RRRERSNOSACL
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`PHARMACEUTICAL ECONOMICS
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`AND POLICY
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`Second Edition
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`Stuart O. Schweitzer
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`OXFORD
`UNIVERSITY PRESS
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`2007
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`Mylan v. Regeneron
`IPR2021-00881
`U.S. Pat. 9,254,338
`Exhibit 2260
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`Exhibit 2260
`Page 01 of 20
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`

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`on acid-free paper
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`OXFORD
`UNIVERSITY PRESS
`
`Oxford University Press, Inc., publishes worksthat further
`Oxford University's objective of excellence
`in research, scholarship, and education.
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`
`Copyright © 2007 by Oxford University Press.
`
`Published by Oxford University Press, Inc.
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`Oxfordis a registered trademark of Oxford University Press
`All rights reserved. No part ofthis publication may be reproduced,
`stored in a retrieval system,or transmitted, in any form or by any means,
`electronic, mechanical, photocopying. recording, or otherwise,
`without the prior permission of Oxford University Press.
`
`Library of Congress Cataloging-in-Publication Data
`Schweitzer, Stuart O.
`Pharmaceutical economicsand policy / Stuart O. Schweitzer—2nded.
`p.; cm.
`Includes bibliographical references and index.
`ISBN 978-0-19-530095-6
`
`1. Pharmaceutical industry—United States.
`3. Pharmaceutical industry.
`{DNLM: 1. Economics, Pharmaceutical—UnitedStates.
`3. Public Policy-——United States. QV 736 S413p 2006]
`HD9666.5.S385 2006
`338.4'761510973—de22
`
`2006003075
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`2. Pharmaceutical policy—UnitedStates.
`
`2. Drug Industry—UnitedStates.
`I. Title.
`
`98765432
`Printed in the United States of America
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`Exhibit 2260
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`Page 02 of 20
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`Exhibit 2260
`Page 02 of 20
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`

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` Contents
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`Introduction
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`The Supply of Pharmaceuticals
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`The Demand for Pharmaceuticals
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`Pharmaceutical Prices
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`The Multinational Pharmaceutical Industry
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`International Price Comparisons
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`Timing ofPharmaceutical Approvals
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`Government Intervention in the Pharmaceutical Sector
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`PartI. The Industry
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`The Pharmaceutical Industry
`Pharmaceutical Research and Development
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`The Competitive Structure of the Pharmaceutical Industry
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`Pharmaceutical Research and Development and Prices
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`The Pharmaceutical Research Process
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`Product Liability
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`Conclusions
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`The Biotechnology Industry
`Background
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`Product Development in the Biotechnology Industry
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`The Natural History ofBiotechnology Firms
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`Case Studies of Alliances
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`Regulation
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`Case Studies of Biotechnology Firm Growth
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`Conclusions
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`eatinWw
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`Exhibit 2260
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`Page 03 of 20
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`Exhibit 2260
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`3 Other Firms in the Pharmaceutical Industry
`Generic Drugs and Their Manufacturers
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`Outsourcing Firms
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`Conclusions
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`4 Marketing Pharmaceuticals
`Size of Marketing Effort
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`Does It Work?
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`Types of Promotion
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`Disguising Marketing as Research
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`marReting in aaaofManaged Care
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`bene}
`anagers
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`Direct-to-Consumer Advertising
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`Over-the-Counter Drugs
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`Joint Marketing
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`Disease Management
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`Roles of the U.S. Food and Drug Administration in Marketing
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`False and Misleading Claims
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`Part II. The Consumer
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`5
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`The Demand for Pharmaceuticals
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`How Is Demand Determined?
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`The Changing Structure of the Pharmaceutical Market
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`Conclusions
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`Part IE. The Market
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`PharmaceuticalPrices
`The Problem of Pharmaceutical Prices
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`Pharmaceutical Prices over Time
`Measuring Drug Prices
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`How Are Drug Prices Determined?
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`Cost Structure of Pharmaceutical Firms
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`Is the Pharmaceutical Industry Monopolistic?
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`How Drug Quality Influences Price
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`The Worldwide Market for Pharmaceuticals
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`Geographic Patterns of Pharmaceutical Production and Sales
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`Pharmaceutical Research and Development: An International View
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`Does Government Drug Price Setting Influence R&D?
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`Worldwide Manufacturing and Sales
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`Access to Appropriate Drugs in Developing Countries
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`Effect af the World Trade Organization Treaty
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`Pricing Pharmaceuticals in a World Environment
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`Why Do Drug Prices Vary Across Country?
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`Comparisons of International Drug Prices
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`How Do We Measure Drug Prices across Countries?
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`Exhibit 2260
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`Page 04 of 20
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`Why Drug Price Differences Persist
`Policy Implications
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`9
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`The Timing of Drug Approvals in the United States and Abroad
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`The Timing of Pharmaceutical Approvals and Heaith Policy
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`The Drug Approval Process in the United States
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`Recent Initiatives to Expedite Drug Approvals
`Is There a U.S. Drug Lag?
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`Part IV.
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`Intervention in the Pharmaceutical Market:
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`Public and Private
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`Pharmaceutical Regulation and Cost Containment
`by the Public Sector
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`Evolution of the U.S: Food and Drug Administration
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`Medicaid
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`State Cost-Containment Efforts
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`Medicare
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`Regulation by the Private Sector
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`Cost-Containment Mechanisms
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`Cost Containment in Managed Care
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`Pharmaceutical Regulation in Europe
`The Pharmaceutical Industry in Europe
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`History of Regulation in Europe
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`Move Toward a Single Marker
`Structure and Role of the European Medicines Evaluation Agency
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`Drug Review under the European Medicines Evaluation Agency
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`Current Regulatory Structure
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`The Centralized Procedure for Marketing Authorization
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`The Mutual-Recognition Procedure
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`Performance of Europe's Centralized Drug Approval
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`Rules on Labeling of Medicinal Products
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`Advertising Regulations
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`Pharmacovigilance
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`Generic Drugs
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`Patent Protection
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`Patent Law
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`Patentability and Patent Categories
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`How Are Patents Obtained?
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`What Protection Does a Patent Confer?
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`Duration of Patent Protection
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`Infringement of Patents
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`International Patent Treaties
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`Patent Procedures under International Conventions
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`Shortcomingsof the Patent System
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`Patents and Societal Choice
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`Social Benefits of the Patent System
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`Exhibit 2260
`Page 04 of 20
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`PHAR
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`MAC UTICAL ECONOMICS AN D POLIC
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`xiv Contents
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`14 Evaluating New Drugs
`Optimizing Production of Health
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`Cost-Benefit Analysis
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`Cost—Effectiveness Analysis
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`Cost-Utility Analysis
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`Policy Applications
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`Interpretation and Misinterpretation ofCost-Effectiveness Studies
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`15 Complementary and Alternative Medicines
`Who Uses Complementary and Alternative Medicines?
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`Manufacturers and Distributors of Complementary and Alternative Medicines
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`Dietary Supplements
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`Food Additives
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`Medical Foods
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`Concluding Remarks on Complementary and Alternative Medicines
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`Pharmaceuticals and Health Policy: A Look Ahead
`Structure of the Pharmaceutical Industry
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`Health System Reform
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`Drug Prices
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`Drug Imports
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`Patent Protection
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`Drug Approvals
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`Managed Care and Restricted Access to Pharmaceuticals
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`The U.S. Food and Drug Administration
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`Genetically Targeted Drugs
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`Conclusions
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`Index
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`Exhibit 2260
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`Page 05 of 20
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`Exhibit 2260
`Page 05 of 20
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`

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`
`Marketing Pharmaceuticals
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`he pharmaceutical industry produces a great number of new products
`each year, andit is crucial that prescribers be informed aboutthe in-
`novations on a continuing basis. This activity is marketing. According to a report
`by the Pharmaceutical Research and Manufacturers of America (PhRMA)(2002a,
`2002b), formerly the Pharmaceutical Manufacturers Association, pharmaceutical
`companies employed nearly 225,000 people in 2000, with 39% of these employees
`being involved in marketing, with 22% in research and development (R&D), and
`26% in production. The size of the marketing effort in terms of expendituresis seen
`in Figures 4.1, 4.2, and 4.3, showing the sales, R&D expenses, and marketing and
`administrative expenses for 2001, 2002, and 2003 for three of the largest U.S. phar-
`maceutical manufacturers, Johnson & Johnson, Pfizer, and Eli Lilly, respectively.
`While the R&D expenses varied between 11% and 15% of annual sales for these
`firms, marketing and promotional expenses ranged from 21% to 40% ofannual sales.
`Marketingis critical for the success of any firm. The Tagamet-Zantacbattles in
`the 1980s underscoreits importance. Tagamet, the first H2-blocking anti-ulcer agent,
`was introduced in the United States in 1977. Glaxo’s version of an H2-blocking
`drug, Zantac, was released in 1981. While Zantac had fewerside effects than
`Tagametand its dosing regimen was more convenient,its real advance over Tagamet
`was Glaxo’s marketing strategy. Rather than relying entirely on its own salesforce,
`Glaxo contracted with sales people from Hoffmann—La Roche to promote Zantac
`worldwide. Despite a 4-year entry lag and a price that was 50% higher than
`Tagamet’s, Zantac sales increased dramatically, and in 1990, Zantac sales world-
`wide totaled $2.4 billion, compared to Tagamet’s $1.2 billion (Fortune 1991).
`Pharmaceutical marketing takes six major forms: sales representation (“detailing”),
`
`82
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`Exhibit 2260
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`Page 06 of 20
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`& Marketing and Administrative Expenses
`i Cost of Sales
`CO Research and Development Expenses
`Figure 4.1. Johnson & Johnson and subsidiaries sales, and R&D and marketing expendi-
`tures, 2001-2003. Adapted from Johnson & Johnsonand subsidiaries, Annual Report (2003).
`
`
`
`@ Marketing and Administrative Expenses
`@ Cost of Sales
`C0 Research and Development Expenses
`Figure 4.2. Pfizer Inc. and subsidiary companies sales, and R&D and marketing expendi-
`tures, 2001-2003. Adapted from Pfizer Inc. Annual Report (2003).
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`R23
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`2001
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`2002
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`2003
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`$inBillions
`$inBillions
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`Exhibit 2260
`Page 06 of 20
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`$inBillions
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`84 The Industry
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`2001
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`2002
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`2003
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`Marketing Pharmaceuticals 85
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`restrict physician access to information and have becomeintensely debated. At the
`endofthis chapter we will discuss the FDA’s activities and some of the controver-
`sies surroundingthis role.
`
`Size of the Marketing Effort
`
`According to the National Association of Chain Drug Stores, nearly 3.14 billion
`prescriptions were dispensed in the United States in 2002—nearly 11 for every man,
`woman, and child in the country. These prescriptions are manufactured by some
`1300 manufacturers worldwide. Eventually, they are prescribed by 850,000 active
`physicians and dentists. But before they can be dispensed by the 208,000 pharma-
`cists working in 65,000 pharmacies, they pass through 100 drug wholesalers. They
`are paid for either by patients or by 1900 third-party payers (U.S. Department of
`Commerce, 1990; National Wholesale Druggists Association 1992; Freid et al.
`2003). How can manufacturers notify all of these intermediaries of their products?
`The answeris marketing. The need is even more acute becauseofthe rapidintro-
`duction of new products. Marketing is an essential tool by which producers can
`inform those whoselect drugs on behalf of patients ofall the products that are
`available.
`It is estimated that in 2003 the U.S. industry spent $25 billion on drug promo-
`tion, which included direct-to-consumer (DTC)advertising, retail value of samples,
`physician office promotion, hospital promotion, and journal advertising (PhRMA
`2005). Of this number, $3 billion was spent on DTC advertising while the retail
`value of samples was $16 billion.
`
`Does It Work?
`
`The purpose of advertising is to affect doctors’ prescribing habits in ways favor-
`able to the manufacturers—andit works (Chew et al. 2000). Over 30 years ago the
`strategy was put succinctly in an advertising manual, as follows:
`
`Medical men are subject to the same kindsofstress, the same emotional influences
`that affect the laymen. Physicians have,as part oftheir self-image, a determined feeling
`thattheyare rationalandlogical, particularly in their choice of pharmaceuticals. The
`advertiser mustappealto this rationalself-image, and at the same time makea deeper
`appealto the emotional factors whichreally influence sales. (Smith 1968)
`
`Therole of marketing in providing information to physicians has been studied
`extensively for many years. Many studies have been conducted to determine what
`impact the different types of promotion have on physicians’ behavior and their at-
`titudes toward the pharmaceutical industry’s marketing efforts. It has been found
`that 46% of physicians considered information provided by pharmaceutical sales
`representatives moderately to very importantin influencing their prescribing be-
`havior, and 32% of resident physicians reported they changed their behavior on
`the basis of this information (Ziegler et al. 1995). Cleary (1992) has described the
`
`C Marketing and Administrative Expenses
`@ Costof Sales
`(] Research and Development Expenses
`Figure 4.3. Eli Lilly & Co. and subsidiaries sales, and R&D and marketing expenditures,
`2001-2003. Adapted from Eli Lilly & Co., Annual Report (2003).
`
`direct mail, samples provided to physicians (“sampling”), medical journal adver-
`tising, sponsorship ofcontinuing medical education, and public media advertising.
`In an era ofcost constraints, marketing assumes an increasingly importantrole,
`as companiesseek to differentiate themselves from their competitors and create
`brand namesthatcan be exploited in the newly emerging markets of managed care
`and over-the-counter (OTC) drugs. Traditionally, drug manufacturers have promoted
`their products with advertising aimedat physiciansvia direct mail, detailsales forces,
`and scientific symposia. Growing competitionin the pharmaceuticalindustry and
`a shift in the locusofproductselection from individual physicians to managed care
`organizations haveled to new forms ofpromotionalactivities aimednotonly at the
`physiciansbut also at consumers, hospitals, and, increasingly, third-party payers,
`all of whom now influence drug purchases. The new promotionalactivities include
`giving press conferences, sponsoring mediatours, encouraging media coverage of
`scientific symposia, issuing video newsreleases, sponsoring single-issue publica-
`tions, and discussing drug development with the investment community, along with
`advertising aimed directly at the consumer(Kessler and Pines 1990). Another new
`approach is pharmaceutical manufacturerparticipation in developing disease man-
`agementprotocols for managed-care providers.
`The Food and Drug Administration’s (FDA) oversight and regulatory authority
`encompassevery aspectofthese activities by U.S. pharmaceutical firms. The FDA
`has expandedits role beyond ensuring the safety and efficacy of drugs into setting
`standards for drug advertising and marketing. Many ofthe agency’s regulations
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`Exhibit 2260
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`Exhibit 2260
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`86 The Industry
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`importance of pharmaceutical marketing efforts in prescribing patternsofantibiotics,
`and Girard (1992), Lichstein et al. (1992), and Bowman (1994) have all noted the
`importanceof interactions between drugsales representatives and advertisements
`in informing physicians-in-training about new drugs.
`The effect of pharmaceutical marketing on physician prescribing is not just a
`U.S. phenomenon.Ananalysis of the Canadian pharmaceutical market, published
`in 1981, showedthat the mostsignificant determinant of a drug’s sales wasthe
`amountof promotion it had. In other words, sales of drugs are influenced by the
`advertising allocated to it (Pazderka and Rao 1981). Lexchin (1994) has noted how
`difficult it has been to control Canadian pharmaceutical marketingactivities. Scott
`and Ferner (1994) have documentedthe strategy of pharmaceutical firms in influ-
`encing prescribing patternsof British physicians, and Zarate and Llosa (1995) have
`described the influence of marketing on Latin American physicians.
`Anunderstandingof physicians’ attitudes toward drug promotion and how those
`attitudes shape their prescribing behavior is crucial for firms. Steinman and col-
`leagues (2001) studied the attitudes and practices of medicine house-staff toward
`promotions.In this study, first- and second-year internal-medicine residents were
`surveyed to identify and measuretheir attitudes toward industry gifts. The authors
`found that residents considered inexpensive gifts to be more appropriate than ex-
`pensive ones. Additionally, the price of the gift was more of a determinantof ap-
`propriatenessthan the educationalvalue ofthe gift. Sixty-one percentofthe residents
`believed that their behavior wasnotinfluenced by the gifts and promotions. How-
`ever, only 16% felt this was true of other physicians. This study underscores the
`need for better rules and policies for interactions between residents and the phar-
`maceutical industry.
`A correlate of knowledge about drugsis the age of the physician. The longer
`one has been removed from one’s academic training, the greater the influence of
`commercial (as opposed to scholarly) sources of information. Glickmanet al. (1994)
`related physicians’ knowledgeof the costliness of drugs and foundthat “younger
`physicianswere morelikely than older physicians to make correct[price] estimates.”
`The general agreementthat advertising affects physicians’ prescribing habits raises
`concernsaboutits possible detrimental effects for medical decision making. Wolfe
`(1996)cites former FDA Commissioner David Kessler, who stated that “enormous
`potential exists for misleading advertisements to reach the physician and influence
`prescribing decisions, [which] can result in significant adverse consequences.” Ac-
`cording to Chewetal. (2000), while advertising makes physicians more awareofthe
`products, it also promotes poor prescribing. For example, aggressive promotion has
`been foundto be associated with inappropriate prescribing of antidepressants to people
`whoare notclinically depressed. Josefson (1998) recounts Eli Lilly’s promotion of
`its new antipsychotic drug, Zyprexa (danzapine). Its marketing efforts included of-
`fering university scholarships to schizophrenic patients who switched to this drug.
`Thesetactics were successful. Lilly grossed $550 million in the drug’s first year of
`sales. However, it was noted that Lilly was targeting a population that did not have
`the proper judgment and were vulnerable to the enticements offered. Prescriptions
`for antidepressant drugs reached record highs, increasing from 32.7 million to
`45.6 million prescriptions for mental health illness from 1984 to 1994. As a result of
`
`Exhibit 2260
`
`Page 08 of 20
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`this marketing, psychiatrists believe that as much as 80% ofantidepressantprescrip-
`tions were unnecessary and inappropriate (Josefson 1998).
`
`Marketing Pharmaceuticals 87
`
`Types of Promotion
`
`There are six types ofdrug promotion. The four direct categories are detailing (sales
`calls by pharmaceutical companyrepresentatives to physician offices), direct mail-
`ings to physicians, free drug samples, and journal advertising. The two indirect
`methods are drug company-sponsored continuing medical education programs and
`media advertising to the general population.
`
`Detailing
`
`Pharmaceutical sales representatives,called “detailers,” have traditionally been an
`important way for pharmaceutical manufacturers to inform physicians about new
`products, answer questions, and maintain goodwill. In the United States, more than
`26% of drug company promotional budgets, or about $7.3 billion, was spent on
`detailing in 2004 (Kaiser Family Foundation 2005). The numberofdetailers has
`increased rapidly in the last 20 years. Currently there are 90,000 industry sales rep-
`resentatives and about 800,000 physicians in the United States, resulting in a ratio
`of | sales representative for every 9 doctors (Saul 2006). These ratios are not so
`easily interpreted, however, because sales representatives have different missions
`andareasofjurisdiction,so it is not necessarily the case that physicians are repeat-
`edly being harangued by marketing representatives making the same sales argu-
`ments. Rather, the numberof sales representatives reflects the rate at which new
`pharmaceutical products enter the market place. Not only is the total number of
`new drugsintroduced eachyear large, but the number of new products introduced
`within a particular medical specialty is also significant. Medical decision makers
`need information about these new products and, for the most part, only the phar-
`maceutical industry has stepped into this information vacuum. Although medical
`institutions have policies regulating interactions with pharmaceutical representa-
`tives (Steinman et al. 2001), standards vary widely acrossinstitutions in terms of
`the access that marketing representatives have to physicians. While the FDA regu-
`lates the content of printed drug promotional material for accuracy and validity,
`the contentof face-to-face detailer—physician interactions cannot be monitored. In
`this respect, detailing is an almost unregulated activity.
`This interaction between detailers and physicians often begins in medical school.
`The FDAhasforbidden what had been oneofthe most visible signs of pharmaceu-
`tical largesse: gifts to medical students of the familiar black bag. Medical students
`arestill provided with educational gifts, however, such as pocketreference guides.
`Furthermore, to foster goodwill, companies donate money to sponsorstudent re-
`search and research forums,aid students traveling to conferences, and underwrite
`educational programsforstudents and faculty. Drug fairs allow multiple compa-
`nies to promote their products, providing productinformation together with an array
`of promotional gifts, many with company insignia (Mick 1991).
`
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`

`88 The Industry
`
`In a study of seven Midwestern teaching hospitals, Lurie et al. (1990) reported
`that medicalfaculty and housestaff averaged 1.5 contacts per month with pharma-
`ceutical representatives (PRs), and housestaff (interns, residents, and fellows)
`averaged more than one meal per month at pharmaceutical company expense.
`Twenty-five percent of faculty and 32% ofthe residents reported changing their
`practices at least once as a result of PR contact. Faculty members who had received
`honoraria or research support were more likely to request addition of that company’s
`drug to the hospital formulary. A similar conclusion was reached by Chren and
`Landefeld (1994), who foundthat requests by physicians for drugs to be added to
`a hospital’s formulary were strongly associated with the physician’s interactions
`with the manufacturers. The types of interactions were traditionaldetailing, accep-
`tance of money from drug companiesto support attendanceat educational sympo-
`sia, acceptance of moneyto speak at educational symposia, and acceptance of money
`for research.
`Detailers are often knowledgeable, not only about the products they represent
`but also about competing products. Many,in fact, are licensed pharmacists. None-
`theless, dubious selling practices do sometimes occur. A surveyof internal-medicine
`residency directors in 1991 revealed that 14.3% had observed “unethical” market-
`ing activities, and 37.5% reported thatresidents had participated in pharmaceutical
`company-sponsored trips during the 3 years prior to the survey (Lichsteinet al.
`1992). One of the most famousof these activities was the frequentprescriber plan
`of American HomeProducts (AHP). In 1987, AHP launched a program thatallowed
`doctors to earn airline tickets by submitting patient profiles and prescribing Inderal,
`an antihypertensive medicine that was facing competitive pressure from cheaper
`generic drugs. Massachusetts Medicaid officials determined that this was illegal,
`and forced AHPto cancel the program and refund $195,000 to the state (Fortune
`1991).
`
`Direct Mail
`
`Approximately 4% to 6% of total promotional expendituresare spent on direct-mail
`promotions. This is usually in the form offree copies of controlled circulation jour-
`nals and direct-advertising flyers from drug companies (Lexchin 1987). The con-
`tent of the advertisingis strictly regulated by the FDA.Firmsarealso forbiddento
`distribute material suggesting use ofa drug for an indication that has not been ap-
`proved by the FDA.This prohibition extends even to scientific reports and journal
`articles.
`:
`In one exampleof a direct-mail strategy, drug makers contractwith individual
`pharmaciesordrugstore chainsto access patients’ prescription records to send what
`they refer to as “patient education,” “patient compliance,”or “disease management”
`letters (Zimmerman and Armstrong 2002). Retailers and drug makersusethelet-
`ters to improve the health of patients by sending them refill reminders when their
`refills are past due or contacting them about new andbetter medical therapies. These
`contracts usually cover just one drug, and the drug store chains typically receive
`between 85 cents and $1.50 for eachletter they mail. Some doctors and patients
`
`Exhibit 2260
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`Page 09 of 20
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`
`
`
`
`Marketing Pharmaceuticals 89
`
`feel that these letters are simply a marketing tactic that confusespatients and vio-
`lates their privacy. Public outcry about possibleprivacyviolations has forced some
`companies to abandonthese programsand has drawn the attention of members of
`Congress and the Department of Health and Human Services (Zimmerman and
`Armstrong 2002).
`
`Sampling
`
`The providing of free samples represents nearly 9% of total promotional expendi-
`tures. The drug industry’s rationale for this practice is that a doctor mustbe per-
`sonally acquainted with a drug before it will be prescribed with confidence. This
`notion is undoubtedly true, though one might question whetherfindings based on
`a small sample of patients selected as a “convenience sample”is as valid as those
`from a larger-scale clinical trial adhering to a rigorous protocol. A survey by
`Lichsteinet al. (1992) found that pharmaceutical companyrepresentatives provided
`samplesin 70% ofthe residentclinics, and 35% of the residents depended onthese
`samples “moderately”or“a lot.” In manyinstances these samples are an important
`source of drug supply for indigentclinics, where patients would be unable to pur-
`chase pharmaceuticals in the normal way. In 2004 the pharmaceutical industry pro-
`vided $15.9 billion worth of drug product samples to physicians (Kaiser Family
`Foundation 2005). In a study by Chewetal. (2000), physicians used drug samples
`even when the sample drug was nottheir preferred drug choice. Physicians justi-
`fied their actions by claiming that it avoided cost to the uninsured patient. Pharma-
`ceutical firms distribute samples because of an expectation that this strategy will
`increase sales in the long run. Why mightthis be?In the case ofacute drugs,a patient
`who has a successful experience with a drugis likely to wantto use the drug again
`if the problem reappears. In the case of a drug for a chronic condition,a patient has
`the opportunity to try a drug to seeif it works, andif it does, the patient is more
`likely to continue with it than to try another product. Drugs are more idiosyncratic
`than one might normally think, and if one is able to find a drug that works well,
`there is a strong inducementto stay with that drug rather than “experiment” with
`other competing products, even if those competing products are less expensive.
`Unless one viewsthe costto the patient of failed drugtrials as zero, the notion of
`the patienttrying a free drug and then continuing with it in the future is expected
`andrational.
`
`Medical Journal Advertising
`This type of advertising is one of the main avenues for drug promotion.In 2004,
`approximately $500 million was spent on journal advertising alone (Kaiser Family
`Foundation 2005). Because most doctors subscribe to medical journals,it is impos-
`sible for them to avoid being exposed to this form of advertising. The only limit to
`the numberof advertising pages a journal can carry is set by the U.S. postal service.
`To continue mailing JAMAat a second-classrate,the ratio of advertising to editorial
`content must not exceed 0.75 in one-half of the journals mailed during the year.
`
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`90 The Industry
`
`Advertisements emphasize the positive aspects of a product, but they do not
`provide objective data that would be required for comparative analysis. The FDA
`requiresfull disclosure of a drug’s indications, contraindications, side effects, and
`normal dosage in the formatof a packageinsert. This information is usually on the
`back side of prominent advertisements. In a study of pharmaceutical advertisements
`in U.S. medical journals, Wilkes and colleagues (1992) found that 92% of the ad-
`vertisements did not comply with FDA regulations. The advertisements were fre-
`quently misleading and hadlittle or no educational value, and a large proportion of
`advertisements (62%) needed majorrevisions before publication.
`In 2002, the FDA found Biogen’s promotional materialfor its Avonex multiple-
`sclerosis drug “false,” “misleading,” and “lackingin fair balance” (Johannes 2002).
`In March 2002,the FDA gave Serono SA of Switzerland permissionto sell Rebif,
`a drug that was nearly identical to Avonex but showed slight clinical superiority to
`Avonexina Seronostudy and offered more frequent dosing. In response to the Rebif
`introduction, Biogensenta letter to doctors saying that “Avonex actually outper-
`formed Rebif” in weeks25 to 48 of the Serono study. The FDA disagreed with this
`interpretation of the study data and asked Biogen to stop distributing the materials
`in question.
`An unfortunate consequence of medical journal advertising is that misleading
`or dishonest information could lead to inappropriate prescribing by physicians
`(Wilkeset al. 1992). The Departmentof Health and HumanServices has stated that
`it is difficult to enforce the regulations due to budgetary constraints, limited man-
`power,andlack of regulatory authority to penalize the offenders (Wilkes etal. 1992).
`In every developed country, regulations and regulatory bodies exist to govern
`the content of pharmaceutical advertising and promotion. In Canada, the Pharma-
`ceutical Advertising Advisory Board (PAAB)screens drug advertisements prior to
`their publication in Canadian medicaljournals. Although this body is composed of
`representatives of the pharmaceutical industry, physicians, and pharmacists,its
`powersare limited,and sanctionsforviolations of the voluntary codeare limited to
`withdrawal or modification of the offending advertisement. Lexchin and Holbrook
`(1994) foundthat manyof the references in pharmaceutical advertisements in Ca-
`nadian medical journals had low methodological quality. This was a result of the
`citations of references from low-quality review articles and other sources such as
`clinical-trial reports.
`The Medical Lobbyfor Appropriate Marketing (MaLAM)is an Australian medi-
`cal lobbying organization that acts as a watchdog for advertisements appearingin
`medical journals circulated in developing countries. This group attempts to use
`physicians’ influence to encourage companies to provide accurate information so
`that prescribing and dispensingare better informed. The MaLAM sends letters to
`senior executives of pharmaceutical companies, requesting evidence in support of
`claims made in the company’s advertisementsto encourage honestadvertising.
`In Britain, the Association of the British Pharmaceutical Industry (ABPI) has
`judged