Pharmaceutical Marketing Ethics

by Jason Shaw
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A Review of Literature

Several literatures have been devoted to pharmaceutical marketing practices used by manufacturers in their global operations. Authors have been interested to find out the benefits of pharmaceutical marketing to the end-users. It is suggested that its activities ultimately shape supply chain management strategies and practises. The objective of the review is to find out whether prescribers are affected by the marketing practices of drug companies. The focus of the review will be on detailing practices, cost of promotions, and outlook of the industry. US pharmaceutical practices have been taken into account as it is one of the biggest sources of pharmaceutical drugs in the world. It is suggested that its activities ultimately shape supply chain management strategies and practises.

Definition

In the pharmaceutical industry, pharmaceutical marketing has been described as any operation involving advertisement, detailing, freebies, and the funding by a drug maker of conferences and symposia designed to encourage the selling of its drugs. (Dictionary of Medicine). Pharmaceutical marketing is regulated by a code of ethics which sets “standard for the ethical marketing and promotion of prescription products directed to the healthcare professions” (Kintanar and Teehankee) The pharmaceutical advertisement culture should subscribe to the freedom of health care practitioners, which ensures that in medical assessment they should exercise impartiality. This suggests that there is no conflict of interest, whether possible, real or evident.

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Marketing Practices

Three marketing strategies that affect the prescribing actions of physicians were outlined in Cousin’s (2009) research that used interviews. Firstly, by their targeted marketing and detailing, physicians were found to be impaired by marketing officials. Physicians, for example, are affected by advertising executives visiting them to sell an items. Second, as previously mentioned, that is by funding or preparation as a means of ongoing medical activities. Fourth, the impact on patients of direct-to-customer ad

As described by Hasbey, pharmaceutical promotion has been segmented into many activities (2009). Accordingly, 28% of advertisers using sample delivery, 36% comprehensive practises, 7% direct to consumer approach (DTCA), conference keeping, 3%, magazines, 25% unmonitored and 0% e-commerce.

Chart 1. Segmentation of Marketing Practices

In his research, Ashley detailed that samples represent a major cost in pharmaceutical marketing. Samples go hand and hand with information, since the sales force utilises them as they meet their consumers. Chart 1 demonstrates the segmentation as prepared by Hashley of marketing practises in the sector and its related operations.

In pharmacy groups, these activities appear to be the standard and are considered conventional marketing. The Braun Community observed that conventional pharmaceutical marketing techniques supply physicians with medications as free trials, offering information about their products by journal papers or political makers. Gifts with a brand emblem or descriptions of the drugs are often customary for pharmaceutical firms. Via funding conferences, pharmaceutical firms frequently participate in continuing patient research. In his assessment, Braun saw the need for modern prescription solutions owing to behavioural shifts and customer behaviour, such as online use and interactive media use.

Holding of Meetings

The “continuing medical education” was addressed in the Cousins research (2003) in which he described the platform as an immoral practise, conducting meetings or in pharmaceutical parlance. Cousins claimed that CME is one of the advertisement tactics at question when it acts as a promotional promotion of their drugs rather than a help for patient education while the pharmaceutical industry funds a case. In this, he said that what is meant to be an informative forum is a pharmaceutical publicity fair in which doctors are named to join. In these conferences, pharmaceuticals foot the bills of the physicians, food and travel expenses plus the medicine samples they give to the doctors. It is possible, therefore, to infer, as Cousin did, that there is a potential conflict of interest. As stated in this study that for every $1.00 invested by pharmaceutical companies in this type of event, they reap $3.56 in increased sales.  For instance, Purdue, a drug company that promoted Oxycontin, sponsored about 40 conferences that were attended by 50,000 prescribers. Trainings of this sort, according to research, are one way of influencing prescribers (Chen . 23 September 2009).

            The above views are contradicted by the manufacturing consortia such as the Association of  the British Pharmaceutical Industry, US PhRMA Association and the Irish Pharmaceutical Association that it is an acceptable practice to pay for the expenses of the delegate in attending conferences and should not be extended beyond health professionals.  These organizations further justified the need for further training of doctors in the uses and techniques of new medicines. They rationalized that doctors and health practitioners will find it difficult to keep up to date with scientific advances without these kind of initiatives from pharmaceuticals.

            To polish the ranks in terms of gift-giving, the US, through the PhRMA, issued a directive toning down extremes of gift-giving and inducements to doctors in 2002. However, Bucks said that it is not clear whether this rule is being followed because the FDA lack resources for monitoring.

Detailing

            Detailing, as part of marketing strategy, refers to “ the practice of pharmaceutical companies sending representatives – essentially lobbyists for their drugs – into doctors’ offices” (Consumers Union 27 Jan. 2005).  According to Consumers Union, the pharmaceutical industry in the US employed 90,000 drug company detailers – a ratio of 1 salesperson for every 4.7 office-based physicians. During its peak in 2007, according to Reilley (2009) pharmaceuticals fielded 102,000 medical representatives. This figure has declined as drug makers shift to on line marketing and layoffs due to hard times. It has been projected that this number will be reduced to 75,000 by 2010 and apparently saved the industry $3.5 billion.

Some studies showed the importance of marketing representatives to prescribers. In a study conducted by Fischer et al, prescribers that participated in the survey believe that pharmaceutical representatives interactions with prescribers tend to benefit patient care and practice health.  Prescribers, in this study, trust the information given to them by the pharmaceutical representatives and “that they are equipped to evaluate it independently. However, while others view marketing representatives importantly, they are facing the problem of  time squeeze wherein reps are required to have an appointment before seeing a doctor. This has been the practice recommended by American Medical Congress that started in 2008. Time restraints are also the reason why doctors close doors to reps while reps struggle to get a slice of their time (Reilley 2009)

Samples and Gifts

            Companies spend a lot to samples and gifts as shown in the above chart. Gift giving has been an accepted norm of detailing, but medical students who are just starting their medical profession are divided in their opinion as to the ethics in pharmaceutical marketing. Some believe that it is ethically permissible and justified to accept gifts from drug manufacturers. Mizik and Robert (2004) concluded in their study that detailing and free gifts have significant effects on the number of prescriptions done by a physician.  With the use of pooled time-series cross-sectional data involving three drugs, 24 monthly observations, and 74,075 individual physicians (more than 2 million observations in total) results showed that detailing and free drug samples have positive and statistically significant effects on the number of new prescriptions issued by a physician.

            This practice however, does not conform to a study in Science Daily (25 May 2011) that believes it will make the medical students immune to bias induced by promotion, gifts, or interactions with sales representative. Student opinions were divided on whether this practice should be regulated by medical schools or the government, study said.

            Despite of impending policy trends on pharmaceutical practice, many prescribers still maintain an affirmative view on receiving gifts and another form of marketing interactions with pharmaceutical manufacturers, according to an article in Science Daily (03 June 2010). Concerns on this practice have received scrutiny because of potential conflict of interest that they pose, such that there are recommendations from individuals and organizations to improve transparency and independent regulation, the report said.

Aside from prescribers, pharmaceuticals eye the nursing influence in prescribing (Science Daily, 09 February 2008).  Pharmaceuticals, according to this article, have been persuading nurses for a long time such that it appears they are also receiving gifts from representatives. From among the articles reviewed by authors in this article, a conclusion is arrived that there are undue influence upon nurses and that they should be made aware of the problem to avoid the complexity of unethical drug promotions.  Authors suggest that nurses should be encouraged to re-evaluate the educational benefits of promotional information that accordingly, “is carefully selected, prone to bias and hardly likely to be as beneficial as many believe.” This article detailed the review of 32 published nursing literatures wherein 13 have serious concerns on the role of the pharmaceutical industry in influencing nursing behavior; 14 articles were “industry-friendly; while 14 put across “mild” concern about pharmaceutical industry. They either “viewed support of the industry as generally favorable, or identified the harms and benefits of the industry’s involvement in health care” (Science Daily, 09 February 2008).

Direct to customer advertising.  “Direct-to-Consumer Advertising” refers to any marketing or advertising of prescription drugs that is targeted specifically to consumers, rather than to physicians, pharmacists, or other health professionals. (PAL) 

               The impact of DCTA has been viewed by US FDA, through a survey, the result of which showed relative awareness of the patients on the advertised drugs.  Accordingly, survey findings revealed that patients inquire about the advertised product when they visit their doctors;  ads make patients aware of treatment; and physicians believe that patients are now more concerned about health care. However, physicians, in the survey, expressed concerns that ads do not convey information correctly. Patients have different understanding of the risks and benefits, and at times pressure the physicians to prescribe the advertised drugs.  In all of these apprehensions, doctors still believe that patients understand the rule that they know better what is best for them.

            Ads that do not convey information correctly is a form of misrepresentation which illegal. The case of Purdue (Chen 2009) is an example of a misrepresentation on their ads while promoting Oxycontin. Company raked in sales and profits but their improper prescription resulted to a huge drug problem and to some extent death of some patients. Purdue plead guilty of misbranding and was made to pay $646 million dollars in fines.

            A similar example of misleading advertising is the promotion of Viagra by Pfizer in 2000, wherein product claims made were inappropriate and did not offer clarity. The ad for Viagra draw unrealistic expectations, but what is considered as more serious is the intended downplaying of risks that resulted in some deaths. (Buckley)

            This incident became a wake up call to Food and Drug Administration to make policies to ensure that henceforth all advertisements on prescription drugs should be honest and truthful. FDA however admitted that they are understaffed to do all the duties assigned to their office, such as watching misrepresentations on ads (Chen, 2009).  Before 1997 FDA rules were strict on this, but after 1997, rules were relaxed such that drug advertisements has to make a general statements on the risks and side effects of the products, and are asked to call another source for full information (Prescription Access Litigation)

Conflict of Interest

            As the issue of unethical practices continues to plague the strategies of pharmaceutical marketing, the cases of bribery and corruption in the procurement of medicine came to light. Transparency International (n.d.) discusses this corruption that goes in buying medical equipment and medicine (typically involving drug manufacturers as payers and government hospital administrators and staff as recipients).  In another stance, corruption is suspected between doctors and drug companies. Doctors are offered commissions for prescribing a particular drug from a particular company. This is of course illegal, but Transparency International sensed that companies used other schemes to cover up.

            In another scope, Transparency International noted that conflict of interest may become a source of bias in presenting evidences in clinical trials. Doctors are paid by pharmaceuticals to recruit patients in their clinical trials and experiments and are on the payroll of the company. For ethical consideration, conflict of interest may arise, and the question that lies in what will be the sanctions to doctors who fail to reveal information because of conflict of interest.

            The issue of too much or heavily regulated system of medical control is also questioned as again this encourages bribery and corruption of those companies who wanted to be favored.  For instance, spending on political campaigns is one way to corrupt public official, Transparency International observed.

            The World Health Organization found conclusive evidence from their studies that doctors who consider promotion highly and rely on it as a source of information about drugs prescribe more drugs and less rationally; they were also shown to prescribe new drugs earlier than other doctors. WHO did not find any circumstantial evidence for a causal link between promotion and individual prescribing.

Pharmaceutical Marketing Outlook

               Pharmaceutical Drug Manufacturers  (PDM) presents a global scenario  of pharmaceutical industry forecasting growth of 4 to 6 percent  in 2010 exceeding $825 million. According to PDM, the global pharmaceutical market sales are expected to grow at a compound annual growth of 4 percent to 7 percent through 2013. This growth is determined by the strong growth in the US market, the global macroeconomy, a combination of innovative and mature products, and growing interest in healthcare.  Global market, PDM, estimates to expand to $975 + billion by 2013. PDM reports that Asia Pacific Region emerges as the fastest growing pharmaceutical market in the recent past.  This growth is seen in China, India, Malaysia, South Korea, and Indonesia because of their reported rising disposable income, several health insurance schemes, and intense competition among top pharmaceuticals.  One ethical consideration seen in health insurance companies, as shown in PDM, is that these companies ensure the sale of branded drugs.

            PDM said  that diabetic and cardiovascular patients are expected to increase, particularly in the US, because of changes in demographics and lifestyles.

            As the pharmaceutical industry turns to global distribution, countries that do not manufacture their own drugs and medicine, turn to importation. For instance, South Africa, one of the emerging economies, depends on importation and is thus subject to price fluctuations due to inflation. Prices of drugs in South Africa is also regulated by its government  that had recently increased its cost to 13% as a move to combat margin pressures due to importation as against a weakening economy. (EPISCOM) 

            Outlook of the Middle East market, combined with African Pharmaceutical markets according to Pharmaceutical Drug Manufacturers estimated the trend to be growing at the rate of Compound Annual Growth Rate (CAGR) around 11% during 2010-2012.  This trend is caused by the development of infrastructure and the change of the regulations in the region.  It has been noted also that the Middle East pharmaceutical market relies on importation of therapeutics and pharmaceutical drugs. In this instance, governments of these countries are taking their turns in developing their own pharmaceutical industry to become a pharmaceutical production center, the report said. EPISCOM reports that generics medicines have overtaken branded in terms of market volume, and this trend is expected to continue because of the demand for cheaper medicine.

            With regards to pharmaceutical outlook in 2020, PWC projects changes in the supply chain such that pharmaceutical supply will undergo radical modification. (PWC refers to the network of firm members of  Pricewaterhouse Coopers International Ltd.). By 2010, PWC sees more diverse product types and therapies that have shorter lifecycles to appear; there will new ways of assessing, approving and monitoring of medicine that emphasized outcomes.  By this year also, PWC foretells of new modes of delivering healthcare where the care is directed into the community and access to information on patients becomes equally important as the products themselves.  It is also foreseen that growing emerging markets will be given due attention, and that the public will be more concerned on the ability of compliance and risks; and a tougher environmental controls.

            PWC sees changes in the marketing system in 2020, suggesting that the current role of marketing sales and workforce in pharmaceutical agency will shift to a new model of a marketing system. PWC sees the industry shifting from a mass-market to a target-market approach to increase revenue.

            According to a report of  Environment & Health,  the pharmaceutical market of South Africa is worth billions in 2008. About 75% of its pharmaceutical requirements are imported, and the market is expected to rise by a double digit growth in local currency terms.  The growth of the South African pharmaceutical market, according to said report is due to the overhaul of the pharmaceutical regulatory system and adoption of the National Health Insurance.  The establishment of a universal healthcare buyer and provider promises increased drug delivery and utilization in the country. Nonetheless, implication in pharmaceutical pricing threatens profit margins because it is expected that the bargaining power of a central financier will be substantially higher than the existing fragmented consumer base.  Outlook of South African pharmaceuticals to 2014 according to the website of Articlesbase (21 July 2010) will focus on changes in government policies, market structure, competitive landscape, and growth opportunities. Significant changes in government policy in South Africa, such as the replacement of the Medicines Control Council to South African Health Products Regulatory Agency has been viewed positively by the organizations in the industry. The consensus of opinion that prevails is that the change in the regulatory system will expedite drug approvals, faster commercialization, and faster return on investments.

            As a universal healthcare buyer and provider, Southern Africa supplies all medical support to its neighboring territories.  One of these is Namibia wherein, according to report of the High Commission of India (HCI) is  entirely controlled by South African based pharmaceutical manufacturers and middlemen such as Pfizer and Glaxo Smith.  HCI observed that the concentration of local distribution rests in the hands of few family-run firms of European descent that prevents other international firms to enter the market.

            Namibia is one of the neighboring territories of South Africa and is also a member of the South African Countries Union (SACU) wherein there is a common external tariff to all its members. Therefore, in order to understand the pharmaceutical industry in South Africa, the High Commission of India contends that the context of 48 million SACU populations should be taken into account.  This is so because once a good or service is exported to Namibia and to other SACU territories, it can move freely without tariff restrictions in all SACU member states.

Cost of Pharmaceutical Promotions

            Buckley, citing authors in his report, said that expenditures for pharmaceutical marketing have been higher than the gross national product of the European Countries and that of the United States. Buckley said that these governments have made efforts to control these expenditures that include cost control by price-fixing and drug budgeting. In some instances, according to Buckley, the government will now allow reimbursements for drugs. For example, payment for Viagra is not allowed by the California Health Maintenance Organization in the US and the NHS in Britain.

            Several studies showed that pharmaceutical companies spend more on promotions rather than on research and development.  In an article by Science Daily (07 January 2008) cited a study done by two York University researchers wherein data shows pharmaceutical industry in the U.S. as a percentage of US domestic revenue of US$235.4 billion, 24.4 percent of sales dollars is invested on marketing thus devoting just 13.4 percent on research and growth.  Canada, according to the same report, said companies are estimated to be allocating a budget of 2.4 and $4.75 billion annually on promotion.  The promotional expenses reduce the budget of other priorities such as research and development. Gaglin and Lexchin (2008) estimates that the average expenditure on direct to customer advertising is $61,000 in promotion per physician. PAL reports DOTC costs to the industry in 2005 as $4.65 billion.  Results of the review on costs coincides with the conclusion arrived at by Medscape Today (n.d.) that promotion costs predominates R & D and that this conclusion should serve as a basis to form a petition to transform the industry to become more research-oriented. It seems from this recent report that pharmaceutical firms invest about twice as much on promotion as they do on research and growth. These figures clearly illustrate how, counter to the industry’s contention, marketing predominates over R&D in the pharmaceutical industry. While the sum expended on ads is not in itself a validation of Kefauver’s representation of the pharmaceutical sector, it reinforces the public perception of a marketing-driven industry and offers a significant point in favour of transforming the industry’s activities in the direction of more testing and fewer advertising.

Legislation

            Various studies point to the overbearing criticisms on marketing practices of pharmaceutical companies. Suggestions to this effect have been found in several studies, but still state laws in the US contend this is unconstitutional.  Sommers (2008), in his article, said that the attempts of the United States District Court of New Hampshire and of Maine were denied, but subsequently appealed. These laws, if approved, will shape the direction of the manner of pharmaceutical marketing.

         In the compendium of state laws and bills filed that concerns advertising and marketing of pharmaceuticals, the National Conference of State Legislatures (NCSL) stated that none of the proposals mentioned direct-to-consumer advertising (DTCA) as a source of problem, nor do they prescribe to change DTCA practices. What concerns the legislators is the rising cost of advertising that contributes to the rising cost of medicine. NCSL likewise noted that with the huge amount spent on advertising, pharmaceuticals have managed to make their brands become a household name that work to the company’s advantage.

            Despite appeals from developing countries (South Africa as one) and poorer countries to produce cheaper brands of medicine to make it affordable, the multinationals were adamant because of the billions of dollars spent on these medicines and therefore want a patent to protect their investment.  Under the international rules, generic medicines are allowed.(Shah, Anup. October 2010).  Shah stated that for poorer countries, patents and rights are significant that mean “life and death”.  For instance, an incident is quoted: “At the end of 1990, the pharmaceutical industry in U.S. lobbied the government to threaten sanctions on South Africa to produce generic drugs to fight its growing AIDS problem. It took huge public outcry to get the case dropped two years later”. Meanwhile, according to Shah, the World Trade Organization succeeded in imposing similar impositions to countries around the world in order to reduce access to generic drugs. Moreover, Shah commented that developing countries got nothing in return because multi-nationals spent more on advertising rather than on research and development; they developed lifestyle drugs rather than on disease curing drugs. As the chief executive of Novartis, a well known drug company, said: “We have no model which would meet the need for new drugs in a sustainable way…You can’t expect for-profit organizations to do this on a large scale” (Shah)

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