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Prescription Drugs: Why Consumers Need Our Help
Joel
Gurin
October 10, 2002
Oregon Conference on Creating a Functional Marketplace
For Prescription Drugs
I'm very happy to represent Consumers Union at this conference today. This is a unique gathering, because it brings together so many different groups that are concerned about prescription drug issues. And Consumers Union is here on behalf of one very important group: the American consumers, of all ages and income levels, whose health will be at risk if they don't get the medicines they need.
We're here because we've been impressed by what the state of Oregon has done to help consumers find the right prescription drugs at affordable prices. And we're here because we believe something must be done-not only in Oregon, but throughout the United States. Consumers have not been well-served by the health-care system, and they certainly have not been well-served by the pharmaceutical industry. Drug companies have played a high-stakes game where the first priority is to make a higher profit, not to improve the health of American consumers. And it is time for that game to end.
The pharmaceutical industry has been very good at protecting itself and promoting its products. Drug companies now market their products aggressively to patients as well as to doctors. They manipulate the formularies that determine what drugs patients will get. They put pressure on Congress to keep good generic drugs off the market. And when state governments try to do something about the problem, PhRMA, the trade organization for the drug industry, takes the states to court. As a result, more and more Americans are either unable to afford the medicines they need, or end up taking expensive drugs when cheaper alternatives might actually be better.
Just read the papers, and you'll find plenty of evidence that the system has really gone awry. Here are a few statistics:
1) Prescription drug expenditures are increasing at double digit rates, and increased by fully 14 percent in the year 2001.
2) About 10 percent of our nation's health-care spending went for prescription drugs in that same year-an annual prescription drug bill of more than $140 billion, and growing.
3) 39 percent of Americans with below-average incomes say that they had a prescription that they did not fill because of the cost-they simply couldn't afford the medicine their doctors told them to take.
4) At the same time, the top nine drug companies had a profit margin of 18 percent of revenue-much more than the average Fortune 500 company.
You can see why we at Consumers Union believe that prescription drugs are a major consumer issue, and why we've covered that issue in Consumer Reports and our other publications. In fact, we've covered health-care issues, including prescription drugs, since the very first copy of Consumer Reports was published in 1936. The magazine's first medical director, Dr. Harold Aaron, became co-founder of The Medical Letter on Drugs and Therapeutics, a newsletter that provides unbiased information on drugs to health-care professionals.
We have a long history of speaking up to the pharmaceutical industry. And unfortunately, there's been a lot to speak up about in recent years. Over the last decade or so, we've covered a lot of pharmaceutical issues that have a big impact on consumers, and that just aren't going away.
Take generic drugs. Back in 1990, when the generic-drug industry was taking off, Consumer Reports exposed the way drug companies were fighting against generics. At that time, we learned that the pharmaceutical industry had sponsored a supposedly objective "white paper" that attacked the FDA's scientific basis for approving generic drugs. They're still playing the same game today-it's just the tactics that have changed. Last year, Consumer Reports ran an article called "The Stalling Game" that detailed the sweetheart deals and patent extension loopholes that are keeping lower-cost generic drugs from reaching the market. Our advocates in Washington have pushed for legislation that would close these loopholes, get generics on the market more quickly, and save consumers billions of dollars each year. (We also want to applaud AARP for the public education they've been doing about the potential savings from generic drugs.)
Here's another example: The way drugs are marketed to doctors. In 1992, Consumer Reports criticized the way drug companies promote their products by giving gifts to doctors-essentially, bribing them with treats like Broadway plays, lavish weekend trips, and expensive meals. Finally, last week, the federal government announced a new regulation aimed at putting an end to this long-standing practice. With luck, these new rules will help.
But even if they do work, you can expect that drug companies will find new ways to influence health-care providers. There's been recent concern over the ways that drug companies are influencing medical journals-both through their advertising and by controlling the reports of research that they sponsor. The pharmaceutical industry has also tried to influence pharmacy benefit managers-the companies that are supposed to save money on prescription costs-by offering rebates and other incentives for using expensive brand-name drugs. Some of these practices have earned the attention of the Justice Department, which is investigating whether they may be anti-competitive.
Next: Consider the way drugs are marketed to the public. In 1992, Consumer Reports covered what we called "media drugs"-drugs that were promoted by pharmaceutical companies with celebrity spokespeople and media hype. Now, with direct-to-consumer advertising, the consumer marketing of drugs has gotten more aggressive, and potentially misleading. Ads for drugs like Paxil can make it look like the answer to all of life's problems can be found in a pill. In reality, the side effects of these drugs may outweigh the benefits for a lot of people. But the ads are very effective. A recent study has shown clearly that heavily advertised drugs are fueling the growth in prescription drug costs.
Finally, there's the big question: Are drug companies simply charging too much? In 1993, Consumer Reports published an article called, "Do We Pay Too Much for Prescriptions?", that analyzed the drug companies' pricing and their profits. At that time, the pharmaceutical industry had a return on sales that was much higher than any other industry, and more than four times as high as the average Fortune 500 company. We reported then that a typical drug company spent 16 percent of revenue on research and clinical testing; spent 22 percent on sales and marketing; and kept 14 percent as profit. Today, the profit margins seem to be getting even larger. We can all agree that drug companies are entitled to make a healthy profit-but you have to ask, How much is enough?
You can see the pattern here. The pharmaceutical industry has huge resources, and has used those resources to protect a profit margin that is unreasonably high-particularly for an industry that is selling essential products for the public good. The cost of maintaining those high profits is ultimately passed on to consumers. Some can't afford the medicines they need-and even consumers with good health insurance and good drug coverage will ultimately pay the price in higher health insurance premiums. What's more, many people have ended up taking high-priced medicine when a lower-cost alternative would actually be better for them.
How do we all fight back? For starters, good consumer information can help. At Consumer Reports, our mission is "to work for a fair and just marketplace for all consumers"-and we believe that objective, trustworthy information is a powerful tool for changing the marketplace.
In our own publications, we give consumers a lot of information to help them choose safe, effective, and affordable drugs. Consumer Reports regularly covers pharmaceuticals-and sometimes raises a warning flag before the government does. In March, for example, we reported that Lariam (mefloquine), which is taken to prevent malaria, can have serious psychiatric side effects. Now, just last week, the FDA and Hoffman-LaRoche have agreed to strengthen the warnings on the Lariam label.
In addition to Consumer Reports magazine, which has 4 million subscribers, we give consumers drug information through our other publications. We reach more than 300,000 people through our monthly newsletter, Consumer Reports on Health, which includes a regular feature on adverse drug reactions. We publish the "Consumer Drug Reference," an encyclopedia with unbiased information that comes from the U. S. Pharmacopeia-not from the drug companies. And we're using the internet to alert consumers to drug-safety issues, both through email and through our website, ConsumerReports.org, which now has one million paid subscribers.
We also tell readers when a low-cost drug will be as good as a high-priced one, or even better. For example, most people with high blood pressure are now getting prescriptions for fairly new and costly drugs-the ACE inhibitors, calcium-channel blockers, and alpha-blockers. But we've pointed out that research still supports using a diuretic or beta-blocker, the two oldest and least expensive drugs, as the first line of therapy. This is the type of information that cost-effectiveness programs like Oregon's can also provide to consumers.
Finally, we've given consumers strategies to help them get the drugs they need at a lower price. We've advised readers to try pill-splitting-taking a higher-dose pill and cutting it in half-which is a simple strategy that works for certain kinds of drugs, and certain patients. Pill-splitting is now being considered as a strategy by the state of Illinois in its Medicaid program. We've covered mail-order pharmacies and online drugstores and told consumers how to tell if a drugstore on the web is legitimate. Our research shows that shopping around can work; we did a comparative pricing study and found that consumers could save hundreds of dollars a year by checking different outlets for common prescription drugs.
But even with the best advice, there's a limit to what consumers can do on their own to save money on their prescriptions. Many desperate consumers are now signing up for bus trips to Canada, and sometimes Mexico, to fill their prescriptions there at a lower price. This so-called "reimportation" is risky: Consumers may have their drugs confiscated at the border-or, even worse, they may buy unsafe, counterfeit drugs by mistake. You can't blame consumers for trying to find a new way to reduce their drug costs, despite the risks. But it just seems wrong that American citizens-living in a country with the best medical care in the world-have to go to another country to get the drugs that they need to stay healthy. It doesn't have to be this way.
Consumer organizations can do a lot
to help, but government needs to do more. That's why we've been very encouraged
to see what Oregon has done, and believe that it's a big step forward. What's
being done here in Oregon could lead to a reliable, unbiased database that can
help both consumers and their doctors find low-cost medicines that will be safe
and effective.
This kind of research-based, comparative information on different drugs is the
first step in controlling the cost of medication. State governments can save
taxpayers money by using this information to provide good medicine cost-effectively
to people on Medicaid or kids in the Children's Health Insurance Program. Health
insurance companies can use this information to control their premiums by being
less dependent on formularies, which often promote expensive drugs. Doctors
can use this information to make better choices for their patients. And patients
can use this information to have a better dialogue with their doctors-and save
on their own out-of-pocket drug costs.
The potential savings, according to recent press reports, are very high. In Michigan, which has published a list of preferred drugs, the cost-effectiveness program is already saving millions of dollars in Medicaid costs. Also, when New Zealand introduced its own cost-effectiveness program in 1993, the rate of increase in the country's prescription drug costs went way down. Costs had been going up by 10 to 20 percent a year; after the new program started, the rate of increase slowed to only 3 percent a year, and it has stayed in that range.
Over time, Oregon's database and
other comparative information could have an even larger impact on the market
for prescription drugs. From our own experience at Consumer Reports, we know
that clear, objective consumer information can transform the marketplace. Our
experience has taught us a few lessons that could be helpful in making prescription
drug information as useful as possible.
First, the information has to be trustworthy. Consumer Reports is based
on our commitment to being independent and impartial-we don't take any advertising,
we don't take any contributions from business, and we don't take free samples
from manufacturers. In a similar way, consumers need to know they can trust
the information they're given on prescription drugs. Oregon has committed to
make all its findings open to the public and to share information and draft
reports with the public through postings on the Internet. That kind of transparency
can go a long way toward building public trust.
Second: the information has to be consumer-friendly. We do a lot of customer
research-through focus groups, through online surveys, and in other ways-to
make sure that we're presenting our information in ways that consumers can easily
understand. With prescription drug information, it's critical to put it in a
format that ordinary consumers can easily use. That means providing fact sheets
or other summaries that contain all the information that's essential for consumers-with
a high degree of accuracy, but without confusing medical terminology.
And third, the information has to be accessible. More and more consumers
want their information available at all times, 24/7, through the convenience
of the web-and we've put a lot of resources into building the Consumer Reports
website to meet that need. Prescription drug information should also be available
on consumer-friendly websites that are easy to access and navigate. And the
information should be available in Spanish as well as English.
Finally, at Consumer Reports, we also know that even if you have the best information
in the world, you have to make sure that people know about it. And just as we
market our magazine and our other publications, the providers of prescription-drug
information will have to market that information to the public. Drug companies
are spending many millions of dollars to market their products. To be an effective
counterpoint, Oregon and other states will need a consumer education campaign
and public service advertising to tell consumers where they can find cost-saving
information on prescription drugs. An education program for doctors would be
especially effective-because most doctors will probably be very happy to have
this kind of information available for the first time.
It's encouraging to see Oregon, Michigan, and other states beginning to act on prescription drugs-and to see the states begin to work together. More and more states are forming partnerships to negotiate with the drug companies, and get discounts on prescription drugs for uninsured people and people on Medicare-even though PhRMA has tried to stop them in court. There's also a great opportunity for states to work together to develop comparative drug information, so they can study more therapeutic categories and get the work done more quickly.
But this isn't just a job for the states: It's also a job for the federal government. The federal government could take the lead by funding more programs like Oregon's and bringing the cost savings to people across the country. And federal agencies could do more to promote their own information, like the FDA's consumer education efforts on generic drugs.
In Washington, DC, Consumers Union has been advocating for legislation in the House of Representatives that would help provide more prescription-drug information. There's a short and simple bill that could help: it's H.R. 4832, called "The Prescription Drug Comparative Effectiveness Act of 2002." This bill would provide $25 million for the Agency for Healthcare Research and Quality (AHRQ) to study the comparative effectiveness and cost effectiveness of prescription drugs. That would make it easier to cover a range of therapeutic categories more quickly, and would put the expertise of AHRQ to work in communicating those findings to the public.
Consumers Union has also supported expanding the prescription drug benefit for people on Medicare. We believe that prescription drug coverage should be built into the standard Medicare benefit so that it's accessible and affordable for everyone, and not subject to the ups and downs of the private marketplace. Congress has reached gridlock on this issue, and needs to deal with it effectively next year. But part of that debate should include ways to save Medicare costs by building our information on comparative effectiveness.
Finally, there is an opportunity for the drug companies themselves to make their products more affordable-if they decide to step up to the challenge. So far, the industry doesn't seem ready to change. The drug companies' giveaway programs for low-income consumers and their discount cards may offer some relief to the poorest Americans-although there are problems with those programs too. But it's hard to believe that the industry really cares about affordability when they're still doing public education against generic drugs, trying to block cost-effectiveness programs, and maintaining a profit margin that's unmatched by other American industries. Rather than fighting against change, drug companies should do some soul-searching and ask how well they are really serving their customers.
In the end, you can be sure that nothing will change unless we all demand it. And we should demand it. The states need to control their health-care costs. Doctors need better information about the drugs they prescribe. And consumers need help in finding medicines that will protect their health without draining their finances.
The work that's going on here in Oregon, and the work that so many of us are doing on this issue, is a very good start. Now we all have to work together to make sure that it's not a false start, but the beginning of real progress.
Thank you very much.
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