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Soaring Drug Costs

Wall Street Journal Series

I, Karl Loren, have found the Wall Street Journal to be one of the best research resources on the internet -- particularly on certain subjects.  This series offers information and insights which I have not found anywhere else in print.

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November 16, 1998

Leader

U.S. Develops Expensive Habit
With Drug Sector Growth Spurt

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By ELYSE TANOUYE
Staff Reporter of THE WALL STREET JOURNAL

America has a new drug problem.

A revolution in pharmaceutical research, a billion-dollar marketing blitz and Americans' voracious appetite for Viagra, Claritin and a host of other pricey pills are driving drug spending to record-high levels. And nobody, it seems, knows what to do about it.

Retail pharmacies will rack up an estimated $102.5 billion in sales of prescription drugs by year end, up 85% in just half a decade. Drug sales in the U.S. are rising 16.6% this year, more than four times the increase in health-care spending overall. And at a time when prices of other manufactured goods have declined by 1%, some generic drug makers have raised the prices of many medications by 10% or more in the past year.

For pharmaceutical companies and their shareholders, the news could hardly be better: Profits for U.S. drug makers are expected to grow 16% to 18% a year for the next four years, far outpacing the 4%-to-7% growth forecast for the nation's top 500 companies.

But the surge is ominous for plenty of others: companies looking to get a handle on employee prescription costs; government-funded health plans weighing the benefits of new therapies against other medical expenditures; uninsured patients who must choose between ever-more-expensive prescriptions and forgoing treatment altogether.

At auto maker Chrysler, spending for employees' prescription drugs has risen 86% in five years to more than $220 million. At Blue Cross Blue Shield of Michigan, drug outlays now represent 28% of total expenditures -- more than the amount spent by the health plan on doctor visits. California's Medicaid program for the poor is expected to run 10% over its $1.4 billion pharmaceutical budget for the year because of a spike in drug spending.

The reasons behind the run-up are many and complex. Great advances in research have allowed drug makers to crank out a profusion of new -- and expensive -- chemicals aimed at treating diseases that were once invincible: AIDS, arthritis, breast cancer, schizophrenia, Alzheimer's, as well as less grave conditions like baldness, wrinkles, toenail fungus and impotence. But with the new drugs have come soaring development costs, especially for clinical trials, the most expensive part of drug development. At the same time, the growth in generic drugs has failed to bring about a much-anticipated drop in pharmaceutical spending overall.

"Given the rate of innovation in the industry, this situation is going to continue," says Raymond Gilmartin, chairman and chief executive of Merck & Co., maker of the AIDS therapy Crixivan, the cholesterol-lowering Zocor and osteoporosis treatment Fosamax.

Medicating an Aging Population

The pharmaceutical frenzy is expected to get worse in coming years, as drug giants crank out more new medications to salve an aging population. The ranks of people over age 65 will double to about 70 million by the year 2030, growing to 20% of the U.S. population from 13% now. On average, people over 65 fill between nine and a dozen prescriptions a year, compared with two or three for people between the ages of 25 and 44.

"We have a very short window to fix this," says Woodrow Myers, director of health-care management at Ford Motor Co., where drug costs consumed 19% of the $1.5 billion the auto maker spent last year on employee medical costs, up from 14% in 1994. "It will get to a point in a couple of years where there will be so many great new products that more and more people can't afford."

While prices of some drugs are rising sharply, higher prices are contributing only 3.2 percentage points of the 16.6% increase in drug spending this year, according to IMS Health Inc., Plymouth Meeting, Pa. A far more important factor: Americans are increasingly demanding the latest brand-name drugs in a ferocious attempt to preserve their health -- and their youth.

Marketing Muscle

That owes largely to the marketing might and research prowess of drug makers. They have spent billions building their prescription portfolios, which they once promoted only to doctors, into some of the hottest and most heavily advertised consumer products of the 1990s.

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A decade ago, advertising prescription drugs directly to consumers was deemed unseemly. Print advertising began to take off a few years ago after some campaigns, such as Schering-Plough Corp.'s for the antihistamine Claritin, fueled big sales increases. A change in regulatory restrictions on television ads last year unleashed a flood of new commercials.

This year, drug marketers will spend $1.3 billion on consumer ads, seven times what they spent five years ago, according to IMS. In the process, Americans, once merely passive recipients of prescriptions, have turned into savvy and demanding consumers who insist on getting the latest and greatest drugs, even when older and cheaper medications might suffice. And why not? About 192 million Americans, or about three-quarters of the U.S. population, have some sort of prescription-drug insurance that requires them to put up only a small "co-payment" of several dollars to $25 for each prescription.

Pharmaceuticals once were a relatively cheap part of health costs, commonly no more than $2 a pill a few years ago. The new-generation drugs cost $4, $11, even $15 per pill, and they tend to be used far more widely than their predecessors, over longer periods and for a broader range of long-lasting diseases.

The way pharmaceutical companies, as well as many caregivers and patients, see it, investing in drugs now helps avoid far more expensive medical procedures down the road. "Pharmaceuticals are the most cost-effective, value-added, least-invasive part of the health-care system," says Alan F. Holmer, president of the industry's trade group, Pharmaceutical Research and Manufacturers of America, or PhRMA.

The logic is akin to the commercial for one brand of automobile oil filters: "Pay a little more now -- or pay a lot later." In recent years, employers and insurers have bought heavily into the pay-me-now premise. But as their drug budgets swell, they will look harder at whether this premise is actually true.

Drug Rations

"All of the new designer technologies ... have the capacity to increase the quality of life. All are going to be very expensive, and it's going to literally break our bank around the year 2005," says Alan L. Hillman, director of the center for health policy at the University of Pennsylvania. Society will then have to decide how to ration the new technologies, he says.

But how does society calculate the value of drugs that let a 70-year-old woman stave off osteoporosis and spend five more years gardening, when she otherwise might have withered away in a wheelchair? New AIDS drugs have sent mortality rates plunging and pared hospital and other costs, but in the short-term the total costs of treating HIV-infected patients haven't fallen much, according to one study by Merck, maker of Crixivan. The dollars have simply been redirected from hospitals to drug makers.

The federal government has largely left it to private enterprise to hammer out these issues. America is virtually alone among major industrial countries in forgoing controls and letting the market set drug prices. The United Kingdom imposes profit controls, France has a complex system of price controls, and Japan orders broad price cuts every year.

No. 1 in New Remedies

As a result, U.S. firms lead the world in drug development. U.S. companies produced almost half of the new drugs introduced around the world between 1975 and 1994, far more than the next-largest contributor, the U.K. with 14% of the output, according to figures cited by PhRMA. And the pace is accelerating: The drug industry put out 120 new medications from 1995 to 1997, and 30 or so are expected to have made their debut by the end of this year. Merck has introduced eight new drugs and vaccines since 1996, among them Crixivan and the baldness drug Propecia; Warner-Lambert Co. eight, including the cholesterol-lowering Lipitor and diabetes drug Rezulin; and Pfizer five, including the impotence pill Viagra and antibiotic Trovan.

America, says Pharmacia & Upjohn Inc. Chief Executive Fred Hassan, "is the locomotive of growth not only for our company but the entire industry. It is the best market for new products and innovation." Which is why Pharmacia, maker of incontence treatment Detrol and baldness treatment Rogaine, recently relocated its headquarters from London to New Jersey.

But that also means that "the U.S. consumer is subsidizing that investment for the rest of the world. And it isn't fair," says Stephen J. Mock, a spokesman at Warner-Lambert.

1Industry Executives Point to Clinical Trials as Cause to Higher Drug Costs

Pushing a new drug through years of human trials can run up bills of $150 million or more, and only a tiny fraction ever make it to market. In the U.S., drug prices are typically one-third higher than in Canada and 60% higher than in Britain, according to government studies.

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Beating the Generics

"It is the national strategy to rely on a competitive health-care system, and that relies on higher prices in the early phases" of a drug's life, says Patricia Danzon, a professor and drug-pricing expert at the University of Pennsylvania's Wharton School. Prices usually don't come down until later years, after a drug loses patent protection and generic copies start selling at a fraction of the price.

By the time the generics get to market, however, brand-name drug makers have often cranked out a new generation of higher-priced replacements. Case in point: Merck and Monsanto Co. are competing to develop a new class of arthritis painkillers called "Cox-2" inhibitors that promise relief without the severe indigestion that current medications can cause. Such side effects afflict only about 2% to 4% of patients treated for a year with pills currently on the market, several of which are generics. But many people are expected to switch anyway.

Indeed, fully half of the arthritis patients in Michigan's Blue Cross Blue Shield plan are expected to switch when the new medicines hit the market next year, says Marianne Udow, a Blue Cross senior vice president. At an anticipated $2 to $5 a pop, the pills will cost up to 17 times as much as current generic arthritis medications.

Left on their own, drug manufacturers charge rates that often have little to do with actual costs of development. Drugs that can prevent hospital visits carry a big ticket because of the purported savings they offer; others are pricey because they treat such common conditions as baldness or impotence.

Pricing Propecia

Take Merck's baldness treatment, Propecia, which is made from the same chemical, but in a different dosage form, as the company's prostate-shrinking product Proscar. A one-milligram daily dose of the baldness treatment costs $1.25, while a five-milligram daily dose of the prostate medicine costs only 35 cents per milligram, or $1.73 per pill.

"The total amount of active ingredient in a product is only one of many factors in the pricing," says David Anstice, the Merck executive who runs the company's Americas pharmaceutical unit. Other considerations, he says, include competition, the drug's effectiveness, the cost of additional clinical trials, and what the company thinks the patient will perceive as the product's value.

The most important factor, however, is profit. Profit margins in the drug trade are the envy of the corporate world. Prescription pharmaceuticals boast gross profit margins of 90%, and the cost of the raw materials runs only a few cents in pills that often sell for up to $15 apiece. (At the corporate level, of course, profit margins are much lower: Gross margins, which include manufacturing costs, but not selling, research and other expenses, are around 70% industrywide. Net profit margins, after all corporate costs, are about 18% for the industry.) Viagra is pegged by one manufacturing expert at a gross profit margin of 98%, although Pfizer won't comment on that estimate.

The drug giants plow a hefty portion of their returns back into the business. Their research spending runs about 20% of total revenue, compared with 6% at International Business Machines Corp. and about 4% at Boeing Co. The drug industry will spend about $17 billion on research in the U.S. this year, more than the National Institutes of Health's budget of $13.6 billion for fiscal 1998.

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Beefing Up the Sales Ranks

The business invests billions more -- about $11 billion this year, according to IMS Health -- to market the newest drugs to doctors and consumers. In the past two years, pharmaceutical companies have hired 40% more sales representatives, called detail people, to pitch prescriptions to doctors, pharmacies and other providers, in large part because of the huge number of new products that the firms have launched.

The recent use of direct-to-consumer advertising has also brought a remarkable change in social perceptions about prescription drugs. "Patients today don't fear them as much as they used to," says Mr. Myers of Ford, almost lamenting the trend. In fact, "patients are specifically looking for a pharmaceutical product as an easy way to deal with whatever malady they have," he says.

Alarmed at the cost, employers and health plans are trying to curb the growth in drug spending by reminding consumers and doctors about cheaper generics. They are also raising co-payments for some drugs and refusing to cover others, such as Viagra and Propecia. More than half of the employers surveyed late last year by William M. Mercer Inc. said they hoped to adopt programs that will better manage their drug costs. In Michigan, a task force of employers, labor unions, health plans, doctors and pharmacies was formed earlier this year specifically to look at ways to control pharmaceutical costs.

Health plans are taking aim first at expensive "lifestyle" drugs that make things more pleasant but don't necessarily tackle life-threatening diseases, such as Viagra, Claritin and rival allergy medicines. Not to mention Lamisil, which was heavily advertised to consumers as "the ultimate pedicure" -- truth in advertising, given its cost of about $500 for a 12-week treatment for toenail fungus. A recent "Let Your Feet Get Naked" Lamisil campaign lamented, "People with nail fungus are, well, embarrassed by how their nails look."

'Good Use of Heath-Care Dollars?'

"In some cases with respect to the new pharmaceuticals, we are paying lots of money for products that marginally increase the quality of someone's life. Is that a good use of health-care dollars?" asks Bruce Bullen, the Massachusetts Medicaid commissioner and chairman of the National Association of State Medicaid Directors. Five years ago, his state's Medicaid program spent three times as much on hospital stays as it did on drugs. But drug costs are rising so rapidly they will exceed hospital costs within five years, he says.

As a rebuttal, the pharmaceutical industry often cites a 1991 study showing that when New Hampshire restricted the number of prescriptions reimbursed by Medicaid, drug use in the program declined by 35%, but admissions to nursing homes rose by 80%; admissions later returned to normal levels when the restrictions were lifted.

For the time being, the pharmaceutical industry seems more inclined to keep pumping out new drugs and impressive profits than to fret about runaway spending. But that complacency poses risks. Drug companies were vilified for high prices and handsome profits five years ago as the nation debated Clinton health reform, and were impelled to hold back price increases until the furor died down. The business could get whipsawed again if spiraling drug costs once more raise the ire of the public and politicians.

"The pharmaceutical industry is being very shortsighted by not working directly on this problem," says Ford's Mr. Myers. "I hope they don't assume that the pot is limitless, that costs can go up forever."

November 16, 1998

Health

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Drug Marketing Drives
Many Clinical Trials

By ROBERT LANGRETH
Staff Reporter of THE WALL STREET JOURNAL

Ask drug-industry executives why their new pills cost so much, and it's a good bet they will cite the high cost of clinical trials.

Certainly, proving to regulators that a new drug safely does what it is supposed to is an expensive process: Exhaustive drug testing can cost $150 million or more for a single medication, and only 10% to 20% of drugs that enter early trials ever make it to market.

1U.S. Has Developed an Expensive Drug Habit; Now, How to Pay for It?

But satisfying the Food and Drug Administration isn't the only reason that clinical-trial costs have ballooned to about $7 billion annually, or almost 40% of the industry's U.S. research budget.

As it turns out, fully one-quarter of the patients in clinical trials are enrolled in studies that continue beyond the initial approval of a drug. Why spend millions testing a remedy that has already won the government's blessing? Take a look -- as many drug-industry executives have -- at what Bristol-Myers Squibb Co. did with its cholesterol drug Pravachol.

In a calculated bet in 1989, the company poured almost $50 million into a large and lengthy human trial of the pill. Not to prove whether it lowered cholesterol, but to show for the first time that taking such a potent cholesterol remedy could reduce the risk of heart attack among healthy people with high cholesterol. Winning that distinction would give Bristol-Myers powerful ammunition against Merck & Co., which had a head start in the market with its drug Mevacor and was readying a second anticholesterol pill, Zocor. Bristol-Myers also needed long-term studies to convince skeptical health-maintenance organizations that cholesterol drugs really did improve patients' health.

Marketable Data

Six years and 6,595 test patients later -- four years after Pravachol came to market -- the data emerged. There was a 31% reduction in heart attacks and deaths in the patient group that received Pravachol for five years, compared with patients who received a placebo. In actual numbers, the figures were much more modest: For every 1,000 patients, there were 22 fewer heart attacks or deaths.

Nonetheless, the results were enough to win Bristol-Myers an unprecedented blessing from the FDA in 1996 to promote Pravachol as the only cholesterol-lowering agent to protect otherwise healthy people against heart disease.

Bristol-Myers began advertising Pravachol as a heart-attack prevention therapy, and sales of the drug soared. It now ranks third among anticholesterol drugs in the U.S. -- a crowded, $6 billion category -- with about 18% of total prescriptions, according to marketing-research firm IMS Health. (Zocor ranks second with 27%, thanks to the groundwork laid by Merck's Mevacor, while Warner-Lambert Co.'s Lipitor, a more potent drug, is No. 1 with 39%.)

Now, what looked at first like a multimillion-dollar gambit by Bristol-Myers has become a model for the industry. Pharmaceutical companies have greatly expanded their clinical testing, often measuring their new products against myriad rivals in hopes of finding incremental differences that will allow them to land a better ad slogan, a broader treatment claim or a spot on the restricted list of products insurers will reimburse.

Beyond FDA Requirements

The number of drug trials has exploded far beyond the dictates of the FDA, which says its requirements haven't grown substantially in recent years. FDA regulations require only that drug makers prove their new entries are safe and effective compared with a placebo or, when that isn't appropriate, another drug. But many trials today go well beyond that. The typical new medication undergoes almost 70 clinical trials, compared with just 30 trials in the 1970s. As a result, the testing bill for each new drug submitted to the FDA is rising by about 12% a year, according to research firm DataEdge LLC, Fort Washington, Pa. The companies say this is because they are tackling tougher diseases and performing more safety tests.

But increasingly, marketing executives are joining research teams from the start, surveying doctors and consumers and tailoring trials to win optimal "positioning" in the marketplace. Many of the biggest trials come not in difficult-to-treat diseases such as cancer, as one might expect, but in well-established therapeutic areas, such as antibiotics or blood-pressure drugs, where enormous testing programs are needed to ferret out small advantages over existing drugs that can then be highlighted in marketing campaigns.

Postmarketing studies, as trials for drugs already on the market are called, "are billowing out of control," says Eve Slater, Merck's senior vice president for clinical testing. She decries "a total lack of science" in some studies. But drug marketers contend they are helpless to stop the one-upmanship. If a rival mounts a new study aimed at backing up a sales-expanding marketing claim, "you have to do it, too, or you are dead in the water," she says.

High Pressure

Bristol-Myers is currently testing a powerful new blood-pressure drug, omapatrilat, in one of the largest clinical-trial programs it has ever waged. It will monitor 20,000 to 25,000 patients in dozens of countries over the better part of a decade. The total cost could hit $200 million, company officials say.

Omapatrilat is billed as an improvement upon a well-tested class of hypertension drugs, known as ACE inhibitors, that have been on the market for almost two decades. Existing ACE inhibitors don't always lower blood pressure enough, however, and often they don't work well for African-American patients. In the early 1990s, Bristol-Myers researchers discovered a chemical that, in test tubes, blocked the same bad hormones as old ACE inhibitors, while also boosting levels of other "good" hormones that regulate heart function and blood pressure.

To capture a beachhead in this competitive drug category, Bristol-Myers's marketers proposed an ambitious plan: test omapatrilat in a giant clinical trial against the three most heavily marketed classes of blood-pressure medications (ACE inhibitors such as Merck's Vasotec, calcium-channel blockers such as Pfizer Inc.'s Norvasc, and angiotension II inhibitors such as Cozaar, also made by Merck). Scientists heading the omapatrilat clinical-testing team readily agreed, and large-scale trials began on about 5,000 people last year.

"The FDA told us that we don't need all these trials" to get omapatrilat approved for blood pressure, says Hubert Pouleur, Bristol-Myers's vice president for cardiovascular clinical research. "But there is a difference between getting a drug approved and having it be a commercial success. A new drug will be used only if it is a significant improvement on existing drugs, and to establish that you need trials that aren't required for approval."

Staking a Claim

The trial strategy, if successful, will allow Bristol-Myers to make the powerful marketing claim that its drug lowers blood pressure more than its competitors' products. The company also is testing its drug among the elderly as a class and among blacks -- trials that could help in marketing to these patients.

Early next year, researchers will begin an even larger round of testing on more than 10,000 patients that will span five years and seek to prove that omapatrilat reduces the incidence of heart attack and death from cardiovascular disease. These trials need to be especially large because some existing drugs, in particular ACE inhibitors, have already been shown to reduce cardiac events, and Bristol-Myers is looking for an advantage over them. Sol Rajfer, senior vice president of clinical research and development at Bristol-Myers, says the clinical onslaught "is driven by science" and isn't only about market positioning. "These trials help doctors use the drugs wisely," and could result in important public-health benefits, he says.

Yet Anthony Coles, a doctor who heads cardiovascular marketing at Bristol-Myers, puts it more bluntly. In a pharmaceutical category as crowded as hypertension, he says, "you have to show your drug gives a benefit beyond reducing blood pressure."

November 17, 1998

Leader

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Drug Costs Yield Grim Choice
Of Medicines Over Necessities

By LUCETTE LAGNADO
Staff Reporter of THE WALL STREET JOURNAL

An aging black-and-white photograph sits on a coffee table in Jewel Brown's immaculate home on a quiet street in Durham, N.C. It shows her as she was half a century ago, a dazzlingly pretty young woman with dark, wavy hair and a hopeful smile.

Today, Mrs. Brown is elderly, ailing and all but broke. She suffers from chronic emphysema, high blood pressure and arthritis. She nearly died from pneumonia earlier this year, and in October was hospitalized for major complications. Now age 70, she qualifies for Medicare, the federal government's massive program that is supposed to insulate the elderly from the devastating costs of health care.

Yet Medicare has always had a glaring hole in the safety net: With few exceptions, it doesn't cover the costs of prescription drugs -- the single largest health-care expense for the elderly.

1MSNBC Video: America's Drug Problem -- See more on skyrocketing drug costs in the U.S. in this report from NBC "Nightly News."

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As a result, some months Mrs. Brown spends up to $400 for medications, more than 30% of her income. Prilosec calms her stomach but sets her back $102.59 for a 30-day supply. Then there are Norvasc for her blood pressure ($43), two inhalers to help her breathe easier ($88 total), two pain medications ($70), nitroglycerin patches for angina ($27.89) and Theophylline to clear her lungs (a bargain at $16.37). Recently, her doctor prescribed Miacalcin, a nasal spray that helps strengthen her bones but depletes her purse by $55.43 a month.

"I need help, I need help real badly," Mrs. Brown says in a raspy voice. She worked for years as a short-order cook and as a caretaker for Alzheimer's patients but gets no pension, living on $780 a month in Social Security and $500 a month in rent from a boarder. She ran up more than $12,000 in credit-card charges between 1994 and 1996 to buy the medications she otherwise couldn't afford. Her daughter, Rebecca, who lives with her, took a second mortgage on their home to pay off her mother's high-interest debt, but Mrs. Brown has had to charge another $2,500 in drugs. She recently resorted to applying for food stamps, but was given only $10 a month in benefits.

Pricey prescription drugs are driving a new surge in health-care costs, but most Americans don't feel it: Their employer insurance plans typically cover most of the expense. But for Mrs. Brown and millions of people in the ranks of "the uncovered," the impact is far more severe.

About 19 million elderly people in the U.S. have little or no drug coverage at all, according to the Congressional Budget Office. Nor do an estimated 43 million younger Americans -- the unemployed, the working poor, immigrants, illegal aliens, single mothers in part-time jobs -- who lack health insurance of any kind.

"There is an absolute inequity in our system," says Aaron Miller, a neurologist who treats multiple-sclerosis patients at Maimonides Medical Center in Brooklyn, N.Y. "The sickest patients are also the most disadvantaged when it comes to drugs." Many of his patients can't afford the $10,000 a year that the newest MS drugs cost, so he tries to get them into clinical trials -- even though they have only a 50% chance of getting the real thing rather than a placebo.

The drug crunch is worst for America's elderly. People age 65 or older make up 12% of the U.S. population but consume almost 35% of all prescription drugs. Excluding insurance premiums, drugs account for 34% of older people's total health-care bill, more than doctor visits (31%) and hospital admissions (14%), according to David Gross, a senior policy adviser at the American Association of Retired Persons.

What's more, about 65% of people 65 and older have two or more chronic diseases, as do 80% of people over 85, the AARP says. As a result, one in five elderly people takes at least five prescription drugs a day. About 2.2 million seniors shell out more than $100 a month for medication, and many pay even more.

Yet Medicare pays for none of it. Medicare, the Great Society program enacted under President Johnson in 1965, now covers health care for nearly 40 million people, including millions with disabilities, at a cost of $200 billion a year. Expanding it to pay for drugs would cost an extra $20 billion annually, according to the CBO. But in an era when balancing the federal budget has been a top priority, Congress has consistently resisted such action -- in no small part because of intense opposition from the drug industry, which fears that Medicare coverage might open the way for government price controls.

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2Medicare Program Considers Reform to Cover Drug Costs

Five of the 10 top-selling prescription drugs in the U.S. are products heavily used by elderly patients. The aged account for 33% of the sales of No. 1-ranked Prilosec, the anti-ulcer remedy, and generate almost 50% of the sales of the No. 9 entry, Norvasc for high blood pressure, according to Scott-Levin, a research firm in Newtown, Pa.

Roughly half of Medicare-covered patients get some drug assistance, because they are also covered under employer-sponsored insurance plans for retirees, are members of HMOs or are poor enough to qualify for state Medicaid programs, which do pay for prescriptions. But the other half go it alone, and the sicker they are, the less likely they are to get any kind of prescription benefits from insurers. "They don't sell insurance plans to houses already on fire," says Michael Knipmeyer, a lawyer at a legal clinic for seniors run by the George Washington University Law School in Washington, D.C.

Left to their own devices, millions of these elderly resort to resourceful but dubious solutions. They rack up big credit-card debts, plead with their doctors for free samples and forgo basic necessities and little luxuries. Some cross the border into Mexico or Canada, where some drugs are much cheaper because of government price controls. Others go without their prescriptions altogether or skip doses to stretch out their supply, often resulting in medical complications that can send them to the hospital.

Cora Albright, an 84-year-old widow who lives 10 minutes away from Jewel Brown, sometimes skips her medications to make them stretch, a classic habit of the "near poor" elderly. Mrs. Albright, who worked for more than 30 years in a hospital laundry, subsists on a pension of about $90 a month and $700 a month in Social Security. But she spends $200 a month -- more than 25% of her income -- to stock her medications, including Prilosec, the Astra anti-ulcer drug that costs her more than $100 out-of-pocket, Megace to increase her appetite and Remeron, an antidepressant.

"Then there is the oil bill, the telephone bill, the water bill, the light bill. I have to pay them, and it is a struggle," says Mrs. Albright, who spends much of the day in a wheelchair in her dark living room, her swollen legs swathed in bandages. "It takes about everything I get to make ends meet."

"People are making big-time decisions on what medicines they'll take versus what utility bills they will pay," says Gina Upchurch, director of Senior PharmAssist, an organization she founded in Durham that helps seniors who make too much to qualify for Medicaid but are too poor to afford their medicines. Yet hers is a small program, and there is a long waiting list of people hoping to get in, including Mrs. Brown and Mrs. Albright.

"The system makes no bloody sense," says Frank Larkin, president of Good Samaritan Hospital in Brockton, Mass. "Does it make sense that we give people costly surgeries but we can't give them prescriptions?"

The uncovered elderly, moreover, can end up paying higher prices than the rates paid by HMOs and drug-benefit programs. The drug industry has always denied that such "cost-shifting" occurs. But experience reveals otherwise. At Upchurch Drugs, an independent pharmacy in Durham, owner David Upchurch notes that HMOs get a month's supply of Norvasc, for hypertension, for $33.80 -- 25% less than what Jewel Brown pays.

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"Prices are going up for those people who pay cash," Mr. Upchurch says. "We don't have any choice. If you are forced to raise prices, it will happen only where you can -- and that tends to be the elderly."

Medicaid's Role

In the absence of a federal drug-benefit program, the poorest of the elderly get some help from Medicaid programs for the indigent. In the past four years, Medicaid's costs have grown by 6% a year, while the cost of drug benefits rose at more than twice that rate, according to data collected by the federal Health Care Financing Administration. "It's one of the fastest-growing parts of the Medicaid budget, and a part that is exceptionally hard to control," says James Verdier, a Medicaid expert at Mathematica Policy Research Inc., a Washington, D.C., social-service research firm.

But even Medicaid is a patchwork. In North Carolina, people's earnings must be 26% below the poverty level to qualify for Medicaid (the federal poverty level is pegged at $8,052 a year for an individual and $10,860 a year for a couple). In Illinois, an older person's earnings must be 46% of the poverty level. In Massachusetts, patients can earn 33% more than the federal poverty level and still get state benefits; that, however, doesn't apply to the elderly, who have to be at the poverty level to qualify, according to Health-Care for All, a Boston advocacy group.

So in some states, thousands of older and disabled people are too poor to afford their prescriptions, yet not impoverished enough to receive coverage. Experts use a buzz-phrase for these patients: the near poor.

Not Poor Enough

Roland and Bessie Pennington, who have been married for 57 years and live in a modest housing project in the shadow of the Capitol in Washington, would seem to be a slam-dunk for Medicaid. Mr. Pennington is 84 and has been retired from his boiler-repairman job for 26 years. He takes 10 prescription drugs to quell high blood pressure, gout, arthritis pain and angina, meticulously tracking every expense and saving every receipt. Last February, for example, he spent $235.09 on drugs, 32% of his monthly Social Security payment of $739. Mrs. Pennington's $350-a-month Social Security check is used by the couple to buy groceries and pay $255 in monthly rent, which was recently reduced to $83.

Yet Mr. Pennington has applied for -- and been rejected by -- Medicaid four times. Under local Medicaid rules, the couple's combined income is $154 a month over the limit.

So Mr. Pennington improvises. Early each month, he buys only half the prescribed quantity of his most expensive drugs, such as Nitrodur for angina ($51.29 for a full month's supply); then he buys the rest two weeks later -- his fear is that he will run low on cash, and so this is his way of budgeting. And rather than use the drugstore a block away from his home, he drives his temperamental 1987 Chevrolet six miles to his old neighborhood and the Safeway he has patronized for 20 years. When he is short of money, the Safeway pharmacist advances him some pills, knowing Mr. Pennington will promptly return to pay up when his Social Security check arrives. The pharmacy near his current home refused to do that.

Sue Andersen, a lawyer at the George Washington University legal clinic, has been trying to help the Penningtons qualify for Medicaid. "The very poor get a free ride, but it is the lower-middle classes who are stuck with bills of $2,000 or more a year," she says.

A $300 a Month Drug Bill

Even aging patients who are financially better-off can feel the pressure. Nathaniel Ashkenaz, 79, a retired appliance repairman, and his wife Thelma, 75, live in El Paso, Texas, on a comfortable pension of $22,800 a year. Yet he worries constantly about how to pay $300 a month in drugs to treat his ulcer and Thelma's diabetes. He crosses the border into Juarez, Mexico, each month to buy 100 Zantac tablets for his ulcer for $24, one-fourth the price he would pay in Texas. But his wife's medications must be purchased stateside: $117 for Rezulin, $126 for cholesterol-lowering Zocor, $33 for Norvasc.

To offset some of the cost, Mrs. Ashkenaz tried to purchase through the AARP a "Medigap" insurance policy, which typically covers half of drug costs. But she was turned down because she was on too many medicines, her husband says. "They said 'Sorry, we can't accept you.' " Then in September, his wife underwent an emergency quintuple-bypass operation, and since has required a slew of additional medications, including Coumadin, at $47, and Amaril for diabetes, at $23.29.

"We are retired and we are getting by, but we aren't rich," Mr. Ashkenaz says. "We can't afford luxuries. We would like to take a trip or go on a cruise, but it isn't feasible."

Waiting for Free Prescriptions

The high cost of drugs also shakes the lives of the young and uninsured. In Brockton, a depressed mill town in eastern Massachusetts, local churches and synagogues have banded together to raise money to dispense free drugs to the poor. On a recent evening, the small waiting room of the Brockton Neighborhood Health Center is crowded with two dozen people hoping to snare free prescriptions -- mothers struggling to rein in their children, young men, elderly couples -- most of them immigrants from Haiti, Cape Verde, Puerto Rico, Swaziland and the Caribbean.

Maria Chadderton, 41, sits nervously fingering the six prescriptions she has never filled. They are dated from June, and include drugs she needs to manage her diabetes and high blood pressure. "I couldn't fill them. I scarcely have money to get to work," she says. Her take-home pay for working up to 12 hours a day as a home health-care aide has been at most $800 a month, she says. Filling the prescriptions, which include pricey drugs such as Vasotec for blood pressure and Glucophage for diabetes, would set her back a couple of hundred dollars, leaving her unable to pay the rent and buy groceries, she says.

As someone who cares for the ill, Ms. Chadderton has no illusions about the risks she is taking by forgoing the drugs. "I can go into a coma," she says.

"We see this all the time," says Sue Joss, the Brockton clinic's director. "It becomes a choice between filling a prescription and eating." Even so, she says, clinic doctors are under strict orders to give out free medication only to those who expressly state they can't afford it. "If we met all the demand, we would go bankrupt," she says.

The Costs of No Medication

Yet even higher costs loom when people don't get adequate access to prescription drugs, says Stephen Soumerai, who has studied the issue and is chairman of Harvard University's Drug Policy Research Institute. Elderly people who don't get sufficient medication often get too sick to stay independent and end up in the hospital or a nursing home, where care is far more expensive, he says. About 75% of doctor visits result in prescriptions, yet Medicare pays for the visit but won't pay for the resulting therapies, he complains.

"Drugs are the glue that holds the medical system together," Dr. Soumerai says. "We can't afford not to cover people with chronic illnesses, or whose independence rests on access to medications."

Four hours away from Brockton, in the quaint Norman Rockwell country of western Massachusetts, day laborer Ralph Carsno is learning the hard way what it means to be both unhealthy and uninsured. A 38-year-old diabetic, he returned to North Adams, his hometown, a year ago after losing his job in Florida. In July he underwent emergency surgery to clear blocked heart arteries. The surgery was free under a Massachusetts program for the uninsured, but he balked when the pharmacy wanted to charge him more than $200 out of pocket for two pricey medications -- Lipitor and Zestril -- to manage his cholesterol and hypertension problems.

Half a Prescription

"It was a pretty good chunk of money to spend the day I got out of the hospital, and it really would have put a dent in my budget," Mr. Carsno recalls. He purchased only half the prescription, hoping to scrape together enough money to fill the rest later on. So far, though, he has been recuperating and hasn't earned enough to follow through.

A local aid group, Ecu-Health Care, which comprises local doctors, hospital executives and volunteers, has been trying to help Mr. Carsno. Officials successfully prevailed upon the two companies that make Lipitor and Zestril -- the Parke Davis division of Warner-Lambert Co. and Zeneca Group PLC -- to hand out free supplies to tide Mr. Carsno over for several months until he can find a job with full drug benefits.

The industry pledged to redouble its efforts to help the indigent even as it fought the Clinton health-reform plan in the early 1990s, but progress has been uneven. The industry says it helped nearly a million people last year with drug giveaways, but the application and approval process differs from company to company.

But Ecu-Health Care officials see the Carsno victory as merely a temporary and unsatisfactory solution. "It's hit and miss -- we don't know what we are going to do for folks from month to month," says Charles Joffe-Halpern, Ecu's director. He offers people hope only "on a temporary basis," he says.

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November 17, 1998

Major Business News

Medicare Program Considers
Reform to Cover Drug Costs

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Since its establishment 33 years ago, Medicare has never covered the cost of prescription drugs. Now, would-be Medicare reformers are trying -- one more time -- to plug the gap.

As the National Bipartisan Commission on the Future of Medicare grapples with how to shore up the embattled program, some insiders predict it will attempt to patch up the hole caused by a lack of drug coverage. Forcing the issue: the soaring costs of new medicines, along with the growing ranks of the elderly.

Commission member Bruce Vladeck, who until last year ran the Health Care Financing Administration, the agency that oversees Medicare, says the push for coverage has "gained momentum" and is increasingly central to the work of the panel, which will issue its recommendations for reforming Medicare in the spring.

"It is still a long shot," cautions Mr. Vladeck. "But whereas a year ago I would have said it was a decade away, I would now say that it will be a lot less time." There are, he says, "glimmerings in the wind" that point to the enactment of a drug benefit.

Such efforts have a long history of failure, however. Says fellow commission member Deborah Steelman: "I have no interest in creating a dinosaur." She estimates that inserting such a benefit could wind up costing $40 billion a year, double the $20 billion that proponents say it would cost to add drug coverage. "There has to be another answer," she adds.

Ms. Steelman is a Medicare expert and Washington lawyer who also lobbies for the pharmaceutical industry, though she says her work on the commission doesn't necessarily dovetail with the views of the industry she represents.

Any renewed effort to add drug benefits to Medicare is likely to encounter harsh resistance from the drug industry, which has long feared government price controls and a squeeze on profits. In 1997, the pharmaceutical industry spent $74.4 million on lobbying -- more than any other industry or interest group, according to the Center for Responsive Politics in Washington. "I have no idea what that number refers to or what it may include, but the pharmaceutical industry is not out of line compared to any other health-care sector," says Ms. Steelman.

PhRMA, the industry's lobbying arm, says it has never been against the idea of a Medicare prescription benefit, per se. The problem, says spokeswoman Jackie Cottrell, is in the details. "The industry wants to be part of the solution in 1999," she says. "But what is the solution?"

Mr. Vladeck, for one, sees signs that some drug firms may be changing their position. "The industry is hardly monolithic, and I have had some perception that some of the companies were beginning to wonder," he says. As baby boomers age, and the potential market for prescription drugs swells, government coverage of drugs could be a boon for some companies, not a detriment, he adds.

But others doubt that drug companies want to change the status quo. "The industry can, in principle, be in favor, but then make sure nothing happens," says Philip Lee, a Stanford University consulting professor who headed a task force in 1969 that strongly pushed for a Medicare drug benefit. That proposal came to naught in the face of industry opposition and congressional inaction. Another attempt in 1972 collapsed, as did numerous other efforts through the years, culminating in President Clinton's own ill-fated health-care reform, which also included potential price controls and a Medicare drug benefit.

Will this Medicare commission change all that? Prof. Lee predicts not. "It is destined to fail," he says.

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-- Lucette Lagnado 

November 18, 1998

Leader

Demand for Brand-Name Drugs
Beats Lower Prices of Generics

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By THOMAS M. BURTON
Staff Reporter of THE WALL STREET JOURNAL

When Congress passed legislation in 1984 smoothing the way for fast marketing approval of low-cost generic drugs, one major intent was to reduce inflation in pharmaceutical costs.

Since then, generics have grown from 18% to 42% of all prescriptions written in the U.S. Generic drugs such as "beta-blockers" for preventing heart attacks are embraced as the medical standard of care.

So why are drug costs higher than ever?

In the personal-computer industry, it was the clone makers that ultimately won. But so far, big drug companies are staying one step ahead of their clone-making generic rivals at every turn.

Even as generic copies of popular brand-name medications like Prozac and Procardia are being planned for when the patents on these drugs expire, big pharmaceutical companies are developing the next generation of expensive, brand-name antidepressants and heart pills. To ensure demand for their new products, the pharmaceutical titans promote their drugs with direct-to-consumer advertising -- an estimated $10.8 billion in ads and promotions this year alone, and growing. Behind the scenes, they employ an arsenal of legal and regulatory tactics so that generics don't make more headway

No Match

While generics have managed to prosper in certain categories like asthma treatment -- where the only competition is from older brand-name drugs that are directly equivalent -- they are consistently slammed in categories where a new, heavily marketed brand-name drug has entered the picture.

Witness how Astra Pharmaceuticals LP of Wayne, Pa., has beaten back generic heartburn and ulcer remedies with its drug Prilosec. Part of a class of new and powerful acid-fighting drugs called proton-pump inhibitors, Prilosec is designed to treat both serious ulcers and severe recurrent heartburn, called gastroesophageal reflux disease, or GERD.

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The drug got a big boost from the American Digestive Health Foundation of Bethesda, Md., and the American College of Gastroenterology in Arlington, Va., which paid for extensive "public education" spots on television and in newspapers and magazines, telling people about ulcers and GERD. "Maybe there's a better medicine that will help you live pain-free," one ad says -- without naming Prilosec. The two organizations receive financial support from Astra Pharmaceuticals, a joint venture of Astra AB of Sweden and Merck & Co.

'Ask Your Doctor'

Astra also launched an extensive ad campaign for the drug last year that ran on network television and cable, and in publications ranging from Woman's Day to National Geographic. One, showing a grimacing man holding his stomach in pain, encouraged, "Ask your doctor about the most prescribed acid medication in America."

Now, Prilosec, at a wholesale cost of $116 to $178 for a month's supply, is an industry blockbuster. Sales in the U.S. are expected to reach $3.5 billion this year, up from $2.2 billion last year. The drug is now the biggest single pharmaceutical cost at many companies that cover employee prescriptions.

Meantime, the generics are losing ground. Value Rx, a leading drug-benefits manager that is a unit of Express Scripts Inc. of St. Louis, reports a big decline in usage of ranitidine, whose brand name is Zantac and which costs about half as much as Prilosec. Among the plan's 7.2 million members, use of the generic has fallen in the past four years from 41% to 19% of the gastrointestinal-disease market. Over that same period, Prilosec and a similar drug, TAP Pharmaceuticals Inc.'s Prevacid, have jumped from 9% to 36%. Much of the rest of the GI-drug market is held by brand-name drugs, too.

Another Kind of Heartburn

Now, the people with heartburn are those whose job it is to keep medical costs down.

"We see use of a much more expensive product, Prilosec, when a less expensive therapy would work fine," says Thomas Snedden, director of Pennsylvania Assistance Contract for the Elderly, or PACE, a Pennsylvania state program that provides drugs for older people. "GERD used to be infrequent, and now it is frequent. Physicians just want to prescribe it, so they diagnose GERD."

3MSNBC Video: America's Drug Problem -- See more on skyrocketing drug costs in the U.S. in this report from "NBC Nightly News."

An Astra spokesman, Jim Coyne, says its ads are "very specific and refer only to frequent and persistent heartburn." He contends that GERD actually is underdiagnosed and that as many as 21 million Americans may have a recurring form of it.

A large part of the reason generic-drug makers can't keep up is that they lack the marketing muscle of their big rivals.

Sales of cefaclor, a potent antibiotic used to treat sinusitis and ear infections, plunged after its patent expired in 1992. Prior to that, the drug had been Eli Lilly & Co.'s leading product under the brand-name Ceclor, with nearly $1 billion in total sales. After the generic appeared in 1993, new prescriptions fell to less than 20% of their earlier level.

This was because Lilly salespeople ("detail" people in industry parlance) used to push Ceclor heavily during visits to medical offices. But when the patent expired, they stopped, virtually overnight. "Lilly just quit flogging it," says Paul Arnow, an infectious-diseases doctor at the University of Chicago Medical Center. A Lilly spokesman confirms that it "substantially reduced" marketing visits on Ceclor in a "short period of time" after the generic cefaclor appeared. Meanwhile, lots of prescriptions get written for expensive, heavily promoted antibiotics, when cefaclor or the even cheaper amoxicillin would do just fine, according to health-care and managed-care executives.

It is rare for generic-drug companies to dispatch salespeople to visit doctors, or to host medical seminars and pay marquee professors to laud their products, as brand companies do. Even leading generic makers, like Mylan Laboratories Inc. of Pittsburgh, with a market value of about $4.4 billion, and Barr Laboratories Inc. of Pomona, N.Y., at about $950 million, are dwarfed by leading brand companies like British drug giant Glaxo Wellcome PLC, at about $110 billion.

The free samples that detail people hand out to doctors are a key weapon in winning market share for a new drug. The pharmaceutical companies' hope is that doctors will give these drugs to patients instead of prescribing other medications. And once the freebies in these "starter kits" have run out, a patient often ends up on long-term, even lifelong, prescriptions for that drug.

Battle Over Beta-Blockers

This has happened with medications designed to ward off heart attacks. While there is powerful medical evidence that heart-attack patients generally should be put on generic beta-blockers to avoid further attacks, often, doctors who have free samples of more-expensive brand-name calcium channel-blocker drugs for hypertension will place patients on these instead.

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One leading calcium channel-blocker, Hoechst Marion Roussel's Cardizem CD, wholesales for between $60 and $78 monthly for the most common doses. By comparison, two widely prescribed generic beta-blockers, atenolol and metoprolol, cost between $21 and $36 wholesale for a month's supply.

"There is clear evidence that beta-blockers are the drug of choice" after heart attacks, says University of Chicago cardiologist Matthew Sorrentino. But the expensive drug often gets prescribed instead, he says, "because the doctor has just been detailed on it, and he has samples in his closet." Also, he says, many doctors are unfamiliar with the precise appropriate usage of the drugs, so they are heavily influenced by salespeople. A Hoechst spokeswoman didn't return calls seeking comment.

'Pharmaceutical Overkill'

"We're getting pharmaceutical overkill," says Woodrow A. Myers Jr., director of health-care management at Ford Motor Co., where pharmaceutical costs for employees rose 16% and 18% in the past two years, respectively, driven by expensive brand-name ulcer drugs, antibiotics, antidepressants and allergy pills. "Because of advertising to consumers and marketing to doctors, great drugs are given to the wrong patient for the wrong disease."

Employers and managed-care companies could crack down, of course, by enforcing use of generics. But under attack in Congress and competing to woo customers, many managed-care plans are reluctant to antagonize patients any further.

"Many managed-care companies have gotten lenient in implementing drug cost-containment efforts," says Henry F. Blissenbach, former president of drug-benefits manager Diversified Pharmaceutical Services Inc., now a unit of Britain's SmithKline Beecham PLC.

Lee N. Newcomer, medical director at managed-care company United HealthCare Corp., Minnetonka, Minn., says it is difficult for HMOs to insist on switching "without alienating our membership." Moreover, he says, it would be too expensive to inquire into the appropriateness of every use of an expensive drug. But he says United HealthCare is beginning to make it more costly for many of its patients -- up to $20 more per prescription -- to choose an expensive brand product instead of a generic.

Lawyers and Lobbyists

After all, the vast majority of generics are regarded by the FDA as substitutable for the brand drug in all medical cases. And every generic approved by the FDA has been found by the agency to be precisely the same chemical, with the same dosage and equivalent absorption rate, and with the same manufacturing-consistency that brand manufacturers must have.

The brand-name pharmaceutical industry isn't taking this pro-generic talk lying down. Instead, big drug makers are dispatching platoons of lawyers and lobbyists to protect their monopolies, even after their patents -- which usually run for 20 years -- expire.

Bristol-Myers Squibb Co. is seeking to keep certain generic versions of the anxiety drug trazadone off the market by claiming that the generic pill infringes on its patent -- not on the chemical compound itself, but on the form of the pill. Like the brand-name medicine, called Desyrel, the generic pill has two grooves on it, to split the tablet into thirds. A Bristol-Myers spokeswoman says, "We do have a valid patent on the form of the tablet."

In some cases where litigation is pending, big pharmaceutical companies sometimes pay generic firms to keep the clones off the market. For instance, Abbott Laboratories, North Chicago, Ill., currently pays quarterly fees totaling several million dollars to two generic companies as patent litigation over Abbott's hypertension drug Hytrin proceeds. The recipients, the Zenith Goldline Pharmaceutical unit of Ivax Corp. and the Geneva Pharmaceuticals Inc. unit of Novartis AG, have agreed, for now at least, not to market a generic competitor.

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Meanwhile, Hytrin is generating about $700 million in annual sales and growing at about 13% a year, at a typical drugstore cost of $53 monthly. Even though the original patent on the chemical expired in 1994, there is no generic on the market. Abbott says it can't comment on patent litigation. Zenith declined to comment, but confirmed that Abbott agreed to pay it $6 million each quarter. Geneva says that it fears marketing the drug now because it might end up owing damages.

Arsenal of Tactics

"There are anywhere from 10 to 20 tactics" pharmaceutical companies "use to protect their products," says Roger L. Williams, the Food and Drug Administration's director of pharmaceutical science.

Among these are "citizens' petitions" filed with the FDA to oppose generic drugs -- often filed by citizens who happen to be lawyers for big drug companies. Alan F. Holmer, president of the brand drug industry's trade association, says, "The research-based industry does not oppose the generic industry. But if we think the FDA is about to make a mistake in approving a generic, we will let the FDA know about it."

Currently, the FDA is considering a petition from American Home Products Corp., Madison, N.J., against the generic version of the hypertension drug Verelan, called verapamil. Verapamil already has been shown to dissolve in the bloodstream at essentially the same rate as the brand product when in capsule form. But American Home says an additional test is necessary: It wants the generic company to sprinkle the drug on applesauce, have patients ingest it, and measure how fast it is absorbed. That is because the Verelan label says the medicine can "be administered by carefully opening the capsule and sprinkling the pellets on a spoonful of applesauce." Toronto-based Biovail Corp., the generic maker, says it believes it has successfully completed the applesauce test.

Even when petitions fail, they can keep generic drugs off the market for months or years. At least 40 were filed between 1990 and 1997 against generic drugs. Of the 29 already decided, 24 were rejected by the FDA. But it took the agency between seven months and four years to approve the generic drugs in question after the petitions were filed.

A Case Study

After the FDA approves a generic, there still can be serious roadblocks to getting the drug to consumers.

A case study is the drug Coumadin, whose generic form, called warfarin or warfarin sodium, won FDA approval last year. Coumadin, made by DuPont Pharmaceuticals Inc. of Wilmington, Del., is an anticoagulant used, for example, by stroke patients to ward off further episodes. The drug generates about $500 million in yearly sales for the DuPont Co. unit. A standard monthly dose has a typical drugstore price of $35.50, against the generic's $28.60. Despite the price difference, Coumadin has so far retained about 80% of the U.S. market.

DuPont has waged a campaign to convince state legislatures and state agencies to limit the ability of pharmacists to switch patients to warfarin. DuPont points out that Coumadin/warfarin is a "narrow therapeutic index" drug, meaning that there is a narrow range of safe blood levels of the drug. Too little can lead to strokes, too much to internal bleeding.

DuPont has produced slides, press releases and other promotional materials that question the safety of switching patients to the generic: "Once a patient is stabilized on Coumadin ... he or she should not be switched to another formulation of warfarin sodium without the knowledge and approval of the patient and his or her physician so additional monitoring can be performed," DuPont asserted in a June, 1997 press release.

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An FDA Warning

The FDA, which has deemed the two products equivalent, warned DuPont in January: "We cannot overstate the seriousness with which we regard DuPont's false and misleading promotion of Coumadin."

Nonetheless, DuPont is pursuing either legislation or agency action in as many as 20 states to prohibit switching unless a druggist first gets a doctor's verbal approval. DuPont's senior vice president for public policy, Robert W. Perkins, says the company is taking "a stand that physicians should be aware of which brand the patient is taking." But doctors already can prevent switching by specifying the brand medicine on a prescription pad. Generic companies, however, say requiring busy pharmacists to phone busy doctors over each prescription simply is a roadblock.

"You can't call all the physicians," says the FDA's Dr. Williams. "It effectively blocks generics." In North Carolina, where phone calls are required by law, generic warfarin recently made up 7.7% of the market. In Wisconsin, where switching can occur freely, the share was 25.3%.

Contradicting Testimonies

In Chicago, a state council on generic medicines considered in late August whether switching to warfarin should be allowed. A pharmacist with the Group Health Cooperative in Redmond, Wash., Claudia Swenson, testified that 2,000 patients were successfully switched to generic warfarin without difficulty. "Our conclusion was that the two products were clinically the same," she testified.

DuPont's main outside witness was Steven M. Wilk, a Chicago suburban doctor who heads the Illinois Academy of Family Physicians. This group has received $160,000 from DuPont since 1996, though that fact wasn't mentioned at the hearing. Dr. Wilk testified he was concerned that doctors, not pharmacists, should oversee patients' care. "Physicians are quickly losing control," he testified. In a later interview with this newspaper, Dr. Wilk said he has no experience with any of his own patients switching.

In the end, the Illinois council prohibited druggists' switching prescriptions to generic warfarin. A member of the council, Robert Buckman, said that the group's role was to listen to Illinois doctors, explaining, "We've looked beyond the FDA."

The FDA's Dr. Williams sees it differently. To him, the scientific justification for restricting the generic came to this: "Absolutely none."

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