The large pharmaceutical companies are in the midst of what I view as a major transformation of their business models. I have documented some of these changes here. One has been the outsourcing of new drug development to contract research organizations, referred to as CROs (see, for example: CROs Continue to Prosper; Benefits of Big Pharma Outsourcing). Another manifestation of this change has been a series of ethical lapses including large payments to academic physicians and the publication of ghost-written medical journal articles (see: Details Emerge About Ghost-Written Medical Articles for Wyeth; Medical Schools Share Some Blame in Scandals Involving Pharma Payments to Faculty).
More evidence of this change has been the company emphasis on direct-to-consumer (DTC) advertising, which I have come to believe is inappropriate (see: Effectiveness of "Direct-to-Consumer" Drug Advertisements). Putting all of these changes together, what I see happening among these companies is a heavy emphasis on marketing and the abandonment of their previous moorings to science and ethical practices. A recent article about drug industry expenditures on marketing reinforced my previous ideas (see: How the Drug Industry Spends $20 Billion a Year On Marketing). Below is an excerpt from it:
Despite all the job cuts for drug reps, despite the endless stream of TV drug ads, the pharma industry still spends most of its U.S. marketing money the old-fashioned way: Paying salespeople to call on doctors and other health-care providers. Drug companies spent “at least $20.5 billion in marketing” in 2008, the CBO said in a research brief ....The big categories include:
- $12 billion for “detailing,” the industry term for sending sales reps to talk to doctors, nurses and other providers....In each of those categories, branded drugs are competing against generics for a big market.
- $4.7 billion direct-to-consumer advertising, and an additional $400 million on advertising in professional journals. CBO took a closer look at consumer advertising for about 2,000 drugs and found that TV ads accounted for 62% of spending, print ads made up 35% and online ads were 4% ....
- $3.4 billion sponsoring professional meetings and events. This includes sponsoring courses and talks that doctors can attend (or watch online) in order to satisfy requirements for continuing medical education (known as CME). Industry-funding of CME has been getting some attention in Congress lately, with some lawmakers calling for public disclosure of who pays for what.
Some recent articles have documented recent rising drug prices in the face of possible healthcare reform, an attempt to come "under the wire" in anticipation of future price restrictions of drugs (see: Drug Makers Raise Prices in Face of Health Care Reform). Here is a passage from this article:
In the last year, the industry has raised the wholesale prices of brand-name prescription drugs by about 9 percent, according to industry analysts. That will add more than $10 billion to the nation’s drug bill, which is on track to exceed $300 billion this year. By at least one analysis, it is the highest annual rate of inflation for drug prices since 1992.
I believe that the drug companies have refrained from such abrupt price increases in the past out of concern for their reputations in the eyes of the general public and that this is no longer a primary concern for them. For me, this is merely additional evidence of the ideas that I have stated above -- they believe that sophisticated marketing can trump a distaste for the industry and its products on the part of consumers. In short, the drug companies are concerned first and foremost with their bottom line and will invest whatever resources they deems necessary in marketing to enhance their profits.
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