Bob Ehrlich - DTC Perspectives

We all know the final price patients pay for prescription drugs is as complex as determining whether life exists on other planets. In no other consumer category do users have no idea what the product will cost. We all can estimate the price of a Mercedes, a four bedroom house in our neighborhood, a new suit, a jug of Tide, or a gallon of gas. We may not be exact but we would get reasonably close. Prescription drugs are unique in that an advertised product can cost $50 a month or $50000.

We would have no idea from watching the DTC ad whether that drug is the $50 or $50000 product. Even our doctor would not know because 72% say in a study by Deloitte they have inadequate price information. Congress wants to remedy that by requiring DTC advertisers to put price information in DTC ads. Consumers widely support this idea and it is from Democrats, Republicans, and Independents, at 83%, 72%, and 73% respectively. HHS Secretary Alex Azar is going ahead with the new policy of requiring price disclosure in drug ads.

“DTC advertisers will face a new FDA guidance on price disclosure.”
-Bob Ehrlich

Of course, that idea is fraught with problems. It is a well-meaning solution but would cause a raft of other problems. We all know the out of pocket cost of our drugs is dependent on our insurance coverage, our deductible/co-pay, formulary status, treatment protocol, and availability of similar drugs. That means you could pay nothing for a $100000 cancer drug, and more for your $100 a month depression drug. Consumers would benefit from knowing what they would actually pay, but that is not possible to do in a voice over or super on screen.

What insurers and government payers really want to do is discourage DTC advertising of expensive drugs. They think that by forcing price disclosure, the premium price drugs would be advertised less because those drug companies would face consumer backlash once price is part of the advertisement. I have wrestled with the positives of adding price to a DTC ad. I can see some benefit giving a heads up to a potential patient that the premium priced drug may cost a lot and therefore may not be covered or restricted to use after cheaper alternatives have been exhausted.

On the other hand, a patient may misinterpret that price as being unaffordable and not pursue further even though it might not cost them much in the end. I come back to the conclusion that discussing price in the ad would probably confuse consumers more than help them. If I were a policy maker I would focus on the doctor by giving them tools to determine likely out of pocket cost for their patients. They already have the patient insurance information so determining coverage status and final cost should not be too difficult to estimate.

I understand the reason insurers and government payers dislike DTC Ads for expensive drugs. It is a legitimate argument that some of these drugs might be only marginally better than cheaper treatments. DTC Ads create demand and put pressure on payers to cover those drugs. An insurer is placed in a tough position of being the “bad” guy by not covering the latest drug. While that may be a consideration, the restricting of advertising is not the best solution. Insurers need to make their case on comparative efficacy to both doctor and patient. Insurers and patients should not want to pay for drugs with minimal incremental benefit. That case is better made downstream from an awareness DTC ad.

DTC advertisers will face a new FDA guidance on price disclosure in the next few months. It will be just a super or voice over stating the list price for a one month supply. This whole exercise is political and unfortunately will not help consumers. What might help more is the drug industry decision to offer comprehensive price information on their branded web sites announced 10/15 by PhRMA. I doubt any drug maker will drop DTC over this requirement although it may give the highest price drugs some cause for concern.

Bob Ehrlich

The Senate recently passed an amendment to a larger health care bill that requires drug prices be disclosed in DTC Ads. The Durbin amendment was adopted with bipartisan support. It really just gives HHS a million dollars to study a way to require the disclosure. What is clear is this idea has strong support from President Trump, Congress, HHS Secretary Azar, and the American Medical Association. So, like it or not, the drug advertisers may be forced to add some price information to ads.

On the surface, that list price disclosure seems reasonable. We see MSRP in car ads, so we know whether it is a premium or economy car. Not that we don’t know that already but it is not unreasonable. For cars, we know we will likely pay somewhat less than MSRP but we do know the range a Mercedes will cost us. Congress thinks consumers deserve to know the price of drugs they see advertised. To Congress that seems like it would help consumers decide if this advertised drug should be considered.

Drug pricing is not like car pricing. Consumers pay much less than the list price and sometimes pay nothing for the $50000 drug for cancer. Admittedly, drug pricing is a Byzantine process that confounds most of us. Each insurance company, PBM, and government payer negotiates prices. Each consumer depending on their insurance pays a different price no way near the list price. Sometimes the consumer would pay out of pocket more for their OTC cough medicine than the $50000 cancer drug.

So how should drug companies disclose drug prices? If the list price is not anywhere near what consumers pay, then how does disclosing it help them? It does not. It helps insurance companies in making DTC more difficult for drug companies to execute. The knowledgeable legislators know that if they force drug makers to talk about price that may discourage them from doing DTC Ads for expensive drugs. Drug makers advertising the $100000 cancer drug may decide that DTC is not worth trying to explain the complexities of drug pricing or face the barrage of criticism for having a sticker shock price.

I think this is the real reason for this amendment. Embarrassing drug companies they hope will put a chill on DTC for cancer drugs, biologics for arthritis, Crohn's, and other new premium drugs. Of course, all drugs will face a guidance on how pricing needs to be discussed. Somehow FDA will make disclosure a time consuming step in a DTC ad. That will add 10-15 seconds to the ad and may make them difficult to execute. Their hope is to get drug companies to stop doing DTC.

So the good news is it will take FDA a while to study and draft guidance for disclosing price. This lag may allow the powerful advertising lobby to show how impractical this disclosure requirement will be. My guess is we may have some compromise that speaks in terms of ranges of price. That is something like “most patients will pay much less than the price listed depending on your insurance coverage.” Or, drug makers may be able to say “the average price paid by consumers is x.”

It may be illegal to require drug makers to disclose price under commercial free speech grounds. I am sure the advertising lobby will argue this inhibits commercial speech. They would have a strong case based on precedent.

My advice to the agencies is to be ready to deal with adding some price statement but I am sure it will be a few years before FDA can figure out how best to do this. They research everything they do and that will take a long time to study. DTC price disclosure sounds great but is just a bad idea that will not help patients.

Bob Ehrlich

The latest Chantix smoking cessation DTC television ad is featuring my favorite wise guy actor Ray Liotta. Looking a little grayer and heavier Ray is still the iconic member of the De Niro/Pesci crew from Goodfellas, maybe only slightly behind The Godfather in my favorites list. Ray is also in my favorite baseball movie Field of Dreams, portraying the leader of the dead baseball players returning to Kevin Costner’s cornfield.

Ray’s lifelong bugaboo was getting to stop smoking. Pfizer is using him to promote Chantix and rather than just being a paid announcer he is actually a real patient, still paid handsomely I assume. I like him in this role. Usually I wonder how much a celebrity adds to a drug pitch. Do potential users really care that a Hollywood type uses a drug? There have been very effective celebrity campaigns, Sally Field for Boniva, Jennifer Aniston for Dry Eye, Phil Mickelson for Psoriatic Arthritis to name a few.

A celebrity campaign needs to get the audience to believe that the celebrity actually uses or really believes in the drug advertised. There are some celebrities who endorse anything and pushing garlic pills, grape juice, reverse mortgages, might hurt your credibility when pushing a cancer treatment. Drug companies need to be very careful that the celebrity chosen has limited exposure as an endorser of health products.

Ray Liotta, to my recollection is not a serial endorser. In fact I do not remember him doing any commercials. That is a good first step. Can I Imagine Ray Liotta having a smoking habit? Sure can. Is Ray credible saying he has had a lifelong problem stopping smoking? Yes. So far so good. What is interesting about the campaign is that Chantix has been on air for years with regular folks pitching their success. Maybe they felt they needed to reinvigorate the story and potential customers would stop and re-engage after all the years of real patient testimonials. Ray got my attention, maybe a bit less than Joe Pesci would have, but any Goodfella is better than none.

I do not know if this is a one off use of a celebrity for Chantix or the first in a series. One thing we know is Hollywood is likely full of smokers, and addicts of other less than legal substances. No credibility issue with Ray having a smoking addiction. I am sure Pfizer will be very careful vetting their celebrity candidates. With all the problems of celebrity reveals on past sexual harassment/assault it is important to do your homework. I think they have chosen well here. Congratulations to Pfizer and their agency for a well done celebrity campaign.

Bob Ehrlich

Allergan’s Botox is going “Brotox” in its latest DTC campaign. That term is not mine as I borrowed it from a Forbes article. Men, yes, we men are a vast untapped market for smoother skin. As I age, my frown lines are forming, and why not try to look better. For me being the frugal sort, I will personally pass and learn to love my new post 60 visage and save my money.

For those men interested in starting on the cosmetic road to rejuvenation Botox has decided to talk to you directly. From the actors in the DTC spot, it looks like the target are 40-50 year olds who are concerned about maintaining their youthful looks. A Matthew McConaughey type in an expensive suit is seen adjusting his tie as the announcer says, “details make the difference”. Another scene shows another professional who seems to be an architect while the voice over says what Botox is indicated to improve. A third actor is shown jogging while the indications are further discussed.

The tone of the ad is that men who get Botox are not vain, just fine tuning their details which make the man better. The closing tag line is “The details make a difference; the man makes them matter.” I interpret that to mean this will not transform you, but just give you the little edge to boost your confidence. These men are already successful, and Botox will help them continue that on that track.

Why are men a DTC focus? It has everything to do with the huge market that is under developed with men. Botox is trying to get them to see cosmetic treatment as something that is perfectly normal and not just for Hollywood stars. They want to show that refining those little facial details is just another step in grooming and dressing well. In other words, real men can use Botox. The number is not yet big but growing fast. According to Forbes it was 400,000 in 2014 but grew over 300% in the last ten years.

So, Allergan sees the benefit in investing in a DTC campaign to make Botox more acceptable to men. That is not easy because the historical and cultural male image is to be accepting of those signs of age. The weathered face of the macho man is ingrained in our heritage. John Wayne and Charles Bronson would not use Botox. Mick Jagger and Keith Richards also a no. Maybe Matthew McConaughey and George Clooney would. So this effort is to get the 40 year old male to see cosmetic dermatology in a new light. The wear their baseball cap backwards generation will likely view these Botox tune-ups differently from my generation. Hey, why not if that is how you want to spend your discretionary dollars.

I still drive a Honda, buy most of my clothes on Amazon, and never will pay for first class air. Sorry Allergan but no Botox for me. Fortunately for them I am a dying breed of male. Goodbye Charlie Bronson and that weathered face. Smoother is in.

Bob Ehrlich

Kantar Media reported full year 2017 DTC spending declined 4.6%. Is this decline any reason for concern among the DTC industry? No, not really. DTC spending has become an integral part of drug brand marketing. There is no drug industry talk of ending it or reducing its importance. There was such talk during the temporary decline of spending about five years ago but that never took hold.

There were several CEOs then who were questioning whether DTC was hurting the drug industry in terms of image. There was joy among the critics that maybe drug companies would end the practice of creating consumer demand. I think the drug companies recognized that the critics would not change their negative views even if DTC was ended. The critics did not like drug companies before the 1997 spending surge and although DTC angered them more, that is not their biggest issue. It has been and is about price. Unless drug makers agree with critics they make obscene profits and cut their prices to generic levels; there will be no peace with the critics. If there were no DTC, price issues would remain. DTC is a convenient talking point and used by critics to lead the public to believe they are being manipulated by greedy drug makers.

So back to the decline of 4.6%. Kantar reported that magazines and Internet companies shouldered the whole decline. In fact television DTC was up over 6% in 2017. The print media industry has a selling job ahead to keep their publications profitable. This is not just about their share of drug ads but a fight for viability of traditional hard copy magazines. Print is still a place to see greater detail on drug benefits and risks and I expect the major print conglomerates to innovate to keep readers and advertisers.

DTC is now a mature ad category. Growth in any given year will depend on new brand entries and when brands are going off patent. We can therefore expect years with growth and years with decline. The 4.6% decline is not the start of any long term trend down. As long as drug companies see a positive ROI DTC ads will continue. We saw the rise of diabetes drug ads the past few years along with the end of erectile dysfunction ads as they go off patent. That is what we will continue to see in DTC spending with some categories accelerating and some ending their ads.

Of course there are existential threats to DTC which could make spending decline dramatically. Those include an outright ban, putting a moratorium on for new brands, taxing it by making it non-deductible, or going to single payer healthcare. None of these will happen in the next few years. That being said, a Democrat House and Senate majority could make it very possible that DTC will be a casualty of healthcare reform. Mr. Trump might sign a bill accepting limitations on DTC as part of a bigger bargain on free market practices.

In the meantime, we will see DTC remain strong in total and see spending shifts within media categories.

Certainly media innovators are looking at new digital platforms such as virtual medicine, point of care opportunities, and new ways to gain efficiency from television and print.

Bob Ehrlich

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.

Bob Ehrlich

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.

Bob Ehrlich

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.

Bob Ehrlich

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.

Bob Ehrlich

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.

Bob Ehrlich

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