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The Wall Street Journal Interactive Edition -- August 7, 1998
Europe's State-Funded Health Care
Is Stymied by Emergence of Viagra
By BETSY MCKAY and STEPHEN D. MOORE
Staff Reporters of THE WALL STREET JOURNAL
As assignments go, this one had its attractions.
Rashid Gabdullin's editor instructed him to become one of the first Russians to try Viagra, the hot new impotency drug ahead of its approval this week in Russia. As the 47-year-old journalist later described it to readers of Moscow daily Komsomolskaya Pravda, two tries of a regular dose failed to stir him, so he took a double dose. Within half an hour, he found himself dashing out of his apartment with an "irrepressible urge to make a woman's acquaintance."
But an electricity blackout in the neighborhood stopped the elevator after he had ridden down just a few floors. When he was freed two hours later, the drug's effects had worn off. So had his desire ever to try it again: "If you're young and healthy, Viagra isn't for you," he told his readers.
Fiscal Headache
But Viagra seems to be the answer for a lot of other men, with three million prescriptions written in the U.S. since the drug was launched in April. That kind of popularity raises a question as Viagra heads to market this autumn across Europe: Who pays? The cost of a healthy sex life could create a monumental headache for the Continent's strained public health budgets. Health officials in country after country are balking at public-insurance coverage of Viagra, which runs about $10 a pill. That leaves Pfizer Inc., the drug's maker, with a market challenge.
"In all European countries there is acute financial pressure on health-care systems," says Professor Alan Maynard, director of the Center for Health Economics at the University of York (England). "And there's lots of discussion about rationing criteria -- what drugs the state health-care system will pay for. Things like Viagra are bringing this to a head."
For Pfizer, "pricing and reimbursement constraints will hold European sales of Viagra considerably below the traditional 20% to 25% of world-wide sales" reached by conventionally reimbursed medicines, frets Arvind Desai, an analyst at New York-based investment research firm Orbimed Advisors. And once initial, pent-up demand for the drug is satisfied, Mr. Desai adds, the cost "will become a big deterrent to sales in many countries in Europe. People just don't have that kind of money to throw around."
Mr. Desai predicts Viagra sales will peak at about $3 billion around the turn of the century. He sees Europe accounting for $400 million to $500 million of that, assuming conservative reimbursement by state health services.
Unlikely to Pay
In Germany, a blue-ribbon panel on Monday advised the Ministry of Health against reimbursing the cost of Viagra prescriptions from national health-service funds. The ministry isn't obliged to follow the panel's advice, but Health Minister Horst Seehofer has already expressed opposition to dipping into state coffers to pay for Viagra.
Representatives for German health insurers warn that up to 7.5 million German men have problems with impotence; if they all seek treatment, the tab could approach 7 billion German marks ($4 billion) a year. That would be an overwhelming financial burden even for Europe's biggest economy: without Viagra, Germany's national drug budget is expected to reach 32 billion marks this year -- a painful 11% of total health-care outlays.
Germany isn't the only country feeling the pinch. France and Italy have refused to reimburse patients for other impotence therapies already on the market, and they seem likely to force their citizens to pay for their own Viagra, as well. In the U.K., where government-funded medicine is politically sacrosanct, prospective Viagra users probably will be forced to see a specialist, as well as their usual family physician, to obtain prescriptions for the drug. A spokesperson for the British Impotence Association fumes that the prescribing curb appears to be a covert form of rationing, because it can take up to 18 months to get an appointment with a specialist in many parts of the country. Most other states of the European Union plan to wait until Viagra is formally approved to decide how much of the tab to swallow along with the pills.
The issue of who pays reflects a debate over using public funds to pay for "lifestyle" medicines -- for such conditions as impotence or obesity -- when government budgets are already struggling to provide genuine life-saving medicines, says Thomas Postina, a spokesman for the German Pharmaceutical Association, a trade group. The biggest surprise in the recommendation by the German Health Ministry's panel is that it doesn't include any exemptions that would allow reimbursement of Viagra prescriptions to patients with a clearly documented need for the drug.
As a result, Mr. Postina says, the move raises potentially serious questions about the state's willingness to pay for groundbreaking, but expensive, drugs in the future. "We're worried that it can lead to a new policy where we'll see other innovative drugs -- perhaps a new cancer treatment -- denied reimbursement someday on economic grounds," he says.
Some people are quicker to draw the line between lifestyle drugs and life-saving medicine. "If the brain is working, but the equipment is not," says Raoul Vanrechem, a 51-year-old Brussels hairdresser, "then the problems are psychological," and Viagra won't help. Mr. Vanrechem sees Viagra as a performance enhancer rather than a problem solver, and says the government shouldn't foot the bill. "If one wants to have performance and fantasy, one must pay big," he sniffs. "Pleasure is expensive."
Martino Afokpa, a 33-year-old dancer, says, "The impotence of a man depends on how he lives, and how much he takes care of himself." Cancer, AIDS and handicapped children should take priority over impotence, something he thinks develops from a decadent lifestyle, he says, adding, "The government has more important things to do with its money."
But Thierry Roumegouer, a urologist at Erasme Hospital in Brussels, says he thinks the drug should be supported by the government. However, he says it should be "absolutely not" for general use, but available only by prescription.
Pfizer expects to win EU marketing approval in September. "And post-approval, we'll be meeting with countries to seek reimbursement," says Andrew McCormick, a spokesman for the New York-based drug maker. "But we plan to introduce Viagra even without reimbursement and continue the dialogue because we want to make the medicine available to patients as rapidly as possible."
Thriving Black Market
In Russia, which last month licensed Viagra for sale starting in October, the government says it isn't planning to subsidize the drug, which Pfizer plans to price at about $12 a pill there. Russia's free medical care extends only to some essential drugs administered in the hospital, although some veterans qualify to receive all drugs for free. Most men won't be able to afford Viagra on the average monthly Russian salary of $177.
Still, most Russians don't expect the government to pay for the drug. "That would be unreasonable," says Dmitri Pushkar, a leading urologist at the Semashko Medical Institute, a research and clinical facility. "We have other drugs for severe diseases that the government must pay for."
Despite the cost, though, plenty of Russian men are eager to get Viagra. Those men with the means to buy the blue, diamond-shaped pills are fueling a thriving black market, say analysts of the Russian pharmaceutical industry. Viagra and counterfeit versions of the drug are imported by entrepreneurs from the U.S., Africa and other destinations and then sold on the street for $25 to $120, according to Russian press reports. Private clinics offer treatment for impotence using "new American methodologies." "In our country, everyone wants to be a superman," quips Mr. Pushkar.
While Russia doesn't have official statistics on impotence, a study by the Semashko Medical Institute found that 30% of respondents of a survey of 2,000 patients between the ages of 35 and 70 had some form of erectile dysfunction, the textbook term for impotence. Market research by Pfizer found 14% of men over 35 to have moderate or severe impotence, according to Robert Marshall, the company's head Moscow representative.
Impotence is a serious insult to some patriotic Russians. "There are far fewer impotent Russians than Americans," thunders Nikolai Lopatkin, director of the prestigious Russian Academy of Medical Science's Urology Institute.
That could well be. In the U.S., Pfizer says, the average Viagra user is 66 years old. By contrast, male life expectancy in Russia is only 58 years. Smoking and heavy drinking are common habits, and are known to contribute to impotence.
"Russian men live a hard lifestyle," says Peter Scheplev, a professor of urology at the Semashko Medical Institute. "Of course, it can't help but have an effect."
Lifestyle vs. Life-Saving
Lifestyle raises another question about Viagra use: How much is enough? "In the U.S., we've said to private [health] plans that six pills a month seems like a reasonable coverage," says Mr. McCormick, the Pfizer spokesman. "And we'd agree that you'd want to take care that the drug is prescribed for a medical condition, not recreationally."
Unauthorized use -- such as Mr. Gabdullin's double dose -- and the dubious quality of black-market supplies pose a danger. But even used under supervision, Viagra isn't without risk. Following Viagra's ballyhooed introduction in the U.S., Pfizer and the U.S. Food and Drug Administration reminded physicians that the drug can cause sudden drops in blood pressure when administered together with certain types of heart medication. There also have been warnings about effects on vision, as well as possible adverse interaction with diabetes medicines, but Pfizer officials insist there's no causal link between Viagra and a handful of men who died shortly after taking the drug.
Viagra has sailed through regulatory scrutiny by the European Medicines Evaluation Agency, the EU's main drug watchdog. In late May, a key EMEA scientific panel unanimously recommended approval of Viagra. Consultations currently under way between the European Commission and health ministries of member states are expected to lead to formal marketing clearance by late September or early October. But sales won't begin until Pfizer clears the toughest hurdle of all-pricing negotiations with individual EU countries. With few exceptions, European governments keep a tight rein on health care costs -- and strict price controls on prescription medicines are the rule across the EU.
The most potent weapon is reimbursement, the proportion of a drug's price paid by state health systems. In theory a drug company can charge any price it wants but if governments decide the price is too high they can refuse to reimburse it. And because such a slim proportion of Europeans have private insurance that covers the price of medicines, the lack of reimbursement status could decimate a drug's sales.
"A drug company stands to lose a majority of potential sales in Europe if its drug isn't reimbursed," says Prof. Maynard, the British health economist. "But reimbursement decisions are amazingly arbitrary and imprecise, with enormous local and national variations. With Viagra, the decision on reimbursement will determine who controls access to the drug. But if governments don't provide it, they could create an illicit market where the stuff is smuggled in and sold at a fraction of the official price."
Pfizer officials vow to defend their patent rights and pursue pirate producers aggressively. The company is keeping other details of its commercial strategy-including the prices it plans to charge around Europe-under wrap.
In Russia, neither price nor prescription will stand in the way of determined playboys, despite the risks. And some specialists say that some embarrassed men may prefer to buy Viagra on the black market rather than divulge their problem to a doctor. "It's impossible to control, says Dr. Pushkar, the urologist. "If someone wants to get it, they will."
-- Special correspondent Jennie James contributed to this article
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