Category: Big Business

[Here’s the From the Editor page for the latest issue of my magazine]

In America, the July 4th holiday involves an entertaining combination of patriotic fervor and minor explosives. As a nation, we celebrate the declaration of our independence from the one country that we now call our closest ally (supposedly, the British also celebrate July 4th, but they call it “thanksgiving”).

In Brazil, the July 4th weekend evidently involves a game of brinksmanship (not surprising, in a country legendary for knife-fighting). The country’s health ministry gave Abbott Laboratories a July 6th deadline to drop the cost of its HIV/AIDS drug Kaletra, threatening to declare a “public health crisis” and employ a World Trade Organization process to break Abbott’s patent on the drug.

This would lead, at a minimum, to a generic version of the drug in Brazil, in which 600,000 people are infected with HIV/AIDS. That’s a pretty significant impact, but the Associated Press report on this subject actually goes a step further:

Poor countries without drug industries could take steps to authorize imports from Brazil, experts said. And developing countries with robust generic drug production capacity like India and China could be tempted to follow Brazil’s example, creating a bigger threat to the global reach of multinational pharmaceutical companies.

Now, maybe I’m being paranoid (could have something to do with all those explosives that went off this weekend), but “global reach of multinationals” sounds to me like the Pharma biz is being characterized as the Evil Empire (again), and that voiding patents is a viable way to “stick it to the Man” (note that “the Man” in this case is providing Brazil with the lowest price on Kaletra outside of Africa).
India and China have spent years trying to get up to snuff on intellectual property rights, so we wouldn’t possibly imagine that a news organ like AP would champion their reversion to IP theft. On the other hand, maybe I’m just overreacting:

“The impact of breaking the patent would be enormous,” said Michael Bailey, a senior policy adviser for Oxfam International. “If a major country such as Brazil goes through with this, not only will it help ensure sustainability of their excellent treatment program, it will set a hugely important precedent for other countries.”

Nope! It’s pretty clear that this rep from Oxfam believes (along with an HIV-infected Sao Paolo university professor, and a spokesman for Doctors Without Brains Borders, both quoted in the article) that Brazil’s best path is to void the patent for Kaletra, and then sell the generic form to other countries!

The “hugely important precedent” it would set? That would be “don’t bother researching drugs in this field; we’re just going to get your patents voided.” Then we can see how well Brazil “ensures sustainability” of its treatment program when no new treatments are developed. Last I checked, viruses don’t stand still.

(I want to be fair here, and point out that the article quotes Brazil’s health minister as saying that the country has no plans to export the drug. I also point out that the article fails to quote a single Pharma company spokesman, and the only industry statement is a threat from the International Federation of Pharmaceutical Manufacturers and Associations to withdraw investment and jobs from Brazil.)

–Gil Roth

I’m off to the BIO conference down in Phila., PA. We likely won’t have as many protesters as last year’s BIO, which was in San Fran; you’d figure anyone dressing up as a giant monarch butterfly is likely to get his ass handed to him on these streets . . .

(For those of you who are wondering about those Pharma/Biopharma profiles I’m working on, it’s kinda depressing so far. A lot of companies are facing a ton of problems, starting with the #1 guys. Here’s last year’s online version, which oughtta keep you entertained while I’m away.)

Working at home today, writing up profiles of the top 20 pharma and top 10 biopharma companies, for our annual Top Companies issue. It’s a ton of research and writing, so I figured, “Why wear pants? Why not cocoon myself here at home and get writin’?”

Depending on your level of curiosity, it can be a pretty entertaining project. Especially when you have to write about Merck.

In my secret identity, I’m the mild-mannered (okay, angry and abrasive) editor of a pharmaceutical business magazine. The big news in the biz this week was that the FDA “recommended” that Pfizer stop selling Bextra, a Cox-2 inhibiting anti-inflammatory in the same class of drugs as Vioxx and Celebrex. The move sucks for Pfizer, which bought Pharmacia for $60 billion a few years ago with the plan to use Celebrex and Bextra to build a Cox-2 powerhouse. Now it’s stuck with a bloated infrastructure, tons of redundant employees, and a business model that’s still predicated on the crapshoot of Pharma R&D.

But why is the FDA calling for Bextra’s withdrawal? Well, it’s not for the cardiac events that led to the Vioxx disaster. The FDA just wants more data on that from Pfizer. Nope, the FDA withdrawal notice cites, “Reports of serious and potentially life-threatening skin reactions, including deaths, in patients using Bextra.”

That’s right: “life-threatening skin reactions”.

Well, I couldn’t leave that alone, so I had to find out exactly what sorta skin reactions can kill a dude. And then I found Stevens-Johnson syndrome.

Sure, at the sound of it, Stevens-Johnson syndrome oughtta just cause you to break out in slacks or drive a Volvo, but it turns out the be one monstrously messed-up medical condition. When the skin’s reaction is “sloughing off,” I understand where the “life-threatening” part comes in.

Still, that wasn’t the weirdest thing that I came across in my little research. No, it was the FDA’s drug info page for Bextra that wins that award. Because the FDA wants us to know the following:

Stop taking Bextra and call your doctor right away if you get:

• a burning stomach pain

• black bowel movements that look like tar

• vomit that looks like blood or coffee grounds

Now keep in mind, that’s before the serious issues with the drug arose.

And you guys wonder why I don’t quit this day job.

A few posts down, I ran the From the Editor page of my magazine’s new ish. In it, there’s a quote from the director of the Congressional Budget Office, Douglas Holtz-Eakin, whom I praise for trying to raise the alarm about the false numbers in the Medicare prescription benefit bill:

“Two equally plausible scenarios for the future of healthcare costs yield Medicare and Medicaid being either 11 % of GDP–half the size of the current federal government–or over 20% of GDP–larger than the current federal government. So there’s an enormous certainty out there but the trends in the long term, I think, are the central issue. There’s no question about that.”

I gave the page to my associate editor, and told her, “Here’s my vituperative rant for the month. Sometimes I get so vituperative that I make typos.”

She proofread my page, found no typos, and said, “I don’t think it’s a certainty.”

“Hmm?”

“That part about how there’s an enormous certainty. I don’t think he meant to say that.”

“Maybe he was being ironic,” I said. She frowned.

Still, best to double-check, since the quote did come from a transcript, and not a prepared statement. So I called the CBO’s communications department. I got bumped over to someone’s voice mail, and figured that I’d have to let it go as is.

Y’know the funny thing? The CBO got back to me within an hour, asked to see the exact passage in an e-mail, and called back within minutes to let me know that Mr. Holtz-Eakin’s words had been mis-transcribed and that he meant “uncertainty”.

I’m just amazed at how quickly they responded to my request, especially given that my magazine doesn’t exactly have a household name. So, additional kudos to the CBO! Keep watchdoggin’!

What’s $320 billion among friends?

(Editorial from the March issue of my magazine)

Last March and April in this space I wrote about the scandal(s) behind the passage of the Medicare prescription drug bill. At the time, I was irate over the fact that the White House hid $134 billion in costs for the bill, conveniently capping the publicized cost at $400 billion in order to gain votes. It was transparent fraud, and it was compounded by the fact that the chief actuary at Medicare/Medicaid was threatened with firing if he revealed the “true costs” of the prescription drug benefit bill.

The former head of the agency, Thomas Scully, was recently fined $85,000–equal to seven months’ salary–for this action,* Fortunately, he’s now on the speaking/lobbying trail, discussing the intricacies of health care coverage. Why, “[f]rom Medicaid and Medicare to the future of U.S. public health services, Thomas Scully precisely understands the intricacies of health care & public policy,” according to his online biography. This job must’ve taken up a good deal of Mr. Scully’s time. After all, his busy travel schedule prevented him from testifying in front of Congress about Medicare costs last April.

But maybe I shouldn’t be so harsh on Mr. Scully. After all, it appears that his strongarm tactics only cost the American people $134 billion (minus the amount of his fine). As we learned in February 2005, the true extent of budget mendacity was actually a lot worse than we thought.

Revised estimates of the prescription benefit’s cost now range from $720 billion to $1.2 trillion over 10 years. The higher number’s skewed by ignoring cost-savings that the program is likely to generate, but it’s a big number that left-wing partisan hacks like to publicize. The problem is, that leaves the right-wing partisan hacks swallowing a $720 billion program, nearly double what was approved.

How on earth did the numbers jump from $400 billion to $534 billion to $720 billion? Mainly because the initial estimates of the cost included years when the program wouldn’t yet be in effect. That’s right: Congress voted on a bill for a Medicare prescription drug benefit that takes full effect on Jan. 1, 2006, but the initial (fraudulent) costs floated were for the 10-year stretch from 2004 to 2013, since the first phase-ins were to begin last year. But the cost of the program is negligible for 2004 and 2005, making the program look cheaper than it is. This administration has made a practice of that sort of cost-estimate trickery, a hinge of its 2001 and 2002 tax cuts.

So it’s the 2006-2015 costs that are now leaping up to bite us, just around the same time that the administration has a much more valid point to make about the long-term insolvency of Social Security. Virtually no one will treat this matter seriously, since the White House has made a practice of crying wolf, fiscally speaking.

Last June, in a Policy Forum on fiscal policy, Douglas Holtz-Eakin, the director of the Congressional Budget Office (and one of the few people to denounce the initial false numbers of the Medicare bill), remarked, “Two equally plausible scenarios for the future of healthcare costs yield Medicare and Medicaid being either 11% of GDP–half the size of the current federal government–or over 20% of GDP–larger than the current federal government. So there’s an enormous uncertainty out there, but the trends in the long term, I think, are the central issue. There’s no question about that.”

No question at all.

–Gil Roth
Editor

* Actually, the correct amount of the fine is $84,933. We want to be exact about our numbers.

My From the Editor page in the July/August issue of my day job:

Who Knew?
Cancer drug prices explained! (and the Gell-Mann Amnesia effect, to boot!)

In June 2004, Robert Bazell, the chief science correspondent for NBC News, wrote an article called Strange Medicine on Slate.com. I’ve read Slate, which is owned by Microsoft, for a few years now. It has its partisan turns, which can drive me to distraction, but I find its articles pretty informative, in general.

In his article Mr. Bazell attempts to explain why cancer drugs are so expensive. He writes, �[T]he simplest answer is that drug companies can charge whatever price they want.� Who knew it was that simple? I certainly didn’t, so I kept reading, to find out why Pharma doesn’t charge $1 million per dose of every drug (a prospect which surely would’ve made this year’s Top 20 Pharma Companies Report even more entertaining).

Well, I discovered, it’s because Medicare has failed to rein in costs by setting fees for treatment. Since private insurers follow Medicare’s lead (until they don’t, in Mr. Bazell’s world), new MAbs for cancer like Erbitux and Avastin are ridiculously expensive because drug companies want to charge lots of money for them. He writes, “Like all pharmaceutical companies, [Bristol-Myers Squibb] and Genentech cite research costs and the huge risks involved in drug development (many drugs fail; clinical trials are expensive . . . but haven’t we heard it all?) as explanations for the high prices of their drugs. But the real reason is that market forces do not apply to drugs.” Who knew? Perhaps the $2 billion that B-MS committed to ImClone to co-market Erbitux simply grew on a tree, too.

Referring to manufacturing those same drugs, he writes, “True, these antibodies are more expensive to produce than most pills, but only slightly–the technology can be replicated in any college biology lab. Production costs amount to few dollars a dose at most.” (You can go back and read those lines again; I’ll wait.)

Again, who knew? All this time, I was under the impression that my readers and advertisers were manufacturing and purifying multi-step chemical and biological processes under cGMPs at large scale, then storing, packaging and distributing them, while educating doctors and other prescribers about the uses and benefits of their products (e-mail me to let me know what additional steps I missed, like formulation and validation). Now I realize that a bunch of college kids could make Erbitux to treat the 106,000 annual colon cancer diagnoses that Mr. Bazell cites, and there wouldn’t be any problems at all!

At this point I rapidly concluded that my AppleCare warranty likely wouldn’t cover damage to my nifty new laptop caused by hefting it across the room. Then I was reminded of something I read a few months ago. At the risk of turning this space into the �Michael Crichton page,� I’d like to A) note that I’ve never read a book of his, and B) cite another of the writer�s speeches (to the International Leadership Forum, in April 2002):

[T]he Gell-Mann Amnesia effect is as follows. You open the newspaper to an article on some subject you know well.

[. . .] You read the article and see the journalist has absolutely no understanding of either the facts or the issues. Often, the article is so wrong it actually presents the story backward–reversing cause and effect. I call these the “wet streets cause rain” stories. The paper�s full of them.

[. . . .Y]ou read with exasperation or amusement the multiple errors in a story, and then turn the page to national or international affairs, and read as if the rest of the newspaper was somehow more accurate about Palestine than the baloney you just read [about your field]. You turn the page, and forget what you know.

That is the Gell-Mann Amnesia effect. [. . . I]t does not operate in other arenas of life. In ordinary life, if somebody consistently exaggerates or lies to you, you soon discount everything they say. In court, there is the legal doctrine of falsus in uno, falsus in omnibus, which means untruthful in one part, untruthful in all. But when it comes to the media, we believe against evidence that it is probably worth our time to read other parts of the paper. When, in fact, it almost certainly isn’t. The only possible explanation for our behavior is amnesia.

Smart guy, this Crichton. If he applies himself, he may just amount to something in this world.

Gil Roth
Editor