An insider's perspective: defense of the pharmaceutical industry's marketing practices.

• Author: Johar, Kanika

1. INTRODUCTION

   A sharply dressed, attractive female walks into the waiting room of an office. All eyes turn and look at this young lady, who looks quite out of place amongst the throngs of elderly, young, and sick patients waiting long periods to see their doctor. This person, carrying meals, gifts, and free drugs, skips the line of patients waiting to be seen and walks right into the back, embracing a friendly handshake with the physician. The patients are all wondering how much longer they will now have to wait because a "'drug rep" has walked in just as their appointments are to begin. The patients eventually see their doctor, late because of the drug rep, and are wondering if they have been prescribed a drug that the rep was just promoting to their doctor. These same patients eventually go home and turn on the television in the evening to enjoy sports, the evening news, or a sitcom. The evening news may even be airing a special on the marketing tactics of "big pharma.'" Each commercial break is full of ads by drug companies promoting their products ...

   It is no wonder that negative perceptions surround the pharmaceutical industry. (1) The woman described above represents a pharmaceutical company, and for many, is an image of what is wrong with today's healthcare industry. The perception that the pharmaceutical industry is market-driven (2) arguably conflicts with the hope that it is a research-driven, (3) lifesaving industry. (4) I would argue that it could be all three.

   The right to affordable healthcare for all members of society is a burning topic--cheaper medications are at the forefront of the debate. (5) Although pharmaceuticals only make up about ten percent of all healthcare costs, (6) the pharmaceutical industry falls into the heart of the healthcare debates because of its conflicting role as a provider and profit maker. (7) The companies are providers of essential, yet expensive, medicines that are partially financed by high out-of-pocket costs, and such costs are justified by the industry as the expenses incurred in researching and developing the lifesaving and life-improving medicines of the future, (8) The high profits in the pharmaceutical industry certainly do not help the image. (9) Some believe that pharmaceutical companies have a social contract with society to provide cheap, lifesaving medicines and that the government should be regulating pricing. (10) Others believe that lifesaving medicines only come from innovation, which will be eradicated by heavy regulation of prices if the government were to get involved, thereby leaving companies with little incentive to invest towards research and development. (11)

   This paper is a benefits analysis to the services provided by the pharmaceutical industry and aims to address and clarify a few of the many misperceptions about the industry. The pharmaceutical industry is often portrayed as having unethical business practices, and the industry fails to fall into a positive light--more often than not--becoming a target amongst the media, the general public, and politicians. (12) I would like to expose readers to the pharmaceutical world I knew in my former career as a pharmaceutical representative (13) and provide one viewpoint from the other side--the story that is often not told by those who are quick to blame pharmaceutical companies for the problems affecting the healthcare industry. (14)

   More specifically, I plan on addressing the practices that are the most widely criticized by opponents: direct-to-consumer marketing, (15) physician-directed marketing, (16) and the so-called lack of regulations governing the pharmaceutical industry's practices. (17) Part II of this paper will begin the discussion by providing relevant background information in order to gain insight into the pharmaceutical industry's world. The background will cover the drug development process from Petri dish to pharmacy, the economic effect of the pharmaceutical industry, and what pharmaceutical marketing entails. Part III will continue an exploration of the pharmaceutical industry by discussing several laws and regulations that govern the industry's research, development, and marketing. The research and development ("R&D") process can span decades, and many times the profit generated barely covers the expense of R&D. (18) In fact, many drugs, even after years of research, will fail once they reach the Food and Drug Administration ("FDA") process, and by then, millions of dollars have already been spent by the pharmaceutical company, only to see no return. (19) Part IV will argue that the industry's highly criticized marketing practices are distorted perceptions and will provide a balanced discussion in favor of many pharmaceutical practices. Many of the industry's practices have voluntarily evolved (20) and the industry is now a good citizen trying to do the right thing. Part V will conclude with a discussion of how the industry can continue to evolve in the right direction, both for the average consumer and industry insiders.

2. BACKGROUND INFORMATION

   1. Research and Development

      Drug development is both a "lengthy and costly process." (21) Pharmaceutical companies are spending tremendous amounts of money on research and development ("R&D") and not necessarily seeing an equal rate of return. (22) In 2010, according to Pharmaceutical Research and Manufacturers of America ("PhRMA"), the pharmaceutical industry spent an estimated $67.4 billion on R&D alone and, importantly, over twenty percent of sales went directly to R&D. (23) According to a study from 2003 ("DiMasi study"), which analyzed sixty-eight randomly selected new drugs from ten pharmaceutical companies in 1997, the expense of bringing a single new drug to the market was estimated to cost pharmaceutical companies $802 million. (24) As of 2005, it was estimated that the expense of bringing a new drug to the market had increased to $1.3 billion. (25) The authors of the DiMasi study previously considered profitability and return rates versus pharmaceutical R&D, and they had "not found evidence of significant and sustained excess profits." (26) Surprisingly to many, only two out of ten marketed drugs return revenues that match or exceed R&D costs. (27)

      What makes bringing a new drug to the market expensive? There are several factors to consider, including the gamble that drug companies make in drug development, the amount of time R&D takes, and most importantly, the FDA's approval process. (28) A significant aspect of developing a new drug is meeting the FDA's standards for safety, efficacy, and marketing. (29) The federal government's involvement requires FDA approval at two stages of the drug development process. (30)

      The initial phases of development, called pre-clinical testing, take place in the pharmaceutical laboratory where experiments are conducted between the new drug and the disease that is being researched for a cure to see if the drug has any effect on the disease. (31) During these experiments the research is concerned with safety, toxicity, and biological activity and the experiments are only performed on animals and/or involve other laboratory studies, which do not include humans. (32) This period alone, for a single compound, can take, on average, three to four years to complete, and typically 5000 compounds are evaluated at a given time. (33) Once the pre-clinical testing is finished, the company will file an investigational new drug application ("IND") with the FDA. (34)

      Once the IND application is approved, clinical testing can begin on humans, (35) There are three stages to clinical testing: Phase I, Phase II, and Phase III. (36) Phase I involves twenty to eighty healthy volunteers, and the goals are to determine the safety and toxicity of the compound, its in vivo behavior, and preliminary dosage requirements or potential indications for the drug. (37) Phase II consists of 100 to 300 volunteers who are afflicted with the disease being researched and the potential compound to combat it. (38) This phase lasts around two years and the goal is to determine effectiveness and side effects of the compound. (39) Typically, only 5 of the original 5000 compounds will enter Phase II. (40) Phase III involves controlled experiments with 1000 to 3000 volunteers whom physicians monitor during a trial period. (41) At this stage, which lasts about three years, the goal is to verify effectiveness and monitor effects of long-term use. (42) Here, dosage can be more accurately defined, and the FDA requires adverse reactions that were reported early on to be further monitored during this phase. (43) Typically, the studies are controlled, following a form of randomized, double-blind, placebo-controlled investigation so that neither the investigator nor the patient knows who is taking a placebo. (44)

      After the clinical testing phase is over, the company submits a new drug application ("NDA") to the FDA, which includes the data and analyses of safety and efficacy of the compound from all the phases of clinical investigation. (45) The FDA review phase is performed by three FDA centers consisting of physicians, pharmacologists, chemists, microbiologists, and statisticians. (46) In addition to FDA reviewers, there are also advisory committees making decisions with regard to the compound. (47)

      FDA review is followed by Phase IV, which consists of post-marketing testing, where the FDA will use adverse reactions reported by the public to educate physicians, pharmacists, and patients when safety concerns arise. (48) There are several methods used by the FDA to educate consumers, including: (1) providing "Dear Healthcare Professional" letters which contain product safety information to the aforementioned individuals; (2) directing the pharmaceutical company to alert consumers with brochures and advertising themselves; (3) instructing the pharmaceutical company to change labeling on the product and restrict the use of...