lavalamp, I didn't see any specific LGND story in BW yet, but there are a couple of intersting ones that are relevant. One is increased drug costs even though the cost of a given drug is only rising modestly. The reason is simply more drug usage because patients want more and the new drugs are expensive. Rezulin was cited as one of the examples. Also of note yesterday was the persistance of HIV, even when levels become undetectable. Rexinoid treatment of resting lymphocytes could help in that area, although I'm not sure about specificity.
Here's the article on the increase in drug prescriptions:
DRUG COSTS JUST WON'T GO
DOWN EASY
Price hikes are slower, but more pills
are prescribed
Back in 1992, candidate Bill Clinton demonized drugmakers as the greedy
culprits behind soaring health-care inflation. Stung, the industry promised to scale
back its annual price increases of 7% to 8%. And lately, prices have inched up by
less than 3% a year.
Why, then, are health insurers such as Aetna, PacifiCare, and Oxford suddenly
blaming soaring drug costs for their disappointing profits? The total tab in the U.S.
rose 13.7%, to $93.3 billion, for the 12 months ended Sept. 30, according to
research firm IMS America. That's twice the increase health-maintenance
organizations expected six months ago, and carriers expect the unwelcome
torrent will persist through 1998.
THEY ASKED FOR IT. There's a simple reason behind the surprise rise:
Patients are using more drugs than ever--and often pricier ones. Pharmacies have
been filling 5% more prescriptions than last year, and more of them are for
high-priced new drugs. Eli Lilly & Co.'s schizophrenia drug Zyprexa and
Warner-Lambert Co.'s Type 2 diabetes drug Rezulin should produce 1997 sales
of $700 million and $400 million, respectively, estimates Cowen & Co. analyst
Stephen M. Scala. Sales of cholesterol-reducing drugs such as Merck & Co.'s
Zocor and Warner-Lambert's Lipitor are up 37%.
Ironically, these new drugs are just what the managed-care companies ordered.
For years, they argued that more therapeutic-drug use would lower overall
medical expenses. Studies by the Institute for Clinical Outcomes Research have
demonstrated that up-front investments in disease management, including drug
therapies, can reduce overall medical costs for some diseases by 30% to 50%.
In practice, though, managed care hasn't seen a clear payback. Few
managed-care plans have the data-management systems, or the cooperative
relationships with doctors, that would let them identify which patients will benefit
from more intensive, and expensive, drug regimes.
At the same time, HMOs have failed to anticipate drugmakers' success in
marketing new therapies. Pharmaceutical companies have bulked up sales forces
and are expected to spend over $1 billion on consumer advertising this year, up
from $345 million in 1995, according to market-research firm Scott-Levin. The
result: ''There's a whole new generation of patients coming in and telling
prescribers what they want,'' says P. David Jarry, a medical director for Fallon
Healthcare System in Massachusetts.
Often, doctors and patients demand more expensive new treatments. Consider
Warner-Lambert's Rezulin. Older treatments for diabetes cost pennies a day, but
Rezulin costs about $5. HMOs argue that many Type 2 diabetes patients do just
as well with the older sulfonylureas. Warner-Lambert says clinical studies show
that Rezulin taken in combination with sulfonylureas is more effective in controlling
the disease with fewer side effects.
SHORT LISTS. Soaring sales of costly new products are lifting drug company
results. Net income from operations at Lilly, Warner-Lambert, and Merck should
jump from 15% to 20% this year, according to a September report by Cowen &
Co. At HMOs, though, drug expenses are shaving up to half a point off pretax
margins that range from just 3% to 5%. That's why some HMOs are trying to rein
in costs. PacifiCare has new incentives for doctors to prescribe cheaper drugs,
helping to pare annual pharmacy-cost increases to 7%, from 14% earlier this
year. Fallon sends doctors monthly reports on drug usage.
Managed-care companies also will continue to tighten their lists of drugs. Patients
of United HealthCare Corp. now pay $10 for approved drugs, $5 for generic
substitutes, and $25 for products off the list. For many newer drugs, though, there
is no generic alternative. And drug companies still have
a raft of possible stars in their pipelines: Pfizer Inc.'s Viagra, for erectile-tissue
dysfunction, could be a $1 billion-a-year product. Drug prices may be stable, but
actual drug costs should keep soaring.
By Amy Barrett in Philadelphia and Keith H. Hammonds in New York, with
Steven V. Brull in Los Angeles and bureau reports |
