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DTC-In-Perspective by Bob Ehrlich

Revolutionizing Pharma: The Rise of Direct to Consumer Pharmaceutical Drugs

December 3, 2024 0

One of the current trends in DTC marketing is the availability of some branded drugs shipped directly from the manufacturer. Some pharmaceutical companies are starting to cut the wholesalers and retailers out of the purchase cycle. While still in its infancy, the direct to consumer operations have enormous implications for how consumers will get their drugs in the future. Eli Lilly and Pfizer are the first to offer this service.

The direct sales of drugs to consumers have been in place for nearly a decade from non-pharmaceutical companies. Hims started in 2017, and there are now many non-pharmaceutical companies diagnosing, prescribing, and shipping to consumers. Drug companies have decided to enter direct sales in the past few years.

Why are drug companies now getting into the direct sales business? There are several good reasons for this new approach. First, drug makers are now seeing a huge growth in direct sales companies offering compounded versions of their drugs. These are cheaper and, in categories like weight loss, have lots of appeal to consumers. Second, cutting out the middlemen gives drug companies better ability to lower drug prices. Third, there are enormous marketing advantages to knowing your customers and tracking their purchases over time. Fourth, drug companies are concerned about counterfeit drugs through reimportation which is a real problem for consumers ordering from the internet. Fifth, consumers like the convenience of getting diagnoses and prescriptions without having to see their doctor in person.

“Cutting out the middlemen gives drug companies better ability to lower drug prices, know their customers, and combat counterfeit medications – reshaping how consumers access healthcare”

I would expect that drug companies will greatly expand their direct to consumer programs and use traditional DTC advertising to make consumers aware of their purchase options. The direct business will not replace retail drug stores or drug wholesalers for most drugs. Most of the growth will come from lifestyle categories like weight loss, sexual dysfunction, sleep disorders, migraine, anxiety, and depression. Any category where an online survey and virtual healthcare can diagnose a consumer condition is an opportunity for direct sales.

There are legitimate ethical and policy implications to expanding direct pharmaceutical distribution. The non-pharmaceutical direct business makes it easy to get prescription meds through an online survey or telemedicine that inappropriate prescribing is possible. I expect pharmaceutical companies will have better controls in place to make sure a prescription is justified. After all, these big pharma companies have a lot more to lose in public reputation and through regulatory, public policy, and legal actions.

The Amazoning of America has certainly shown that consumers love the convenience of shopping from home. Getting a diagnoses, prescription, and delivery online is becoming accepted for many drug categories. Drug companies see the potential and expect major growth in this channel.

Bob Ehrlich

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DTC-In-Perspective by Bob Ehrlich

Trump and Pharma

November 12, 2024 0

The election of Donald Trump is having pharmaceutical companies evaluate how things may change in terms of legislation and regulation. Trump is not yet clear on his moves regarding pharma. In his first term, he criticized the drug companies for pricing higher in the U.S. than other developed countries. Republicans in Congress have generally not allowed punitive legislation on price controls. They understand the negative impact price controls would have on R&D. Trump wants lower prices and that is publicly popular.  Acting on PBMs would be one option. Another would be allowing and promoting reimportation of drugs.

The DTC Industry should be nervous about Robert Kennedy Jr. being given a large role in healthcare policy. He said on 11/4 that he wanted to get Trump back in D.C. so they can “ban pharmaceutical advertising on TV.”  Scary comment. Kennedy is known for anti-vaccine sentiment and the desire to get corporate influence reduced. He is anxious to focus on prevention of disease which he feels is neglected in budgetary decisions. Kennedy thinks DTC advertisers exert influence on editorial coverage. Anyone who has watched news coverage knows the drug industry has not historically been favorably covered.

I doubt Trump will act on DTC advertising. He did not in his first term and a Republican Congress will recognize the free speech rights to advertise. I do expect Trump to speed up the regulatory drug approval process and that should be a net positive for innovation. In fact, expansion of drug use and DTC ads promoting such should help in the disease prevention goal of Kennedy.

Will FDA be asked by Kennedy and Trump to make DTC harder to execute? It is already harder with the latest OPDP rule recently implemented. Can it be made so restrictive that DTC ads are impractical? That is certainly a possibility, but the drug, media, and advertising agency lobby is strong and persuasive. Usually, the pro advertising forces have prevailed. Republicans have historically been pro-advertising, and I expect Trump not to act even if Kennedy proposes a ban.

Uncertainty is never helpful in DTC planning and the anti-DTC proponents will make a lot of noise. I remain confident, however, that no actions will be taken to ban or further restrict DTC.

Bob Ehrlich

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DTC-In-Perspective by Bob Ehrlich

Bernie Sanders Hearing on Drug Prices

November 6, 2024 0

On September 24, Novo Nordisk CEO Lars Jørgensen testified before the Senate which I watched on C-SPAN. He was asked to appear to discuss the reasons for high prices for GLP-1 diabetes drug Ozempic and its weight loss sister drug Wegovy. The savaging of drug company pricing policies is an ongoing cause for Sen. Sanders.

Bernie pointed out in his opening statement that US prices for Ozempic and Wegovy are multiples of their price in Germany, the UK, Canada, and other European countries. With his usual outrage, Bernie demanded answers from big pharma. Mr. Jørgensen had a few reasons for higher prices, most important that the list prices are high because Pharmacy Benefit Managers (PBMs) want drugs with high list prices. This is because rebates to them are a percent of list price. According to Mr. Jørgensen, Novo only gets 26% of the list price, the rest going to PBMs.

He also said that insurance companies set the net price consumers pay, not drug companies. Bernie then said that even with PBM rebates US prices are still too high. There was no definitive answer given by Mr. Jørgensen on the reasons for the difference between US and European pricing. What was clear was neither Republicans nor Democrats were satisfied they got their answers. Senators seemed frustrated with the complex nature of drug pricing and want legislative action on how PBMs get compensated.

The reality is that US drug prices are higher because the drug makers face price controls in most other countries. Prices would be lower if PBMs were cut out of the loop but still be higher than Canada or Europe. The US consumer partially subsidizes R&D for the world. That is unfair, of course, but reality. If Bernie got his wish and drug companies charged the European price, we would have less R&D. Mr. Jørgensen pointed out Novo Nordisk is spending $30 billion on increasing manufacturing capacity and $4.2 billion on Diabetes R&D last year. He said their annual R&D budget was more than the National Institutes of Health spent. If US drug prices historically matched Europe, it is likely we would not have Ozempic or Wegovy available today.

Innovative drugs like Wegovy will come down in price as production is ramped up and competitors enter the market. The obesity market is huge and Wegovy and Lilly’s Mounjaro will grow exponentially if price comes down significantly. Their makers know this and once they have enough production capacity, they will cut prices and vastly expand usage. Their large DTC spending shows how much they think they can grow the market.

As the GLPs increasingly show health benefits beyond diabetes and obesity, such as for cardiovascular and kidney disease, it is imperative that prices are low enough to get mass use covered by insurers and affordable for direct pay patients. Our collective health may depend on a significant cut in prices.

Bob Ehrlich

DTC-In-Perspective by Bob Ehrlich

DTC in Perspective: Trump Drug Plan and DTC Price Disclosure

May 18, 2018 0

I was watching HHS Secretary Alex Azar during the White House press briefing unveil an idea we have heard pushed before. That is, DTC advertising should disclose the price of the advertised drug. That sounds fair but is a lot more difficult to implement than any other advertised category.

Most advertised retail prices have relevance to consumers. A car advertised at MSRP will sell for somewhere between 85-100% of that price. That is true for most products that disclose prices. Health care prices are wildly variable depending on the payer. Those prices can vary by as much as 50-75%. I understand the goal of HHS. It is to give consumers an idea about how expensive a drug is before they and their physician make the decisions to use it.

Bob Ehrlich
“I doubt a DTC ad is the right place to discuss price.”
-Bob Ehrlich

In my last column on this topic, which was written last July after the American Medical Association recommended that a drug’s price be required in DTC ads, I said prescription drugs are unique in that consumers have no idea what the advertised drug costs based on the ad itself. No other category has ads where its products range from $300 a year to $100,000. Consumers who are interested in an advertised drug may be in for sticker shock and depending on coverage may be paying a high out of pocket cost. Secretary Azar thinks that the consumer deserves to know that price information in advance. The issue is how to do that in the prescription market with its myriad of discounts. What consumers want to know is what they will pay, not what their insurer will pay. Given the numerous payers, all with different formulary coverage and individual discounts, that is hard to communicate.

Clearly drugs can be broadly categorized by cost, so perhaps an ad can say in what pricing category the drug fits. Maybe there are terms HHS can come up with to give consumers an idea in which cost category the drug belongs. Even if they do, consumers care what they pay not the listed retail price. It is possible a $100,000 drug costs them less than the $3000 drug based on reimbursement.

This price disclosure motive seems to be designed to put pressure on drug makers to be embarrassed advertising high priced drugs. That may mean those $100,000 cancer drugs prefer not to advertise if they had to list a high retail price in the ad. My recommendation would be to have ads refer to a link on their website or an HHS website that can discuss price in detail. In a 60 second spot HHS can only expect a super that discloses a list price or a voice over saying what the drug may cost. That would be totally insufficient for consumers and more likely confuse them.

OPDP likely will propose research studies on how best to convey price and we can expect a guidance several years out. I do not agree with the practical value of some of their research studies but this one deserves careful study. I doubt a DTC ad is the right place to discuss price but if it is mandated by FDA then it must be done to help consumers evaluate a drug on the cost/benefit context, and not just to generate public outrage that some drugs are very expensive.

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DTC-In-Perspective by Bob Ehrlich

DTC in Perspective: AMA Delegation Pushes for DTC Ads to Tell Price

July 7, 2017 0

Some state delegations are pushing the AMA to adopt a position to push drug makers to include the retail price in their ads. They feel full disclosure will inform consumers that some drugs are very expensive up front. The physicians pushing this idea feel drug makers will be held more accountable by the public if they disclosed prices in their ads.

Clearly these advocates hope that forcing drug makers to disclose price in ads will create pressure on drug makers to keep prices in check. The question I have is, is disclosing price a net positive or negative at the stage of awareness advertising? Consumers are entitled to know prices of what they are being prescribed. Does upfront price disclosure help them make a better decision or just add confusion?

Bob Ehrlich
“Advertising price…will not be a net positive for consumers.”
-Bob Ehrlich

In a world where the advertised price is what you pay, then disclosing it makes sense. In the drug world, however, consumers do not pay retail prices. There are many net prices to consumer depending on insurance, co-pays, formulary position, and discounts offered by drug makers. The retail price is only relevant if the consumer pays it. I understand that many expensive drugs are not a viable option unless the consumer has good reimbursement. That viability is rarely known by the consumer until they take that prescription in to be filled.

Advertising price generally will not be a net positive for consumers. An expensive drug that says it costs $100k a year may scare consumers away from asking about it even though it may in fact cost them nothing. A $20 a month drug may sound cheap but a consumer may be paying full price for it because of coverage. The only intent of this potential AMA policy is to embarrass drug makers of very high price drugs. Pressuring drug makers on price is fair game for insurance companies, PBMs, and government payers. Retail price disclosure will only cause angst and confusion among consumers.

I also have concerns that consumers are not experts on price/value of drugs. Does curing Hep C for $80,000 cost less than liver transplant, or long hospitalization? Does paying $100,000 for an extra year of life make sense for a cancer patient? These decisions are complex and required an informed factual basis. It makes sense to have independent medical third parties do research on drug price/value and have consumers and doctors made aware of those analyses. I can even support ads being required to have a web site posted that has those analyses.

I understand doctors are frustrated with drug prices. I also know some drug companies have gone too far in aggressive pricing. The solution is in self-restraint, tough negotiations by payers, and well done research on cost/benefit of drugs. Advertising retail price will not help consumers and in fact may discourage them from seeking treatment because they assume they cannot afford the drug.

Bob Ehrlich