Xpectives News

DTC in Perspective: Premium Priced Drugs and DTC Dilemma

October 23, 2015 by Bob Ehrlich1
Bob Ehrlich
“The industry needs to be better prepared to defend premium pricing…”
-Bob Ehrlich

Recently Opdivo from Bristol-Myers started television advertising for its advanced stage lung cancer indication. What Opdivo does is work with the immune system to help fight the lung cancer. Clinical studies show survival versus chemo of 9.2 months vs. 6 months among half the patients taking it.

The ad, which is on the Opdivo web site, says “it’s not every day something this big comes along.” This voiceover is followed by an image on a skyscraper saying “a chance to live longer.” The ad continues with supers imposed on other buildings on living longer.

The cost of Opdivo is quite high at over $100k a year. The survival benefit is clinically significant. Survival, however, is measured in months not years. The ad tells the survival benefit with a super. So we have a drug with a significant benefit and a very high cost to the insurer. While the patient and their families certainly want the extra months of survival, the insurance companies are going to be reluctant to pay that much for those few extra months.

The ad will be highly effective in getting patients to ask their doctor about Opdivo. Insurance companies and government critics will surely hate this ad because it increases demand and it costs the payers a lot. I can hear Bernie and Hilary shriek with indignation that patients are given hope by the ad, only to be turned down by insurers over the high cost.

The use of biologics is growing and many genomic cures are on the horizon. The recently launched Hep C drugs Solvadi and Harvoni cure this terrible life threatening disease. They cost about $80k for a course of therapy and have created the same angst among payers. Both drugs used DTC effectively in raising consumer awareness.

The use of DTC for drugs costing tens of thousands a year is rising. The backlash over price will make DTC for these drugs a target for legislative and payer critics. Drug companies need to be ready for the outrage. Consumers really do not know from drug ads what the cost will be for a new treatment. Advertised drugs have widely varied costs per pill or dose from a few dollars a pill for cholesterol drugs to a thousand a pill for Hep C. The commercials do not address price and consumers face potential sticker shock.

Most consumers have an idea what that new car, new TV, or new box of detergent will cost. Drugs are somewhat unique in that pricing is opaque. Watching the Opdivo ad gives no clue the drug is 100 times more costly than a cholesterol drug. Drug companies have price supports through compassionate use programs for the poor, but those are not used broadly. Insurers hate these DTC ads because it puts pressure on them from consumers to cover life extending drugs. Once consumers complain, legislators enter to cajole insurers to cover the drug.

Opdivo and other cancer drugs have every right to advertise. What they offer is life altering. They should, however, expect legislative and consumer pushback over advertising a benefit that is expensive. While many patients will get the drug covered, many will not. The lack of consumer price information is an important strategic issue in my opinion and unique within the drug industry. The industry needs to be better prepared to defend premium pricing and explain to consumers why some drugs cost thousands a month. DTC for those drugs will motivate price critics to scream for price controls and DTC bans.


Bob Ehrlich

One comment

  • Richard

    December 9, 2015 at 4:28 am

    Explain to me how a .38% (3 months extra out of 65 years) increased life can be classified as significant. Especially in a population of mostly smokers who, if they’d stopped smoking a few years earlier, would actually live years longer:
    “However, even those who quit much later in life gained some benefits: among smokers who quit at age 65 years, men gained 1.4 to 2.0 years of life, and women gained 2.7 to 3.7 years.”
    Spending $100k or more on such treatment is just ludicrous.


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