Before its patent ran out, for example, the price of Schering-Plough's top-selling allergy pill, Claritin, was raised thirteen times over five years, for a cumulative increase of more than 50 percent—over four times the rate of general inflation. As a spokeswoman for one company explained, "Price increases are not uncommon in the industry and this allows us to be able to invest in R&D." In 2002, the average price of the fifty drugs most used by senior citizens was nearly $1,500 for a year's supply. (Pricing varies greatly, but this refers to what the companies call the average wholesale price, which is usually pretty close to what an individual without insurance pays at the pharmacy.)
Paying for prescription drugs is no longer a problem just for poor people. As the economy continues to struggle, health insurance is shrinking. Employers are requiring workers to pay more of the costs themselves, and many businesses are dropping health benefits altogether. Since prescription drug costs are rising so fast, payers are particularly eager to get out from under them by shifting costs to individuals. The result is that more people have to pay a greater fraction of their drug bills out of pocket. And that packs a wallop.
Many of them simply can't do it. They trade off drugs against home heating or food. Some people try to string out their drugs by taking them less often than prescribed, or sharing them with a spouse. Others, too embarrassed to admit that they can't afford to pay for drugs, leave their doctors' offices with prescriptions in hand but don't have them filled. Not only do these patients go without needed treatment but their doctors sometimes wrongly conclude that the drugs they prescribed haven't worked and prescribe yet others—thus compounding the problem.
The people hurting most are the elderly. When Medicare was enacted in 1965, people took far fewer prescription drugs and they were cheap. For that reason, no one thought it necessary to include an outpatient prescription drug benefit in the program. In those days, senior citizens could generally afford to buy whatever drugs they needed out of pocket.
Approximately half to two thirds of the elderly have supplementary insurance that partly covers prescription drugs, but that percentage is dropping as employers and insurers decide it is a losing proposition for them. At the end of 2003, Congress passed a Medicare reform bill that included a prescription drug benefit scheduled to begin in 2006, but as we shall see later, its benefits are inadequate to begin with and will quickly be overtaken by rising prices and administrative costs.
For obvious reasons, the elderly tend to need more prescription drugs than younger people—mainly for chronic conditions like arthritis, diabetes, high blood pressure, and elevated cholesterol. In 2001, nearly one in four seniors reported that they skipped doses or did not fill prescriptions because of the cost. (That fraction is almost certainly higher now.) Sadly, the frailest are the least likely to have supplementary insurance. At an average cost of $1,500 a year for each drug, someone without supplementary insurance who takes six different prescription drugs—and this is not rare—would have to spend $9,000 out of pocket. Not many among the old and frail have such deep pockets.
Furthermore, in one of the more perverse of the pharmaceutical industry's practices, prices are much higher for precisely the people who most need the drugs and can least afford them. The industry charges Medicare recipients without supplementary insurance much more than it does favored customers, such as large HMOs or the Veterans Affairs (VA) system. Because the latter buy in bulk, they can bargain for steep discounts or rebates. People without insurance have no bargaining power; and so they pay the highest prices.
In the past two years, we have started to see, for the first time, the beginnings of public resistance to rapacious pricing and other dubious practices of the pharmaceutical industry. It is mainly because of this resistance that drug companies are now blanketing us with public relations messages. And the magic words, repeated over and over like an incantation, are research, innovation, and American. Research. Innovation. American. It makes a great story.
But while the rhetoric is stirring, it has very little to do with reality. First, research and development (R&D) is a relatively small part of the budgets of the big drug companies—dwarfed by their vast expenditures on marketing and administration, and smaller even than profits. In fact, year after year, for over two decades, this industry has been far and away the most profitable in the United States. ... http://www.nybooks.com/articles/17244
Value of Direct to Consumer Advertising Oversold Study Finds, But Direct to Doctor Much More Effective http://hms.harvard.edu/public/news/ss0808/090108_soumerai.html
The basic question was simple: did use of these drugs increase faster in English-speaking regions after American DTCA campaigns began? ...
Sales for Zelnorm, however, did spike noticeably in English-speaking Canada as soon as the ad campaign began. While prescriptions for this drug increased by over 40 percent, this jump was relatively short-lived, and after a few years, prescription rates in both groups resumed identical patterns. A similar analysis of U.S. Medicaid prescriptions found a slightly higher, but similarly brief, jump in sales.
The researchers hypothesize that DTCA may not be as effective as other types of consumer advertising due to the unique complexity of the marketing/sales trajectory.
With a typical consumer product, an individual sees an ad and then can choose to simply go out and buy the item. “But pharmaceuticals aren’t typical consumer products,” says Soumerai. “A person needs to see an ad, get motivated by that ad, contact their doctor for an appointment, show up at the appointment, communicate both the condition and the drug to the doctor, convince the doctor that this drug is preferable to other alternatives, then actually go out and fill the prescription. This is a chain of events that can break at any point.” ...
One hundred years of marketing experience and recent studies indicate that face-to-face promotion of drugs to doctors by pharmaceutical representatives is far more effective than DTCA. ...