Some Utilitarian Considerations Regarding

Discouraging Pharmaceutical

Incentivizing in Emerging Markets:

Andrew Gustafson

Creighton University

Vincentian Conference, 2010

The Pharm Industry Worldwide

• $800 billion industry worldwide • US: $200 billion a year on prescription drugs.• Recently: The pharmaceutical companies are

targeting emerging markets hard as their mature markets show a decline in market growth rates.

Thesis 1: Incentivizing in Emerging Markets Beneficial and Acceptable

• From a Utilitarian standpoint seeking the greater happiness for the most, it is the best interest of the localized many, and so, ethical, for pharmaceutical companies to use incentivizing marketing methods in emerging markets like Pakistan, India, China and Venezuela which would be restricted in the more economically developed countries.

Thesis 2: Inverse Relationship Between Economic Maturity and

Appropriateness of Incentivizing• As the economy of a country does emerge and

mature, the incentivizing marketing methods which were at one point acceptable should become restricted as they are developed economies. In other words, the ethical ‘rightness’ of the incentivizing dissipates as such actions become detrimental and less beneficial to the greater good.

Thesis 3: Parallels Thesis: Pollution & Copyrights

• Allowing for less restrictions in emerging markets on pharmaceutical incentivizing is analogous or parallel to the case for non-equal pollution regulations or lax enforcement of copyright laws in emerging markets in order to help catchup states to catch up until their economies mature.

The Current Situation in

Emerging Markets

Emerging Markets are On their Way:

Sales of prescription drugs in emerging markets:

• $67.2 billion in 2003 • $152.7 billion in 2008• $265 billion by 2013 (estimated)

(IMS Health Statistics)

Example: Pfizer Growth in China

Pfizer increasing sales representatives in China from

• 2,300 reps in 177 cities in 2009 to

• 3,200 reps in 252 cities by 2011

Lack of Regulation Worldwide

In 2004, the World Health Organization established that less than one-sixth of countries had a well-developed system of drug regulation, and one-third had little to no regulatory capacity. (DDD,6)

Consequences of Poor Marketing Information:

It is estimated that up to 50% ofmedicines in developing countries areinappropriately prescribed, dispensedor sold. (DDD)

Irrational Drugs

• In 2005, the Indian National Commission on Macroeconomics and Health labeled 10 out of 25 top selling brands of medicines in the country as being either “irrational or non-essential or hazardous.”(DDD,27)

Pressures on Pharm Companies

It is estimated that:• More than 90% of the pharmaceutical industry’s total

pharmaceutical revenues came from medicines that have been on the market for more than five years, i.e. not new drugs.

• In 2009, a dozen of top 35 branded prescription drugs lost patent protection.

• Expiring patents expose an estimated $157 billion worth of sales (measured in 2005 terms) to generic erosion.

• The leading pharmaceutical companies will lose between 14% and 41% of their existing revenues as a result of patent expiries.

• The industry’s growth rate is now at 7% compared to 14.5% 1999.

Industry Growth Rate

Ethical Issues In Emerging Markets

#1 Problematic Drug Promotion1. Increasing the perceived frequency and/or severity of

the indications.2. Widening the indications to include more people.3. Increasing the perceived likelihood and magnitude of benefits.4. Decreasing the perceived likelihood and magnitude of harms.5. Increasing the use of the drug for longer durations.

#2: Advertising with Incomplete Information

• 2005 study of Psychobiology of the Paulista Medical School of the Federal University of São Paulo Brazil

• Analysed 24 Brazilian advertisements for the same psychoactive drugs as advertised in American and/or British publications from the same period.

• Observed that “Brazilian advertisements omitted information on usage restrictions, such as contraindications, adverse reactions, interactions, warnings and precautions, and that such information was present in American and British advertisements.” (DDD)

#3: Pharmaceutical Gifts in Pakistan

• Low cost: pens/pads/diaries/calendars.• Medium cost: stethoscope/books/briefcases.• High cost: air conditioners/laptops/desktop

computers/club membership/ Continuing Ed Trips abroad.

• The latest practice is: For writing 200 prescriptions of the company’s high priced drug, a doctor is rewarded with the down payment on a brand new car.

The Incentivizing can be a conflict of interest leading to

Doctors’ Biased Behavior

Evidence shows that biased doctors are more likely to:

• Prescribe a drug if they had recently attended a sponsored event by the manufacturer.

• Prescribe a drug that is not clinically indicated.• Have a drug placed on a hospital formulary.

Utility of Incentives for Society

• Short Term: – a. Drug availability – b. education of doctors– c. Drug market is initiated

• Long Term:– a. Market Maturation– b. More options, variety– c. More consumer knowledge and price optimization

Restrictions in Mature Markets:

• Government• Industry• Company• Medical Profession Guidelines

• When the pharmaceutical industry and economy is in an emergent state, these restrictions are by and large absent.

Accreditation Council on Graduate Medical Education Guidelines:

• Benefits to patients result from services provided by both doctors and drug companies. Closer scrutiny, however.. .reveals an irreconcilable difference. The relationship to its shareholders defines values and influences behaviors held by industry.. .the responsibility of the pharmaceutical industry must be to act in the best interests of its shareholders by maximizing their return on investment. In so doing, much good is clearly accomplished for patients. In contrast, however, the altruism expected of medical professionals dictates that doctors put patients first.. .the good of the patient must be preeminent.7

Opposition to Gifts to Doctors:

• Groups like • Public Citizen• Physicians for a National Health Program• American Medical Student Association• No Free Lunch

all oppose industry gift giving.

Alleged results of Gift-Giving

• a. physician preference for new products with no demonstrated advantage over existing ones,

• b. a decrease in prescribing generic drugs, • c. rise in prescription expenditures and • d. irrational and incautious prescribing.

(Katz)

Conflicts of Interest: $ vs. Patient careA Defense of Gift-Giving

• 1. Market Incentives are common:Financial advisors or insurance salesmen receive payment or bonuses based on what they sell to their clients, yet these remuneration practices do not necessarily undermine the agent's concern for their client.

• 2. Doctors and Pharmaceuticals are not Adversarial: the ACGME document above seems to assume that doctors are not in business, but that is a very naive view of medicine. It is simplistic to say pharmaceutical companies are only concerned with money, and doctors are saintly altruists. Doctors need to make money (while helping people), and pharmaceutical companies are trying to make drugs to help people (and to make money from that).

• 3. A non-Friedmanite Stakeholder theorist will argue that the purpose of business is not merely to increase shareholder value, but also to help stakeholders.

• 4. Even a Shareholder theorist wants the company to produce and sell quality products which will not lead to lawsuits and which will lead to customer loyalty.

The Benefits of the double-role• The fact that pharmaceutical companies act as supplier and

educator is not in itself necessarily problematic for two reasons:

• First, a pragmatic utilitarian argument for the greater good: this is a necessary conflict of interest— education by pharmaceutical companies is better than no education, and in many of these developing countries, there would be little or no ongoing education for the doctors if it was not for the pharmaceutical companies. The WHO cannot educate all medical doctors worldwide, and local governments often are incapable both in expertise and financial resources to achieve this end. To prohibit CME by pharmaceutical companies takes away the only CME currently available, in many circumstances. More good is done than harm, and much more good is achieved by this practice than by avoiding it.I

Benefits of the Dual Role:Path to Market Maturation

• Second, looking at the long term benefits of such an initial conflict of interest: the only way for the market to mature so that competition is possible is for a realized demand to be developed in the first place. The initial pharmaceutical companies have an advantage of course, but their work will grow the market, and as a significant market develops it will become a more viable market for other companies to come into.

PHARMA’s View of Benefits of the Pharm-Rep/Doctor relationship:

• a. to inform healthcare professionals about the benefits and risks of products

• b. to provide scientific and educational information

• c. to support medical research and education• d. to obtain feedback and advice about their

products through consulting with physicians.

Total Ban isn’t Necessarily Appropriate:Can’t Simply apply US rules Abroad

• Lack of other means of continuing education in emerging markets

• Lack of internet access or resources for doctors in EM

• Lack of consumer knowledge• Lack of competition• Money involved is small

Example of Maturation: India

• 1970s Foreign Drug firms were 80% of market• By 2004 Indian firms were 77% of market

Example of Too-Strict, Too-Centralized Code: Karachi Bioethics Group

• The Karachi Bioethics Group in Karachi, Pakistan has recently come out with their “Ethical Guidelines for Physician Pharmaceutical Industry Interaction”. It is a good initial model of guidelines for emerging market countries. It is actually more rigorous in some of its rules than those found in the U.S. The document is divided into the following sections/topics:

• http://karachibioethicsgroup.org/PDFs/Karachi_Bioethics_Group_Ethical_Guidelines.pdf

Karachi Bioethics Group• • 1. Disclosure: Support from pharmaceuticals by institutions and

health care workers (physicians) must be declared on institutional website or in a disclosure register.

• 2. Gifts/Drug samples: physicians should not accept gifts of any kind. One-on-one contact is discouraged. Drug samples should be given to a designated institutional committee, who would use such samples to cater to the needs of poor patients. Books, travel support and any other like financial support should be collected in a special pool overseen by the designated transparent committee. Such materials should not prominently show the drug or product name.

• 3. Scholarships: all such funding should go to the institution, not individuals. Doctors should not enter into contractual agreements with pharmaceutical companies. Any support must be declared by doctor.

KBG (continued)• 4. Research: No direct payments to researcher, and everything

provided by pharmaceutical company should go through institutional committee.

• 5. Pharm Industry funding for CME: All support should go to common pool under authority of institution, under oversight of an institutional committee. Drug information talks should be held in hospitals and institutions, not hotels, and not include meals. No advertising banners or posters should be in conference area. Practice of flying in foreign experts should be discouraged since they are paid by Pharmaceutical company.

• 6. Promotion: Doctors should not participate in product promotion on TV etc.

• 7. Repeatedly the document mentions that “Educational and other academic grants and support should ideally be provided by academic institutions. However given the paucity of funds in academic institutions, reliance on pharmaceutical support cannot be entirely excluded.”

Goals of Kariachi Group Guidelines:• No gifts to doctors of any sort, and no pharmaceutical-

doctor interaction.• Doctors should have no contracts with pharmaceuticals• Anonymizing the donations• De-linking individuals to industry grants and creating

‘firewall’ between physicians and industry with specifically created institutional committees to interact with industry

• Pooling all donations/grants/pharm-support in a central fund institutional pool with transparent committee oversight

• Influence-free disbursement of these grants by the committee, with the industry having absolutely no say in how the money is utilized, and which individuals within the institution get funding.

• (from Dr. Aamir Jafarey, Associate Professor at the Centre of Biomedical Ethics and Culture, SIUT (Sindh Institute of Urology and Transplantation) of Pakistan)

Possible Problems with KBG Rules:Disinsentivizing by banning Incentives• Why Sponsor without acknowledgement?• Why give drugs anonymously?• These restrictions would hamper market

maturation severely (customer samples lead to sales)

• This would undermine CME and CME scholarships, research, drug sample giveaways, etc.

• Result of Legalism: Loss of Medical Field Support

Copyrights//Pharmaceutical Developments

• What counts as a fair or just rule may vary from country to country, as countries differ in their levels of economic maturity. As Lester C. Thurow has pointed out in an article on intellectual property rights, "What different countries want, need, and should have in a system of intellectual property rights is very different, depending of their level of economic development. " He distinguishes between "Catch Up States" (developing countries) and "Keep-ahead states" and claims that copying to catch up has historically been the only way to catch up. US did it to British textile mills in 1800's. Japan did it to us in 60's and 70's. China has recently been doing it to the US although we now some reform happening there as well. In some way each of these countries did not have ideally just situations until they became economically mature, and then the just rules were enacted once there was competition and hence transparency. In other words, at a lower level of economic maturity, we should expect rules and expectations to differ much as we would have different expectations for a novice and an expert.

Market Development Is Ultimate Goal:

Transparency as Derived from Competition

No Competition = No Incentive

• Competition and Transparency— are reciprocal. If there is no competition, there is no incentive to market oneself with information. But when there is competition—for example among the home improvement supply stores in the US— when Home Depot starts to highlight its green policies, Lowes and Menards and other home stores feel obliged to follow.

Conclusions: various ethical concerns

What is Clearly wrong:• Pharmaceutical companies incentivizing by simply

rewarding doctors for prescribing medications seems clearly wrong and creates an unnecessary conflict of interest with little valuable effect for the patient.

• Payments for token consulting or gifts for attending non-educational meeting are also of little valuable effect, and they should likewise prohibited by professional standards. These should be rejected in developing countries as they have been already in the developed countries.

Positive Conclusions:• Purpose and Value, not Size: When it comes to gifts doctors are given, the size is

not as important as its value to patients. The primary concern when judging the acceptability of a gift should be its relative worth to the patients served by the doctor. If an air conditioner is received, it should be for the clinic, but more medically-useful gifts are more properly acceptable under this criteria.

• Education: When pharmaceutical education is the primary source of education, there is more justification for it—better pharmaceutical education than none at all. (But there is added responsibility for pharmaceutical company when they are the only game in town)

• Feedback loop: Feedback from the doctors to the pharmaceutical company by way of the reps, if it is to be serious, requires reps who are trained enough to understand and convey this information. What pharmaceutical companies need to constantly show is how that this information is used, and demonstrate that product revisions or procedure changes have been made (even stoppages) in light of this information feedback.

Effective Guidance with Teeth• Widespread effective training and explanation of this code to relevant parties on

both sides, with some sort of resources to support that training in educational institutions and associations.

• Institutional support, from academic institutions, hospitals, groups of doctors like KBG, and government funding and fine schedules.

• Authorized oversight– Governmental: laws need to have teeth and be enforced – Associational or institutional: power to disbar or otherwise cause repercussions

• Regular monitoring: overall progress needs to be kept track of and benchmarked.

• Ongoing reformation of the system as new issues arise, through responsive corrections in the system process.

• Guiding Principle: whether or not the greater good is served—the greater good being the thousands of patients served by the few doctors and pharmaceutical companies, whose purpose, ostensibly, is to serve the greater good.

Success: China’s Response

• A stark example comes from a leading industry report that attributed China’s considerably slowed growth rate in the sector (from 20.5% in 2005 to 12.3% in 2006) to a government anti-corruption campaign. The campaign was introduced during the second quarter of 2006 to set limits on physician directed promotion, and according to the report, served to dampen sales in the region. (DDD,15)

*Governments’ Key Recommendations:

1. Implement, improve and monitor legislation in line with the WHO Resolution on the Rational Use of Medicines and the WHO Ethical Criteria for Medicinal Drug Promotion.2. Support the provision of independent information on drugs for consumers and health professionals.3. Implement and enforce a ban on gifts to doctors.4. Enforce strict sanctions that will deter poor corporate practice in drug promotion.5. Take measures to improve the transparency of drug companies’ marketing activities and seriously address the conflict of interest encountered in drug companies’ funding of medical education.

**Key Recommendations at the Company Level:

1. Stop the practice of gifts to doctors

2. Implement rigorous policies on vetting of drugpromotion materials and adherence to existing codesof conduct

3. Provide transparent and verifiable informationon the precise nature of relationships and associatedfunding for all stakeholder groups, including healthprofessionals, pharmacists, students, journalists,clinical research organisations and patient groups.

**Industry-Wide Level:

1. Ensure codes of conduct on drug promotionextend to interactions with health professionals ANDconsumers.

2. Invest in innovative partnerships withgovernment and civil society organisations sothat corporate funding of disease awarenesscampaigns, and CME may be channelled via blindtrusts in line with specific health priorities ofconsumers at a community or national level.

Bibliography

• Drugs, Doctors and Dinners: How drug companies influence health in the developing world

• Managed Care and the Morality of the Marketplace(NEJM, 333:50-52, 7/6, 1995)