The search for drug company evil continues as Glaxo’s Avandia is the latest drug in the crosshairs of regulators, the media and lawyers. This diabetes drug is highly effective at regulating blood sugar and is used by millions of type 2 diabetics. It may have a higher risk of causing heart attacks than some alternate therapies and placebo according to some studies.

The issue as with all drugs is benefit/risk ratio. Avandia may cause a heart attack just as aspirin may cause a stroke or intestinal bleeding. The issue is how many heart attacks we should accept versus the serious risks from poorly controlled diabetes.

The harsh reality of drugs is that they have side effects and risks. There are no completely safe drugs. There may be real issues with Avandia’s benefit/risk ratio and I am not downplaying the issues raised by critics. The feeding frenzy from lawyers and drug critics seeking a new scapegoat for drug company evil is what bothers me. Since Avandia was a DTC drug we can also expect new calls for bans based on claims that consumers were led to take ”dangerous” Avandia by DTC ads.

I have been a critic of how risk is regulated by FDA. People need to know the real odds of a serious side effect, not vague terms describing every potential risk. If a diabetes sufferer well-controlled on Avandia is given the odds of them suffering a heart attack, they can make the decision with their doctor. My guess is that the real odds of increased risk are quite small. The media will report figures like a 50% increased risk of heart attack which sounds horrible to consumers. In reality that may mean 1.5 in a thousand get a heart attack versus 1 in a thousand not on the drug.

I sympathize with Glaxo’s plight because I was on the Rezulin team in the late 1990’s when we faced the same issue. Rezulin, in the same class of drug as Avandia, was associated with fatality. As I recall the level of fatality was one in thousands, but since alternative drugs existed, it was pulled. The lawyers had a feeding frenzy and a good drug was no longer available for the many patients it helped.

To the person getting a rare side effect the consequences are devastating. We cannot, however, have life saving drugs if we will not accept that some people may actually die taking those life saving drugs. The question is always how many die versus how many saved? Much of the latest criticism of Avandia has been hyped to the point that it will scare diabetics from treating their disease. If Avandia has a negative risk benefit profile it should be withdrawn but not because of lawyers and knee-jerk critics but because of hard facts. I now see commercials from lawyers seeking “harmed” Avandia patients. Glaxo may face billions in potential liabilities as lawsuits grow exponentially. These lawsuits raise the cost of our medicines as eventually all of us pay for liability settlements in higher prices.

We can also expect new Congressional hearings on drug safety so our legislators can get face time bashing executives on what they knew and when did they know it. The Avandia commercials will be shown as examples of demand creation for a dangerous drug. Waxman will call for a moratorium on drug ads. Sidney Wolfe will cry cover up of key clinical information. No critic will be dealing with facts just hyperbole du jour. That is a sad reality in the world of drug makers.

Despite some critics saying DTC was heading to a permanent downturn, after a serious first half 2009 decline, the second half was so positive the year ended up. Spending ended up 2% according to data from Kantar Media. Usually I do not get excited about 2% increases. In this instance I am thrilled because I did not see growth until 2011, after I predicted a flat 2010 when I thought the bleeding would stop.

The good news is every major new product launch has used DTC. The medium that remains number one is network television. Television is continuing a slow decline but still is 61% of the media mix, down from 63% in 2008. I expect Television to continue its strong presence in major launches for the foreseeable future. Internet grew 128% and its share of media is now 7% up from a small base of 3%. This is the first year we have seen quantum growth in use of the Internet which drug companies had been slower to adopt from than other industries.

Magazines had a tough year down 9% from 2008 and its share of media mix declined to 28% from 32%. On the other hand newspaper spending rose 93% and grew from 2% to 4% share of media.

The next few years’ spending will largely depend on whether the FDA tries to make DTC harder to execute. The FDA is clearly under pressure to be tough on advertisers, as the increase in warning letters indicates. FDA could require more risk disclosure and more visual and audio balance in portraying such risk. Any increase in risk disclosure will require more space/time and that may make DTC ads less attractive. My guess is that such additional requirements will not happen near term and any FDA action will be in more and faster warnings for lack of fair balance and risk disclosure.

The latest spending is great news for all of us who rely on DTC for our livelihoods. DTC is not going away, despite vigorous efforts from some in Congress to end it. That $5 billion provides a lot of good information to consumers, and is carefully vetted for accuracy by FDA. My new call for 2010 is up 3% from a previous call of no gain. New brands are the lifeblood of DTC and I expect pipelines to be robust long term which means double digit spending rises will likely occur in a few years.

One of the benefits of a home office is I can watch television so I watched the six hour summit. I thought it was promising in that there is a wide area of agreement on goals albeit a cavernous gap in how to do it.

The basic gap seems be in several areas. Republicans feel the cost curve is not sent downward with either House or Senate bill. They also want more private sector free market solutions and less Federal mandates. A key area missing, say Republicans is tort reform and fraud reduction. Republicans would agree that we need more affordable insurance rates, more protection for pre-existing conditions, and more focus on prevention. Republicans want a step by step approach rather than a comprehensive system wide bill desired by Democrats.

The Democrats think they address these provisions at least partially. They say costs will come down because they establish a medical panel to evaluate what works, provide preventive care without co-pays, and are working on incentives for states to reduce lawsuits.

I think that if the Democrats included full tort reform and less mandates they can come to an agreement this year. The Republicans would need to agree to Federal standards on coverage mandates for insurance companies, although maybe they can be scaled down so costs can be less for consumers. What is striking is that the CBO says rates will rise more than 10% because the government mandates coverage levels higher than we get now.

The level of political theater was evident on both sides. I would say at least 50% of the comments were substantive and could lead to a bridge between the parties. I was disappointed that Reid, Pelosi and McCain and several Republican house members were highly political rather than cooperative. Leadership seems to be a problem on both sides as many junior members had better comments than senior members who seem so set in the blame game.

Obama was very good. He did not give his normal 10 minute answers and let members talk. He listened and minimized blame. He appeared to be genuinely trying to see what the common agreement was between the sides and tried to encourage positive discussion. On the other hand, it seemed that he was fairly set in his views that the Democratic plans do achieve the goals Republicans wanted since it has many of their ideas in it. If he wants a bi-partisan bill passed he will need to give a lot more. It seems up to Republicans to agree that the current bills have many of their ideas rather than have Democrats conclude that for them.

One of the best arguments came from Tom Coburn, a Republican who is a physician, said we must go much more aggressively after the estimated 15% fraud in Medicare. He suggested we use undercover patients who can reports fraud and Democratic Senator Chuck Schumer said that can be added. Coburn also admitted that he and his fellow doctors practice defensive medicine that is also raising costs greatly. We need, Coburn said, tort reform to allow doctors to prescribe only tests patients need and not for legal protection.

It is clear from the day long talks that Obama will need to mediate much more as the Congressional leaders are much more set to blame each other than compromise. What Obama needs to do is to give enough to Republicans that their moderates are satisfied. If he tries to pass this bill through reconciliation it will be a major political blunder. I believe the current bill is not the needed solution to our problems. No one convinced me that cost will be controlled under the current bills. All that will be achieved is more coverage at a huge cost to taxpayers. I think Republicans are correct that cost must be the primary focus. Obama says the bill is deficit positive but that is because we are all paying more taxes and premiums to fund it.

The First Lady this week has announced a new push to fight childhood obesity. Michelle Obama’s cause is the kind of push needed to lower the health care cost curve long-term. We, as a nation, are getting fatter year by year and clearly our obesity related diabetes and heart disease will on its current path eventually bankrupt our health care system. Thirty years ago the teen age obesity rate was 5%, and now it is almost 18%. That is a huge change in one generation and portends a huge increase in future diabetes and heart disease cases. There is no doubt that health care marketers will be playing a key role in the shift from disease treatment to disease prevention.

DTC, as it is largely done today, is about treating the disease once it is diagnosed. Very few DTC ads are designed to encourage prevention. Once could argue that cholesterol drugs do promote prevention of heart attacks among people with high cholesterol. Or that diabetes pills promote control which prevents serious complications later in life.

The majority of ads, however, target existing disease sufferers for treatment. Under pressure from DTC critics drug companies have increased campaigns to encourage early diagnoses and testing. Clearly though, spending is about 90% in the brand awareness building among current sufferers.

The future of health care cost control will depend on keeping us from getting chronic illness. Some of this will be the result of early diagnosis. Much will be targeted to keep us from getting disease. The problem we face as advertisers is convincing America that they must slim down, exercise, and eat better. If it was easy to succeed through simple public service ads, we would not be getting fatter and more sedentary.

Michelle Obama is doing a good thing urging American parents and their kids to exercise and eat right. The issue is how to change behavior which clearly has been trending in the wrong direction. Drug, OTC, diet, exercise and food companies have an enormous opportunity to develop products and services to address prevention. They are fighting an enormous counter marketing machine for tasty, cheap products that create obesity. Marketing disease prevention will take all the creative talent we can muster.

I expect that marketing disease prevention is a huge future industry once we recognize that we do not have the budget to effectively treat a nation of obese diabetes and heart disease sufferers. Ten people in good shape might be able support the one costly sedentary sufferer of diabetes and heart disease. The reality is that we may have one in shape person for every obese person. That math will not support generous treatment. Sounds like our social security dilemma where the numbers just do not add up for affordability long term.

Once we get healthcare reform we can expect prevention to be a huge part of its metrics for success. We need to incentivize good behavior and penalize bad behavior. We can no longer allow people with bad health habits to get a full government subsidy to maintain bad habits. Medicare and Medicaid do just that. One day I suspect cost pressures will force government to shift co-pays to those who fail to maintain healthy habits. The fast-food, couch potato, smoker crowd may resent that but that is the way it has to be. Prevention will be encouraged and good habits rewarded with lower premiums and co-pays. Otherwise we will all go broke treating preventable disease.

The latest data from FDA shows warning letters on drug promotion almost doubled in 2009 to 41 from 21 in 2008. That is not surprising given the changes in Washington. Clearly the Democrats are demanding more enforcement actions against drug companies, which they saw as lax under Bush.

FDA has indeed speeded up its process to issue warning letters. The new head of FDA Dr. Margaret Hamburg has pledged to step up enforcement. Most of the letters are for inadequate fair balance. Obviously, there is always a desire from drug companies and advertising agencies to stress the positive. No one wants ad space dedicated to stressing negative points. The law, however, requires balance and some drug ads were non-compliant.

No one can argue against a vigilant FDA. The public needs it and drug companies are better off if violators get caught. The more warnings issued the more likely Congress will realize that the FDA is vetting drug ads, thoroughly and quickly warning offenders to end their campaigns. Companies who fully comply expect FDA not to let their competitors get away with unfair balance.

What FDA needs to do is continue to issue guidances and educate drug companies with examples of acceptable and unacceptable treatments of fair balance. As long as FDA is consistent and clear in what is violative the drug companies will have no problem complying. It is clear that most new drugs are using DTC in their launch campaigns. Therefore the guidances on what is acceptable treatment of risk are critical to brand teams developing DTC. No drug company wants a warning letter and its possible consequences and I believe they do want to comply. In the past there have been inconsistent decisions as to what is a violation. I hope the FDA reviewers are huddling with each other to ensure standards for one category are the same as others.

So go to it FDA, and if warnings increase in 2010 from 41 to 81 so be it. All the industry can ask is for clear standards, fast pre-clearance and sensible negotiation over disagreements on what is fair balance. That requires continued quantitative studies as to what consumers take away from drug ads so we all know what is fair disclosure. It is not in the public interest to overwhelm consumers with information as studies have shown less can be more in terms of risks and warnings. Drug companies have a right to sell their products through DTC and it is in everyone’s interest to have a well staffed FDA overseeing it.

While the traditional definition of DTC advertising is for pills, inhalers, devices and injections to treat medical condition or illness; the growth drivers may come from other DTC categories. One of the major growth areas will be in aesthetic products. A new report from Global Markets Direct predicts solid annual growth from cosmetic procedures forecast at 6.5% per year through 2016.

Obviously, this category thrives on DTC advertising because demand creation is critical for an elective treatment not covered by insurance. Our aging population seems to demand perfection. Look at the shows from the Real Housewives series as examples of a society driven to look good. Most of the women profiled are proud to talk about their numerous enhancements. Men are also increasingly using Botox and getting facelifts and hair transplants.

What is interesting is that there is a huge potential international market long term as developing countries will increasingly be able to have enough discretionary income to support enhancements. Currently 60% of cosmetic enhancements come from the United States. That means long term opportunity in the emerging middle class markets. I am sure Real Housewives of Beijing will want to emulate Orange County in breast size and smooth skin.

Another potential boom category for DTC is preventive testing. Early diagnoses and treatment will grow as government puts more effort into cost effective treatments at early stages of disease. This means genetic testing companies will see a boom in sales as they get better at identifying subsets of the population that will benefit most from Rx and medical device treatments.

I still see a healthy DTC market for traditional pills for existing categories. Our society is still getting fatter and more prone to diabetes, high blood pressure, heart disease, impotence and other diseases. Major drug companies will see price pressure from government and other payers. Therefore market expansion will be crucial to success and DTC is great at creating awareness. More users, even at lower prices, will keep drug company profits strong and society will be healthier.

So whether in traditional DTC categories or new or expanding ones, it is highly likely DTC advertising will grow significantly over this decade. It is also likely other countries will be more liberal in allowing health ads from drug companies, although in the disease prevention and treatment area, not in branded ads.

The tsunami of independent voter discontent evident with the last three elections in Virginia, New Jersey, and in this week’s Scott Brown Massachusetts win means major reconsideration of health care reform. I have called for reform and meaningful reform. We must not let our citizens go broke paying for health care. We must not deny care to people with existing problems. We must not let insurance companies use the practice of rescission because someone forgot to report a minor past health detail when they applied.

All these things can be done and should be done with a strong bi-partisan consensus vote. Republicans must understand that doing nothing is unacceptable to the majority of Americans. On the other hand a Democrat led only bill was also unacceptable to the American people who know that government cost figures are always suspect. Few believed that the current bill would solve their cost problems.

My health plan wish list would allow anyone to get free preventive and emergency care at government subsidized clinics. It would allow national competition for health insurance. It would reform malpractice insurance. It would require portability of health insurance from job to job. It would require full fee disclosure from doctors and hospitals so consumers can decide if co-pays are worth it. We need to be sensible and solve the problem with as little government involvement as possible.

The Brown win will convince most moderates to back off the current plan no matter how much pressure Obama puts on Congress. These moderates know the Massachusetts vote is a referendum on discontent with health reform and other issues. Ignoring Massachusetts would be political suicide for Democrats. If they were smart they would vote out Pelosi and Reid and replace them with more centrist leaders. The infuriating negotiations which led to sweetheart payments to several states to buy their votes were the final nails in the coffin. Americans know politics is messy but they thought we were getting a new process where reasonable people in Congress would do what is best for the people. Instead we got complexity and pork. More of the same was what we got.

I want reform and want it this year. How about letting the centrists develop a plan that can get 75% of the votes in the Senate and House? There is wide agreement on what is bad about the current system. The problems can be solved. Obama was elected to change the process. Here is another opportunity to prove he is the transformative President. To do that he must insist that a bi-partisan bill is required rather than a one party plan. That means he must lead and inspire legislators. Change we can believe in must be made a reality.

The media stories on DTC are still frequent. USA Today ran a story on banning DTC on 8/10. This follows the New York Times story on 7/27. Obviously, the mass media finds DTC a subject that interests its readers. Despite evidence on DTC’s relatively small impact on sales, albeit positive, the popular belief is that DTC is greatly contributing to improper utilization and higher drug prices. I saw the USA Today story was mentioned by a website call the Consumerist. There were over 20 mostly anti-DTC consumer comments on the story that all were on variations of the two issues mentioned above. I am afraid consumer activists need a lot of continuing education on the real impact of DTC.

As I explained in this story to the reporter, DTC has no impact on raising consumer prices. How can $4 billion of advertising on a $291 billion drug outlay really affect prices? Let’s take Lipitor as an example. The drug does about $8 billion in sales and probably spends about $100 million on DTC. That is about 1.25% of sales. So, assuming Pfizer would stop ads and rebate the entire DTC cost; that would be only a 1% reduction. That is not what would actually happen if DTC was banned. Pfizer would not lower the cost because the government forced them to curtail DTC. That money would go to other promotion or drop to profit.

I think the drug lobbyists need to argue that in fact DTC lowers consumers’ prices. If the government or private insurers want to negotiate, they need brands familiar to consumers to play one brand against the other. DTC creates awareness and also creates acceptance of alternative brands. Once consumers are equally aware of several brands, it is easier for a doctor and plan to substitute the lower cost version. Lipitor knows they have to compete with Crestor, and generic Zocor and Pravachol. That competition lowers prices.

The other argument against DTC that still has traction is that DTC somehow interferes with the doctor’s ability to prescribe what they want. That assumes doctors have all available information and data and are objective. In reality, doctors are not always up to speed on available drugs and rely on habit many times. They are also controlled by insurance plans as to what drugs will be covered and at what co-pay. DTC serves as an alternate source of information that provides a check on what the doctor/insurance plan does. Maybe a consumer inquiry based on DTC gets a doctor to study a new drug or give it a try.

The other frequently argued issue is that the U.S. and New Zealand are the only countries to allow DTC. If it is good for the consumer why does the U.S. stand nearly alone in allowing it? That is because countries that are single payer want control over what their citizens learn about drug treatments. They want no pressure from their citizens on what to allow them to get. That makes sense in a single payer world most interested in providing adequate care to the entire population at a fixed cost. The issue for Americans is do they trust that government can best decide which drugs they can get. DTC is very American by providing an alternative to government provided information. The system of tiered co-pays allows the payers to encourage cheaper drug choices without banning information on newer, branded drugs.

I am afraid that the media interest in whether DTC is good or bad will continue for a long time. As long as some Congressman wants to hammer drug companies DTC will get coverage. All heath care providers now use advertising. Hospitals, doctors, and medical test centers advertise. One could argue that no one should be able to advertise health care products and services covered by insurance. That may reduce demand for health care and save money. That argument can be made for many products government would rather not have us buy. Is that the way we want to go? I hope not because it is a very slippery slope.

By government regulation prescription drug advertising is under much greater scrutiny than other health advertising. While that is the way it is, one has to question the logic. A consumer, who is barraged by all types of health product ads, is somehow less protected from claims made by OTC’s, supplements, weight loss products, exercise equipment, and physicians and hospitals.

A hospital can claim it has brilliant doctors who can cure your cancer. A weight loss supplement can claim it reduces deadly belly fat. An exercise device can claim rock hard abs in minutes of daily exercise. Somehow Congress in their infinite wisdom treats prescription drugs as something worthy of super regulation while letting numerous other medical products skate free of providing proof of efficacy and free of risk disclosure.

Most disturbing is the freedom doctors and hospitals have to boast great success and expertise in their ads without any substantiation. Not regulated, they can use anecdotal stories at will showing patients boasting of cancer cures. They need not clutter their ad with any statistics on success rates or risks of staying at their institution. A recent (12/16) New York Times Article by Natasha Singer profiled the problems with hospital advertising and the lack of regulation.

Consumers need and deserve consistency in how medical ads are regulated. If we can have once in a hundred year health care reform we should be able to figure out how to put health care products and services on a fair footing in terms of benefit and risk disclosure. Prescription drugs are serious medications and should be regulated heavily in ad claims. I would argue that choosing a hospital or treatment center is also deadly serious and deserves the same level of claims review. Many supplements are downright dangerous taken incorrectly but escape serious scrutiny from regulators. If our goal in America is to provide better quality care at lower cost, then all health care advertising needs to be regulated whether it is a product or service.

Congress, as part of a final health reform bill should give FDA or another part of the federal government jurisdiction over health claim advertising. Americans are wasting precious health care dollars on products that do not work as advertised and potentially dangerous. Prescription drug advertising, although widely criticized, is at least scrutinized by FDA for accurate information. There are powerful lobbies designed to keep many health products free to make unsubstantiated claims. A Congress that claims to want to protect the “little” guy needs to act to equalize claims requirements.

This year promises to be a transformative one for health care. Once Congress finalizes a reform bill we can expect a number of things to change, albeit not immediately. The reform bill will not take effect until 2013 or 2014 but preparations for change will take place in 2010.

First, for drug makers it is clear their market will expand as more people get coverage and will get more affordable prescriptions. That broader coverage means more need for awareness ads, particularly for drugs for younger people who are more likely to be currently uninsured.

Second, it is also clear that drug companies will face more intense negotiation from insurance companies and other payers. The margins for payers will be squeezed under health reform and they will try to recoup that margin from suppliers of services and products including drug makers. That means drug companies will carefully assess promotion budget allocations. We can expect more management demands for proof of ROI.

Third, there will be an increased emphasis on prevention in the hopes that costs will be better controlled. The reform bills mandate coverage for well care check-ups. That is good for drug makers because many people will be diagnosed for the first time with treatable diseases such as high cholesterol, diabetes, and blood pressure. That means more ads for condition awareness and screening from drug makers with products in those categories. It also means growth in home diagnostics and genetic tests to identify likely disease sufferers. That means more consumer ads for diagnostic products.

Fourth, with doctors getting their government reimbursements increasingly squeezed, I would expect them to be more marketing oriented to figure ways to increase their incomes. That should lead to numerous promotional partnerships with drug companies and service companies. Although doctors will deny being influenced by added revenue opportunities, they are just people trying to maximize income. For example, they may want to charge companies to send patients literature and product information. Drug stores charge drug makers for those mailings, so why not doctors?

Now, as for DTC spending I think 2010 will be a pretty good year. Once we have some clarity from the final bill, drug makers will be able to plan with more certainty. DTC looks safe from Congressional limitations, as well as other traditional marketing such as detailing and meetings. Given a general economic improvement, we should see DTC spending at least equal to 2009 with a possible increase of 1-3%. I believe the DTC budget bleed is over. In fact I would expect DTC spending to once again pass $5 billion by 2011.

DTC spending is of course dependent most on new drug launches. We have had some weak years recently and one can only hope that we are closer to break through drugs in the near future. Given our massive issue of medical costs, finding drugs to better treat and/or prevent illness seem to be our only real hope for affording to treat an aging population. I remain quite bullish on drug company prospects and that means I expect a healthy dose of promotional spending. Things look a lot clearer than at the beginning of 2009 and that allows for better planning from drug companies and their suppliers.