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'The Other Drug War'
Jon Palfreman

Friday, June 20, 2003; 11:00 a.m. ET

How a group of frustrated senior citizens led the state of Maine into battle with the powerful pharmaceutical industry is the launching point for Frontline's examination of the rising cost of prescription drugs, an issue affecting not only the elderly and the poor but increasingly working Americans.

In "The Other Drug War," airing Thursday, June 19, at 9 p.m. ET on PBS, (check local listings), just as Congress debates a new Medicare prescription benefit for seniors, Frontline examines the battle being waged between major pharmaceutical companies and American consumers fed up with paying the highest drug prices in the world.

Producer Jon Palfreman was online Friday, June 20, at 11 a.m. ET to talk about the film and the battle for prescription drugs. The transcript follows.

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.

Hyattsville, Md.: Why is that prescriptions that cost very little to manufacture are rising in cost?

Jon Palfreman: The main reason for the rise in drug spending isn't the cost of the drugs themselves. It comes from two factors. One is that pharmaceuticals are a bigger part of medicine than 20 years ago, and secondly, the aggressive promotion to doctors and consumers encourages patients to switch from cheaper drugs to more expensive ones. The cost is going up, but slightly, so it's a bit more complicated than just prices.


Washington, D.C.: Why don't people pushing for lower drug costs, etc., realize the damaging impact this is going to have on future generations and new diseases? It takes an enormous amount of money to develop and test new drugs, and to bring them to market. Most never make it. Therefore, companies need to charge a lot of money to recoup their costs and to be able to continue developing new drugs, not to mention making a profit. It angers me that people push the drug companies to lower their prices and give their product away in poor countries, because this means less effective drugs in the future. With new diseases like monkey pox popping up, and the overuse of antibiotics that has resulted in drug-resistant bacteria that will require new drugs, this position seems shortsighted and selfish. Those seniors pushing for lower costs on the multitude of drugs that keep them alive wouldn't have access to those drugs at all if prior generations had managed to do what they are trying to do. Doesn't anyone else see the potential havoc this will wreak?

Jon Palfreman: An excellent question. This is in fact the crux of the dilemma Americans face. We have a trade off between access to affordable drugs today vs. access to potential life-saving drugs tomorrow. Exactly how you come down on this issue depends on your circumstances. An elderly, uninsured person is probably going to want cheaper drugs today rather than break-through drugs tomorrow. A young working person with full insurance who doesn't has to pay for drugs himself, will want the breakthrough drugs tomorrow. What is clear is that we as a society can't continue to have both.


Blairstown, N.J.: 1. Why are drug companies allowed to 'lobby" doctors & hospitals with thousands of dollars of "free samples", concert tickets, box seats at sports events etc. in order to have more prescriptions written for their drugs? Shouldn't a doctor's prescription be based on the health needs & pocketbook of the patient?

2. Drug companies already concentrate R&D dollars on expected 'payback' - price controls wouldn't matter a bit. Curing a terrible disease (AIDS, cancer) would bring in a fortune & easing every day problems (Rogaine, Viagara) would do the same. How many R&D dollars are spent on the "middle tier" of unglamorous diseases/conditions? (Emphysema,sickle cell anemia).

3. I worked in the pharma industry for 25 years. The amount spent on armies of salespeople, sponsoring sporting events (baseball, auto racing), quarterly sales meetings all over the country, "free samples", & perks is obscene. I've never seen it in any other industry.

Jon Palfreman: 1. I couldn't agree more. America is the only country that allows direct advertising to consumers and many people feel that this along with aggressive marketing to physicians distorts the practice of medicine. Unfortunately, or fortunately if you believe it, the protection of the first amendment is so great that there is no way to prevent this. Some critics argue that he medical profession is largely to blame. If they chose, the American Medical Association (AMA) could educate doctors about the most appropriate drugs to prescribe, rather than leave it to drug companies. This is the idea behind Oregon's preferred drug list -- the scheme which sought to produce a consumer reports for drugs.

Good question on part two, drug companies are commercial businesses and given the expense of getting the new drug to market they tend to concentrate on drugs that will be used by large numbers of people -- the so-called blockbusters. Drugs that affect a few people are sometimes referred to as "orphan" drugs and there are special tax breaks companies can get for producing such drugs. Diseases that affect poor people in the developing world, such as tropical diseases, are of no interest to the drug companies and they do no research on those conditions. One ironic example is the disease called River Blindness -- which affects people in central Africa. As it turned out, Merck had a drug which they used on cattle to cure a tick disease by chance, by luck, this medicine also cured River Blindness in people. Since Merck had made its money already they could afford to give it away for use in the developing world. But such examples are very rare. This is why today we have practically no new drugs for tropical diseases.


Naples, Fla.: In Naples and other parts of the country I am hearing more and more about middle-man store fronts, RE: "Canada Drug Service" that simply ask for a prescription and in turn, they order drugs from Canada to be shipped to a customer's house.

Are these companies legitimate and will the U.S. government allow this practice to continue?

Thank you!

Jon Palfreman: Its my understanding that the FDA has asked that U.S.-based operations that import drugs from Canada or Mexico be shut down. To date, the U.S. has not sought to interfere with drug-buying trips made by seniors to Canada and Mexico. There is an interesting consideration that economists point out, however. Since very few people live in Canada and a lot live in the U.S., if every American started buying drugs in Canada, the huge demand would rapidly drive up the prices to American levels. So this can never be more than a stopgap solution for a very few.


North Brunswick, N.J.: Just wanted to compliment you on that report last night. It really went into depth and showed the greed. The part I really think is terrible is that they can stop another firm from producing the generic drug for a longer period. I hope something is done on that.

Jon Palfreman: Legislation going through Congress now seeks to limit the practice of so-called "gaming the patent system." It should make the process of getting generic drugs easier and faster.


Arlington, Va.:

Although your show was well-done, I was rather shocked that there was no reference to the role of government sponsored R&D. Indeed, many of the true breakthroughs in research over the past several years have come through such research. NIH's budget has about doubled. Because the government is not in the business, rightfully so, of manufacturing and distributing pills, big Rx companies get licensing agreements to bring the research to market. Many argue that the government has failed to negotiate a good price for such licensure. Thus American consumers are paying on both ends.

Does it make sense to leave more of the R&D to government -- taking away the PhRMA scare-card -- and more of the manufacturing/distribution to the Rx companies?

Jon Palfreman: Very good question. The Rx industry depends on the state of basic research. The main reason the U.S. pharmaceutical industry is so productive is because it rests on the best and best-funded medical research system in the world. Clearly, drug development depends totally on the state of biological knowledge. Since much medical research is funded by the tax payer, this has led some to argue that consumers are "paying twice." The problem with this argument is as follows:

While universities, the NIH, produce most of the scientific ideas which lead to new drugs -- in other words they find the disease targets, the molecules which are the targets of drug research -- in most cases this is just the start of a long process. While there are exception whereas drugs like Taxol were largely developed in the public research system, virtually all commercial drugs are developed by the Rx industry. The reason is that the process of turning an idea into an FDA approved drug is long, tedious, boring, expense and error prone. Almost everything that Rx companies try to do fails. Tens of thousands of molecules might yield one that is tested in rats. Fifty tests on rats might yield one tried on humans. Ten tried on humans might yield two that make it to market. Ten that make it to market might yield three that make a profit. My point is not that this is just expensive, but very tedious and not something that the NIH would do. THe only ones willing are drug companies and the reason is making a large profit.

An interesting sidenote is that no communist country ever produced Rx industry.


Michigan : Jon,

You completely edited out any reference to the patient assistance programs offered by every pharmaceutical company. I would find it hard to believe that either CEO would have let slip the opportunity to mention that many of the bus riders could take advantage of these programs.

You also neglected to mention that literally millions and millions of samples, AIDS drugs, river blindness drugs, are given away every year.

There was one point where you should have gone farther. The segment that discussed evaluating drugs based on outcomes made a very good point. During that segment you showed an add for Lipitor while the announcer talked about some of the block bluster drugs not doing what they claim. You should have allowed the commercial to continue until the graphics on the add point out that, "Lipitor has not been shown to reduce the risk of stroke or heart attack." That would have given the voice over copy that much more impact.

Jon Palfreman: I did indeed hear this argument from the Rx companies. The problem is that to qualify for patient assistance programs you have to be extremely poor. Most of the seniors we spoke to in Maine would not qualify. From a policy standpoint also, it doesn't seem that relying on company charity is a very sustainable system.

Your point about Lipitor is well taken. In fact it failed to make Oregon's preferred drug list precisely because the company, Pfizer, had not bothered to do research proving that their drug, which so effectively lowered cholestorol, actually reduced the frequency of heart attacks. Other statin drugs that Oregon considered did do the research and made the drug list.

My point is that it is surely better that states and doctors make their choices about what to prescribe based on objective, independent research rather than advertisements and sales pitches to doctors.


Irvine, Calif.: Do you think any drug justifies a monthly retail cost of $26,000 (including supplies)? Well, that's what my life saving drug costs. There must be an "outrageous" minimum price. I think this drug has reached that level. The drug company knows that my only alternative is to die or pay the price.

Jon Palfreman: Excellent question. In the program, one speaker mentioned the new drug for AIDS called Fuzeon which is priced at over $20,000 a year. This is a life-saving drug. Many patients with AIDS need it. But as Richard Evans, the analyst, said the decision to make this drug was a commercial one.

Roche didn't set out to make this drug simply to save lives, they did it because they thought they could also make money.

I can't answer your question as to whether more than $20,000 is justified, but I do know that a life-saving drug that is targeted at a small niche group of patients is likely to cost much more than a drug like Vioxx used by tens of millions. We as a society have a very difficult question to answer -- who is going to pay for the expensive drugs aimed at niche groups. If we simply force the drug companies to lower the price, the risk is they may stop producing such drugs. If on the other hand, we allow them to charge what they like, the patient may not be able to afford them. This is the dilemma we find ourselves in and it's a tough one.


Bristol, Vt.: Of the many millions of dollars spent by the pharmaceutical companies how much in dollars and % are spent on advertizing and promotion, how much is spent on research, and how much is subsidized either by tax breaks or direct investment by the federal government?

Jon Palfreman: Great question. It's very difficult to get objective figures about how drug companies spend their revenue. But the estimates of what they spend on marketing range from 9 - 16 percent of revenue as compared with 13 percent on R&D. They certainly spend an awful lot on marketing and because of this critics question whether they would really suffer if prices were controlled. After all, couldn't they spend less on marketing and use that money for R&D.

As for the Federal subsidy on basic research, this is almost impossible to figure. The U.S. gov't has made a decision that this research should go on and benefits us all. It actually wants these research ideas to be turned into commercial products and has done everything to make it easy for this to happen. Some critics argue, however, that because this industry relies on this public largesse, it should make more effort to offer their drugs at prices that consumers can afford.


Bristol, Vt.: What reimbursement rate has been chosen for the Maine plan and why?

Jon Palfreman: The idea behind the Maine plan is to offer uninsured seniors the same discounts that patients in Maine's Medicaid plan get. This might be, I'm guessing, 20 - 25 percent off the wholesale price.


Hartford, Ct.: Why don't they eliminate 'direct-to-consumer' advertising since this has created an increase in pharmaceutical purchasing, created consumer driven prescribing practices and escalated the demand for brand name prescriptions?

Jon Palfreman: Personally, I agree with you, but the protection of the first Amendment is so great that I don't think it will happen. Interestingly, even though direct to consumer advertising only came in 1997, it never was illegal. The reason it didn't happen before this was that the FDA ruled that drug companies would have to include the full contents of their package inserts (giving warnings) in the ad. Since this runs to several pages, it was impractical. In 1997 the FDA eased the regulations only require that the commercial give a 1.800 number. You are right, however, the practice has exploded.


Santa Barbara, Calif.: I found your program to be quite even handed.

You left out one very important member of the health team -- that is the pharmacist. I have been in pharmacy for nearly 37 years and believe that pharmacists are an untapped source for drug selection and price control. We have more training in medications than physicians because that is all that we do. I find myself increasingly being a counselor for physicians pressed for time and need to solve a particular patient's problem. I have known about "me too" medications for many years and have been powerless to do much about them. However, the aspects that you touch on -- price and "me too" are only part of the picture. There are cases of biovailabilty, species difference, etc. that make drug selection much more difficult. One drug will not work the same in everyone. I admire what Oregon is attempting to do. It is an innovative step in trying to solve this problem. It is good first step, but it is only a first step. This has to be an ongoing study utilizing the entire health team. I hope future progams on this will also include pharmacists.

Jon Palfreman: I agree. I think that pharmacists are an untapped resource. One thing which alarmed me in making this program was the relative ignorance of physicians concerning the medications that they are legally permitted to prescribe. They seem to emerge from medical school without sound Rx training and they only continuing ed the receive comes from the drug manufacturers -- people with an interest in selling one drug over a competitors. It's reasonable to ask why the AMA, American Medical Colleges and specialist societies haven't done something to put their house in order.

Doctors' power in prescribing is so complete that even if the FDA only approves a drug for one disease and one patient group, physicians are free to prescribe it for other diseases and patient groups. Often with adverse consequences. I wish that pharmacists had more power and influence in this system.


Harrisburg, Pa.: There is a Pennsylvania state legislator who arranges bus trips for senior citizens in his district to travel to Canada so they may save money on purchasing pharmaceuticals. At least people in Maine are closer to Canada. I know your film addresses this, still, doesn't this tell us something when the same company charges two different prices for the same drug?

Jon Palfreman: The reason drugs are cheaper in Canada is because the Canadian government, the provinces, determine the price. And a U.S. drug company can lump it or leave it. If they leave it, the state of Canada is free to take out a compulsory license so t he Canadian company can make the drug anyway. So there's not much the drug companies can do. The U.S. market is the last unregulated market in the world. For better or worse it is the place where most of the profits come from. That is why they are so scared and why they'll do anything to prevent schemes like Maine's.


Washington, D.C.: I watched your program last night, and there seemed to be some difference of opinion as to the effect of the medicare prescription benefit proposed by the president. One commentator suggested that the drug companies had lobbied for such a program to prevent states from taking steps like maine had to get the right to bargain with pharmaceutical companies. Yet another analyst suggested that once the federal government controls 52% of the drug purchasing market, as it would with medicare + medicaid drug programs, that the government could effectively demand lower prices. What was your conclusion on this issue?

Jon Palfreman: Things are moving very fast in Congress. The idea that they would pass the Medicare prescription drug benefit would have seemed impossible even three months ago. What seems to be happening is that both parties are agreeing to pass something with the understanding that whoever wins the next election will further modify it one way or another. From a pure "Democratic" standpoint, the idea of a Medicare drug benefit that does nothing to control prices seems flawed. This is what Chellie Pingree was arguing in last night's program. If drugs remain expensive, then any drug benefit, even a $400 billion one will only pay for so many drugs. In the current proposals, seniors have to pay $35 a month plus the first $275 dollars plus 50 percent of the next $4,000 plus 100 percent of the next $1,800 plus 10 percent of everything above $5,800... it adds up.

From the Republican standpoint, and the drug companies, the fear is that if the government is ultimately responsible for purchasing around 50 percent of all drugs, there is a danger that eventually it will force manufacturers to lower prices. Doctors complain that their reimbursement through Medicare have not kept up with inflation. A similar thing may happen with drugs.

The unresolved question is exactly how the Medicare drug benefit will be enacted. Republicans want the private sector to deliver the drugs. Democrats prefer an expansion of the current Medicare system -- ie the state to do it.

Whoever wins the next election will probably tamper with the bill that is passed later this month (if indeed it is passed), to bring the Medicare drug benefit in line with their ideology.


Blairstown, NJ: I also want to compliment you on Frontline - you set an excellent standard for journalism and I watch faithfully.

As for the Rx industry: is it overly simplistic to assume that in a free market system all companies that don't invest in R&D will go bankrupt? In other words, the "scare tactics" can't work - if they want to remain a profitable concern they have to keep investing in R&D, even with price controls or government regulation?

Jon Palfreman: I don't think anyone was arguing that price regulation would lead to bankruptcy. Rather that price regulations would make certain high-risky ventures less attractive. In other words, while price regulation probably wouldn't affect the production of blockbuster drugs, it might reduce the likelihood of finding some lifesaving drugs for rare niche diseases -- especially if they were very expensive.


Santa Clara, Calif.: The industry approach to clinical research is expensive in part because of their approach. If clinical research were modernized the cost of drug development could be significantly reduced.

What evidence have you found that the industry is cooperating to reduce clinical research time?

Jon Palfreman: Over the last 10 years the industry has lobbied hard to get the FDA to "streamline" the drug approval process. Some critics argue this has compromised safety. The new FDA commissioner is, I know, very keen to speed things up further. It's a hard question to know whether things could be very different than they are. The process I observed at Lilly and Merck seemed to be inherently expensive because almost everything they tried -- even using the best science available -- ultimately failed. The costs of the drugs that make it to market will always be a reflection of a number of things that failed along the way.


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