Paul Holmes 02 Aug 1990 // 11:00PM GMT
Pharmaceutical companies are both heroes and villains. Their products save lives, which is good. But they appear to be making a lot of money out of their customers' suffering, and that's not so good. Now the national debate over health care costs is threatening drug manufacturers' profits, forcing them to find new ways to convince consumers that they're the good guys.
On the one hand, the pharmaceutical companies have been responsible for a great many of the tremendous advances in medical science Americans have come to take for granted, new drugs and treatments that save millions of lives every year. On the other hand, the same industry has ranked first or second in profitability among all U.S. industries for the past 30 years. In 1988 the industry's return on sales was 13.5%, almost three times higher than the average for all industries, placing pharmaceutical companies in the tricky position of profiting from other people's misfortunes.
Moreover, while the role of pharmaceutical companies in providing ever-improving products has been a major factor in upgrading health care and enhancing the quality of life, there have been a handful of well-publicized cases in which these same companies very clearly put profits ahead of people: the Dalkon Shield, Oraflex, Selacryn, thalidomide.
Pharmaceutical companies are not ranked among the most popular institutions in America. Nor have they worked particularly effectively in the past to make themselves more popular. They have, in the words of Alan Frank, president of medical advertising and PR agency Gross Townsend Frank Hoffman (GTFH) "failed to take the initiative in any powerful way, failed to tell their side of the story"
It was inevitable, however, that a time would come when the pharmaceutical companies would be placed in a situation where they need the support of the public, and that time is now. The whole health care process in this country is under intense scrutiny, with a widespread perception that costs are soaring out of control. Hospitals are already feeling the pinch and in 19 states, sharp restrictions have been placed on drugs available to Medicaid patients.
Programs aimed at controlling prices do so by requiring that the lowest-priced generic drug be dispensed whenever possible, and are now commonplace when drugs are reimbursed by third parties, either government or private insurance plans. In 1984 it became easier for the FDA to approve generics and since then they have been gobbling up market share.
Now Senator David H. Pryor has proposed legislation that would intensify restrictions and make them effective on a national scale. The Office of Budget Management (OBM) has recommended a similar plan as part of the on-going budget summit. If such a plan were adopted it would seriously reduce the sales of many newer, more expensive drugs. It would also, the pharmaceutical industry argues, have a devastating effect on the health of Medicaid patients and on medical research and development
"The perception is that health care costs are running amok," says Richard Rothstein, managing director of Edelman Medical Communications . "Employers are no longer able to cover their employees the way they used to, and many people are not able to pay for their own health care. It's easy to portray the pharmaceutical companies as the villains of the piece, despite the fact that it costs them about $100 million to bring a new drug to the market, and despite the fact that the cost of drugs represents only 15% the total cost of health care in this country."
It may not be fair, but it ought not to be particularly surprising either. As Alan Gross says: "Nobody likes being sick. Nobody likes being compelled by fate to pay money for something. People will pay almost any amount to get well, but after they are well again they resent the fact that they had to pay anything. It's human nature."
It's human nature too to look for someone to blame, and of all the potential villains the pharmaceutical companies are the most obvious targets. People have a more personal relationship with their physicians and their hospitals, they feel they know them better. The government and the FDA catch some flack, but few people really understand their roles. The pharmaceutical companies are big and impersonal and appear to be making the most money out of all this.
That is an impression that has been reinforced by the pharmaceutical industry's failure to appreciate that it is held to higher standards than most industries, argues Richard Rothstein.
"They have traditionally operated largely the same way other companies operate, with their big flashy buildings and their fancy cars. People resent those outward signs of affluence. Then there's the problem that these companies are fallible. When a manufacturing company makes a mistake it's embarrassing; when a pharmaceutical company makes a mistake people die or are crippled."
In 1970, for example, A.H.Robins introduced the Dalkon Shield, distributing 4.5 million of the intrauterine contraceptive devices in 80 countries. "The modem, superior IUD" was marketed as "safe" despite clinical tests on baboons in which one in eight subjects died. The company did not make results of those tests public, and in the words of the judge who tried the first of many product liability cases against Robins "continued to allow tens of thousands of women to wear this device—a deadly depth charge in their wombs, ready to explode at any time."
Ten years later, Smithkline Beckman introduced Selacryn, a prescription drug marketed to control high blood pressure. Although Selacryn carried a warning that abnormal liver function had been reported in some test patients,the warning emphasized that "no causal relationship has been established" and Smithkline Beckman told doctors they could prescribe the tiny light blue tablets "with confidence, once a day." Like Robins, however, Smithkline was withholding test results, and after 60 deaths and more than 500 cases of liver damage, the company eventually pleaded guilty, to charges that Selacryn had been falsely labeled.
There are also those who level more general charges against the industry, like Marshall Clinard, who, in his 1989 book Corporate Corruption, argues that: "Great, often life-saving contributions to the health of Americans do not mean that pharmaceutical companies have the right to abuse their power to help mankind. Although, the miracle drugs of the 20th century have produced immense profits for the industrial giants that dominate the industry, the quest for ever greater profits has led many of them to engage in a range of unethical and illegal practices.
"Some companies have encouraged the unnecessary use of drugs; others have sold vital drugs at exorbitant prices; still others have promoted worthless drugs; and some have improperly tested, manufactured and sold unsafe drugs. Several have engaged in foreign bribery, and some have been charged with illegally conspiring to fix high prices for certain life-saving drugs.”
Public relations professionals working with the pharmaceutical industry acknowledge the damage done not only to individual companies but to the sector as a whole by charges such as these, but argue that unethical behavior is not as widespread as many critics charge, and that most drug marketers have the public good at heart.
Clearly this is a message that must be communicated to the public. Equally clearly, there are obstacles to clear communication.
"The drug industry is not like any other industry, because there are regulations that govern what you can and cannot say," explains Gail Safian, executive vice president at health care PR agency Management Communications Services. "That means you are not always free to explain the benefits of a specific drug in a 30-second commercial the same way a car company, for example, is free to explain the benefits of an air bag. You can't dramatize your case."
Safian says education may be a slow evolutionary process, although she believes progress is being made, citing the increased interest patients are now taking in their own health, from greater nutritional awareness to cholesterol lowering programs. "What the pharmaceutical industry has to do is encourage this trend by focusing on individual diseases and health problems and making people more aware of the problems and the range of solutions, rather than talking about their products."
"Great, often life-saving contributions to the health of Americans do not mean pharmaceutical companies have the right to abuse their power to help mankind."
Other companies have chosen to give away product to indigent patients and low-income families—even to developing countries—to show that they care. Perhaps the best-publicized example is a program introduced by Searle in the late'80s, called Patients In Need, which offered patients with life-threatening illnesses access to one Searle product free of charge. Individual physicians were allowed to define the poverty level at which the program came into play. A Patient Promise plan followed, the company vowing to refund costs if a particular treatment was ineffective.
Merck has introduced similar programs, usually offering specific drugs and sometimes on a global basis.For example, the river blindness drug Mectizan has been offered free of charge to 35 endemic countries. In the U.S. in 1987, Merck donated pharmaceutical and biological products with a market value of more than $7 million.
However, some pharmaceutical PR experts believe that while such programs build goodwill, they have a limited effectiveness, and that they are not motivated entirely by altruism.
They suggest that the real issue is more complex than the popularity of the industry or whether drug company profits are too high. They say the most immediate challenge is to place drug pricing in the context of a wider economic picture and a legislative framework that has made bringing new products to market a longer and more expensive process over the past few years.
That, however, will be quite a communications challenge.
"If you look at the issue of rising costs you realize that the pharmaceutical industry is not to blame," says Richard Rothstein. "It's not to blame for inflation. It's not to blame for the increased government regulation through the FDA, the more complex regulatory process which means it takes longer and costs more to bring new products to market."
He points out that by the time many drugs eventually reach the market, ten to 12 years of their 15 year patent may have expired, giving the manufacturer just three years to recoup costs before lower-priced generic versions of the same formula, which have no research costs to recoup, are available.
The problem is exacerbated for products that treat a relatively uncommon disease. One drug that has attracted widespread criticism for its cost is the AIDS-drug AZT But the patient universe here is (at least for the time being) relatively small, and it costs as much to develop a product that will treat 100,000 patients as it does to develop one that will be used by 100 million.
"AZT focused the issue in a lot of minds, because of all the criticism over the cost of the drug and unreasonable profiteering," says Rothstein. "Companies began to ask why they should suffer all this bad publicity when what they were doing was bringing a drug to the market that cost millions of dollars to develop and was going to save lives."
Sam Ostrow, executive vp at The Rowland Company and head of the agency's medical division, believes the most important task facing pharmaceutical companies in the current environment is raising the level of the public policy debate about health costs. The problem, he concedes, is that this is not an easy issue, nor is it one that can be drawn in terms of black and white. That makes it difficult—some would say impossible—to communicate through the media.
"What the pharmaceutical industry has to do is describe to the American public the choices that are available in health care," Ostrow says. "It must explain that the American public can have the highest quality health care in the world, but if that is what it wants it is going to have to pay for it. Basically, if you want a Cadillac, we'll give you a Cadillac. But if people are not prepared to pay, they are going to have to settle for second-best."
The industry must also try to explain, Ostrow says, the "byzantine bureaucratic approach" to health care this country has adopted in the past decade, an approach that makes it more and more difficult for new drugs to reach patients they could help, either because the testing process is more demanding or because the FDA is increasingly unable to cope with the volume of new drugs being presented for approval.
Perhaps concerned that the media, particularly television, is ill equipped to address such complex issues, at least one pharmaceutical company has chosen to encourage better coverage of the debate. Ciba-Geigy has worked with PR firm Ruder-Finn and the American Association of Retired People to underwrite a PBS documentary, Health Care on the Critical List, focusing on new cost-containment regulations and policies and their effect on health care.
The film was also previewed at the Smithsonian in Washington, DC, for an audience of health care influentials, taken to Congressional dinners and made available to health care organizations around the country. Ciba-Geigy was able not only to stimulate debate but also to build stronger coalitions with other interested parties.
The public policy debate should also include asking the public whether it wants the highest possible standards of safety, or is prepared to accept some level of risk if it means patients can get access to products quicker. Again, the AIDS tragedy has focused attention on this issue, with many patients clamoring for new drugs to be made available immediately, regardless of the fact that they could have harmful and as yet undiscovered side effects.
Ostrow is currently working on an issues management program for yet another product at the center of the debate. Sandoz Pharmaceuticals' new schizophrenia drug Clorazil has attracted criticism because the company will only market it in conjunction with a monitoring system, available only from Sandoz, which costs almost $9,000 a year. The monitoring system is to ensure patients taking the drug do not suffer from a potentially fatal side-effect, but the Department of Veterans Affairs has refused to purchase the system, while patient advocacy groups have asked the government to intercede.
It is a fairly typical case, complicated by the fact that it involves a mental health problem, traditionally a low priority for funding agencies. Sandoz says fears of product liability suits force it to market its product only with extreme safety precautions. "We can't risk the company on this drug," a company spokesman told The Wall Street journal. It also argues that the drug will save money by freeing thousands of hospital beds. Ostrow says treatment with Clorazil, even with monitoring, will save $30,000 per patient per year.
"It is not an easy issue to explain," he admits. "The media, particularly broadcast media, are not set up to explain such complexities, but if we can put our case before the public, my guess is people will choose a higher level of healthcare, and they will be prepared to pay for it.
Ostrow may be being a little optimistic however. Others, including Alan Gross of GTFH, believe that most people are only prepared to pay top dollar for health care if they are sick themselves, and that resentment over paying for high quality health care will be the most powerful factor in making any decision. He believes the war will have to be fought on a different front.
"I don't believe that warm fuzzy stories about how a new drug saved little Johnny's life are going to do it," he says. "Those stories have to be told, but they won't win the debate, because the focus will be on more substantive issues. We have to go into this program acknowledging that people do not want to pay for our product, and acknowledging that the pharmaceutical industry has already allowed itself to be defeated in some areas, the most important of which was allowing the market to become a mixed market, partly free and party controlled."
Gross contends that the laws already passed encouraging the use of generic drugs, as well as recent restrictions on other areas of the health care business, have put the industry on the defensive and weakened its position, and that the only recourse is to form broad-based alliances.
"The health care business in the broadest sense has allowed itself to be carved up into a lot of little Balkanized states," he says. "We have been picked off one at a time. The pharmacists are happy to prosper at the expense of the pharmaceutical companies. The pharmaceutical companies have ignored the problems of surgeons who have been forced to accept set prices for certain procedures. As an industry we have to find ways to work together. The short-term interests of each component of the industry must be subjugated to the good of the whole industry."
Some alliances are already being forged. For example, the Pharmaceutical Manufacturers Association campaign against the OBM plan to replace modern brand name medicines with older generics has focused on pulling together a range of interested parties, from patient organizations (the Cystic Fibrosis Foundation, the Epilepsy Foundation of America, the National Council on Aging) to political organizations as diverse as the conservative Heritage Foundation and Jesse Jackson's Rainbow Coalition.
The groups have jointly asked members of the budget committee to reject the proposal, arguing that medication should be based on the needs of individual patients and that drugs effective in some may be useless in others. They warn that the proposals would create a dual-standard of health care, result in lower standards of health among the poor, and that they would thus cost the country more money in the long term.
"Patient groups can be powerful allies," says Richard Rothstein. "They can focus on the need for particular treatments." And they don't have the obvious vested interest pharmaceutical companies have.
Sam Ostrow believes the coalition can and should be even broader. He suggests that eventually both academia and the churches will become involved. "This is an important ethical issue," he says. "At the heart of it is how much we are prepared to spend on the well-being of our citizens."
No-one wants to put a dollar value on human life, but before the health care debate is resolved, the American public is almost certainly going to have to.