BrandweekNRX

The 'J&J Girl Scout Drug Dealer' Thing -- a Lesson in How Media Viruses Work

About a week ago, I published this story about a charitable effort currently being launched by J&J unit McNeil Consumer Healthcare. Briefly, J&J -- or McNeil, as they insist on being called -- is allowing community groups to sign up at a website where their members can buy OTC drugs like Tylenol. For every sale that is made, the charitable group will get 8% of the sale.

But the website in question has since been "temporarily" shut down.

Interesting but not world-shattering, right?

In an attempt to hook readers into this story, I wrote a rather flippant lead sentence: "Johnson & Johnson wants to turn Girl Scout troops into 'drug dealers'—but it's all for a good cause."

The rest of the report was a straightforward summary of how the effort will work, and what J&J/McNeil is doing to promote it.

To my surprise, McNeil was furious, and I got an earful from one of their PR people about a day after it came out. "We're not trying to turn Girl Scouts into drug dealers," they fumed. "We demand a correction."

After some back and forth Brandweek declined to run a correction on the ground that the matter was more about tone than fact. No one really thinks J&J/McNeil is trying to get girl scouts to deal drugs. It was a journalistic turn of phrase. And besides, despite that one line the entire rest of the story was told straight.

We offered to publish a letter to the editor from McNeil, but they declined.

I figured the matter would end there ... but then Pharmagossip produced an item (which has since moved off his frontpage so I can't reproduce it here for you but Jack Friday kindly provided the link in a comment below) ... and then Tampa Bay News 10 did this item ... and (9 News Now in Virginia did this (including that fancy logo at the top)...

Which explains why McNeil was so pissed at me.

For the record: J&J is not literally trying to turn literal girl scouts into literal drug dealers. The program, which does involve the distribution of pharmaceuticals, is open to any charitable group, including the girl scouts, who want to participate. I only wrote that "girl scout" line because the girl scouts and their cookies are the most famous nonprofit group who sell things to raise money.

Guys, you can put your website back up now.

Can't Be Bothered to Read That Massive Drug Price Ruling? Start Here!

You can be forgiven for not reading Massachussetts federal judge Patti Saris's huge ruling on average wholesale price litigation (inflating drug prices to make companies and doctors rich, in layman's terms), which was handed down last week.

It's 183 pages, after all.

So I thought I'd do all my readers a favor and extract the juicy bits for your entertainment. Have fun! If you've got a lot of free time, you can download the full text at the end of this post.

Because AWP is the predominant benchmark for reimbursement by the government and third-party payors, plaintiffs contend that manufacturers grossly inflate each drug’s AWP to create a “spread” between the doctor’s real acquisition cost and the fictitious published AWP, and that drug manufacturers then “market the spread” in order to obtain market share over a competitor’s drug. Indeed, some doctors began to refer to “AWP” as “ain’t what’s paid.”

The evidence established that the Medicare system created perverse incentives by pegging the nationwide reimbursement for billions of drug transactions a year to a price reported by the pharmaceutical industry without any oversight. Many pharmaceutical companies unscrupulously took advantage of that flawed AWP system by establishing secret mega-spreads between the fictitious reimbursement price they reported and the actual acquisition costs of doctors and pharmacies.

Many doctors (particularly oncologists and urologists) eagerly entered the fray by exacting discounts and rebates from manufacturers. Many doctors purchased the drugs based on their “return to practice,” which means the profitability of the drug to the practice.

Disturbingly, the patient was a vulnerable victim of this strategy of “marketing the spread” because when the AWP was raised, the Medicare patient was required to make a co-payment of 20 percent of the inflated AWP…Not surprisingly, none of the cancer patients who testified had ever heard of AWP, and they trusted their doctors to pick drugs for them based on effective treatment criteria, not profitability.

What was remarkable, though, was how few of the pharmaceutical witnesses at trial were concerned about the impact of an inflated AWP on old and sick people making co-payments based on a percentage of AWP. Indeed, from the vantage point of AstraZeneca’s sales team, they were actually assisting patients because Zoladex was cheaper than Lupron in treating prostate cancer.

The Office of Inspector General reports that Medicare reimbursement for the top 10 oncology drugs ranges from 20 percent to nearly 1000 percent per dosage more than acquisition costs.

The conjunction of manipulation of the AWP to induce customers to purchase a product with active marketing of the spread is strong evidence of the unlawful intent necessary to trigger the anti-kickback statute.

According to GAO and CMS, in 2001 Medicare overpaid Part B drugs by over $1 billion. … In 2002 oncologists collected approximately $600 million in overpayments.

(Congress ended the AWP spreads in 2003, and unsurprisingly, drug prices plummeted)

Even with the increase in administration fees paid to doctors, Medicare has had overall cost savings from the decrease in drug expenditures for Zoladex, Taxol, Remicade, Procrit, and albuterol. The total reimbursement for a typical administration of Zoladex, including both product cost and administration fee, fell from $451.56 in 2002 to $226.48 in 2005 under the new ASP system.

(But back in the bad old days …)

The reported AWP for Zoladex, however, was drifting farther and farther away from the actual selling price of the drug. In 1995 the spread rose to over 40% and continued rising steadily to reach over 140% in 2002. During that year, the AWP for a 3.6 mg dose of Zoladex was $469.99, while the ASP was only $194.62. Despite understanding that patients and payors were paying for Zoladex based upon these inflated AWPs, AstraZeneca seemed unconcerned. Alan Milbauer, AstraZeneca’s VP of Public Affairs, acknowledged that “yes, the reimbursements went up, but it was overall less cost to the health care system and less cost to the patient. So I actually felt good about that.”

Sales representatives sent a letter to potential accounts encouraging them to switch to Zoladex … A section titled “DO THE MATH!” then explained exactly how to calculate the “Return to Practice.”

(Internally, J&J execs began to have ethics and public relations concerns about marketing the spread, but … )

J&J actively encouraged their sales representatives to market the spread on Procrit to physicians. The materials for a Sales Training Workshop indicate that one of the training objectives was to “[k]now how to explain PROCRIT Profit to the Pharmacist.”

(J&J) Sales Manager John Hess … directed the sales representatives to be discreet in their use of the profit information, instructing them to “simply draw out the scenario on a piece of scratch paper asking for the office billing fee, injection fee, and acquisition fee based on medicare or non-medicare.” The memo closes with an underlined directive: “Do not distribute this memo to your offices. This is for your information only!”

BMS also knew that AWP was an “artificially inflated number.” Yet despite these understandings, there was very little concern, if any, about payors and cancer patients overpaying for their drugs. Sales Representative Douglas Soule best summed up the attitude of BMS when he said, “it’s just the system.” When asked if it ever bothered him that people were paying a percentage of a phony price, he finally responded, “No.”

The overwhelming evidence at trial established that AWPs are fictitious and are rarely, if ever, prices paid by doctors … Nonetheless, defendants argue that they had no intent to deceive the patients or payors who ultimately paid for their products.

While establishing mega-spreads itself constitutes egregious misconduct, marketing those spreads so that doctors would choose a drug based on profit rather than therapeutic value is particularly outrageous and unethical. Even the industry understood that spread-marketing violated industry standards. Both BMS and J&J instructed their sales teams that the spread should not be a promotional or marketing tool, although these instructions were often ignored.

The defendants well understood the devastating impact the mega-spreads had on old and sick patients required to make co-payments they could ill afford, and set up programs to help some needy patients by subsidizing their costs. The spiraling drug costs incurred by third-party payors and the government, however, were never a concern.

The Court finds liability for:
a. AstraZeneca: Zoladex (1998-2002)
b. BMS: Taxol (2001-2002); Vepesid (1998-1999, 2001-2002); Cytoxan (1998-2002); Blenoxane (1998-2002); Rubex (1998-2000, 2002)
c. Warrick: albuterol sulfate (1998-1999)

Download 07_6_21_awp_ruling

Most Uncomfortable Dinner Conversation Ever: Andrew Forman at the Table of Nektar's Founders

I would have paid to be eating at this table: WR Hambrecht analyst (and professional Exubera/Pfizer-hater) Andrew Forman had dinner with the founder of Nektar (John Patton?) at the ADA industry confab, Forman revealed in note to investors today.

Regular BWNRX readers will know that Forman has devoted many electronic words to insulting the "Nektarines" and Exubera, the disastrous diabetes brand that the company managed to sell to Pfizer (If you click that link, work your way backwards through the posts for the full Forman vs. Nektar soap opera).

Here's his account:

"Investors rewarded the one-year anniversary of Exubera's coming out party (diabetics will have until the end of this year for the anniversary of actual product availability) by pushing NKTR stock to a new low which based on our previous sum of the parts analysis that NKTR is worth $10 to $12 ex-Exubera implies that this pioneering breakthrough that consumed well over $2B and 15 years before the launch is worth less than worthless. Dinner with the founder who was sporting the new second generation monthly disposable prototype that will be easier to use demonstrated that the continuous improvement inhaled insulin lifecycle strategy remains on track. But the problem, as many may have discerned while waltzing through the competitive landscape of diabetes purveyors this weekend, lies squarely at the marketing door of Pfizer who is still learning diabetes disease management is complex and lack of marketing insulin experience has yet to connect with the many thousands of potential Exubera prescribers."

But the food was fantastic, I'm sure.

Steve Warshak, Enzyte King, Morphs Into ... Consumer Privacy Champion?

A while ago, Brandweek chronicled the exploits of Steve Warshak, the man behind Enzyte, a pill that -- don't laugh -- brings in $200 million in revenue in some years. We also told you that the feds want to put Warshak in prison for many, many years because, they allege, he ripped off his customers' credit cards for about $100 million.

But recently, the Fifth Circuit Court of Appeals heard an appeal brought by Warshak as he fights to stay out of jail. And the court ruled in his favor -- the feds cannot read your email while you're under investigation without notifying you, the ruling says.

This means that while Warshak may have spent the last 6 years poisoning the airwaves every night with his ridiculous "Smiling Bob" ads, he could also have given us the single most significant step forward in email privacy rights of this decade, legal experts reckon.

What does all this have to do with Big Pharma?

Counterintuitively, the fate of Warshak is closely bound with that of the major legit drug companies. Both are in the same business after all -- selling pills. As I reported back in April, many of the Big Pharma companies have sideline businesses in "dietary supplement" pills, vitamins, and other new-age concoctions that most scientists look at and laugh.

Don't believe me?

Bayer, for instance, has been disciplined by the FTC for attempting to maintain the fiction that it's One a Day WeightSmart vitamins have nothing to do with trying to persuade consumers they're about weight loss (vitamins don't help you lose weight, obviously).

More recently, GSK was disciplined by the advertising police, NAD, in a ruling in which GSK was forced to admit that a data claim for its Os-Cal calcium product was misleading.

Here's what GSK was saying about Os-Cal: "Only OS-CAL is proven to help REDUCE the risk of HIP FRACTURES by 29%.* ... * Among calcium supplements. When used as directed."

Here's what NAD thought about that: "NAD, however, recommended that the advertiser discontinue its use of the disclaimer, 'Among calcium supplements,' to avoid any implication that the study compared competing calcium supplements."

That's right. GSK was hoping no one would notice that they apparently don't have any head-to-head data on that issue.

(BTW, if you'd like to find out what's actually in Os-Cal, good luck. Here's the web site  -- www.oscal.com -- but I couldn't locate the section on it that simply lists the ingredients. I did find this, however:

"The oyster shells contained in Os-Cal are obtained by dredging only ancient oyster beds in offshore U.S. waters. The shells are carefully ground to a powder, which is the source of calcium carbonate. The oyster shell powder is combined with pharmaceutical-grade ingredients to present the calcium carbonate in a form that is readily ingested, disintegrated and metabolized by the human body."

Yummy!

A little light will be shed into this murky world soon. The government is going to start requiring that dietary supplement makers actually prove that what's in their bottles is what is says on the label.

It's not much, but it's a start.

In the J&J Media Review, Does OMD Have the Advantage?

Wall Street analysts Bear Stearns told investors today that they believe Omnicom's OMD media buying group has "an edge in the ongoing J&J $3 billion media account review."

Why?

Because OMD won Media Agency of the Year at Cannes recently, Bear Stearns sez.

But is it as simple as that? This review has been dragging on a long time. One presumes that Kim Kadlec and Brian Perkins, the J&J execs who are making the decision on this, are looking a little closer at these agencies than just the glass cabinets at HQ that hold the trophies.

Bear Stearns reckons that OMD's "edge" also comes from its hot account winning streak: "Best Buy ($170m-200m), China Unicom ($60m), Birds Eye ($30), and John Deere ($20m), among others." But does J&J really want to park a massive, enormously complicated account with an agency that's already in a frenzy as it tries to staff up its new wins?

The other contenders in the review:  IPG and Aegis.

Also note here that Kadlec used to work at IPG's Universal McCann buying service. One might presume that she left that shop with good feelings, otherwise IPG wouldn't be in the review.

However, Adweek reported in its email newsletter today that J&J just stripped McCann of  "creative duties on all but one of its brands, Acuvue, and dividing the rest of the shop's business, worth $90 million in the U.S., among its roster agencies, which include Omnicom's DDB, WPP's JWT and IPG's Lowe, per sources.  The company is also expected to hand its $35 million Splenda business to Omnicom's BBDO following a review, sources said. That work had been at Alchemy, a unit of Lowe."

That looks to me like better evidence that J&J is leaning toward OMD than the Cannes thing.

Why is this review taking so long? Can't say, but its length was extended by a couple of days when Kadlec (pictured) took a trip to Venice in April. Check out that speaker list and you'll note that all the companies competing in her review also managed to show up in the canal city. Nice work if you can get!

The Party Is Over for Lunesta's Marketers

The party appears to be winding down at the high-flying, high-spending Sepracor, best known for its Lunesta sleep drug.

In a note from analysts FBR this morning, the money boffins describe how the Centers for Medicare and Medicaid Services is not expected to reverse its decision that there are no meaningful clinical differences between Xopenex and albuterol, and therefore won't change it's proposal to lower Medicare reimbursement for Xopenex.

If that wasn't bad enough, FBR also notes that it thinks Sepracor is being too ambitious in its sales forecasts for Lunesta: "SEPR is guiding to 2007 Lunesta sales of $640M to $660M (the Street estimate is in line with guidance). This implies 13%-16% annual growth over 2006. With quarterly sequential prescription growth nearly flat, we believe SEPR needs to lower its guidance range for the year. Our 2007 estimate is $601M."

FBR is right to be skeptical -- Lunesta has been stuck at just under 13% share for months and there are no signs it will break that barrier. Rather, things may actually get worse. First of all, generic Ambien is now firmly on the market and although some Rxs have switched to Ambien CR most patients appear to be figuring out that the extra price for ACR isn't worth it and the cheap generic will work just fine.

Second, Sepracor is winding down its marketing commitment to Lunesta. According to Nielsen Monitor-Plus (corporate owner of BWNRX), adspend on Lunesta declined 16.4% from January thru April this year. (It's still running at $119 million over 4 months, which isn't pocket lint, but this is a company which once blew $300 million --- about half the drug's total revenue! -- on Lunesta in a single year.)

And of course, marketing management at Sepracor went through some changes a few months ago.

Current unanswered questions: Sepracor has been a potential takeover target for months. Is it now a lot cheaper than it used to be? Pfizer, are you reading this? You guys need a sleep drug that works and Kindler said months ago that M&As were the way to go...

Previous coverage of the Sepracor saga here, and here, and here.

Guiliani -- Friend of OxyContin Dealers

File this one under "So Weird It's Gotta Be True": Rudy Guiliani was the "lead counsel" to Purdue in the OxyContin settlement. That's right. That Rudy Guiliani, who's now running for president.

The NYT points out that the feds' fine for the false marketing case consumed 90% of Purdue's profits.

A few weeks ago I bemoaned the fact that Big Pharma had essentially outmaneuvered the law by engaging in so much M&A activity that companies' sheer size made government fines negligible. This appears to be one case where that didn't happen.

These are the questions that emerge:

1. Does this fact hurt Rudy's presidential ambitions? (Guiliani -- Friend of Hillbilly Heroin in 08!)

2. How exactly did Rudy "counsel" Purdue -- in addition to the massive fines, three execs were convicted. With a defense like that,who needs prosecutors?

Should Brand Names for Drugs Be Banned?

I had an interesting conversation with Terence Young of Canada's Drug Safety Canada organization, and he floated an interesting idea: He believes that drug brand names should be banned, internationally, and all drugs should be known by only by their single generic name.

Mainly, he argued, it's a safety issue: There shouldn't be any confusion over the drugs that doctors and patients are taking and prescribing. He cited three well-known examples:

+ Wellbutrin for depression and Zyban for smoking (both GSK), which are both the same drug.

+  Propulsid and Prepulsid, a now removed J&J drug that was marketed under different names in the US and Canada (disclosure: Young's daughter died after taking Prepulsid).

+ And Thalidomide, originally marketed for morning sickness, which was removed years ago from the market because it caused birth defects. Now it's being researched for multiple myeloma patients, and it's back on the market as an "analogue", Revlimid.

Having the same drug marketed with different names in different countries or for different indications increases the chances of confusion, overdose, and side effects, Young argues.

He has a point.

But let's suppose for a minute that this actually came to pass ... wouldn't it be the case that drug companies would simply give their generic chemicals more attractive sounding names? For instance, Pfizer would probably have asked that torcetrapib be called "Cetrapib," or something. Not great, but OK, right?

Well, it turns out that most generic names are controlled by the nomenclature of the generic class they're in, the method of action, and various drug committees like USAN and WHO.

So even though Young's proposal will never come to pass in the US -- PhRMA would likely forbid the Senate to do it -- it is actually feasible.

Daniel Carlat Starts a Blog to Ban Commercial CME

For years, criticism of drug marketing has focused most on reps delivering dubious info and expensive DTC campaigns. But a tide seems to be turning against CME, which is mostly underwritten by drug companies. Daniel Carlat, who is already known for his Carlat Report publication, has started a blog dedicated to banning drug company funded CME. You can check it out here.

DrugWonks and Michael Moore: Who's 'Demagoging' Who?

Peter Pitts has defended himself after I criticized him and his DrugWonks blog on June 14 for not understanding why it is that Michael Moore's new movie Sicko is likely to resonate with anyone who has ever been a patient, insured or not. You can read his comment here.

Pitts says: "Our health care system is not going to be fixed via Moore-ish demagogy."

Hold on a second, isn't that the pot calling the kettle black?

Let's take a walk through DrugWonks' coverage of Michael Moore to see who, exactly, is engaging in demagogy. (FYI, as a verb, 'demagog' means to "obscure or distort with emotionalism, prejudice.")

All the following quotes about Moore are verbatim from DrugWonks:

June 18: "Moore recycles tired old arguments for national health care, abeit with more charm, humor and poignancy than most leftists can ever muster even when high. And Moore's fact and anecdotes are mostly incorrect, outdated and easily rebutted."

June 15: Moore is "an Overweight Director Who Didn't Give His Own Employees Health Insurance … This is the same guy who spends $4000 a week to be driven to a Pritikin fat spa to lose the weight he put on eating up the praise of leftists who love his books and movies. At least he didn't gain the weight driving an SUV, the claim he makes in Stupid White Men. He was chauffered to the fat farm in a stretch limo… Better to spend the money on obese people like Moore who keep on gaining weight.”

June 13: "Paging Dr. Moore ... Dr. Michael Moore ... we will ask experts as well as average folks what they think about some of the most pressing health care issues we face as a nation. Oh yes, and some that aren't so pressing -- like whether or not Michael Moore should be trusted to direct American health care."

<>

May 18: "Sicko-phant: Michael Moore Scarfs Up Publicity ... Can a guy who took a stretch limo to a $3000/day fat farm do a credible movie about health care in America? He can if he plays to people's deeply held stereotypes about scummy business practices and twists the truth in the process.... here's a reminder for those of you Sicko-phants about how much Moore has to lie to make his point.

May 9: "Michael Moore's 'Sicko' will roll out on June 29th. Indeed, 'roll out' is the right phrase.  Can anyone take a film about health care from a clinically obese person seriously?"

Aug. 3, 2006: "Does Ambien Cause Anti-Semitism? ... I pondered this question in light of Mel Gibson’s anti-Semitic rant at the LA cop while deep under the influence of distilled spirits. Can we blame Gibson’s views on alcohol? You can say a lot of things when you are drunk, but the phrase “The Jews start all the wars” is not exactly one that leaps to mind in people who are plastered. Then again, Michael Moore called Israel part of the true axis of evil and he was stone sober, though overweight when he said that…No one seems to care."

Feb. 3, 2006: Moore's efforts to make his movie are "another high profile example of the Propaganda of Fear, of finding horror stories and packaging them to look like the everyman status quo."

Sept. 6, 2006: In a review of The Constant Gardner, a movie that has nothing to do with Michael Moore: "This flick is so silly—-so Michael Moore-like in its excess and mendacity."

So let's summarize: From DrugWonks' point of view we should be against Moore's movie because he's fat, lazy, vain, anti-semitic, a fearmonger, a liar and excessive. (To my knowledge, Moore hasn't said anything bad about DrugWonks.) No demagogy here!

On a personal note, in the June 15 post, DrugWonks' Robert Goldberg poked fun at my inability to find a low-cost MRI even though I have insurance, which I described to you last week: “Now some have nothing better to do than price MRIs,” Goldberg wrote.

I'm not claiming to be seriously ill or anything, but isn't making snide remarks about someone's attempts to get low-cost treatment  just about the most classless form of political discourse you've ever seen?

(And besides, as a good healthcare consumer who's trying to keep my costs down and that of my insurer and its premium payors, isn't this what I'm supposed to be doing?)