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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

DTC in Perspective: Drug Prices in DTC Ads? Bad Idea Gets Traction.

September 5, 2018 0

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.

Bob Ehrlich
“Drug makers may be forced to add… price information to ads.”
-Bob Ehrlich

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

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

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DTC-In-Perspective by Bob Ehrlich

DTC in Perspective: Keytruda Enters the DTC Arena

February 10, 2017 0

Merck’s cancer drug Keytruda recently began its DTC campaign competing with Bristol Myers’ Opdivo. What is significant is that highly targeted drug categories continue to invest heavily in DTC. Keytruda is a biologic injection that has indications for non small cell lung cancer, advanced melanoma and head and neck cancer.

Bob Ehrlich
“Keytruda has done an excellent job in its DTC ad.”
-Bob Ehrlich

The market is small by size compared to mega categories like diabetes and cholesterol where sufferers are in the tens of millions. Lung cancer cases number about 200,000 newly diagnosed annually. Of course, when the treatment price is around $100,000 per year for biologic lung cancer treatment versus less than a thousand for cholesterol drugs; the DTC payback is certainly achievable.

Roughly the numbers show a $50 million ad campaign for Opdivo and Keytruda need only gain 500 new patients from DTC to break even on a revenue basis. While consumers are the DTC apparent target, these ads also reach oncologists. Once an oncologist knows patients are seeing the DTC and will ask about the drugs, it clearly provides the motivation to consider using them.

The Keytruda ad is very different from Opdivo. While Opdivo used a headline dramatic announcement approach, Keytruda chose an individual patient story. Using an actor portrayal Keytruda showed a 60ish age woman named Sharon telling her story in a tv production studio. Sharon says she learned her type of lung cancer could be treated with an alternative to chemo. She tells how she was given only months to live but a year later after treatment she is still there with her family.

The commercial is filmed in black and white which adds to the seriousness of the presentation. Sharon’s story in this 90 second ad is told very well. It is very informative and understandable using Sharon and supers emphasizing the key benefits. What is interesting is that they are showing Sharon in the production studio both telling her story and in the makeup room preparing to be filmed. Her family is also at the studio watching her being filmed telling her success story.

The sell portion of the ad is about 30 seconds with fair balance risks and warnings in the last minute. Clearly the ad is technical in terms of disclaimers about who can take the drug and one wonders if patients who have non small cell cancer are aware of their biomarkers and gene types mentioned in the ad.

Given the high prices for treatment stock analysts see Keytruda generating revenue in the billions. A DTC campaign costing $50-100 million for a drug bringing in billions is a small risk for Merck. Opdivo had been criticized by some doctors for advertising to patients in an area best left for oncologists. This is a fair question but advertising breakthrough therapies does help potential patients become aware of their options. It also puts pressure on insurance companies to cover the large expense.

Keytruda has done an excellent job in its DTC ad. This campaign will get attention and is very different in executional style from Opdivo, an ad I also think is very good. The broader concern is whether advertising $100,000 drugs to consumers causes Congress to look more critically at both drug prices and DTC ads. While individual patients get extra months and in some cases years longer to live, government payers and insurance companies are paying a lot for that life extension. While no one wants to put a price on those months, unfortunately it is a calculation needed to be considered by policy makers.

Bob Ehrlich

DTC-In-Perspective by Bob Ehrlich

DTC in Perspective: Election 2016 and DTC

November 11, 2016 0

It is finally over. We have a new President elect. We have a relatively unchanged Senate and House. What does this mean for the DTC Industry? Both candidates were critical of the drug companies during their campaign. President-elect Trump has not said anything about DTC, but he has called for price negotiations with drug companies for Medicare. That would greatly affect drug company profit margins and result in R&D and marketing cuts.

My fear is that there will be lots of bi-partisan support for negotiating price. It may be too hard to say no from a Congress anxious to show its populist bent. The drug lobby may be able to convince Trump that cutting their prices through government negotiations has negative consequences on R&D investment. I doubt Mr. Trump has given the drug business much thought beyond his general comment that billions can be saved through tough negotiations.

Bob Ehrlich
“DTC will survive any changes instituted by President Trump.”
-Bob Ehrlich

The good news for drug companies is there will be a move towards less regulation. I also expect an FDA that is quicker to act on drug approvals. Clearly Trump will want both drug companies and device makers to get cost effective drugs out to the marketplace faster.

Now what about Obamacare? It has proven to be a difficult program to afford for many Americans. Despite the high cost, most of those insured under it will still want access to insurance. Trump will push for more free market options including opening up the insurance market nationally. He will likely have a subsidized program for Americans with pre-existing conditions.

DTC will survive any changes instituted by President Trump. While prices may be pressured to stay lower, I do not think Trump and his business advisors want to kill the drug industry through punitive regulations. Trump is not Bernie Sanders who wanted to punish “evil” drug companies. I am hopeful that a free market oriented approach to health care will be good for America. Opportunities will be plentiful for companies promoting evidence based approaches to delivering care more efficiently.

The Republican Senate and House should be relatively drug company friendly as long as they are not seeing sharply rising prices. The drug companies must exercise some restraint by keeping price increases related to inflation or other justifiable costs. A Trump presidency is highly unpredictable so I expect drug makers to face some uncertainty in the short term.

Bob Ehrlich

DTC-In-Perspective by Bob Ehrlich

DTC in Perspective: Taking on Anecdotal DTC Critics

September 22, 2016 0

Everyone has an opinion on drug ads. From skits on Saturday Night Live, to the halls of Congress we hear critics mock DTC. Last week I criticized the 9/12 Ad Age story citing terror tactics used by drug marketers. The managing editor, Ken Wheaton, of Ad Age decided to write a follow up column telling pharmaceutical marketers to take a chill pill because he was surprised how they defended their ads in their “terror” story. Ad Age decided to double down in their criticism of drug marketers.

Bob Ehrlich
“Ad Age’s Mr. Wheaton is wrong about the facts.”
-Bob Ehrlich

Mr. Wheaton says drug companies are jacking up ad prices to pay for the advertising. This is why these anecdotal stories are so off base. Mr. Wheaton has decided that it is obvious that DTC raises drug prices. Why? Because he says it must be so from his experience. He may be very knowledgeable about general advertising as his title would suggest. He is dead wrong that drug advertising causes high prices. The facts do not support his views. Drug marketers spent a bit over $5 billion on DTC in 2015. That is only about 1.5% of sales. Drug companies do not set their prices based on ad budgets. That might be true in advertising driven consumer brands where ad budgets make up 30% or higher of sales but not where multi billion dollar brands are spending a $50-100 million.

Mr. Wheaton makes some fair points that the drug industry has a reputation problem. He is certainly on point that drug makers must be aware of the negative impact high prices have on this industry image. They have not helped themselves with the recent EpiPen pricing hearings or Martin Shkreli smirking during his hearing day in Washington. Drug companies have the unenviable task of justifying higher prices in the United States versus price controlled developed countries. The American consumer does not like paying more but they also want drug innovation. While the media and political critics doubt the claim that cutting prices will reduce innovation, the economics of the drug business say otherwise. If drug prices were cut 30% to match Europe and Canada, that is coming right out of the bottom line. I challenge any business to reduce its profit in its biggest market by 30% and not affect R&D.

Advertising, however, is not the cause of the pricing issue. Drug companies have had this problem pre and post DTC advertising.  Drug ads have become a convenient symbol for criticism of the entire industry. Drug companies do weigh the pros and cons of advertising in terms of causing criticism versus the projected sales increase. What is disturbing is Mr. Wheaton making the unsupported statement that only drug marketers and their marketing partners support their right to advertise. Where is his data that says that? Many consumers would be happy to see drug ads banned, and those folks may even be greater in number than those who want to see drug ads remain on air. Clearly it is not a unanimous view and I suspect many consumers against drug ads feel that way because they think that DTC ads raise their prices.

Mr. Wheaton recommends drug makers stop their ads. Does he feel the same about ads for other products often criticized? What about fast foods, violent video games, beer, explicit music, unproven health supplements, and many others often criticized for causing harm? Mr. Wheaton has taken drug marketers to task for lawfully trying to build awareness of their highly regulated products where every word in their ads is reviewed by FDA. There is no doubt that drug ads are meant to sell product. Drug makers are in the profit business. Profit leads to investment. Advertising allows new competitors to compete with the category leaders.

In a world of no DTC, drug makers will still price as high as the market will bear. That is the same strategy used by every business including what Ad Age charges their advertisers. Mr. Wheaton is very convinced in his anecdotal and observational argument. Ad Age’s Mr. Wheaton is wrong about the facts, however, and in his cynicism about the value of drug ads.

Bob Ehrlich

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