Drug Company Guidelines

Washington Post business columnist Steven Pearlstein was online to discuss his latest column , which examines drug company advertising and other guidelines announced Tuesday by the industry.

A transcript follows.

You can also read The Washington Post's coverage of the new guidelines: Drug Firms Seek Ad Remedy .

About Pearlstein: Steven Pearlstein writes about business and the economy for The Washington Post. His journalism career includes editing roles at The Post and Inc. magazine. He was founding publisher and editor of The Boston Observer, a monthly journal of liberal opinion. He got his start in journalism reporting for two New Hampshire newspapers -- the Concord Monitor and the Foster's Daily Democrat. Pearlstein has also worked as a television news reporter and a congressional staffer.

His column archive is online here .

____________________

Laurel, Md.: Steven, we've discussed before the way economic and societal factors distort the priorities of the medical profession, such as sports medicine is a much more lucrative practice than delivering high-risk babies.

But, has the profitability of these well-advertised drugs targeted at high-end customers (sexual enhancement for middle-aged men; blood clots for airline passengers) reduced the number of drugs developed for those with more need but less money, like reducing the risk of birth defects to poor mothers or psychotic drugs for those marginally employable?

Steven Pearlstein: I don't think we're dealing with a zero sum game here. These companies have lots of money, and access to plenty of capital. If they thought a project had a good payoff, they'd do it, irrespective of whatever else they are doing. I don't think there is a crowding out effect. What there might be, however, is that the kind of drugs you speak of offer such great returns that the drug companies have become used to such returns, and turn their collective noses up at a project with higher risk or the kind of "good" returns that other industries consider acceptable. They set their hurdle rates very high, in other words.

_______________________

Hartford, Conn.: How much do drug companies spend on advertising and marketing?; How much do they spend on research and development?;

Steven Pearlstein: This is something of a candard. Drug companies spend more on research and development than they do on advertising. They spend more on R&D than advertising and marketing combined, including marketing to docs, which is still bigger than direct to consumer advertising. But in recent years, the marketing and advertising budget is getting close to the research budget.

Liberals and industry critics love to cite these figures. I think they are somewhat irrelevant, and unrelated. They spend on advertising and marketing because it works, and increases their profits. There is no evidence, as I wrote, that it increases prices, since prices are set in this industry NOT on the basis of cost. So there is really no reason we should care whether they advertise or not, except if it drives up the cost of the overall health system, which it does.

As for what they spend on R&D--again, they spend what they think will give them a good payoff. No more, no less. But its not like, if they didn't spend on advertising, they would spend that money on R&D. That's not a given. The amount of money is not fixed, in the way the question implies.

_______________________

Pipeline, PA: Good morning: So, what did they do that woman's eyes in the Levitra ad to go well beyond dreamy? Do drug companies pay doctors to promote thier new products, samples and the like? Thanks

Steven Pearlstein: Don't know much about the woman in the Levitra ad (too bad for me!). As to whether drug companies pay doctors to promote their products, the answer is: not directly. That would probably violate some ethical code. But they do accept research dollars, trips to conferences, payments for providing consulting services, payments for participating in trials. They also accept free samples. All of this marketing to doctors amounts to about $5 to $6 billion a year, if my memory serves. Its a big business.

_______________________

Washington, D.C.: "A study by the Kaiser Family Foundation found that each $1 invested in advertising yields an extra $4.20 in sales."

That's a phenomenally good return on advertising dollars, although it probably diminishes some as spending approaches $1 billion for one specific drug.

One important aspect of drug company advertising is to make people aware of beneficial medicines. Some doctors aren't aware of all the new drugs and some doctors won't prescribe drugs for the wrong reasons (i.e., they push old drugs from favored companies). Some doctors dole out pills like candy prizes to the most satisfactory patients. And it isn't a stretch to believe that Viagra would never have been shared with any other males on earth if the drug company hadn't bypassed doctors directly through advertising.

Drug advertising is a component of an efficiently working marketplace, even though some ads are directed to narrow audiences with odd phrases like, "if you have a uterus..."

Steven Pearlstein: Yes, it is a good return -- so good, in fact, that there almost certainly has been some diminishing returns as the ad spending has increased. That's one reason why the companies have recently begun to back off. If I had had room this morning, I would have mentioned, for example, that Viagra sales haven't really suffered much since the company pulled all its ads last year. And overall, drug advertising is off for the first half of this year, after several years of big increases. I think the general feeling is that, with so many companies now doing it, often with competitive products, there are better, more targeted ways to spend some of that money.

I think you are right about Viagra, by the way, which is why I didn't take off after that advertising in the column. I'm all for empowering patients with more information and breaking the monopoly control that docs have traditionally had on the health care system. But advertising is not just about conveying information. There's a lot more to it, including the emotional and irrational content of advertising. And that's where the problems come in.

_______________________

Washington, DC: I just wanted to point out the irony of reading this chat on a page blanketed with ads for a prescription toe fungus remedy. Who knew there was an epidemic of killer toe fungus we needed to be saved from?

Steven Pearlstein: Actually, I don't see that advertising on the screen I am working on, so thanks for that. It is ironic indeed.

By the way, I don't know whether there is an epidemic of fungus, but that may be a common enough malady that it is a good subject for advertising, particularly if people have been just living with it for years and never really knew there was an easy remedy. That's why we need to be careful about banning all advertising. I'm not for that.

_______________________

Lorton, VA: One way the FDA can create a more realistic market for certain drugs is to do what they did with Claritin and designate the drugs as over the counter (against Schering Plough's strong objection). This way patients have to pay for them out of pocket rather than relying on insurance companies, dramatically lowering the price.

Obviously, many drugs need to be restricted, but do you think more common drugs like Claritin will be designated OTC?

Steven Pearlstein: That's a very good question. And I tend to agree with you. Rather than preventing the drug companies from advertising, I'd rather have the government be as aggressive and creative in dealing with these issues as the drug companies are, including using their powers over reinbursement and designating which drugs need prescription from doctors. Once a drug goes off prescription, it seems to me the market works pretty well, since the person deciding whether to use/buy the drug is the person paying for it, just like most other goods.

_______________________

DC: "So there is really no reason we should care whether they advertise or not, except if it drives up the cost of the overall health system, which it does."

Let me try and parse that so it makes sense, OK:

'The real reason we should care about whether the drug companies advertise or not is that it does drive up the cost of the overall health care system.'

So, there we have it, in your own words, almost. Why the torturous qualifiers?;

Steven Pearlstein: Thanks. I needed a good editor. But to be more precise, , "The real reason we should care about whether drug companies advertise or not is that it drives up the cost of the overall health care system in a way that doesn't deliver enough benefit for the increased cost." How's that.

_______________________

Steven Pearlstein: Thanks, folks. See you next week.

_______________________

Editor's Note: Washingtonpost.com moderators retain editorial control over Live Online discussions and choose the most relevant questions for guests and hosts; guests and hosts can decline to answer questions.