Health Inc.

Taxpayers May Pick Up Tab For Drug Ads

If Democrats weren't miffed enough at Big Pharma after news reports suggested the industry hiked prices to offset the impact of the overhaul, the flames could be fanned by a new study that finds companies may also have passed advertising costs on to taxpayers.

The medication Plavix. i i
Mark Lennihan/AP
The medication Plavix.
Mark Lennihan/AP

Direct-to-consumer ads for a blockbuster anti-clotting drug, sold under the brand-name Plavix by Sanofi-Aventis and Bristol-Myers Squibb, cost drug makers an average of $70 million a year between 2001 and 2005, according to the study published Monday in the Archives of Internal Medicine.

The researchers suggest that companies passed much of those costs on to taxpayers by hiking the price they charge Medicaid programs for the drug. Twenty-seven Medicaid programs — which insure low-income people — spent an extra $200 million on the drug during the advertising campaign compared to what they were paying before the ads began rolling.

But interestingly, the ads didn't seem to succeed in encouraging doctors to prescribe the medicine more often to Medicaid patients. As Reuters reports, that cuts against the logic behind direct-to-consumer drug marketing. Industry analysts say that normally when ads are aired that broaden the use of drugs, companies lower drug prices and make up the losses in volume.

The new study comes after a rough couple of weeks of drug prices in the news. The New York Times reported earlier this month that the industry had raised wholesale prices by 9 percent over the last year, adding $10 billion to the nation's drug costs. That's more than enough to offset the first year's worth of the promised savings for Medicare patients. (Drug makers had promised the White House and top senators that they'd help save Medicare patients $80 billion over the next decade as part of the overhaul.)

Lawmakers expressed their frustration with the industry and their pricing plans in a letter to the Government Accountability Office. "The industry may be artificially raising prices for certain pharmaceutical products in expectation of new reforms," the letter says.

The Plavix study suggests that another "controversial potential driver of drug costs is direct-to-consumer advertising," especially in Medicaid where drug costs are a leading cause of spending growth. The health-overhaul bills in Congress would channel millions of new patients into the taxpayer-funded program.

PhRMA, an industry association, did not immediately return a phone call. The group said in a statement today, "We cannot speak directly to the veracity of the research or conclusions in the piece published in the Archives of Internal Medicine, but would urge readers to note the authors' uncertainty revealed with such phrases as 'one could surmise' and 'we must assume.'"

Weaver is a reporter for Kaiser Health News, a nonprofit news service.

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