Wednesday, October 12, 2005

New Assault on Pharma Marketing?

It's one thing to criticize pharmaceutical marketing techniques like we have seen in the press, in Congress, on this Blog, and elsewhere. But attempting to deliver a death blow via competition is a different thing all together.

What I am talking about are new techniques by managed care organizations and health insurers aimed at influencing how physicians prescribe drugs. For example, many PBMs and insurers are actively engaged in getting physicians enrolled in their plans to implement an ePrescribing solution. While there are many benefits to ePrescribing, it can also subtlely guide physicians to prescribe generic products or brand drugs on restricted formularies. The Medicare Moderization Act also includes incentives for physicians to adopt ePrescribing by 2006.


But ePrescribing is a technology, not a competitive marketing ploy.


Free Generic Samples

A better example of what I am talking about was featured in an article in today's Wall Street Journal ("
Generic Drugs Sampled Freely in Aetna Test"): ATM-style machines dispensing generic-drug samples in doctors' offices. This competes directly with one of brand pharma's most effective physician marketing tools: free samples.

According to the article, "Last year, doctors received more than one billion branded drug samples -- three for every person in the U.S. -- valued at nearly $16 billion, an 18% increase over 2003, according to data from IMS Health, Fairfield, Conn. Makers of low-priced generic drugs don't provide samples to doctors, except in rare cases, because of the expense and lack of sales forces."

[Note: The value of samples is calculated many different ways. Usually it's an inflated number based on the AWP - average wholesale price. One could argue that the actual cost of samples to the pharma company is much less than that -- pennies or even fractions of a penny per pill. If one billion pills = One billion pennies, then the actual value of the samples is $160 million, which is about 5-6 days worth of sales attributed to Lipitor. Just to put it in perspective.]
Whatever the value of free samples, it is probably one of the most successful physician marketing techniques employed by the industry. As stated dryly in the article: "The tendency among doctors is to write prescriptions for the medicine samples they have on hand." Duh, Yeaaah!

Should brand pharma companies be worried that these generic drug dispensers will effectively compete with their sampling programs? Many brands compete with generics already and sampling may not be a big part of their marketing programs (sampling is used most often for newly launched drugs).


Turns out, this tactic may not be much of a threat after all.


The challenge for Aetna and other insurers interested in this idea is to identify practices with enough of their own insured patients to justify the financial commitment of installing and stocking the machines. Presently, physicians can give generic samples to all of their patients, regardless of what prescription plan they have.


The same financial hurdle besets ePrescribing and implementation of health information technology in doctors' offices in general. No one stakeholder (e.g., insurer) can shift the adoption curve enough to make it worthwhile. It's another example of how the fragmented nature of health benefit coverage and health delivery in this country stands in the way of reducing costs and improving outcomes.


I don't think, therefore, that pharmaceutical marketers will be losing much sleep over this challenge.

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