Latest News

Alex Azar the new HHS Secretary has promised to make healthcare value a top goal. Azar says he will shake up the healthcare system to deliver value to patients. He delivered that message this week to hospital executives at a convention in Washington. Azar said that America is not getting enough for the money spent on health services.

In his speech he outlined ways he plans to encourage better bang for the buck. Azar wants patients to have control of their online health records so they are easier to access across providers. He also wants much greater price transparency so patients know how much they are spending. This is because patient deductibles and co-pays have risen so much that patients, not insurers, are the payers for much of their care. Azar said the fee for service model must change to encourage delivery of outcomes rather than just encourage more tests and procedures.

Citing the Trump philosophy that shaking things up is necessary, Azar promised that innovation will be encouraged through the Medicare system. He vowed to remove regulation that impedes innovative approaches. Although he was talking to hospital executives, Azar said drug companies and doctors also must also deliver value.

Drug companies will be under intense pressure to justify the value of newer and often much more expensive treatments. From Azar’s speech and Trump’s past criticism of drug prices, it is likely we will see government be more willing to intercede on drug pricing. Whether that is through Medicare price negotiation, reimportation, or pressure on patents, it is clear drug companies will feel pressure.

What does all this mean for DTC? It makes it more likely drug companies will advertise branded drugs. They want to raise awareness among the public and doctors of new treatments. By doing so that keeps pressure on payers to cover the newer drugs that are generally much more expensive than older alternatives. While advertising drugs that cost $100k a year might annoy insurance companies it does force them to decide faster on formulary status. They have to respond to their consumer and physician base about why a life saving drug is not covered. Insurers are justified in demanding outcome research but it is hard to refuse covering a drug that extends the lives of patients, particularly if it is advertised widely.

What is clear is American consumers cannot keep paying higher premiums, deductibles, and co-pays that are well above their wage increases. That is not sustainable and the public will demand action. Azar saying a shake up will occur is not bluster. It has to happen or else the single payer advocates will get what they want, a government run healthcare system.

Alphabet, formerly known as Google, has decided to enter the health insurance business according to a CNBC report. The entry of big data companies into health insurance could have significant impact on costs. The Alphabet health subsidiary is called Verily. Why might big data companies affect costs of care?

They have tremendous capabilities to know their user base’s behavioral tendencies. That could lead to better analysis on how to improve communicating targeted health information. This capability is both on a group level and increasingly on an individual basis. Verily could have an enormous opportunity to effect change in terms of health behavior. Knowing us as they do, one can envision an automated outreach to help prevent and treat illness before it escalates into expensive hospital care.

Verily will likely try to work with existing insurers, both public and private, to use their data smarts to lower payer costs. This could be through better identification of populations to message needed health information or to provide individual outreach to individuals identified as high risk or non-compliant on treatment.

If it sounds like big brother watching over you, it is. We may eventually see Verily or another data giant like Amazon become your health advisor and remind you to take a diagnostic test, track your vital signs, analyze your DNA, find the best doctor, make your appointments, store your medical data, and potentially use algorithms to diagnose and offer treatment plans. One can envision an avatar of a doctor replacing the real doctor one day.

Verily is likely trying to make insurance cheaper and more widely available. Clearly, they have a huge financial incentive to enter the market where premiums have become too high for many Americans. I love to hear when innovative private companies are entering the health care sector. I bet they will do a better job at innovation than HHS or some other government department. Whether they merely support the existing insurance industry with consulting or expect to replace it entirely remains unclear.

Drug companies should expect these data innovators to be adept at negotiating prices based on patient outcomes. Verily and others will eventually be able to advise providers, payers, and patients which branded drugs to use. They may also be the ones to sell drugs to patients. No one expected Amazon to dominate the retail world 10 years ago. I would not bet against Verily, Amazon, or a new tech company to reinvent the whole health care delivery system. The world of 2028 will be significantly different in how we interact with payers and providers. Of course, if we get single payer government run healthcare then all bets are off as to innovation. Let’s hope the innovative tech giants get their chance first.

While branded DTC Ads dominate the spending, there are some drug makers investing heavily in disease education. Most do it because when they have a drug for the disease coming out shortly or are in the introductory physician awareness phase for a newly approved drug. They usually have the only drug available for the condition or are the dominant drug in a category.
Disease awareness ads help on many fronts. First, they create patient conversations during the sell in phase between patient and doctor. By not mentioning the brand, the drug maker will not embarrass the doctor if they have not yet heard about it or tried it with patients. Second, drug makers can give insurers some pressure to put the drug soon to be approved or just approved on formulary. Finally, disease education ads can be more flexible creatively as there is no fair balance.

One of the most interesting new ads is on the lesser known effects of Parkinson’s disease. We all know about the tremors from Parkinson’s. I was unaware that one of the effects of Parkinson’s is experiencing delusions. Acadia has launched a compelling disease education campaign on the delusions and hallucinations experienced by sufferers. They call it “Secret Visitors” which was created with their agency STRIKEFORCE. We see those “visitors” in the spot through the eyes of a man who hallucinates and are told over 50% of disease sufferers experience such hallucinations or delusions. The first part of the 60 second ad is shot in a low light as the man is seeing things that are not there.

The final part of the spot is then seen in normal daylight as the voice over discusses treatment options and the man sees his grandchild outside coming for a visit. “Secret Visitors” is a very engaging spot that highlights the effectiveness of disease education ads. Devoting a full 60 seconds to telling a compelling story is what makes a disease education spot a good DTC choice. Acadia has the only approved drug to treat Parkinson’s delusions called Nuplazid, which was approved in the United States in April 2016.

It is not uncommon for drug makers to hold off on DTC until the physician community has been detailed and opinion leaders get some prescribing experience. Allowing the 18 months from approval to the disease education spot, as in this case, is not atypical for a first in class specialty drug. I do not know if a branded spot will follow as that may depend on whether a competitor will enter and when. Nuplazid is a premium priced drug costing about $3000 a month at retail. While not at the very top of the cost curve, $3000 a month is at the higher end of Rx drugs. Of course most patients are insured or get patient assistance so their cost is much less.

Nuplazid may be a blockbuster for Acadia, with some analysts projecting a billion dollar potential. At that sales level, we can expect DTC advertising to continue beyond the well crafted introductory disease education campaign. DTC television used to be for big high incidence disease categories only, but the recent trend is for small market premium priced drugs to do DTC television. Acadia continues the trend and is off to a good start with this campaign.

Amazon, JP Morgan, and Warren Buffett’s Berkshire Hathaway have announced a joint venture to improve healthcare coverage for their three companies. There are a lot of unknowns as to what this means for the broader healthcare sector. Is this just the start of Amazon disrupting how insurance is provided? Or, is it more limited to squeezing company costs for their combined employee base of 1.2 million?

Perhaps this is the start of a massive transformation where employees are provided their own network of providers employed by the new venture. It is unlikely that Amazon will stop just with the three companies serving their own employees. Bezos, Buffett and Dimon are the A-list of CEOs and most likely think they can disrupt how insurance and delivery of medical services are done. While America is great at offering speedy service for any test or procedure needed, there is high cost of those services. Consumers are seeing rising deductibles, premiums and co-pays and we have an unsustainable trajectory. Companies do not want to accept the rapid growth of their healthcare costs and are looking for ways to get more for their money.

I am looking forward to seeing how these three leading companies find ways to provide services at lower cost. Some players may have to pay a price for that as many smaller provider companies may fall victim to being squeezed out of business by the new giant disrupter. Will we see Amazon Cancer Centers across the United States? Will our routine lab tests be available with Amazon Prime? Will Amazon be negotiating prices and supplying our drugs? Amazon should not be underrated for its ability to create value services that we love. Few of us love our current health insurance companies. Most of us like Amazon.

Changing a $1.4 trillion system is not going to happen quickly. There are so many complexities across the Byzantine American fee for service model. The lobbyists for insurance companies, drug makers, physician and hospital networks are very powerful and will defend their turfs aggressively. Lots of companies are making money in our inefficient system and anyone benefiting will fight to survive. Patients are the ones desperately in need of a break in cost. Amazon has the clout to challenge the status quo but even they will see how difficult major change will be.

I thought I woke up in a dystopian 1984 world when I saw an article on the low number of warning and untitled letters issued to drug companies in 2017. Written in the NY Daily News on 12/11/17 the article bemoaned the fact that only three letters were issued in 2017 compared to eleven in 2016. Somehow the lack of violations bothered the authors and DTC critics he quoted.

Drug companies complying with FDA regulations in this dystopian world is now somehow a bad thing. Something must be amiss because we all know drug companies are trying to hoodwink consumers with rampant false claims. Where are all the letters? Noted drug company critic, and former FDA Commissioner Dr. David Kessler is quoted in the piece as saying that the lack of letters “certainly raises questions.” Yes, comrade drug maker your clean record is very suspicious. We are very concerned you did not commit any crimes.

The article points out that there are only 60 FDA staff to review 75,000 promotional pieces. Therefore, the implication is that many deceptive pieces must be slipping through the cracks of an understaffed agency. That might be a legitimate concern but please provide any evidence that violative ads are airing undetected. FDA has the resources to watch all the television ads. In fact, maybe it would take about 120 minutes of one staffer’s time to review every ad on air. Oh, the workload required to watch those ads must be so stressful that no Federal agency can be expected to accomplish this task.

Can FDA miss something out of the 75,000 pieces submitted? Yes, there may be some sales aids or long pieces missed but not in anything seen in mass media. I think the author and Dr. Kessler can sleep at night knowing that wildly false and misleading claims are not being made in DTC Ads. I do not see FDA complaining that false claims are a major concern.

Critics of DTC will not be satisfied until our legislators ban it, or make DTC more difficult to do. Making it harder to do is certainly a policy goal of many on Capitol Hill. In fact, if the Dems retake Congress in 2018 we can expect the usual anti-DTC bills to make it to a vote. Ending tax deductibility of DTC, putting a moratorium on ads for new drugs for three years, and forcing drug makers to disclose prices in ads, are all recent proposals.

The same media outlets that rail against drug companies in their news coverage are also the leading purveyors of drug ads. That must be an interesting conflict between the business and editorial side. They should be careful what they wish for because if DTC is legislated away who will sponsor network and cable news? Think about that Wolf Blitzer!

Good is good and the three letters issued are a sign that drug companies know how to comply with DTC regulations. Drug companies complying does not fit the critics narrative therefore it must be a sign of bad enforcement. Only George Orwell could envision such a scenario.

In the latest attempt to kill DTC, Senator Claire McCaskill (D-MO) tried to amend the Trump tax bill with an elimination of the tax deductibility of DTC as a business expense. It was defeated. This is the umpteenth time this tactic has been tried by Congress hostile to the drug industry.

I have lots of friends and relatives who are Democrats. I respect their right to think the drug industry charges too much and tries to create demand for drugs for diseases they advertise. Trying to limit the right to advertise lawful products, especially heavily regulated DTC advertising, is a huge mistake and creates a slippery slope. May I remind my Democrat friends that there are many categories of advertising that interest groups do not like.

Do we ban beer ads because drunk drivers cause accidents? Do we restrict ads for Mercedes because many people cannot afford them and feel bad? What about those violent video game ads? How about ads for violent movies? Somehow legislators have singled out drug ads for special treatment. Let’s deal with the common assertions about drug advertising.

Drug ads raise prices because critics point out that consumers eventually pay for those expensive ads. Sounds like a rationale argument but facts prove otherwise. Drug ads represent 1-2% of drug sales. We spent less than $100 million on Lipitor ads when sales were over $5 billion. No one ever mentioned advertising as a basis for pricing. Price is set based on a number of factors unrelated to advertising. What is competition charging? Are we first to market? How will pricing affect insurance coverage? How much patent life remains? What did we spend on development? How many markets worldwide are we in? The bottom line is we as an industry spend $5 billion on a revenue base over $400 billion. That is hardly an expenditure that would drive price up.

Drug ads create demand for products which are not needed. This is the second assertion usually made. Drug makers create disease awareness for ailments that are not a real problem say critics. Social anxiety, low testosterone, restless leg syndrome, are just some of the examples raised by critics. Critics also say advertised drugs are often no better than their generic alternatives. These are fair criticisms as there are people who turn to prescription drugs too quickly. I admit that. The issue is between doctor and patient to decide whether no drug, a generic drug, or the latest premium price drug will work best. Trying to ban commercial speech to prevent a patient learning about a drug is a bad solution to concerns about over use.

Like it or not, we are a country that believes in free markets and selling what we make. Having the right to advertise provides an incentive to develop new products. Some of these are bad products that we waste money buying, but that is the price we pay to have a free market. We would all save money driving a Chevy, wearing Walmart clothes, and buying generic groceries. That decision is left to consumers and not by government forbidding advertising for products they feel we should not buy. I know what the critics say. Drugs are different than other consumer categories. Life saving meds should not be marketed like perfume.

The critics forget that we need a drug industry that is anxious to do research and can get rich risking lots of money. Yes, we may not need all the me-too drugs being sold or advertised. Those drugs provide cash needed to take risks on new technologies. The next pandemic will one day be upon us and we better have a strong drug industry ready to find life saving drugs.

Time to have a little fun with the unknown. Predictions are nice for stimulating discussion so here goes.

1. The DTC spending will increase modestly in 2018 by around 5%. Some of that increase is media cost inflation. So, I am expecting a strong year but not a boom in spending.
2. FDA will not take any action in 2018 to make DTC harder or easier to execute. It is possible we could see a guidance on reducing risk presentation, but I doubt it.
3. The media mix will change slightly to include more digital and point of care, but television and print will still be dominant. FDA will do nothing to make social media easier to execute and will not change word search requirements on indication and needed fair balance.
4. Drug company reputation will still be an issue due to pricing concerns. DTC will be attacked regularly for causing demand for high price drugs and for creating higher prices. I am not predicting any Congressional action on price controls or reimportation but the mid-term elections in 2018 might alter the balance of control to Democrats and then something could happen in 2019.
5. Virtual medicine is going to become the next big thing. That means cheaper opportunities to interact with a doctor online for lower cost and get drugs prescribed. Married with online tools to track vitals and other useful diagnostic tools will accelerate the shift.
6. Genomics companies will continue to grow in offering tests to determine our likelihood of getting diseases. Consumers will be more informed and be more active partners in deciding with doctors what tests are needed and what treatments are best.
7. Consumer cost burden will continue to rise as insurers and employers continue to expect higher deductibles and co-pays. That means more of us are really self-insured in a normal year and we pay the full bill. That means consumers will be questioning any service, test, or drug where they are paying most of the bill.
8. Media targeting will be a higher priority as technology improves to micro target potential users. As DTC for higher cost drugs targeting smaller segments in cancer and other targeted diseases increases, the need to better target potential customers increases.

There you have it. 2018 will be a relatively quiet year as nothing should happen to dramatically alter how we use DTC. Just my opinion and many of you will have a different take on these and others not mentioned. Have a great holiday as this is my last column in 2017.