Business Stories the Media Hasn’t Written Yet
More than a half-dozen drug companies are chasing a dream — an antiobesity pill that actually works. So why does no one ever succeed in designing one? The answer is that the human body conspires to defeat them in a way that doesn’t occur with “regular” illnesses.
Read a deeper explanation here, at BNET’s Pharma Insight’s page. And yes, that’s me doing the guest blogging over there.
The era of the “four-hour erection” warning in the middle of the Super Bowl is over.
It’s been predicted for a while (mainly by Richard Meyer at World of DTC Marketing), but the numbers are finally showing up to fulfill the prophecies: The money that drug companies are putting behind consumer marketing — particularly on TV — is about to go into decline.
Spending grew at 14% two years ago, but is likely to be flat this year, according to a report in Brandweek by yours truly.
To blame: the FDA and lack of pipeline refreshment. (And, to a lesser extent but nonetheless worrying, lack of new scrips brought on by patients without insurance who can no longer get them.)
Most likely to suffer will be TV spending. Money is still pouring into the internet and CRM compliance programs, but those are less visible than the big campaigns we’ve seen since the late 1990s.
For consumers, the mental environment is going to change. The days when primetime was filled with drug ads are going to fade from memory, like so many Pepsi Challenge taste tests.
Some time ago I took a strong stance in favor of Gardasil, the HPV vaccine that also prevents certain cervical cancers (which can be fatal). I believe I called critics of the vaccine “the anti-science/pro-cancer crowd.” The most vocal opposition to this vaccine has been from religious parents who think that protection against HPV will make their daughters slutty.
In the last two years there has been a drumbeat of reports about the number of adverse events, and a handful of deaths, reported to the FDA after young girls were administered Gardasil. The conservative group Judicial Watch obtained an FDA database detailing 10 deaths and 140 serious events associated with Gardasil.
I was going to write yet another post urging people to put those reports in the context of the thousands and thousands of girls who have received the vaccine and not experienced any problems. But someone has done a much better job of that for me: Jeff Bercovici at Portfolio. You should read his post.
A couple of side-thoughts, however: First, it’s worth downloading the FDA files at Judicial Watch’s web site, because reading adverse events reports in the original is very, very different from reading about them in Sharyl Attkisson’s report on CBS. None of these reports ever put the adverse event numbers in context of the number of girls who have actually received the injection in total: It was at least 1 million in 2007, and obviously well north of that now.
Here’s a couple more examples of reporters who thought the adverse events were news but couldn’t be bothered to give you the total number of girls unharmed by the jab. One is at CBS, the other is at US News & World Report.
Worse, they rarely describe how lousy the adverse event reports are. Just by skimming them myself I noticed that even in death cases the autopsy physician sometimes concludes that Gardasil played no role. So why are they in there? Because adverse event reports can be sent in by anybody for any reason, and the FDA has a duty to collect them. There are no standards for information collecting — and so the reports fill up with junk, basically.
The only thing that gives me pause for thought here is that Susan Edelman at the New York Post thinks it’s news. Edelman was one of the first reporters to jump on the J&J Ortho Evra birth control patch story. (Basically, the patch administers an unexpectedly high level of estrogen, giving girls heart attacks and strokes in unusual numbers.) The one thing that the patch and Gardasil have in common is they are both administered to young girls who rarely drop dead for no reason. This fact turned out badly for J&J, which has quietly stopped promoting the patch as a result.
Not much – as long as you’re willing to do your own research and your own math.
A front page story in today’s New York Times doesn’t seem to add up – until you figure out that the missing statistic in the story is the fact that there are about 80 million children in the U.S.
Stephanie Saul’s story says
But a chart accompanying the story shows children taking Medco prescriptions for diabetes at a rate of 1.2 per 1000. The chart says the database has 600,000 children in it.
Do the math: If there are 1.2 kids on meds for every 1,000 kids, then in a database of 600,000 there are only 720 kids on meds. Right?
If you do the same math for the rest of the chart, you come up with 12,840 kids on fat pills in total. That’s a long way from “hundreds of thousands.”
The story goes on to say that the Times also used data from Express Scripts that was presented at the American Public Health Association last November. After a search, that study seems to be the one cited here (scroll down) and here and here and here.
(Even if it’s not the same study, it’s a good proxy because it covers kids on diabetes meds over the same time period.)
That study presents similar math: It has 4,333,344 kids in its database. It then says that the prevalence of kids on diabetes meds is just over 2 per 1000 in 2005 for type 1 diabetes, and 0.6 per thousand for type 2.
The back of the envelope says: (2 x 4,333) + (.6 x 4,333) = 11,265.
Again, a long way from “hundreds of thousands.”
So where does this story get its beef? The story mentions in passing that its numbers come from “extrapolating.” As we saw recently with the ludicrous JAMA “women and Viagra” study, extrapolating has its problems. But the answer is that it is only when you take these per-thousand rates and multiply them across the roughly 80 million kids in America, that you start to get hundreds of thousands, and then only in two categories: blood pressure and heartburn (665,600 and 944,000, respectively).
It would have been nice if the 80 million number was in the story, because the piece makes no sense unless you know this already.
Plenty.
The media has gone bonkers for this study which purports to show that women with sexual dysfunction brought on by anti-depressant use can get their orgasms back by taking Pfizer’s Viagra. Google News had upwards of 476 stories on the study at the time of writing.
(NRx highlighted the Great Orgasm Robbery a couple of days ago. Summary: Anti-depressants rob you of your sex life, subjecting you to dystopian side effects such as the “pleasureless orgasm.”)
But the study has problems, bears many of the hallmarks of garbage science, and raises serious questions about why JAMA would publish it.
Among the issues:
+ There were only 98 women in the trial. Forty nine of them were on the placebo and 49 were on Viagra.
+ Only 39 on Viagra actually completed the study.
+ Only 72% of those women reported improvement.
+ Which means that only 28 actual women reported improvement.
So that’s it: 28 depressed women have an orgasm and the media goes crazy.
(The good news? At least nobody got cancer.)
The difficulties with the study don’t end there.
Pfizer, the maker of Viagra, funded the study. And the doc who carried it out has taken Pfizer money before.
All the women are taking two drugs, an antidepressant plus Viagra, making it difficult to presume whose symptoms were being caused by what.
To qualify, their depression had to be in “remission” (meaning they were the type of patients who were already responding nicely to drugs, treatment, or were getting better on their own).
And the headline stat — that 72% of women taking happy pills plus Viagra get their orgasms back — masks some very odd data lower down in the results tables.
Check out the results in the study that are not about orgasms. “Arousal” got a P value of .81. “Sexual arousal” got .61. “Lubrication” got .64. “Sexual drive” got .40.
If one assumes the .01 value for orgasm was significant, then these other results suggest that although the women got their orgasms back, they didn’t get back all the other stuff that goes along with them.
In other words, the one thing that makes this study interesting is that it may have provided hard proof of the reality of the pleasureless orgasm phenomenon.
And can we just remind ourselves of the fact that the reason these women are sexually dysfunctional is because they’re taking the kind of drugs — such as Zoloft — that are made by Pfizer, in the first place?
The way Wall Street looks at drug companies has always been a mystery to me. Why are analysts so uninterested in the “Selling, General & Adminstrative” line on firms’ income statements? This is the line that describes how much a company spent on its sales force and its consumer marketing, and the managers who run that stuff.
Mostly, analysts are obsessed with the usual suspects: revenues, net income, free cashflow, and the state of the R&D pipeline. That is as it should be.
But in the majority of companies, SG&A is roughly double what companies spend on R&D. More interestingly, SG&A is a short-term expenditure, with the results of your efforts being reflected in your revenues in the same quarter in which the expenditures occurred. (By contrast, the smaller R&D line only begins to affect revenues about 10 years later, when the drugs finally come on the market.) And drug company execs are constantly talking about improving their marketing return-on-investment.
So I decided to look at three companies — Pfizer, J&J and Novartis — to see if there were any interesting trends in the way that their SG&A expenditures correlate with revenues and gross profit.* Revenues and gross profit are broad measures of how well managers did at promoting and selling the pills they had on hand, and whether they increased or decreased their profitability while doing so.
Guess what? While the three companies’ margins for revenues, gross profit and SG&A look fairly stable quarter-to-quarter, the yield from their SG&A dollars fluctuates much more dramatically. Interestingly, the growth in the yields changes more dramatically still, meaning that companies are creating and destroying value, based on their marketing investments, far more quickly than the income statements would suggest.
The growth of all three companies’ SG&A yields declined last quarter.
Here are graphs for the three companies, showing the growth rates — or lack thereof — for the yield on their SG&A dollars in terms of revenues and gross profit. If you click on them you should get full-size versions. (Continues after the jump.)
To colleagues who have welcomed me back to the blogosphere, including: Peter Rost at the Pharma Law Blog, John Mack at the Pharma Marketing Blog, Jack Friday at Pharmagossip, and the guy at ClinPsyc whose name I have shamefully forgotten (will someone re-educate me on that one please?).
Could it be, “GSK to DDMAC: Drop Dead?” Possibly.
As outlined on Pharmalot (here and here) and by John Mack (here and here), Troy is hostile to the idea that drug advertising should be heavily regulated. In fact, Troy joined the conservative legal think tank Washington Legal Foundation in June 2005, right before WLF launched its “DDMAC Watch” campaign. (DDMAC stands for Division of Drug Marketing, Advertising & Communications.)
The campaign essentially challenges every warning letter that the FDA sends out. (FDA warning letters ask drug companies to change or halt advertising which the FDA believes is misleading.) The position of the WLF is that FDA has extremely limited authority to control drug advertising, which should be First Amendment protected speech.
Further, WLF believes that the current regs banning off-label promotion should also be thrown out, to allow drug companies to distribute scientific literature for unapproved uses. The FDA is currently reviewing that regulation.
The WLF, for whom Troy is a legal policy advisor, has been chipping away at the FDA’s power to control drug advertising for years. In addition to its DDMAC Watch, the WLF files amicus briefs in cases where off-label allegations are made. The WLF has even defended drug execs who have blinded their patients by arguing that the off-label law is unconstitutional.
The move by GSK to appoint Troy is a fascinating one, because it again raises the question of how aggressively drug companies want to challenge FDA’s authority to regulate what they do. (At one time, Pfizer also employed a WLF sympathizer.)
GSK’s answer seems to be, more aggressive than ever.
File this one under “Why isn’t this on the front page?!” It’s a natural audience-grabber that actually has some proper science behind it:
SSRI antidepressants — such as Paxil, Lexapro, Zoloft, Luvox and Prozac — have rates of “decreased libido, delayed orgasm, anorgasmia, erectile dysfunction, and difficulties with arousal, of between 36 and 70%,” according to a new study.
First reported on the excellent (but badly named) psychiatry blog “Clinical Psychology and Psychiatry: A Closer Look,” the study is a comprehensive review of sexual side effects triggered by selective serotonin re-uptake inhibitors. (That’s happy pills, for us lay-folk.)
One of the worst side effects, seemingly designed by the devil himself, is the “pleasureless orgasm.” The condition goes hand in hand with “genital anaesthesia” (meaning “can’t feel anything,” presumably).
Let’s do a little math: According to Scientific American, close to 10% of Americans are on antidepressants. Let’s make it easy and say that’s 30 million of 300 million yanks. Of those, possibly 23 million are walking around in a state of sexual frustration. And they have partners — so that’s somewhere in the neighborhood of a possible 46 million of us who are inexplicably tetchy and bad tempered on most days. (Yes, I know that some of them will be dating each other — but you can see my point.)
Clin Psyc has a link to the original study but it is no longer functional. However, his/her blog carries large quoted chunks from the paper. Among the scariest:
There are indications that some SSRI/SNRI sexual side effects thought to be rare are actually common. The most frequently documented sexual side effects are diminished libido, unspecified problems with arousal, and delayed orgasm or anorgasmia. Delayed ejaculation or orgasm, and anorgasmia have been those symptoms that the literature links most clearly and most frequently to SSRI treatment, vs. to depression itself. However the symptoms of genital anesthesia and pleasureless orgasm, outside the range of common experience and appearing to often occur together, are frequently reported among men and women in Internet communities, in an accumulating case reports literature, and in one research investigation.
Bahrick
And Audrey Bahrick, a psychologist at the University of Iowa University Counseling Service who wrote the study, has done all the legwork for you hacks already:
Over 1500 individuals belong to one internet-based group whose main focus is the discussion of SSRI-related sexual side effects.
All the media have to do now is log on and take notes.
It is true there have been scattershot media reports of sexual side effects and antidepressants over the years. The Times published one here, probably because it contained this quote, about a woman who switched drugs because she became sick of not liking sex :
Two weeks later, Susan called from her cellphone to say that the antidote was working. While shopping, she said, she spontaneously had an orgasm that had lasted on and off for nearly two hours.
(Now that’s a prescription.)
But the scandal here — the lurid, eyeball-drawing scandal — is that the numbers who suffer from sexual side effects due to anti-depressants have been played down and under-researched.
Surely this subject screams for the Alex Kuczynski treatment?
On Friday, Bristol-Myers Squibb reported that it agreed to pay a $389 million settlement to end allegations that it illegally promoted the antipsychotic Abilify for use in children.
This settlement is interesting for two reasons:
1. $389 million is a very large sum.
2. $389 million is a very small sum.
Clearly, as an existential financial fact, $389 million is a vast quantity of cash. Larger than a lottery win. Enough to buy Manhattan’s most expensive residence — a $50 million townhouse — several times over.
So this should be a significant punishment for BMS, yes?
Er … No.
It’s actually only 2% of the company’s 2007 revenues, which were $19.3 billion. The company will probably write off the fine as a “one-time charge.” (It is due to report its 2Q08 revenues on July 24.) And Wall Street will ignore the loss of cash by building in the fact that it is unlikely to ever happen again (i.e. by “pricing in” the bad news and concentrating on the overall progress of its business.)
To paraphrase Warren Buffett, Who do they think is paying for these one-time charges — elves?* That’s $389 million that won’t be distributed to BMS shareholders in their dividends this year, for starters.
But there’s an even worse problem here: Pharmaceutical companies who break the rules are often bigger than their enforcers, even when the enforcer is the federal government.
Here’s a typical example. Pfizer admitted to acquiring a company it knew to be selling human growth hormone illegally to vain middle-aged weirdos who want big muscles and bigger libidos. Federal law requires a 5-year prison sentence for anyone convicted of that activity. But Pfizer pled guilty and paid only $34.7 million in fines — or just 0.07% of its $48 billion in revenues that year. The settlement was announced on April 2, 2007. Was the stock price affected? No. There was no significant change in PFE’s stock price over the period when the settlement was announced.
This is an important finding: When the fines levied to deter bad behavior are so small in proportion to the finances of the actors comitting the bad behavior, you know you will have an inevitable enforcement problem. Why should CFOs warn their CEOs and marketing chiefs against breaking the law when they know that the punishments (although “large”) are so small that the market won’t notice?
How did it get this way?
Simple. These companies are not really “drug” companies, in the sense that a layman would understand it. Rather, they are financial conglomerates that are the product of a long chain of previous mergers and acquisitions. There was a time when BMS would have been really hurt by a $389 million hit. But that time was prior to 1989, when the former Bristol-Myers Co. merged with Squibb Co.
And Pfizer is a chain of smaller companies, including Warner Lambert and Pharmacia. Now, it is so massive that its criminal transgressions amount to a mere rounding error in its accounts.
Which … ironically … goes some way to explaining why Big Pharma is constantly beset by plaintiffs’ lawyers, who all know that is it easier to settle than fight …
*If anyone can point me to the original quote, I’d love to link to it.
A couple of days ago I wrote a story suggesting that there might be loopholes in the new voluntary ban on drug companies giving doctors lavish meals at fancy steak houses in the hope that those docs will increase their prescriptions for the companies’ drugs.
I noted that the rules said:
“A CME provider at its own discretion may apply the financial support provided by a company for a CME event to provide meals for all participants.”
That, I suggested, would be “a gap in the system that companies will be tempted to test.”
It turns out there’s an even wider loophole elsewhere in the rules. Eli Lilly posted a press release on the same day as the new rules were published that gave this interpretation of the restaurant meals ban:
“Allows outside meals only in conjunction with speaker or peer selling programs.”
Er … isn’t that pretty much exactly the kind of meal that the rules are supposed to ban?
So I looked more closely at the new rules. Meals are banned unless they are:
1. “modest.”
2. offered “in-office or “in-hospital.”
3. Not “entertainment.”
4. offered by a CME provider and not directly funded by a drug company.
Pretty comprehensive, huh? But then, buried in the section on “consultants,” the rules say:
“Modest meals or receptions may be appropriate during company sponsored meetings with healthcare professional commercial consultants.”
So Lilly has it right. Meals are banned, unless you have a consultant along.
Which kind of defeats the purpose of a ban on meals, doesn’t it?
A few days ago PhRMA outlined its new rules for drug reps. The headline requirement was a ban on freebie pens and coffee mugs. You can read the details here. (Say goodbye to the Viagra hammer!)
At the press conference, which I attended telephonically, I asked PhRMA CEO Billy Tauzin about the requirements for those companies that sign on to the voluntary new rules. CEOs will be asked to certify annually that their reps are obeying the guidelines. And companies must report at least once every three years on the results of their efforts to police their reps internally. Tauzin responded that companies will be supplying PhRMA with their certifications, and PhRMA will post them on its web site. “Transparency” was Tauzin’s word of the day.
Fair enough. But what is PhRMA’s record like when it comes to following up its own transparency efforts? Let’s look at its most recent effort in this area: The enforcement of its own rules on consumer drug advertising.
Every time someone complains about drug advertising to PhRMA, the lobby group alerts the responsible drug company. Annually, PhRMA compiles a report on its efforts and the compliance levels of companies who have pledged to advertise responsibly. The report is posted on its website.
But … at the time of writing the most recent report available covered calendar year 2006! The report for 2007 is already about a month late.
So the bar hasn’t been set very high.
I currently have a request pending to interview Tauzin for Brandweek magazine. I’d like to ask him about this. To be honest, I think Tauzin does actually understand that the drug industry has a huge image problem that needs fixing. He told my former colleague Alicia Mundy (now at the WSJ) that his message for pharma industry chiefs is, “Your house is on fire, and you’re still smoking in bed.” Those are the words of a man who understands, intellectually, how much trouble he is in.
The only question is, Does his industry believe that an 18-month response time is acceptable or not?
Twelve babies died in a trial of a pneumonia vaccine in Argentina, according to TradingMarkets.com. The trial was being conducted by GSK. The incident is a sad one and GSK will have its defense—the 15,000 other children recruited didn’t die, which actually means that the death rate is very low.
More worrying are the allegations that poor families are being “pressured and forced” to have their babies enrolled in the trial.
The report flags a huge issue for all major pharma companies: The prevalence of trials conducted in foreign lands—often in countries where people are poor or badly educated—and the fact that the resulting drugs will be made available in rich countries first.
Pfizer, for instance, has suffered years of embarrassment over its Nigerian trials of Trovan, dating back to 1996.
And I know of one drug company that has gone to Russia in order to test an asthma treatment, ostensibly because Russian patients are less likely to be already taking steroid-based treatments.
The financial advantages for pharma companies are obvious: they don’t have such aggressive lawyers; they can be bought off more cheaply; and if a trial goes horribly wrong the chances of it making headlines in the U.S. and Europe are slim.
However, this is the stuff that Pulitzer prizes and Congressional hearings are made of. It’s a matter of time before some bright spark at the BBC, the NYT or the Journal thinks to him/herself, “Hmmm, I’ll bet there’s some interesting dirt to be dug here.” And they’ll find it.
The only question is whether pharma companies dare bite the bullet and commit to ending drug trials on poor people. They won’t, of course. With pharma stocks battered and CEOs looking to squeeze every drop out of their expenses, the idea of making the R&D budget even fatter isn’t that appealing.
Ed Silverman at Pharmalot reported today that GSK will pay an “eyepopping” $3.3 billion for Actelion’s phase III sleep drug, almorexant. But I’m guessing that the eyes that are popping the most will be up in Massachussetts at Sepracor, maker of sleep drug Lunesta.
Why?
Because in September of last year Sepracor signed a deal with GSK to distribute Lunesta in “all markets worldwide (excluding the U.S., Canada, Mexico and Japan).” Which happen to be mostly the same markets covered by today’s deal.
And while the Actelion deal cost $3.3 billion, the Lunesta deal topped out at a modest $155 million. So someone here has been vastly overpaid or vastly underpaid. GSK is now touting almorexant as “first-in-class,” which raises a question about how serious GSK’s commitment to Lunesta is, especially as both drugs have yet to be approved in Europe.
Unsurprisingly, Sepracor’s stock declined this morning and after a recovery closed slightly down at 20.11.
Some advice in hindsight to GSK: While the ink is still wet on that contract, you might want to actually taste almorexant before writing more of those milestone checks … because apparently, in some patients, Lunesta/Lunivia a) tastes disgusting and then b) takes away your sense of taste completely.
It would be a bad thing to drop such a large lump of cash on a pill no one wants to eat twice…
Jim Edwards' NRx 