PCS "Encouraged" By Pricing Of COX-2 Inhibitors Close To Branded NSAIDs

The recent pricing of Merck's Vioxx and Searle's Celebrex close to existing branded non-steroidal anti-inflammatory drugs is evidence of some pricing restraint in the pharmaceutical industry, PCS Health Systems CEO Jean-Pierre Millon said May 3 at The Wall Street Journal Healthcare Summit in Washington, D.C.

"I've been encouraged by the way the COX-2 [inhibitors] were priced close to branded NSAIDs not so long ago," Millon said.

However, Millon added that he was "disturbed" by "how new biotech products are going to be priced as there is a major momentum behind the R&D effort there."

"Restraint should be applied at the new product pricing level for innovative drugs to find the right equilibrium," he added.

Noting the need for innovation in the pharmaceutical industry, Millon added that, "at the same time, I think it would be digging the industry's grave not to have that kind of self-restraint in terms of new drug pricing."

Drug pricing is "a matter of balance and being sure that as intermediaries we continue to have this leverage and increasing leverage in the pharmaceutical industry...in terms of rebate negotiation," Millon said.

He added that he "would wish that this self-restraint would apply all across the pharmaceutical industry without killing the golden goose, if you wish. Because we need the innovation and clearly the U.S. has been leading more and more compared to Japanese and European industry."

Merck CEO Raymond Gilmartin also pointed out that "the U.S. stands alone as an island of biomedical innovation," and attributed the U.S. pharmaceutical industry's success in developing new drugs to "support for intellectual property protection and a market based on competition."

Gilmartin argued that price controls are not the solution to the problem of access to prescription drugs in the U.S. He reiterated Merck's support for a prescription drug benefit for seniors along the lines proposed by Sens. Breaux (D-La.) and Frist (R-Tenn.) and Rep. Thomas (R-Calif.).

Although drug prices are lower in Canada than in the U.S., the real problem is lack of drug coverage for Americans, Gilmartin maintained. "Americans with drug coverage don't go to Canada," he asserted. Drug prices are lower in Canada because of price controls in that country and the impact of currency exchange rates, he explained.

The willingness of manufacturers to make products available at lower prices in Mexico does not amount to a U.S. subsidy, Gilmartin said, but represents manufacturers' efforts to maximize profits in that country.

"People do pay attention to the purchasing power ability of any one of these poorer countries and take that into consideration," Gilmartin said. "From economic theory, behaving that way maximizes social welfare and also maximizes profitability."

By selling large volumes of product in Mexico at a price people can afford rather than selling less drug at a higher price "you could argue that that actually funds more research," Gilmartin said.

Gilmartin expanded his argument about providing access to pharmaceuticals to the global level, noting that Merck is participating in initiatives to improve access to HIV/AIDS therapies in developing countries.

Merck will build on its experience from programs it has developed with the Harvard School of Public Health's AIDS Institute "looking at healthcare delivery systems and infrastructure in places like Senegal, Thailand, Brazil and South Africa," Gilmartin said.

"Based on that experience and our experience with [the Global Alliance for Vaccines and Immunization], I think that may give some important ideas about how to attack this issue in a substantive way that will really make a difference," Gilmartin said.

Gilmartin emphasized the need to create a comprehensive solution to the crisis of AIDS in Africa, rather than focusing on elimination of intellectual property for pharmaceuticals.

"The more significant barriers are political leadership, lack of healthcare delivery systems and infrastructures and lack of resources to attack the problem of HIV/AIDS in a comprehensive way that extends well beyond just supplying antiretrovirals," Gilmartin argued. "Formation of a global alliance...is the only way to attack these problems."

Merck's Mectizan program is a model of the kind of collaboration required to address the problem of HIV/AIDS in developing countries, Gilmartin said. Merck donated the drug to treat and prevent river blindness in Africa and developed an infrastructure and delivery system by collaborating with the World Health Organization, the World Bank, the Carter Center, international aid agencies and other groups.

"Once you have a large market created in a predictable situation...competitive forces, as they already have in the vaccine industry, take care of themselves in terms of having medicines available at affordable prices," Gilmartin predicted.

In the U.S., Merck is addressing the problem of accessibility of drugs for the uninsured by providing discounts through the Merck Medco/Reader's Digest "YourRx Plan," Gilmartin said. Uninsured individuals may join Merck-Medco for $25/year and obtain an average discount of 18% for mail-order prescriptions (¹ (Also see "Medco/Reader's Digest Consumer PBM Plan Offers 18% Discount On Mail Rxs" - Pink Sheet, 24 Apr, 2000.)).

The "YourRx Plan" is not a long-term answer, however, Gilmartin said.

He said he was "optimistic about [Medicare reform] solutions this year" in Congress. "Even if a more comprehensive reform of the Medicare program is not possible in 2000, pharmaceutical insurance that is available and affordable to every beneficiary - with special subsidies for low-income seniors - can be put in place today and seamlessly integrated with Medicare modernization in the future."

Public Citizen Health Research Group Director Sidney Wolfe said that he shared Gilmartin's optimism that legislative steps would be taken to create more widespread access to prescription drugs, though he envisioned a different kind of future.

"Like Ray Gilmartin, I'm optimistic. I am relatively confident that it is just a matter of time before we do have, as every other developed country in the world does have, some kind of government negotiated prices or price controls."

Wolfe said Medicare reform involving the private sector would be "a failure" and added that PCS' Millon "can only get half of the discount that the federal supply schedule gets. He would like to get a deeper discount because his customers would like to pay even lower, but he can't get it because he doesn't have quite the volume or the oomph of the Defense Department or the [Veterans Administration]."

The pharmaceutical industry would continue to thrive even with price controls, Wolfe maintained. "I don't think the idea of killing the goose that lays the golden egg is there. It may be laying a silver egg or a chromium egg as opposed to a golden egg but the egg will still be OK and the industry will thrive."

Pharmaceutical Research & Manufacturers of America CEO Alan Holmer asked Wolfe which research projects should be cut back if the industry becomes less profitable with price controls. "If the result is to have, instead of a golden egg, a silver egg, or a chromium egg, which research project do you want to cut back on? Alzheimer's? Cancer? Cystic fibrosis?"

Wolfe described Holmer's question as having a "phony undertone," adding that "it isn't as though the industry is even remotely close to the margin in terms of not having enough profits or whatever else."

"There are all sorts of ways of trimming back," he said, such as on the "massive obscene advertising expenditures, [while] still leaving plenty for R&D," Wolfe said. He claimed that most of the $2 bil. spent on direct-to-consumer advertising "is for products that are not that much better than other products....Viagra is an exception; Claritin is probably not an exception."

National Health Council President Myrl Weinberg agreed that DTC advertising sometimes creates a problematic image for the pharmaceutical industry among patient groups.

"If they are a person that has to pay a high cost for a drug and they hear in the media that a particular company has upped its budget for marketing 200%, those are difficult questions to answer," she said.

"As far as looking at medical education, the [American Medical Association] has a much stronger role to play along with other specialty groups," Weinberg said. Patient groups should monitor drug ads and communicate with FDA about "what they perceive as inaccuracies."

Weinberg added that patient groups in general realize that pharmaceutical R&D comes primarily from U.S. companies and that "to be successful on Wall Street one has to be very good at marketing."