Why drug companies lavish doctors and how they price their drugs

An excerpt from Unhinged: The trouble with psychiatry- a doctor’s revelations about a profession in crisis. Copyright © 2010 Daniel Carlat. Excerpted with permission by Free Press, a Division of Simon & Schuster, Inc.

My own education in pharmaceutical marketing began during my second year of residency at Massachusetts General Hospital.

Suddenly, I noticed that Paxil bagels began appearing everywhere. I first saw them in the break room of the psychiatric emergency department, then in the conference room of the psychopharmacology clinic. There were platters of sesame bagels, poppyseed bagels, “everything” bagels, along with an assortment of cream cheeses, and a big container of Dunkin’ Donuts coffee.

Nestling up by the bagels was an assortment of Paxil paraphernalia, usually pens and pads emblazoned with the Paxil logo. Often, Walter the Paxil rep, a burly, friendly man in a suit and tie, was sitting next to this cornucopia, eager to bend our ears about the particular “advantages” of Paxil.

I usually partook of his offerings, but I felt sorry for Walter, because soon after Paxil was approved in 1992, it was already developing the reputation among the residents as a dud. Our patients who took it often complained of sleepiness, weight gain, and sexual problems. Walter stood gamely by his product nonetheless, arguing that few people actually gained significant weight, that the sedation was actually an advantage for patients with insomnia, and that the sexual side effects were no worse than those caused by other SSRIs.

And Paxil, Walter pointed out, was not only effective for depression, but also for the anxiety that usually accompanied the condition. “Don’t forget Paxil for your anxious, depressed patients,” he would remind us.

Deciding between Paxil and its archrivals Prozac and Zoloft was made difficult by the fact that the FDA doesn’t require drug companies to do head-to-head studies. The bar for FDA approval is set rather low. Companies are required to furnish at least two studies showing that a drug is safe and is significantly better than a placebo pill. In many cases, a company will conduct several trials to ensure they can make the magic number of two. Forest Pharmaceuticals, for example, had to conduct five trials to get approval for Celexa as an antidepressant—in two of the studies the drug beat placebo, but in three others it did not. Companies are allowed as many tries as they want, since the FDA doesn’t count negative trials against them.

Companies rarely pay for head-to-head trials comparing their drug with a competitor, because most drugs within the same therapeutic class are so closely similar in their effects. And if a company can show that its drug is only as good as another drug, that rarely helps sales. If Paxil were found to be just as effective as Zoloft, then Walter would have been unable to subtly imply that it was more effective. It’s much better to leave such questions unanswered, because then there is no inconvenient data to distract the doctor from a marketing pitch.

Although Paxil had the reputation as the high-side-effect SSRI, such was GlaxoSmithKline’s marketing prowess that sales were unaffected. Walter and his counterparts were deployed to doctor’s offices and hospitals throughout the nation, marketing the drug as being the SSRI to choose for anxious patients, and Paxil soon became a blockbuster. Years later, independent researchers conducted a thorough review of the research literature, and concluded that there was no evidence that Paxil outperformed any of the other SSRIs for those with anxiety. But by then, this marketing message had been so thoroughly engrained in the minds of practitioners that the findings were largely ignored.

Walter became such a fixture in our department that in 1994 he earned himself a cameo role in the resident’s skit at Mass General’s yearly holiday party. In that skit, I played a psychiatry resident magically propelled one hundred years into the future, and the MGH Department of Psychiatry was portrayed as giving a single diagnosis to everyone—temporal lobe epilepsy—and Paxil had become the only medication the hospital prescribed. One of my classmates played the role of the chairman of the department, and in a dramatic denouement, this turned out to be none other than Walter the Paxil rep.

The skit, silly as it was, was prescient. Years later, the New York Times reported that in 2002 the MGH Child Psychiatry Department had solicited hundreds of thousands of dollars for a “Johnson & Johnson Center for the Study of Pediatric Psychopathology.” Johnson & Johnson (owner of Janssen Pharmaceuticals) was marketing an antipsychotic drug for children, called Risperdal, and one of the publically stated aims of the center was to “move forward the commercial goals of J. & J.” A drug rep had not quite become chairman of the department, but a drug company was paying the rent. Walter’s gift of bagels was stingy compared to the drug industry’s largesse in later years. In 1999, for example, I attended the annual meeting of the American Psychiatric Association, held in Washington, D.C. I shared a hotel room with three of my former classmates from Mass General. In the exhibit hall, we raced from one drug company display to another, collecting “swag” in spiffy APA canvas bags that were themselves sponsored by a drug company and decorated with its logo. We competed to see who could get the best stuff. My bag was soon weighed down with disposable cameras, textbooks, long-distance phone cards, mugs, clocks, and innumerable pens—all free of charge.

At the Janssen booth, I chatted with a rep about Risperdal, the antipsychotic that was making the company billions per year. He handed me an invitation to a company-sponsored party, urging me to attend. Curious, I rounded up my friends, and we showed up at the address listed. It was the Smithsonian Air and Space Museum, and Janssen had rented out the entire facility—all 160,000 square feet.

A live band was playing jazz on the ground floor. There was a second band upstairs. Several buffet tables and bars were set up amid the Apollo command modules and vintage planes, such as Charles Lindbergh’s Spirit of St. Louis. We headed for the sushi table, stacked our plates with hamachi and California rolls, and moved on to one of the bars to choose from a selection of beers, wines, and martinis—all poured out by smiling staff. On one of the upper levels of the museum, Janssen had hired a team of photographers to take souvenir pictures, which they laminated onto refrigerator magnets. I still have that photo. In it, the four of us are smiling and lifting our wineglasses in a toast, and the Risperdal logo is positioned below us. We look deliriously happy—and why not? When had we ever been treated like such royalty?

Drug companies treat doctors like royalty because we hold the keys to their kingdom of riches. In the strange economic world of prescription drugs, as Senator Estes Kefauver once said, “He who buys does not order, and he who orders does not buy.” In this system neither the patient nor the doctor keeps track of how expensive new drugs are, because neither one foots the bill. As a doctor, I pay nothing when I write out a prescription, and my patients are responsible only for a minimal co-pay. There’s no incentive to bargain hunt, and drug companies exploit this topsy-turvy situation by setting astronomical prices for their newest medications.

Drug companies defend their pricing by arguing that they spend vast sums on research and development on many drugs that never make it to market. Accordingly, they argue, they are forced to charge dearly for the few drugs that make it through the FDA in order to recoup their expenses. It’s a reasonable-sounding argument, but it doesn’t wash with the actual numbers. It is true that companies spend plenty on R & D—$30 billion in 2007 alone. But they spend twice as much on marketing—close to $60 billion in that same year. Some 90 percent of this marketing money is spent on sales activities directed toward physicians.

Thus, rather than saying that drug companies are forced to charge high prices in order to develop new medications, a more accurate statement is that they must charge high prices to support a gigantic sales and marketing machine. Companies need so many salespeople and marketers because they are accustomed to making unusually high profits. Drug companies are consistently among the top three most profitable industries in the world. In 2002, according to Public Citizen, a nonprofit watchdog group, the combined profits of the top ten pharmaceutical companies in the Fortune 500 exceeded the combined profits of the other 490 companies combined.

Psychiatric drugs in particular have been spectacular sellers for the pharmaceutical industry. In 2003, antidepressants were the single most profitable class of drugs for drug companies worldwide. In 2008, Eli Lilly’s top two best sellers were psychiatric drugs: the antipsychotic Zyprexa brought in $4.7 billion/year, while the antidepressant Cymbalta grossed $2.7 billion—and sales were growing at a 60 percent annual clip. Wyeth’s best-selling drug is the antidepressant
Effexor, with $3.8 billion in sales in 2007. And Forest Laboratories’ two top-selling drugs are also psychopharmacological: the antidepressant Lexapro (over $2 billion per year) and the Alzheimer’s drug Namenda (about $800 million per year).

This is why, once we hang up a shingle and start a practice, drug reps descend on us like hordes of locusts—if quite attractive, friendly, and well-dressed locusts. They rarely have degrees in medical fields, though they are given intensive training by the drug company in the advantages of their particular medications and in the disadvantages of the competitors. Mostly, drug reps are great salespeople, and their job is to figure out how to get the doctors in their sales territory to prescribe more of their product. Shahram Ahari, a former rep for Eli Lilly, summed up his duties succinctly in an article published in the journal PLoS Medicine: “It’s my job to figure out what a physician’s price is. For some it’s dinner at the finest restaurants, for others it’s enough convincing data to let them prescribe confidently and for others it’s my attention and friendship . . . but at the most basic level, everything is for sale and everything is an exchange.”


[Editor’s note: Please visit part 1, and stay tuned for part 3 of this excerpt, coming soon.]

Daniel Carlat is a psychiatrist and author of Unhinged: The trouble with psychiatry – a doctor’s revelations about a profession in crisis.

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