Consumers in the $94 billion prescription drug market are mostly indifferent to price. What will happen when they all become budget conscious?
BY Alexandra Alger
04/05/99
Forbes
Page 130
THE NEW ARTHRITIS DRUG Celebrex racked up 881,000 prescriptions in its first eight weeks, the hottest drug launch since Viagra.
Marketed by G.D. Searle and Viagra-maker Pfizer Inc., Celebrex is the first in a new class of drugs known as Cox-2 inhibitors that promise potent pain relief without bad side effects. Current medications such as ibuprofen can cause ulcers and internal bleeding in some patients.
But hold on-fewer than 5% of patients experience the most severe side effects from current drugs. The new Cox-2s aren't any better at killing pain. And Celebrex is far more expensive-$76 for a month's supply at retail, compared with $24 for prescription generic ibuprofen. Yet Celebrex already claims 16% of prescriptions for arthritis pain, second only to ibuprofen (at 28%). Cox-2 drugs' share will go only higher if Merck &Co.'s entry, Vioxx, wins approval later this year. Some health plans fret that half of arthritis patients could switch to the costly new drugs.
Why would doctors rush to prescribe the latest meds for patients who may not need it? The simple answer is that doctors pay no mind to costs at all. Drug companies spend billions plying docs with free samples and ebullient literature about their latest elixirs. Consumer ads stoke demand from patients themselves. And drug-benefit plans-aimed at keeping costs down-only drive demand higher; why not take a Cox-2 when it costs you the same $10 "copay" as an older drug?
"The plain fact is that physicians don't know the cost of the very drugs they are prescribing," says Dr. Alan Blum of Baylor College of Medicine in Houston. In 1993 he cowrote a small study showing that most docs have little idea of the prices of 20 popular drugs they recommend. One of his colleagues recently prescribed the antibiotic Ceftin for an uninsured woman with pneumonia. She balked at the $200 price, got sicker and ultimately received free samples. Even Blum admits that in terms of a cheaper alternative, "I wouldn't even know where to look."
Physicians often prescribe higher-priced drugs even when an identical copy-the generic-is available, usually at a small fraction of the cost. Generics now account for 40% of prescriptions but would be 75% if they were prescribed every time they could be, says Roger Williams, a deputy director at the Food & Drug Administration. Indeed, generics wouldn't even get 40% of the market if not for laws that permit pharmacists to substitute them for brand names unless the doctor insists otherwise.
Physicians say they prescribe what's best. For Cox-2 drugs, safety is an important factor. More than 20 million patients have severe arthritis. Some 13 million use ibuprofen and other nonsteroidal anti- inflammatory drugs regularly. Of those, 2% to 4% have severe stomach problems; 15% have milder side effects such as nausea and heartburn; up to 17,000 die from drug complications annually.
"The numbers are small, but why take a chance?" says Dr. Bevra Hahn, president of the American College of Rheumatology. In her Los Angeles practice, she prescribes Celebrex to any patient whose insurance covers it.
For health plans, the problem is figuring out who really needs it. Blue Cross of California, with 4 million members, gets 200 new requests for Celebrex every day-but only 3 qualify.
Even for patients with cost concerns, including those who lack drug coverage-56 million Americans-doctors can show stunning indifference to price. Belinda Franks of Albertville, Ala., has been trying to get doctors to trim her ailing mother's drug bills, which exceed $200 a month.
"When I ask them if there are cheaper drugs, they say, 'No, not really,'" she says, frustrated. "They don't seem to want to help."
Other times patients are the ones who ignore the costs. It is why Prilosec, a treatment for severe heartburn known as gastroesophageal reflux disease, is a top seller with $3 billion in sales-even though the generic form of Zantac, at half Prilosec's price, works fine for many patients.
"It's probably overprescribed," admits Dr. Sally Ling, an internist with Kaiser Permanente in Overland Park, Kans. "People come in and they want 'the little purple pill.' "Many doctors relent, rather than risk losing the patient to a rival, says Peter Penna, head of pharmacy services for Cigna Healthcare.
What to do? HMOs are starting to demand higher copays, which might curb some demand for the hottest products. Coventry Health Care in Nashville is working on a Web site to let doctors easily pick cheaper choices. If drug costs keep going up, Coventry may have to cap pharmacy benefits or cut doctor reimbursement, warns James (Rusty) Hailey, a Coventry vice president.
The U.S. drug industry has grown fat on the price-is-no-object attitude that prevails among both doctors and their patients. Someday, almost inevitably, that is destined to change. Prescription drugs now account for a big chunk of the increase in the nation's health-care bill. If insurers and health maintenance organizations find some way to penalize doctors or patients for using the costliest and newest drugs, then drug manufacturers are going to feel the pinch.
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