Thursday, February 23, 2006

Pharma PR: It's All About Defending Drug Prices

A couple of days ago, I posted a note about pharma sales reps being poor spokespeople for the industry (see "Sales Reps Make Poor Spokespeople"). This topic generated -- and continues to generate -- a lot of discussion on the Pharma Marketing Online Discussion Forum.

At first the discussion stuck to the topic of whether or not sales reps make good spokespeople for pharma. Leo Doran, for example, went one step further than I did and said that using sales reps as PR people was "dangerous":

"Employees and Sales people can be good Ambassadors for a company, but it is dangerous to allow them to be spokesman for the company. Any successful PR program has at its roots a consistent message and script.

To empower 8,000 sales people with the role of PR spokesperson gives the media an open season for comment from all about management's decisions and path. I hope GSK is leaning more to community relations for these people as part of their job description." -- Leo Doran
Harry Sweeney hoped that reps, whether appropriate for the job or not, would be heard:
John: Please don't "despair." Using sales reps -- the most "local" members of the pharmaceutical industry -- may be the best, if not the only way to deal at the grassroots level with the other "local" actors in the healthcare equation -- elected officials, physicians, pharmacists, hospitals, etc. etc. -- who have had a field day stirring up anti-industry sentiments.

Localization and personalization have been two mighty rhetorical, political tools, used effectively by industry critics, yet to date, largely ignored by the industry itself.

One reason it's so easy to beat up on the Pharma industry with impunity is because it can easily be characterized as a heartless, faceless, big business, that resides "somewhere else." e.g. Know any big time Pharma influences in Senator Grassley's home state -- Iowa?

The 80 to 90,000 "local" representatives who are, at the local level, "one of us," however, changes all that. These are people like you and me, who have every right to speak up and out about healthcare financing reform issues which are a root cause of industry demonization.

Whether they are scripted or not, whatever they say will be subject to the kind of intense scrutiny and criticism that we've come to expect from industry critics. Hopefully, the criticism will be fact-founded and constructive. But, I wouldn't hold my breath waiting on that score.

In the meantime, don't despair. Rather take heart that legitimate industry criticism is being heard and steps are being taken, both to rectify industry past sins and to rebut unfounded criticism at the grassroots level. There's a long road ahead for the industry to regain the moral high ground. But, maybe we're witnessing the first step from Glaxo Smith Kline. I hope so.
But Harry brings up a good point: criticism should be "fact-founded." Let's see how that plays out in the discussion which follows.

Terry Nugent focused in more on the message rather the messenger:

I just attended a meeting of the Midwest Healthcare Marketing Association (MHMA) at which Mike Pucci, VP of External Relations at Glaxo, spoke. The program is indeed intended to reach out to the community at large. This can be as limited as reps' friends and families or as aggressive as making presentations to seniors groups. Glaxo is training its reps to be able to communicate the value of pharmaceuticals, an important message for professionals and the public. They are also running television ads that endeavor to communicate the same message.

Mike does an excellent job of communicating the value of medicines, nicely countering objections to cost. According to him, the latest Harris poll shows the image of the industry is improving after a long slide.

I think Glaxo is doing a great job. I only wish the companies would work together through PhRMA or some other umbrella to improve the industry's image. As Glaxo has realized, industry bashing by politicians is driven by negative public opinion. If the industry is to avoid onerous public policies such as price controls, it must improve the public's economic literacy, making it harder for government to kill the goose that laid the golden egg.
Notice that Terry brought up the issue of drug prices. Sam Nalbone followed Terry's lead a and brought a few facts into the discussion:
We should note that with all the focus on drug costs, they account for only 12% of health care expenditures. This kind of information floats out to the public but doesn't register until the drug rep makes the point in response to the doctor's articulated perception that drug prices are out of line.

The sales people serve a crucial role in receiving that communication from doctors so that they may respond knowledgeably. If they were not in front of the docs to hear that complaint, there would be no rebuttal to the doctors recitation of "conventional wisdom." They are therefore visiting doctors first as "Listenpeople" and responding as "Spokespeople." Like most of us, doctors hear better after they've spoken, and we can't hear anyone at all when they're speaking about a subject that isn't on our minds at that moment.
Katherine A. O'Neill backed Sam up on this:
Sam - you are absolutely right. Why doesn't PhRMA publicize the 12%? I have never understood that. I got into a heated discussion with an oncologist at a cocktail party about this. She did not believe that drug costs were so low.
[Must have been one of those pharma-sponsored "educational" cocktail parties.]

As you see, the discussion quickly turned to the real issue at the root of all industry criticism: the price of drugs. To improve the industry's image, either you lower the price of drugs (or keep the increase in line with the consumer price index as Roy Vagelos, former CEO of Merck did -- see below) or you defend price increases. The industry, of course, is doing the latter and Glaxo's program is all about defending the price of drugs, not about defending the industry per se.


But what are people really thinking about when they think about drug prices? I Googled some facts of my own and found evidence that the actual percentage number may be irrelevant and maybe it's the increase in that number recently that has people worried:

In 1994 the % was 5.6%; in 2001 it was 10%; in 2005/6 it's 12%. Seems to be accelerating.

A Kaiser report: Trends and Indicators in the Changing Health Care Marketplace said: "While remaining the largest contributor to spending on health services overall, the proportion of national health expenditures devoted to hospital care declined from 34.1% in 1994 to 30.4% in 2004. In the same period, the share spent on prescription drugs almost doubled from 5.6% to 10.0% of health spending in the U.S."

Where will it be in 2010?

The perception, if not the fact is that drug costs are increasing faster than other HC costs -- some of which are Decreasing. To get the whole under control, we must also get the parts under control.

Another interesting report I came across was a Harris Interactive survey that revealed that "rate of increase in out-of-pocket spending" is more important to people than the absolute amount.

That report also revealed that people believe drugs and medical care are more expensive here than in Europe (as opposed to gasoline) and that pisses us off. Especially since it is true.
OK. There's some "fact founded" criticism for you! As often happens, in the midst of this discussion new facts suddenly arose. I added these facts to the fire:
U.S. spending on prescription drugs will climb to $446 billion by 2015, up from $188 billion in 2004, according to a forecast by the Centers for Medicare & Medicaid Services. The annual spending rise for drugs now is projected to be around 8.2%, however, lower than earlier estimates (9.1%) due to the new Medicare drug benefit program.

National health care spending will grow by an average 7.2 percent annually over the coming decade, the study said. That would be slower than in recent years but still 2.1 percent faster than GDP growth, it said. (Washington Post story)

Back in 1990, when Roy Vagelos was CEO of Merck, he suggested to only increase prices at the rate of the Consumer Price Index (CPI). There was a "fair amount of grumbling," but Merck did it and was successful because it was a market leader and other companies followed. "Unfortunately," said Vagelos, "that has changed. Drug prices are increasing twice as fast as the CPI and that is going to be very damaging ultimately." (Vagelos Speaks, Will Pharma Listen?)
Derek Stilwell had another take on the "it's all relative" argument:
I agree with the need to look at prices in context, but to be fair, the context can and should be broader, or at least looked at from a number of different perspectives.

"Health care expenditures" is a huge category that can be defined in a number of ways. The patient's perspective being one of them. If I am not mistaken, that figure is a nationwide number that includes "everything". This 12% may not seem like a problem for those who are insured and have copays of 0 to 25 dollars for either the visit or the medication. But if an uninsured (or underinsured) patient pays $250 for a Dr's visit and $600 for the medications the Dr. prescribes (and this happens every month) the value perception may become skewed in the patient's mind. Ask the patient again how he/she feels about the Dr's fee when the renewals run out and it costs $250 just to have the prescription renewed. I think the answer may be somewhat different.

I think doctors are echo-ing the complaints of patients, who frequently ask if other lower priced alternatives may be just as good. And because doctors develop confidence in certain medications and combinations, and wish to see the best results possible, they use the most/best/newest alternatives available.

I think a better reply for a Dr's query would be to ask him how that 12% looks when compared to his administrative overhead, or even just billing and late/unpaid receivables costs. This is another proof of relativity that everyone will understand.
We'll pick up the rest of the discussion tomorrow.

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