug pricing November 20, “Ten years from now, if you can’t demonstrate outcomes, you will have no income.”
Despite Valeant’s recent failings, at least one major investor is holding out hope the drugmaker will deliver outcomes — and income — soon. Pershing Square Capital Management is going against the tide and doubling down its investment in the troubled company, increasing its stake to 9.9 percent on November 24, up from 5.7 percent on September 30. William Ackman’s New York–based hedge fund firm helped Valeant in its failed takeover bid for Allergan last year. Ackman made his investment in Valeant public in March of this year, and whereas this commitment initially paid off, contributing to Pershing Square’s positive returns through August, it may have jumped the shark: At the end of November, his fund was down more than 17 percent for the year, in large part because of the 64 percent drop in Valeant shares from their August highs. Time will tell if Valeant’s buy-low, sell-high strategy will pan out or leave the company panned, but for the moment it’s looking supremely unsexy.
This is the second in a series of five stories on the growing controversy swirling around the U.S. pharmaceuticals industry over drug prices. Also see “Drug Wars: The Battle to Put a Lid on Rising Drug Prices.”