We're a pharmaceutical company, and we're here to HELP you..

dwarven1

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From the LA Times

Fiction Genre Fits Big Pharma
Business, like politics, sometimes makes strange bedfellows. But more often than not, the couples it brings together are perfectly matched.

That seemed to be the case when the Pharmaceutical Research and Manufacturers of America, or PhRMA, hooked up with Michael Viner.

Drug companies aren't known for their devotion to the Platonic ideal of truth. Just look at their TV ad campaign on behalf of the self-serving prescription discount plan they've placed on next month's ballot (Proposition 78 ), which they represent as a selfless contribution to the public weal.

Viner is an old hand at tabloid book publishing. His early venture, Los Angeles-based Dove Entertainment, became the go-to place for tell-all books related to O.J. Simpson, Heidi Fleiss and other L.A. notoriosi. In 1996, he and his wife, the actress Deborah Raffin, founded New Millennium Entertainment, which published such works as "Burning Down My Master's House," a memoir by the disgraced New York Times reporter Jayson Blair. (Raffin filed for divorce last year.)

Viner (pronounced "VEE-ner") was also known for his frequent trips to the courthouse. Of the three authors of a 1996 Dove book about Fleiss' call girls, two sued him for sexual harassment (one claim was dismissed and the other settled in Viner's favor). The third claimed she had been stiffed on royalties, and won a jury award.

In 2003, Viner had a falling-out with Otto Penzler, a book editor who was working on a mystery anthology series for New Millennium. After a jury awarded Penzler $2.8 million in the ensuing litigation, New Millennium landed in Bankruptcy Court to be liquidated. According to lawyers familiar with the case, there is so little of the company to be liquidated that no unsecured creditor, Penzler included, will see a dime.

Viner has now started a third company, Phoenix Books. That's where PhRMA comes in.

Back in April, a lawyer named Mark Barondess approached Viner with a proposal. Barondess is a consultant to PhRMA and an author whose self-help divorce book, "What Were You Thinking??," was recently published by Phoenix.

According to the proposal, PhRMA would pay Phoenix a six-figure sum for the marketing and production of a written-to-order fictional thriller. The plotline was what Hollywood would term high-concept — a group of shadowy terrorists conspires to murder thousands of Americans by poisoning the medicine they're importing from Canada to beat U.S. drug prices. (Think "True Lies" meets the Physicians Desk Reference.)

If this scenario sounds familiar, it's because PhRMA has tried to scare state legislatures and Congress out of giving Americans access to cheap Canadian drugs by warning that terrorists might poison the imports.

Viner duly hired an author, Julie Chrystyn, who in turn enlisted a friend, Kenin Spivak, to help with the writing. Spivak, 48, has an interesting resume: Over the years he has worked at Merrill Lynch, held top executive positions at MGM/UA and Premiere Radio Networks and invested with Michael Milken. Since 1998 he has been chairman and chief executive of Los Angeles-based Telemac Corp., which licenses billing and accounting programs to wireless network operators.

The authors labored on a tight 45-day deadline to produce the book, titled "The Karasik Conspiracy." Spivak says that a PhRMA marketing executive sedulously monitored the work by phone, e-mail and in person, often ordering changes in plot, characterization and tone.

"She was intimately involved," says Spivak, who declined to identify the executive but made it clear that he regarded her input as lowbrow. She demanded that the terrorists be militant Muslims but that their motivation be greed, not politics. She insisted on lots of "frilly female stuff," Spivak says, "Harlequin Romance stuff" — but also that the book incorporate long polemical passages drawn from transcripts of congressional hearings. Spivak says he acceded to many of these demands because "PhRMA was the client." He adds that he had no doubt that the project was being followed by higher-ups at the lobbying group.

And then it all came apart. In July, Spivak says, he and Chrystyn were informed that PhRMA didn't like the book and was pulling out. He says the group offered them $100,000 if they would agree never to speak ill of PhRMA or the drug industry for the rest of their lives. They refused.

PhRMA's management says it discovered the project belatedly and, appalled, pulled the plug. Ken Johnson, the group's senior vice president for communications, has called the project "a screwball idea" and "Looney Tunes" and tagged the marketing executive as a "renegade."

She was a "lower-level employee who acted without authority," he told me. He acknowledges that she had some "budgetary authority," but suggests that she abused it in this instance. He says that PhRMA is evaluating Barondess' consultancy contract and is "presently reviewing disciplinary options" for the hapless marketing exec.

He also indicates that he and his boss, former Rep. W.J. "Billy" Tauzin, who became PhRMA's president in January, know that the group has less than a sterling reputation. (The phrase he used is "quite a lot of baggage.") One of Tauzin's goals, he says, is "to turn the image around," implying that the book project didn't help.

"The Karasik Conspiracy," meanwhile, is set to come out in December. Spivak says there will be a nonfiction preface and afterword describing its difficult gestation. The villains of the plot have undergone yet another transformation. They're now a rainbow coalition of Bosnians, Eastern Europeans and Americans, including some stereotypical representatives of an American corporation: to wit, a pharmaceutical company.

*

You can reach Michael Hiltzik at [email protected].
 
I used to work in a biotech (and wished I still did). I'm truly sad at the bashing pharma is taking. Is some of it deserved? Perhaps. But the people that I worked with in biotech truly were the best, the brightest, and the noblest that I have ever known. Did we want to make money? Sure. Did we want to make a lot of money? You bet.

But at the end of the day, what we wanted to do was save people's lives. My contribution towards that end (being a software guy) was minute. But perhaps I helped in just a tiny way to get Velcade on the market. And Velcade has indeed saved some people who were dying from a particularly nasty form of cancers (Multiple Myeloma) and given them a good quality of life.

So please think twice when you are slamming pharma. You are slamming a whole bunch of really, really good people.
 
Drug Companies

It is fascinating talking to employees of the drug companies - they actually have the mindset that anyone in the US who arranges to buy drugs at the foreigner's price is "stealing" from the drug company and that they are committed to stopping this "theft".
 
I think the drug companies are making a big mistake playing on the safety angle. There's no appreciable risk importing US made drugs from Canada or pretty much any other first world country.

The danger is that we're not just importing drugs; we're effectively importing those countries' price controls as well. If the US wants price controls on drugs, then we should pass those controls through our own legislature, not adopt some other countries' controls without debate or comment.

Politicians have not yet figured out that they can't repeal the law of supply and demand. We can have cheap drugs and drug shortages or expensive drugs and a plentiful supply. Other countries can buy drugs at just above the marginal cost only so long as their markets are walled off from ours: if the US and Canada form one market (through easy import and export) then we'll all be paying the same price. If that price is artificially low through price controls then we'll have shortages and rationing; if that price is market driven then we'll have complaining Canadians. I know which one I'd prefer.

In the long run, this will be a win or draw for the US consumer:
Either the drug companies will start rationing foreign sales (no net effect to the US) or they'll increase the price outside the US (allowing them to drop the US price slightly). I doubt if Canada or Europe would start breaking patents. I'm not so sure about someplace like India.
 
DR said:
The danger is that we're not just importing drugs; we're effectively importing those countries' price controls as well. If the US wants price controls on drugs, then we should pass those controls through our own legislature, not adopt some other countries' controls without debate or comment.

Except that in a system where you have highly-paid lobbyists whose voices drown out constituents, the pharmaceutical companies get to water down the laws that get passed.
 
dwarven1 said:
DR said:
The danger is that we're not just importing drugs; we're effectively importing those countries' price controls as well. If the US wants price controls on drugs, then we should pass those controls through our own legislature, not adopt some other countries' controls without debate or comment.

Except that in a system where you have highly-paid lobbyists whose voices drown out constituents, the pharmaceutical companies get to water down the laws that get passed.

Well, since I'm opposed to price controls I consider that a feature, not a bug. :) Practically, I wouldn't discount the lobbying power of the AARP. They're right up there with the NRA with their ability to make legislators cringe.
 
The price controls that other countries have imposed have basically crushed their pharma companies. What major pharma company is left in Europe? Aventis, Bayer. Who else?

Bringing a new drug to market takes 10 years and costs ~$800M. If you crush the profitability of the drug companies, guess what gets hosed -- R&D.

Beware the unintended consequences.

As for the safety issue, the drug companies may well be overplaying their hand. On the other hand, there have already been problems with phony drugs that look like and are packaged like the real thing, as the Boston Globe recently reported.
 
$ 800M for a new one is a very conservative estimate.
From what I hear we're rather talking $ 1B Euro / $ 1.2B u.S. $
Just the fullfillment of the FDA's requirements costs a fortune.
BTW, I'm working for one of the players mentioned above.
 
M1911 said:
Bringing a new drug to market takes 10 years and costs ~$800M. If you crush the profitability of the drug companies, guess what gets hosed -- R&D.

I just might be a tad more sympathetic if not for antics like those pulled when Prilosec lost it's patent protection. The company who makes it promptly came out with Nexium... with is about 3% more effective than Prilosec. Of course, the advertising campaign that got started didn't mention that about Nexium, just that it's the best thing since sliced bread. Also, let's not forget all the legal maneuvering that went on to try and extend the patent so that they could keep generics from being made of it.
 
DR said:
The danger is that we're not just importing drugs; we're effectively importing those countries' price controls as well. If the US wants price controls on drugs, then we should pass those controls through our own legislature, not adopt some other countries' controls without debate or comment.
Actually, you've got it backwards :). The current system of governmental obstacle to free participation in the world market for drugs is price protection at the expense of the American consumers.

If our government establishes obstacles to buying drugs at the price they are freely offered in foreign countries, they are in effect placing a price control on the American consumer saying "You will pay more than the drug company is willing to sell this drug to a Canadian/European/etc.". The prices charged outside the US more than cover incremental cost, but the companies would probably go broke if they sold them all at such a price.

If there were no borders on drugs sales, it would not be possible for the drug companies to offer different prices to various countries, and those nations would have to choose between not having the product available or paying the free market price. Most likely, the equilibrium free market price would be somewhere between the current US and foreign prices. Remember - although foreign goverments can have price controls, they cannot force a US corporation to do business in their nation, or ship product to that country if the controlled price does not make doing so worthwhile.

It is the US govt which not only allows, but asissts, drug companies in their effort to hit the US consumer with the R&D cost while allowing foreigners to buy at incremental cost.

It is the dream of every seller to engage in "perfect pricing" - charging each customer the absolute maximum that particular person is willing to pay for the product. Car dealers try to do this with one on one "negotiation", however, the industry that has it down to an art is higher education. That's the only business I can think of that gets away with responding to a request for a product price with "That depends on how much you've got, once I to see your banking records I'll set a special price just for you."
 
Rob Boudrie said:
DR said:
The danger is that we're not just importing drugs; we're effectively importing those countries' price controls as well. If the US wants price controls on drugs, then we should pass those controls through our own legislature, not adopt some other countries' controls without debate or comment.
Actually, you've got it backwards :). The current system of governmental obstacle to free participation in the world market for drugs is price protection at the expense of the American consumers.

I don't believe so. We seem to broadly be in agreement as to what would happen if there were a single world-wide market: drug companies could no longer charge different prices. I think this would be a fine thing.

I don't think it's correct to cast that as US price protection. This isn't just semantic wankery: the hypothetical single market price is much closer to the US price than the Canadian or European price. The US price is pretty much whatever the US market will bear. The non-US price is just enough over production cost to be worth selling. For a drug company to maximize its profit in a single market, it wouldn't pay to come down from the US price much if at all. Only in the US is a lot of the demand consumer driven; if you're on NHS and you'd like the latest expensive pill, too bad.

Put another way, import bans provide a windfall for European and Canadian consumers but don't hurt US consumers much. Even with a single market, non-US consumers still wouldn't be paying much of the R&D cost: their governments would just opt for the cheaper, older drugs instead.

That doesn't mean I'm not in favor of scrapping import bans. I am. I just don't expect much practical benefit as a US consumer beyond the entertainment value of listening to the howls of those folks who no longer get a free ride. [wink]
 
dwarven1:

realize that the patent protection starts when the compound is discovered, not when it goes on the market. The company has spent 10 years and about $1B bringing it to market. At best they've got 10 years patent protection, but more likely something like 7 years. After that the generics come in and there is basically 0 profit.

Can you blame them for trying to extend the patent protection?
 
That doesn't mean I'm not in favor of scrapping import bans. I am. I just don't expect much practical benefit as a US consumer
And when the superbugs continue to evolve, but no drug company can afford to develop new antibiotics, that will be a practical benefit to US consumers? That you can get antibiotics that don't work, but you'll get them real cheap?
 
M1911 said:
That doesn't mean I'm not in favor of scrapping import bans. I am. I just don't expect much practical benefit as a US consumer
And when the superbugs continue to evolve, but no drug company can afford to develop new antibiotics, that will be a practical benefit to US consumers? That you can get antibiotics that don't work, but you'll get them real cheap?

I don't expect they'll be really cheap. If drugs are freely importable from Canada, drug companies have a choice: they can continue to sell to Canada at a low price and go out of business when they undercut their US sales or they can charge Canadians more. I have a hunch I know which they'll pick.

(There are intermediate steps as well: they could continue to sell a rationed amount to Canadians cheaply. In that case, Canada has a reason to erect export bans lest their supply of cheap drugs get bought up by Americans.)
 
Drugs Priices

In most government purchasing, the vendors are requied to adhere to a "best customer" clause in the contract, which specifies that:

(a) The government's price will be no higher than the lowest price charged to any customer during the term of the contract.

(b) If the vendor lowers the price within a certain period of time after the government purchase to something lower than the government paid, the difference is rebated to the government.

I've seen companies take a "pass" on private sector deals they wanted since their bid would have triggered the best-customer rebate clause in existing government ocntracts.

Too bad the government does not demand the "best customer" treatment for any drugs it pays for (of, it you accept the fact that the US government subsidizes the industry, it would be justify to require best customer treatment of US citizens).
 
Pilgrim said:
you can't post multi billion dollar quarterly PROFITS and then use R&D costs as an LEGITMATE excuse for robbing people blind.
Most pharmas have been doing quite poorly the last few years. And most biotechs are worse. The only ones that seem to be doing well these days are Genzyme and Amgen, which, as biotechs, are relatively small players compared to Pfizer, et. al. Lilly has been in deep kimche for some time. My previous employer, Millennium Pharmaceuticals, has been losing money each year for the last 5 years or so, and the most recent job cuts will take it from 1500 employees to around 1100. Two of those cut are colleagues of mine, and are among the hardest working and most talented developers that I've worked with.

Biogen-Idec had only a couple drugs on the market and you've probably heard about Tysabri -- as a result, lots of layoffs. Pfizer has bought up a lot of other companies, but that hasn't helped their pipeline any -- it still sucks. Aventis has never done that well, even though it is the favorite of the French government.

The days of big pharma profits are over. If you disagree, then I suggest you buy some pharma stocks. Lots of luck; you'll need it

These days, pharma is the favorite whipping boy of the politicos when they decide to sound populist. I suggest that you carefully consider the motives of the politicos.

I was not an executive or even manager at a biotech company. I was just a lowly grunt software guy. When people slam pharma/biotech, I ask you to consider the people that you are criticizing. I've never met a smarter, more well-educated, harder-working, or more noble group of people. When we had quarterly meetings, we didn't talk about all the money we were going to make. Instead, we brought in cancer patients who told us about how they first found out they were suffering from cancer and how they were trying to live with their disease. Their stories were truly hearbreaking.

These folks really are the best and brightest. And they are working very, very hard trying to save people's lives. What they get in response from the popular press and in forums like this is abuse.
 
The biggest problem in most discussions of health care economics in general, and pharamceuticals in particular is that product changes get completely overlooked. It's like saying that the price of computers keeps increasing, since both my wife's notebook and the PC on my desktop cost more than my old TRS 80 did 25 years ago. Nobody falls for that one, but the all seem to fall for the idea that drug/health care costs are increasing much faster than the general price level. I'll tell you what: I'll bet that (if the government would only let me) I could easily make a handy profit selling 1980 health care and drugs for 1950 prices. Everybody who thinks we're getting screwed by Bristol-Meyer, Aventis, Lilly, Roche, Pfizer and the rest should be standing in line for that bargin. As for me, I'll take the greedy drug companies every time when it comes to my family's health. Darwin can take care of those who prefer government protection from the nasty private sector.

Ken
 
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