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December 2006

What everyone needs to know about drug marketing. Part 1: Products

Healthy Skepticism’s main focus is on drug promotion. However promotion is a component of marketing and can not be fully understood without understanding how it fits in with the other components.

Marketing is often summarised as consisting of 4 Ps:

Product (goods, services or ideas)
Place (distribution).
The American Marketing Association defines marketing as “the process of planning and executing the pricing, promotion, and distribution of goods, ideas, and services to create exchanges that satisfy individual and organizational goals.”[1]

Kotler and Armstrong, authors of a leading marketing textbook distinguish between two main approaches: the “marketing concept” and the “selling concept”. Companies with a “marketing concept” approach focus on changing and improving their products to match the needs of consumers. By contrast, companies with a “selling concept” approach focus on using promotion to change their customers to make them want to buy the company’s unimproved products.[2] Clearly, consumers would be better off if all companies had a “marketing concept” approach. Unfortunately, the market currently rewards drug companies more for using a “selling concept” approach for new drugs. This will be explained below.

Pharmaceutical Products
A pharmaceutical product is a drug plus information about the drug including the indications (conditions for which the drug has been shown to do more good than harm on average), the benefits and harms of the drug. Ideally this information should be unbiased and include information about how the drug compares with other treatments for the indications. However comparative information is rarely provided.

People do not buy drugs because they want to own or consume a drug. They buy drugs because they want a benefit. In economist’s language they want increased utility. They want to live healthier and/or longer lives. One of the best ways to measure such benefits is QALYs (Quality Adjusted Life Years). QALYs are length of life in years multiplied by estimated utility on a scale of 0 to 1 where 0 = death and 1= perfect health. A drug can have the same effect on two different people but give them very different net benefits eg. a drug that saves the lives of a 90 year-old and a 10 year-old and may give the 90 year-old 5 extra years of life but give the 10 year-old 85 extra years of life. Also other health problems may mean that the 90 year-old does not receive as much additional utility from each year as the 10 year-old does. Thus the net benefits of a drug depend on the benefits and harms of the drug and the age and total health status of the person taking the drug.

Just as the net benefits of computers depend on both the quality of the hardware and the quality of the software, the net benefits of pharmaceuticals depend on both the quality of the drug and the quality of the information. Unlike computer hardware, drug molecules are not amenable to continuous quality improvement. Small changes to a drug molecule make a completely different molecule which may have similar or very different effects. Consequently each molecule needs to go through the complete development process from scratch to discover what its benefits and harms are. By contrast, drug information is amenable to continuous quality improvement. The quality of the information depends on the quality of research and development (R&D). Drug information can be improved via additional research on the benefits and harms of the drug and/or by making the information better at conveying what has been learned from the research already done.

Pharmaceuticals can provide a major net benefit on average when used appropriately. However, even when drugs are used appropriately, the beneficial and adverse effects vary between individuals. For most drugs there is a spectrum of benefit with some individuals gaining major net benefit at one extreme and some net harm at the opposite extreme. Usually there is a small group of severely ill patients who get major net benefit. Often there is a larger group who gain less benefit because they are less severely ill so there is less room for improvement. Because of complex differences between individuals it is not possible to predict exactly how much benefit and/or harm an individual will experience from taking a drug before they take it. Even after they take the drug there will be uncertainty about how much change is due to the drug. This is because some observed improvements in the patient’s condition and many adverse events may have happened anyway even if the drug had not been taken. Usually the best we can do is estimate the average benefits and harms for a defined group of people.

Inappropriate use can be harmful directly when there are adverse effects outweighing benefits, or indirectly by wasting time and money that could have been used for more appropriate therapy. Inappropriate use of pharmaceuticals is more likely when essential drug information is flawed or not disclosed, or obscured by distracting irrelevant information.

We can classify 4 main types of pharmaceutical products into 2 groups:

New drugs:
Innovative drugs
“Me too” drugs

Generic Drugs
Unbranded generics
Branded generics.

Innovative drugs are the first drugs in a new class of molecules. They include the best drugs, the worst drugs and everything in between. Some innovative drugs include major advances with great benefits. Others are disasters that cause more harm than terrorist attacks. During the early years after first release on the market the full profile of harms and benefits are not known. In particular there may be rare but severe adverse effects that were not detected during pre-marketing trials. Inevitably the long term effects are not known. Early use of innovative drugs is always a gamble compared to using the best alternative treatment. Sometimes the gamble is justified by the combination of serious illness and a lack of good alternatives. Often the gamble is not justified.

“Me too” drugs are new but are not the first in their class. They are usually little different chemically from the innovator drug for their class. There may be large, small or no advantages or disadvantages compared to the innovative drug. For example some “Me too” drugs have a longer duration of action than the innovative drug. If this means that the drug only needs to be taken once a day instead of three times a day that can be more convenient for consumers and make it easier for them to continue taking the drug for long periods. However such advantages may be at the expense of more adverse effects.

Currently most governments intervene in pharmaceutical markets to give innovative and “me too” drugs many years of patent monopoly protection from competition from generic drugs. Generic drugs are the same molecule as an innovator or “me too” drug made by one or more different manufacturers. Usually there are no important differences between generic drugs and the corresponding new drug except for the packaging and price, but sometimes there are differences in the formulation that are important. For example, a very small number of people are allergic to some of the chemicals used to make a chemical powder into a tablet, capsule or liquid medicine. These people may be allergic only to a generic formulation or only to the innovative drug formulation.

Generic drugs are sometimes sold by their scientific (generic) name but are often given a new brand name. Having multiple names for the same drug can cause confusion. Confusion about drugs can be fatal. This problem is worst in India where it has been estimated that there are over 20,000 registered pharmaceutical manufacturers [3] and over 70,000 brands of various drug formulations.[4] To avoid the overdosing that can result from taking two brands of the same drug it is important for consumers, carers, doctors and pharmacists to know the generic names of the drugs they are using.

Some pharmaceutical companies focus on selling only innovative and “me too” drugs. Others sell only generics. Many sell both. Those that sell both often sell generic versions of their own drugs so as to reduce sales for true competitors. Sometimes this is done via subsidiaries with different names or by special agreements with other companies. Such anti-competitive practices are under investigation by the US Federal Trade Commission which announced on 29 March 2006 that it plans to subpoena nearly 200 pharmaceutical companies.[5]

The key feature of any product or service is quality. All pharmaceutical manufacturers have occasional manufacturing quality problems that are often trivial but sometimes dangerous. As long as government quality inspection systems are working properly there will be no important differences between the quality of new and generic drugs. However counterfeiters can usually make more money by copying expensive innovator drugs than cheaper drugs so drugs that are sold as the more expensive brand names are more likely to be fakes.

Some drugs do not have any justified indications. The Indian National Commission on Macroeconomics and Health has labelled 10 out of 25 top selling brands of medicines in India as being either “irrational or non-essential or hazardous.” [6] Those brands are listed in the table below.

Top selling irrational, non-essential or hazardous drugs in India

E. Merck
E. Merck

Part 2 of this 3 part article will discuss prices.


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