My Tipping Point

Malcolm Gladwell, author of "The Tipping Point," wrote a caustic critique of Marcia Angell's new book in last week's New Yorker. I was so frustrated by his woefully wrong analysis that I sent this letter in today. Let's see if they print it:

To the Editor:

In his enthusiasm to let the pharmaceutical industry off the hook for rising drug prices, Malcolm Gladwell gets many of his facts wrong. Had he relied a bit less on economists who earn substantial fees consulting for drug firms, he might have come up with a more dispassionate analysis.

Gladwell’s core argument -- that more rational behavior by physicians, insurers and consumers will solve the problem -- rests on the claim that drug expenditures are rising rapidly because more people are taking more medications, not because patients are being charged more for prescription drugs. But according to the latest data from IMS Health, the number of prescriptions written in the past year rose by only 3 percent while total retail drug expenditures rose 11 percent. Earlier this year, the AARP conducted a comprehensive survey of the 155 most widely-used drugs and found the average price increase was 6.9 percent, suggesting that rising drug prices accounted for about two-thirds of the nation’s rising drug tab. Further evidence comes from the Kaiser Family Foundation’s latest survey, which estimated that 58 percent of the rise in drug expenditures between 1997 and 2002 came from increased prices and “newer, higher-priced drugs replacing older, less-expensive drugs.”

Suggesting the problem may soon go away, Gladwell highlights the number of drugs going off-patent recently to argue generics are driving a decline in the rate of increase in drug spending. While total drug expenditures at the retail level the past four years rose about 11-12 percent per year compared to about 16 percent between 1997 and 2000, it had nothing to do with rising reliance on generics. Off-brand prescriptions have remained stagnant at about 51 percent of all prescriptions since 2000. Rather, the drug pricing bubble of the late 1990s coincided with the onset of direct-to-consumer advertising, which always pushes the newest, priciest but not necessarily best and most cost effective treatments for chronic conditions. In addition, the current 11 percent rate of increase remains above that of the early 1990s. It appears the one-time explosion driven by ads has settled down into a permanently higher rate of spending.

In championing the drug industry’s penchant for pursuing me-too drugs rather than real innovations (let us not forget that R&D is the ultimate justification for these high prices), Gladwell claims multiple entrants in a drug class drive prices down. If so, it’s hard to spot. Surveys of me-too drug price competition have estimated the benefit of new entrants at around 5 to 10 percent. In an industry with a 30 percent profit margin and a cost of manufacturing around 10 percent of total sales, this is not something to celebrate. It’s justification for an anti-trust investigation. (A New Yorker writer from an earlier era, Richard Harris, wrote a brilliant book documenting the late Sen. Estes Kefauver's investigation into the antibiotic cartel).

Gladwell is correct to highlight physicians’ role in over-prescribing pricey medicines. But it is not cynicism that leads critics like Marcia Angell to blame the pharmaceutical industry for this state of affairs. Most trials, much of the medical literature, a growing portion of continuing medical education, and even government-authorized clinical practice guidelines have been taken over by clinicians on the drug industry’s payrolls. Until these omnipresent conflicts of interests are rooted out of the medical system, the nation will never get accurate information about each drug's legitimate place in health care. And until we do, we will continue paying far too much for medicine.

Merrill Goozner
Director, Integrity in Science project
Center for Science in the Public Interest
Washington, DC

Posted by gooznews at October 27, 2004 08:20 PM