Jim Hoyes is under no illusions. As vice president for managed care at Sanofi-Synthelabo Inc., the pharmaceutical maker, he and his team have led focus groups with HMO managers. They talk not of products, but of corporate capabilities and strategic direction. Invariably, direct-to-consumer advertising comes up. Hoyes steels himself for the negativity.
"They view it as something that's been sprung on them," he says, running through MCOs' common concerns. "They don't have as much control as they would like over their business. The messages could conflict with what they're trying to accomplish."
But once all that is out of their systems, the discussion often turns positive. "You can end up with strategies and initiatives that work together," says Hoyes. "Say as part of a formulary launch, you assure HMOs that your messages are parallel with what they're trying to communicate. They realize you're trying to swing the market to a product that's on formulary, and it turns into a win for them."
Some drug companies less able to articulate the mutual benefits of DTC advertising may not get so polite a reception. A lot depends on whether the product is one a plan's members need or want.
"Take the erectile dysfunction drug," says Allan Korn, M.D., chief medical officer for the Blue Cross Blue Shield Association, not wanting to use product names. "If you're a paraplegic, or if you've had radical prostate surgery, it is a wonderful drug. But why on Earth would you need TV commercials to reach that community? These people are regularly in touch with physicians who would gladly make this medication available to anyone who needs it.
"But creating a diagnosis that doesn't exist in clinical medicine, convincing people that it's important, and driving demand," he says, "is absurd."
It's that "want" aspect that keeps health plan executives awake late at night. Their struggle to channel member desire is intensified by the fact that drugs that pharmaceutical-advertising people call "medical option" -- as opposed to "medical necessity" -- make good candidates for DTC advertising.
Philip Imperial, senior vice president for Noonan/ Russo Communications, a health care public relations agency, says in general, DTC brands address chronic conditions and have a long treatment cycle (otherwise, the ad costs aren't worth it), or are for people with "a condition that means more to the patient than to the physician." Claritin is a case in point, he says: "People don't die from allergies, but if you've got them, you're pretty miserable. It means a lot more to you than to your doc."
The pressures on health plans created by DTC-generated demand won't go away as long as members are given incentives to disregard drug costs. This puts plans in the delicate position of maintaining member satisfaction while trying to check costs.
In two years, DTC advertising has gone from the abstract to a big-money reality. IMS Health reports that DTC advertisers in the U.S. spent $905 million in the first six months of this year, a pace that will surpass 1998's $1.3 billion outlay. This coincides with an estimated 12.9-percent hike in U.S. pharmaceutical expenditures, the second-highest increase since the government began keeping records.
Meanwhile, 14 percent of HMO enrollees exposed to a DTC ad last year were motivated to ask physicians for a prescription -- and more than a third of those got it, according to Inforum's 1998 Pulse survey of consumer health care utilization.
How does all this fit together?
"We're seeing an overall trend of 16 to 18 percent," for drug-benefit cost increases, says Mark Campbell, Pharm.D., director of pharmacy benefits for the Wausau Insurance Companies. "The most expensive and highly utilized items are the same that appear in DTC advertising." While Wausau hasn't quantified it, Campbell thinks there's a "very real correlation. "I estimate that 25 to 30 percent of the increase is due to the influence of DTC advertising."
Even so, Imperial doubts this causes health plans much real duress. "The average managed care plan spends seven and a half percent of its budget on drugs," he says, adding that drug therapy can be a cost-effective way to reduce costs and enhance outcomes. "Their notion that 'You guys are driving us broke' is based on some intriguing arguments."
It's a problem, Korn counters, when nobody will pay higher premiums to support his own demand. That raises a vital question: What is insurance for?
Take the case of a young healthy couple, who Korn says can get a good major-medical policy for about $4,000. "You're insured so when you need a bypass or get hit by a bus, we're there in your hour of need. That's what insurance is.
"Now, if both partners decide they want [a leading nonsedating antihistamine], that's $1,500 per person," he continues. "Three grand! What's left for the unforeseen event insurance is meant to cover? What do Mr. and Mrs. America expect from their coverage? If it is, 'Once I have insurance, I'll never spend another dime out of pocket,' we can live with that. But the premiums need to reflect that."
Health plans bring some of this on themselves. "Incentive payments reward physicians for high patient satisfaction," Korn agrees. "We tell docs, 'Just say no to medically unnecessary drugs on demand -- you're the only ones who can stop this. But if your patients are happy, we'll pay you more.'"
Some pharmaceutical manufacturers lean hard on the patient-satisfaction aspect when dealing with health plans. "Some of them remind MCOs, 'I've got the best stuff, and your patients want it. If you don't give it to them, you'll alienate them,'" says Imperial.
That's because drug companies, he says, have "cracked the code" that MCOs have yet to decipher: The consumer is becoming a primary force in medicine. "Consumers drive an inordinate amount of demand, and patients are not the idiots health care has treated them as," he says. The drug company's objective often is to "drive demand around the managed care plan and up through the physician."
That's not a bad thing when the advertising is more or less public education, says Connecticut psychiatrist Harvey Ruben, M.D., director of continuing education and a clinical professor of psychiatry at Yale University.
"A lot of it's pretty good," he says. "Eli Lilly had an ad about depression that said, 'Here's the disease. If you have these symptoms, call your doctor.' We can't argue with that."
Martin O'Brien has seen similar physician acceptance of efforts to promote Cenestin, Duramed Pharmaceuticals' hormone-replacement drug. O'Brien, head of prescription-drug branding and marketing at Gillespie/RAR Health Care, a Princeton, N.J., advertising and marketing agency, helped launch a DTC campaign for Cenestin in September.
"Our platform is: patient education, understand your options, get involved, and choose what's going to work best for you," says O'Brien. "Physicians have been open to that. The idea of a woman initiating a conversation about hormone-replacement therapy is welcomed by most physicians."
Yes -- if they aren't feeling pressed to see more patients than ever, says Imperial. "For complicated stuff, like HRT, the conversation tends to fall away from the physician and go to his support people -- nurse practitioners, nurses -- who can spend more time with the patient. For HRT, a patient might say, 'Some reports say I might get breast cancer from this.' Then the conversation isn't about the ad, but more about the treatment. And that becomes a time-consuming, capitation-burning conversation."
Physician complaints about time should be viewed in context, says Benjamin Banahan, Ph.D., coordinator of the University of Mississippi's Pharmaceutical Marketing and Management Research Program. "You've got a system forcing them to see more patients every day. If DTC advertising makes patients want to spend time with physicians to talk about these things, that creates a conflict that could irritate the doctor. It's like, 'I've only got so much time with you, and you want to discuss this drug?'"
Physician attitudes, though, are evolving. Banahan led a study, presented at last month's American Association of Pharmaceutical Scientists' annual meeting, of primary care physicians' experiences with DTC-influenced patients. On average, 36 percent of patients who talked with their physicians about a product they saw advertised walked out with a prescription for it. Of those who specifically asked for a prescription, 35 percent got it. But Banahan cites the finding that 94 percent of physicians agreed, at least some of the time, to prescribe products discussed in patient-initiated conversations as evidence of a thaw in physician opinion about DTC advertising.
"Historically, doctors have believed DTC had little, if any, value and often was inaccurate," he says. "Now, about 40 percent see it as mostly accurate, and they are responding to it positively more often -- in a sense, they see the patient as a partner."
Physicians' biggest problem about DTC ads, he says, is formulary conflict. "When a patient asks for a specific drug, often there are formulary reasons why the doctor can't accommodate the patient. The patient doesn't always understand that."
Physicians annoyed by DTC advertising can pose a problem for a health plan when the advertised drug is on its formulary. "If a DTC campaign begins without physicians knowing about it, expect an amazing backlash," says Imperial. "Many will make it a point not to use your medication if they can."
Nancy Dickey, M.D., the AMA's immediate past president, is more concerned with the theme DTC ads impart. "I'm not a grocery store, but I must be responsive to my patients," says Dickey, who directs a family practice in College Station, Texas. "Patients are inundated with the message that there is an instant response to their problems: 'You don't have to forgo the tacos -- just pop this pill.'
"I'd rather have a conversation with patients about how to prevent gastroesophageal reflux disease," she continues, "but the response is, 'Naw, skip all that, doc, and just write me the prescription.'"
What can a physician do?
"I try to make it an opportunity to talk with patients," says Dickey. "I talk about costs. This concept, 'It's free' -- well, it ain't free, buddy. But there's only so much social education I can do in 15 minutes."
Therein lies the rub. DTC-generated demand has unmasked a festering problem: Managed care enrollees are shielded from medications' real costs.
"I don't think there's a man or woman out there who knows this drug costs $1,500 a year," Korn says of that nonsedating antihistamine. "People think it's $5 or $10, because that's their copayment."
Ed Kaplan is vice president of the National Health Care Practice of the Segal Co., a benefits consultancy. He says employers are waking up: "There's nothing they can do about price increases, but they can do something about plan design."
At a labor-management conference last month, Kaplan asked how many in the audience had made changes to their pharmacy-benefit design in the last 12 months. Half raised their hands.
Employers and plans using flat copayments have created some of their own problems. "That kind of plan design has removed any sense of patient responsibility in cost-sharing," Kaplan says.
Flat copayments can encourage patients to gravitate to the most expensive -- often, the most heavily promoted -- drugs. "Imagine seeing sequential television ads for a Dodge Neon, a Chrysler 300M, a Mercedes, and a Bentley," Korn illustrates. "At the end, an announcer says, 'It's your choice for a $25 copayment.' That's what we're doing with drugs."
Blue Cross and Blue Shield of North Carolina initiated a three-tier copayment this year, but combined it with an open formulary. Patients are never told "no" if they are willing to pay a price; the insurer expects this to encourage patient involvement.
"It puts decisions back in the hands of doctors and patients," says spokesperson Susanne Powell. "This way, they can decide what meets their needs."
But Kaplan predicts that coinsurance -- not new copayment structures -- will be the coming thing.
"Coinsurance is a sophisticated choice to drive some market pressures back in," says Kaplan. He names three cholesterol-reducing drugs, whose monthly costs average $42, $70, and $100. "Right now, it's a perverse incentive. With a $10 copayment, you say, 'Get the most expensive drug.' But if you put in 20-percent coinsurance, people see the value. Some will start to be consumers again. They say, 'Let me try this one. I'd rather pay $8 than $20.'"
But coinsurance will probably take years to root, and until health plan members have impetus to try a less-expensive drug, says Wausau's Campbell, there's little employers can do to combat demand-driven cost increases.
Because of the expense of print and particularly broadcast advertising, DTC dollars will be shifted to the Internet, Imperial predicts. "The Internet is such a cheap medium, you could put 97 pages of package insert there and won't pay much for it."
Those 97 pages of small print illustrate a regulatory constraint that makes TV even less attractive to advertisers: The FDA requires commercials to contain a fair balance of risk and benefit information. "In a 30-second spot, about 12 are fair balance. If only a little more than half the time is spent promoting the product, you have to wonder how much return there is," Imperial muses.
That's not to say it hasn't been effective. Scott-Levin research credits DTC advertising for Celebrex with driving an 18-percent increase in physician visits for arthritis; Celexa and similar drugs pushed visits for depression up 10 percent; and Meridia and Xenical helped generate an 11-percent rise in obesity visits.
TV ads have prompted awareness of depression's warning signs among Ruben's patients. "The interesting thing is, usually they come in and say, 'I saw this ad -- I don't know what the drug was, but here's what they told me about depression,'" says the psychiatrist.
Hoyes, at Sanofi-Synthelabo, thinks that benefits everyone. "If patients with symptoms don't know they have a disease, this can drive them into the system," he says. "That helps with long-term savings if you can avoid a catastrophic event. And that generally gets a favorable response from MCOs."
In other words, investment in pharmacy up front can save dollars elsewhere in the system, right?
Campbell and Korn both think evidence to support that is lacking. Worse, says Korn, inappropriate use of drugs can drive medical costs up, not down.
"Suppose phen-fen had come on the market two years later than it did, and had received the kind of attention Allegra and Claritin get now. How many more people would be ill with heart valve problems? We don't know the full story about a drug at the time of its release."
O'Brien, the ad executive, directs that criticism at herbal products, which carry broad-reaching claims but largely are not subjected to clinical study. "There's no real understanding of the downsides of these products," he says. "Looking at the estrogen market, I think it's a disservice to tell women they could take an over-the-counter herbal product to relieve menopausal symptoms, bypassing the health care professional for a potentially unproven therapy."
Whatever health plans have learned about DTC-driven demand, they should study it carefully for the next round of blockbuster products. One on the horizon is tremacamra, which the Journal of the American Medical Association reported last May blocks rhinoviruses from receptor cells that would allow them to proliferate and give someone a cold.
Pharma-watchers expect that if the FDA OKs the drug, it will be widely promoted. And popular. And expensive. A cold isn't life threatening, so will plans cover it? Korn fears they may have little choice if it's FDA-approved and there's no comparable drug.
"I challenge the pharmaceutical industry to price the thing at $10," says Korn. "But you and I know that won't be the reality. So the issue isn't 'We have a drug that's going to make people happier and more productive, so you should cover it.' Our response needs to be, 'If you want the drug, for that reason alone, your premium is going up $150.'"
Neither denying coverage nor raising premiums engenders satisfaction. But Korn says, "We have to stop being other people's goat. It amazes me health plans have taken the heat for the cost of [the erectile dysfunction drug]. We need to convey a very honest message: 'We'll provide you with any benefit. But our actuaries have to factor in the cost.'"
Health plans' own fragmentation feeds their concern that DTC ads affect drug expenditures. "There is a huge incentive-alignment issue," says Imperial. As an example, he names a New York health plan pharmacy executive, whom Imperial calls one of the most creative and innovative people he knows.
"But when all is said and done," Imperial says, "he lives and dies by the bottom line of his pharmacy spend. Even though he knows that taking on a more expensive compound will improve outcomes in his organization, he also knows that unless he keeps his budget in line, he's going to get his hand slapped at the end of the year."
Imperial thinks DTC-generated demand gives pharmaceutical companies and health plans an opportunity to mesh objectives. "Wouldn't it be an interesting dynamic if drug companies, instead of hoping the physician will fight the MCO, act almost on behalf of the MCO?" For instance, an inexpensive diuretic could be a part of a health plan's protocol for reducing CHF, but physicians may never read the health plan's guidelines to know that.
"The detailer could tell the doc why that drug is a better choice, save the health plan money, and on top of it, generate better outcomes," says Imperial. "This historically antagonistic relationship makes no sense for the drug company or the MCO."
The New Jersey Supreme Court sent shock waves through the pharmaceutical industry in August with a ruling that gutted liability protections drug manufacturers long enjoyed. And health plans potentially could be caught up in the fallout.
Pharmaceutical companies are shielded from most product-liability lawsuits, thanks to the learned intermediary doctrine. Generally, if a company adequately informs a physician -- the learned intermediary -- about potential risks and side effects of one of its products, it is excused from responsibility for complications arising from its use.
But in Perez v. Wyeth, the justices threw out that immunity for products pharmaceutical manufacturers advertise directly to the public. Says Terry Gaffney, a lawyer with the Winston-Salem, N.C., firm of Womble, Carlyle, Sandridge, & Rice, "Perez basically says that pharmaceutical companies no longer have the benefit of the learned intermediary rule when promoting products to consumers. Under Perez, ads may have to contain greater detail about side effects, drug interactions, and contraindications."
How much warning is enough? That's subject to debate, but Gaffney thinks direct-to-consumer ads are likely to change. "How do you distill complex warnings and contraindications to a lay person?" A product manager, he says, will have to think about promotional efforts in these terms: "How will this look to a pro-plaintiff jury with a grieving widow in the courtroom who alleges a certain product killed her husband because he wasn't warned?"
Of course, this is law only in New Jersey, but if it spreads, such questions could come to govern DTC advertising, especially in light of consumer mistrust of those ads. A study this year of 20,000 people by Princeton, N.J.-based Consumer Health Sciences found that Americans trust the health care information they get from their physicians more than any other source. TV ads ranked 12th in trustworthiness -- out of 12 possible choices.
Further, a National Consumers League DTC roundtable in September concluded that ads' brief summaries of potential risks and contraindications "do not communicate useful information to consumers," and that DTC ads "do not give consumers enough background to fully understand the spectrum of risks, safety, and potential effectiveness of drugs."
For health plans that use restricted formularies, the Perez case poses a liability threat, says Gaffney, particularly when drug substitution is involved. "A smart plaintiff's lawyer is going to create a theory of liability that not only did the drug company have a duty to warn this patient, but the HMO did, too, if it stepped in and told its doctors which drugs they could and could not use. If they're going to make these decisions, are they going to have to warn members?"
In other words, Perez's extension of liability could mean that more parties can be exposed in malpractice suits based on failure-to-warn -- suits that will wind up before plaintiff-friendly juries.
"A lawyer will sue the drug company, sue the HMO, sue the doctor, sue them all." says Gaffney. "And then he's going to step back, watch them all point fingers at one another, and say to the jury, 'I don't know who's at fault, but obviously, one of these defendants are. You decide.'"
In the wake of Perez, Gaffney says, HMOs should consult with counsel to do a liability-risk analysis. Ask these questions: Is the formulary being managed in-house? Are package inserts for the products on the formulary being kept, and are those being provided to physicians? Contracted physician groups can be considered agents, and an HMO can be held responsible for its agents' negligence.