The Cautionary Tale of Fenofibrate

Today's Managing Health Care Costs Indicator is $700 million 

Source. Click image to enlarge 

The Archives of Internal Medicine has an illuminating narrative today about how Abbott Pharmaceuticals managed to maintain effective brand name pricing for this questionably-effective lipid medication for over TEN YEARS after its patent expiry.   The authors had an earlier paper showing the striking different use of fenofibrate in Canada compared to the US  - which I linked to in 2011. The annual cost to health care consumers and purchasers: $700 million!

Abbott’s plan, called “a novel and especially clever approach” in the accompanying editorial:

1) Sue potential generic manufacturers for patent infringement. This netted Abbott 30 additional months without generic competition
2) During this 30 month window, Abbott filed for a new formulation – with a slightly different number of milligrams per pill. The drugmaker did no new studies to show clinical efficacy –but rather simply showing that the new formulation was equivalent to the older formulation
3) Before the generic came out – Abbott moved 97% of all patients off the drug that would be substitutable, and to the “new” drug for which a generic had not yet been approved.  

Although the new drug was equivalent to the old one, generics could not be substituted.

4) When a generic was just about to come out for the second formulation – voila – Abbott introduced a third formulation – again showing only equivalency to the old formulation, and again preventing generic substitution.   The company only convinced 96% of patients to switch to the new, equivalent, nonsubstitutable brand name medication this time.

During this time, large studies failed to show survival or cardiac benefit to treatment with fenofibrate, which nonetheless was aggressively marketed.  Rates of use of this medication continued to rise!

The authors suggest a number of solutions to this problem – which could have been addressed by better regulatory efforts, a mandate to allow substitution for equivalent drugs, or prescribing physician unwillingness to go along with this decade-long charade.  

H/T to Marilyn Mann for pointing out this article.

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The Perils of Low Cost Medicine

Today’s Managing Health Care Costs Indicator is  128,000

I’ve often posted about “accretive innovation,” new medical technologies that cost a lot, and offer only a small portion of patients what is often only a tiny benefit.  I've talked less about the consequences of when prices are too low - which means we'll not obtain the potential societal benefits of a new drug. 

First, an example of accretive innovation.

In 2001, Xigris (human activated protein C, Lilly) was approved for use in severe sepsis based on a small study.   The drug was heavily marketed by Lilly – including hiring a PR firm and secretly funding an ethics task force which came up with guidelines that promoted Xigris use.  Subsequent studies showed that the drug was associated with a higher risk of brain bleeding and did not improve survival rates. The drug was withdrawn from the market last fall.  The result of all of this marketing is that a wildly expensive drug ($8000 per dose) gained high market acceptance; sales were $200 million per year. 

I’m reminded of the Xigris story by the New York Times last week, which reported that tranxemic acid, a dirt-cheap generic medication, could save up to 128,000 lives a year, 4000 of them in the US.

From the Times report:

For months, a simple generic drug has been saving lives on America’s battlefields by slowing the bleeding of even gravely wounded soldiers.

Even better, it is cheap. But its very inexpensiveness has slowed its entry into American emergency rooms, where it might save the lives of bleeding victims of car crashes, shootings and stabbings — up to 4,000 Americans a year, according to a recent study.

Because there is so little profit in it, the companies that make it do not champion it.   

This isn’t the first time we’re seeing the ugly side to drugs costing too little.  We have serious shortages of generic oncology medications and generic attention deficit disorder medications right now.  We need effective drug company marketing to bring pharmaceutical innovations to physicians – but disseminating knowledge about drugs is difficult if there is no one with a profit motive to do so.    

I was aghast at the FDA approval of brand name colchicine,  a drug that cost pennies, was well-accepted for gout and other indications, and which skyrocketed in price to over $5.    I felt rage when the Wall Street Journal reported that a pharmaceutical would charge $1500 for a previously-generic $20 progesterone injection to prevent premature deliveries.  But perhaps my anger is at least partially misdirected. 

It’s obvious that we can’t afford ridiculously high prices for drugs.  It's a bit less obvious but no less true that we need high enough prices for effective drugs that their makers will manufacture them and market them for appropriate use.

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Generic Biosimilars: Good News Buried in Today’s Newspaper

Today’s Managing Health Care Costs Indicator is 27%

The best news about managing health care costs this week is probably buried on Page B6 of today’s New York Times. Amgen – the maker of epogen and other biologic medications, has formed a joint venture with generic pharmaceutical manufacturer Watson Pharmaceuticals, to manufacture and market biosimilars- the equivalent of generics for the biologic medications. They’ll be looking to make biosimilars of drugs that competitors to Amgen currently market – which is fine because other biopharmaceutical companies including Biogen-Idec have also begun to enter this market.

Why is this such good news? The biologic medications – including medicines for multiple sclerosis, rheumatoid arthritis, hemophilia, other rare genetic diseases and certain forms of cancer represent a larger and larger portion of the total pharmaceutical budget. Many people aren’t aware of this because these medications are often administered in a physician’s office- so the costs of them are not obvious when patients go to their local neighborhood pharmacy. Many of these medications cost $30-$40,000 per year – and drugs for hemophilia and other rare genetic diseases can cost hundreds of thousands of dollars per year.

CVS Caremark estimates that specialty medicines – the kind of drugs that Amgen and Watson have agreed to market – will be up from 13% of total pharmacy cost (2005) to 27% of total pharmacy cost (2015). I’ve already seen some instances where specialty pharmacy spending for certain employers was that high. These are good drugs – delivering longer and better quality life to many patients. But they are enormously expensive.


Biosimilars won’t be cheap like generic “small molecule” drugs – but they will be less expensive than the current specialty medications, and they will help pressure brand name biopharmaceutical manufacturers to constrain their own prices.

The Affordable Care Act requires that the FDA chart a path for marketing of biosimilar medications. The government should get these regulations out quickly so that we can let the competitive market work its magic.

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Generic Atorvastatin: Expensive Delays

Today’s Managing Health Care Costs Indicator is $324 million

This week New England Journal has a simulation showing the value of the introduction of generic atorvastatin in terms of lowering health care costs. 

Some numbers:

·        Pfizer had revenue of $7 billion last year from Lipitor. It was the top selling medication in America

·        Judging from generic simvastatin introduction in 2006, the cost will decline by 16% one month after generic introduction, 19% at six months after generic introduction, and 60% by 12 months.   

·        Savings from the introduction of the generic medication will be over $2 billion next year, and will be over $4.5 billion in 2014.

·        Pfizer’s agreement with Ranbaxy to delay the introduction of generic Atorvastatin by 6 months cost Americans $324 million in savings. (I suspect this understates the lost savings – since the delay will continue to increase costs for an entire year or longer after the final introduction.)

Generic drug introductions continue to remain one of the major sources of new value in the health care space.  Vigorous antitrust enforcement and regulatory actions to speed introduction of generics is important to be sure we get the maximum value from generic introductions.

Pfizer’s efforts to lower the profits of the generic companies that brought the first atorvastatin to the market might seem like a good deal at first. Consumers can purchase brand name Lipitor for as low as $4 per month – as opposed to $160 per month at Drugstore.com today.  However, these efforts will lower the profits of the initial two generic manufacturers and could dissuade generic manufacturers from pushing hard for early generic introductions in the future. 

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Generic Medications Make Prevention More Cost-Effective

Today’s Managing Health Care Costs Indicator is 98%

 Click to enlarge. Source 

Prevention saves lives – but it’s often stated that preventing disease can save money.   It’s intuitive – a mammogram costs far less than treatment of metastatic breast cancer, and a statin medication costs far less than bypass surgery or a stroke.

However, there are historically few medical interventions that are cost saving.  Childhood vaccinations save more money than they cost.  Preventing medical errors can certainly improve care and lower cost, although this is an internal quality improvement as opposed to a new medical procedure. 

But most prevention efforts can improve health care quality and lengthen life – but often at a considerable cost.

Researchers in this month’s Health Affairs reanalyze earlier research on cost-effectiveness, substituting current generic prices for the brand name prices used in past years when there were fewer effective generic medications available.

The good news – the cost per quality adjusted life year in this new analysis goes down between 58% and 98%.   Although the title of the article implies cost-saving, there are no “negative” costs for Quality Adjusted Life Years (QALYs);  a QALY can be purchased in some instances for as little $1022.

Further good news is that there are a number of “blockbuster” drugs going generic in the next few years.

Click to enlarge. Source above. See also article in today's Boston Globe. 

There are still challenges, though.  Many states have less effective laws promoting generic use, leading to higher use of more expensive brand name medicines when they offer little incremental benefit.   Many physicians still object to generic drugs, although laws limiting and/or disclosing pharmaceutical company gifts might change this over time.  Patients aren’t sure, either, and the different colors and shapes of generic medicines diminish their acceptability. 

We need to push hard for the most cost-effective approaches, so that we can better use our limited health care dollars.  This article shows the importance of promoting use of generic medications.

Past relevant  Managing Health Care Cost Posts:

Cost savings with generics, March, 2011

Senators Try to Undermine Generic Bioequivalents  January, 2011

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The AARP Faults Drug Companies for Price Increases

Today’s Managing Health Care Costs Indicator is 8.5%

Click to enlarge image 

The AARP  reported last week that brand name prescription drug prices rose 8.5% last year.    That’s substantially more than the total increase in the cost of pharmaceuticals - which was 3.2% for 2008 (last publication of National Health Expenditures  or 5.7% (CVS-Caremark- figure above).

What’s the difference?

The overwhelming majority of prescriptions (about 70%) are for generic medications.  However, the overwhelming majority of costs (about 80%) are for that minority of medications that are available in brand name formulations only.  So – generic substitution can lead to giant savings, but these can also be wiped out quickly when brand name prices go up.

The big pharmas aren’t in an enviable position.  Many ‘blockbuster’ drugs have gone generic over the past few years, and Pfizer is preparing itself for Lipitor (atorvastatin) going generic at the end of next year.   The AARP study shows that drugs about to go generic have had large cost increases in recent years.   Why is this?

It’s not to fund the research (long since paid for), but it could help underwrite new research.  It’s not to pay for marketing – the pharmas cease large-scale promotion of a drug in the months before it goes generic.  Brand name price increases are certainly not to address additional production costs – generic manufacturers will be able to produce these for pennies a pill in just a few months.  

The pharmas cannot suggest an increase in ‘value’ provided by a brand name as it nears patent expiry which could justify an increase often over 10%. 

Once again –what causes the prices of drugs about to go generic to increase?

There are a few different underlying reasons.  The first is revenue maximization.  The ability to get a high margin is about to evaporate – make hay while the sun shines!  A darker potential reason is that  the pharmas are seeking to make drugs about to go off patent look as unattractive as possible.  When  Lipitor is about to lose its patent protection, even while a similar drug simvastatin is available for pennies a pill , Lipitor goes up in price by 24%.  Sure, that will move some patients to simvastatin.   But that will diminish profits for the ‘first mover’ generic competitor, as some patients will switch to another statin medication that retains patent protection.   Flomax went up 92% over 5 years; most of that price increase was in the two years before patent expiration.   

Many pharmacy benefit managers would move drugs about to lose their patent protection to a “preferred” tier to gain savings after the drug goes generic.  However, the manufacturers would like patients to move away from drugs about to lose their patent protection – preferably to a medication that will retain patent protection for a number of additional years. 

There aren’t perfect answers here.   Most other developed countries have rigorous price controls for pharmaceutical agents, but this can stifle innovation.   Clearly, “me too” drugs can offer an opportunity to create some price competition, which helps improve value.  The pharmas used to introduce controlled release formulations for a drug about to lose patent protection; we have seen fewer of these end-runs around generic substitution recently.  New regulations to make it more difficult for the brand name pharmas to pay a generic manufacturer for a delay can drive some additional volume to the lower-cost generic earlier.

Click to enlarge image

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Canadian Provinces Overpay for Generics

Today’s Managing Health Care Costs Number is 46%

That’s the percentage of Canadian provincial budgets that are dedicated to health care.  It’s up from 35% in 1999.

Health care cost woes are not unique to the United States!

The rise of health care costs crowds out other important government services, and this is not sustainable.

The Economist  reports that if there is no change in health care inflation, Ontario will spend 80% of its budget on health care by 2030!

What’s the problem?

For one thing, the Canadian provinces are overpaying for generic medications. Each province sets rates for generic medications, and in Ontario these are pegged at 50% of brand name price, and scheduled to drop to 25% later this year.  Generic prices are often 10% or less of the branded product cost in the United States. 

Some will suggest that this is further proof that we should rely on market forces to drive down prices, rather than having the government set prices.  I think this shows that regulatory agencies have a hard time being dynamic in their approach to prices.   It’s likely that regulations to cap prices of brand name medications is effective, but there is no need for price controls for commodity generic medications. In Ontario,  setting prices actually artificially inflates costs.

We’re likely to have arguments in Massachusetts and in the United States about price controls in the coming months and years.   In the US, our high unit costs are the main reason our health care is more expensive than the rest of the developed world.    Price controls work (at least temporarily) in some instances, but they can lead to paradoxically high costs rather than cost savings.  

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PWC Estimates 9% Health Care Cost Increase in 2011

Price Waterhouse Cooper  published its projections for health care inflation in 2011 last week.  PWC projects that medical costs will rise by 9.0% - better than the 9.5% from 2010 – but certainly not a game changer. Further, since inflation is likely to remain low or nonexistent and the GDP is likely to be close to flat, the portion of GDP dedicated to health care will continue to increase.

PWC suggests that the factors that are pushing health care costs down include:

-          Move to generic medications

o        Lipitor goes generic in 2011. Note that the huge cost savings are generally 18 months after the first generic comes out; but there are some savings even in year one

-          Increasing patient cost-share

o        This increases price sensitivity, and decreases demand. Above is a summary of the PWC survey on increased cost-shifting to members/patients

-          End to COBRA subsidies.

o        Members who have recently lost their jobs tend to have very high claims costs, and the much higher unemployment coulpled with the federal subsidy of 2/3 of the cost of COBRA has swollen the number of people on this program.

The factors pushing health care costs up include:

-          Medicare cost-shift.

o        Medicare underpays hospitals and other providers less than commercial, employer-sponsored plans (although not as badly as it would if the 21% physician fee schedule decrease had not just been reversed for another six months by Congress.)  The PPACA (health care reform) decreases rate of increase for hospital fees – so the relative underpayment will increase.  While Medicare rates are still substantially higher than payment rates in other countries, they are almost always below

-          Provider consolidation.  

o        Hospitals are merging, and they are acquiring physician practices.   There’s been a dramatic shift of cardiologists from private practice to hospital employment over the past year with reimbursement changes, for example.  Larger provider groups mean less competition and higher prices

-          Health Care Information Technology

o        PWC notes that the largest expenses for implementing Healthcare IT are front-loaded in 2011 and 2012 – and suggests that the savings will accrue later.

o        The New York Times http://www.nytimes.com/2010/06/27/business/27digi.html?hpw had an article today suggesting that EMRs can allow faster physician bill transmission, which can lead to quicker adjudication (payment), and lower administrative costs.  

o        It’s also possible that EMRs will lead to better charge capture, which can increase health care costs as long as we stay in a system of fee for service reimbursement.

All told, the PWC estimate of health care cost increase is especially distressing in light of the sour economy.  

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