American Medical Association calling for an end to direct-to-consumer drug advertising

The American Medical Association (AMA) has taken an interesting policy stance in an effort to promote affordable treatment options. In an interim meeting held November 17, 2015, the AMA voted to support a ban on direct consumer advertising of drugs and medical devices. The physicians believe that these advertisements are causing patients to push for more expensive treatments while cheaper, effective alternatives are available.

Consumer advertising

The U.S. is one of two countries in the world that permits direct consumer advertising of drugs, the other being New Zealand. According to the World Health Organization (WHO),  the practice became much more popular in 1997 after the FDA loosened the requirement for manufacturers to provide a list of side-effects in infomercials. Companies attempted to push for more advertising opportunities in Europe, but the European Union countries strongly opposed the section of new legislation that would allow companies to provide more information directly to patients through the internet and specialist publications.

A study published in 2003 compared prescribing decisions in the U.S. with decisions in Canada and how those decisions were impacted by consumer advertising. Patients were surveyed before primary care appointments on how much advertising they had been exposed to, while physicians were surveyed after their appointments to find out how many patients requested an advertised medicine and how many prescriptions were written in response to patient request. The survey also asked physicians to measure their confidence in the treatment choice and whether the physician would have prescribed the same drug to another patient with the same diagnosis. The study’s results indicated that those exposed to more advertising are more likely to request those medications, which leads to more prescriptions written even if the physicians are not confident about the treatment.

A long debate

Despite the fact that advertisements are overseen by the FDA for truth and accuracy, the practice has been debated for years.  In 2008, Time approached the topic after it received some scrutiny in a House of Representatives hearing. The article stated that drug ads often leave viewers confused about the information that they saw. This assertion was supported with notes from a New England Journal of Medicine article that pointed out the ease with which a medical device advertisement glossed over information that is still being debated by specialists. Time analyzed how ads are created, with an emphasis on the drug’s benefits at the beginning and end of a commercial when they are more likely to be remembered with side effect information squeezed in the middle. Ads often speed up the voice over when listing side effects, which caused viewers to be less likely to remember them when tested than for ads that maintained a constant voice over speed.

Why the opposition?

The AMA believes that skyrocketing drug prices are affecting physicians’ ability to properly care for patients, such as when there are limitations on their health insurance plans or out-of-pocket prices are unaffordable. The association points to marketing as one of the reasons for the increase in prices, with pharmaceutical companies spending billions of dollars to advertise their drugs in hopes that patients will request them specifically. The new policy urges federal limitations on anticompetitive behavior among pharmaceutical companies that try to sway business away from generic manufacturers, as well as patent reform. The AMA believes that transparency of prescription drug pricing will benefit patients and physicians.

Oncologists: astronomical cancer drug costs need to come back to earth

With the average price of new cancer drugs having steadily increased to more than $100,000 per year, a group of 118 oncologists released a commentary in the Mayo Clinic’s Proceedings, calling on patients, family members, and health care professionals to join a patient-based grassroots movement advocating against skyrocketing prices for cancer drugs.  The physicians, who state that they are “engaging in contemporary methods to address a contemporary crisis,” are encouraging individuals to join internet and social media campaigns on sites such as and Facebook to express their support for cancer drug cost control.

Cancer’s costs

According to the physicians, it is estimated that one in three individuals will be affected by cancer in his or her lifetime. Along with threats to physical health, a diagnosis of cancer can also pose serious threats to financial health.  A study in the Journal of Economic Perspectives that examined the cost of cancer drugs found that the average price has increased by 10 percent, or $8500, each year for the past 15 years. A Kaiser Family Foundation study concluded that the out-of-pocket burden on patients is increasing as well,  rising to 20 to 30 percent of the total drug cost. With the average annual gross household income in the U.S. being around $52,000, under such estimates, a patient who needs just one cancer drug costing $120,000 a year, will have to foot a bill as high as $25,000 to $30,0000. The physicians argue that such patients face a terrible choice of foregoing potentially life-saving treatments or paying for household essentials such as food and housing. This difficult choice may be more commonly faced by senior citizens, who are more likely to face cancer and have restricted incomes. Pointing to estimates that 10 to 20 percent of all cancer patients forego prescribed treatments due to the costs, the physicians argue that this cost conundrum is “a structural disincentive for compliance with some of the most effective and transformative drugs in the history of cancer treatment.”

 Drug price negotiation

The physicians point to the 2003 Medicare Prescription Drug, Improvement, and Modernization Act prohibition of a Medicare negotiating drug prices as responsible for making drug companies the sole decision makers in setting cancer drug prices. As we recently reported, a study has suggested that Medicare Part D could be savings billions if it had price negotiating power. The physicians see no relief in sight as drug companies keep raising the prices of medications. As a result, the physicians question whether cancer drug prices are based on a reasonable expectation of investment return, or, rather, based on what the market can bear.

New drugs

The physicians point out that 900 new drugs are under development, including many for the treatment of rare cancers, which is a rate of development faster than ever seen in the past. However, they argue, the current pricing system makes drugs unaffordable for many patients.


The group made several recommendations for improving the cancer drug pricing system:

(1) A post-approval review process should be established that proposes fair prices for the treatments that are based on the “value to patients and health care”;

(2) Medicare should be allowed to negotiate drug prices;

(3) Allow the Patient-Centered Outcomes Research Institute (PCORI), created by Section 6301 of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), and similar organizations to consider the prices of new treatments in assessing their value;

(4) Individuals should be permitted to import cancer drugs for personal use;

(5) Legislation should be passed that prevents drug companies from delaying generic drug access;

(6) The patent system should be reformed to make unnecessarily prolonged product exclusivity more difficult; and

(7) Organizations that represent cancer specialists and patients should be encouraged to consider the overall value of drugs and treatments when formulating guidelines for treatment.

The group is hoping that, with proper support, pharmaceutical companies will focus on the problem and elected representatives can advocate for their “most important constituents among the stakeholders in cancer—American cancer patients.”

Pay-for-Delay Deals After FTC v Actavis: Is a “Presumption of Invalidity” Next or a Complete Ban?

On July 23, 2013, the Senate Judiciary Committee’s Subcommittee on Antitrust, Competition Policy and Consumer Rights held a hearing titled “Pay-for-Delay Deals: Limiting Competition and Costing Consumers.” The hearing was held in the wake of the June 17, 2013 decision in FTC v Actavis, Inc., where the U.S. Supreme Court held that “pay-for-delay” settlements (also known as “reverse payment” or “exclusion payment” settlements) between brand and generic drug manufacturers may violate antitrust laws, even if the settlement agreement falls within the scope of the patent. The subcommittee hoped to gain further insight as to whether the Senate should go beyond the Supreme Court’s Actavis ruling and consider legislation creating a presumption that all these settlements are invalid or go even further and ban them outright.

Supreme Court’s Rule-of-Reason Scrutiny

According to the Supreme Court, under the “scope-of-the-patent” test, “absent sham (patent) litigation or fraud in obtaining the patent, a reverse [pay-for-delay] payment settlement is immune from antitrust attack so long as its anticompetitive effects fall within the scope of the exclusionary potential of the patent.” In its June decision, the Supreme Court found no basis to support the scope-of-the-patent standard. Instead, the Court ruled that pay-for-delay agreements are appropriately subject to “rule-of-reason” scrutiny, the standard applied to most antitrust actions, under which the court considers evidence that the agreement harms consumers (drug purchasers).


Under the Hatch-Waxman Act, a generic drug manufacturer must file an abbreviated new drug application (ANDA) with the FDA in order to introduce a generic version of a branded drug. The Act then allows the brand drug manufacturer, when it is protected by a patent, to file a patent infringement suit against the generic manufacturer who filed the ANDA. The core concern with these pay-for-delay settlements is that the brand manufacturer pays its potential generic competitor to abandon a patent challenge and delay entering the market with a lower cost generic product. The “relevant competitive harm,” according to the Supreme Court in Actavis, is that these agreements will allow the brand manufacturer to “prevent the risk of competition” by splitting monopoly profits with the generic applicant.

 Senate Bill 214

S. 214, the Preserve Access to Affordable Generics Act, introduced February 4, 2013, goes beyond the Supreme Court’s rule-of-reason scrutiny and would allow the Federal Trade Commission (FTC) to bring an antitrust action with a presumption that the pay-for-delay agreements are invalid. The parties to the agreement would then have to demonstrate (by clear and convincing evidence) that the procompetitive benefits of the agreement outweigh the anticompetitive effects on the consumer.

Key Testimony

Edith Ramirez, Chairwoman of the FTC, focused her subcommittee testimony on the Supreme Court’s ruling, its impact on the FTC’s pay-for-delay enforcement agenda, and her support for S. 241. She testified that the Court’s decision in Actavis confirms that these settlements harm competition and consumers. She vowed that the FTC will continue to aggressively prosecute these anticompetitive agreements. She stated her belief that passage of S. 214 would help the FTC by allowing it to begin its prosecution with a presumption of invalidity.  She feels that this presumption would reduce FTC time and effort in each case by putting the burden on the brand and generic drug manufacturers to rebut the presumption.

Robert G. Romasco, President of AARP; Michael Russo, Federal Program Director, U.S. Public Interest Research Group (PRIG); and Michael A. Carrier, Distinguished Professor, Rutgers University School of Law all testified in support of legislation that would create a presumption of invalidity.  However, Diane E. Bieri, partner at Arnold & Porter LLP, appearing before the subcommittee on behalf of the Pharmaceutical Research and Manufacturers of America (PhRMA), testified that S. 214’s presumption of invalidity is unnecessary and inconsistent with long-standing principles of antitrust and patent law.

Jonathan M. Orszag, Senior Managing Director, Compass Lexecon, LLC, and a member of President Bill Clinton’s National Economic Counsel, testified in support of the Supreme Court’s rule-of-reason scrutiny. According to Orszag, it would “make economic sense for the courts hearing these [patent infringement] cases to make an initial inquiry into two fundamental questions: First, is there easily obtained and interpreted evidence that the patent is very strong? Second, is the reverse payment consistent with the expected litigation costs of the brand manufacturer, inclusive of the costs of bearing the litigation risk (i.e., the benefits of reduced uncertainty that the branded manufacturer obtains from settling)?”  Orszag concludes that “if the patent is very strong, then whatever the reason for the settlement, it cannot likely reduce competition.” Likewise, according to Orszag, “the basis for suspicion about the settlement also crumbles if the payment does not exceed the patent holder’s expected litigation costs plus the benefits of reduced uncertainty that the patent holder obtains from settling the litigation.”

Last, but certainly not least, was the impressive testimony of Sumanth Addanki, PhD, Senior Vice President, NERA Economic Consulting. According to Addanki, “. . . the fact of a so-called reverse payment does not convey much information about whether a given settlement is actually better for consumers than the alternative of litigating the patent. For reasons thoroughly discussed in the economic literature, a patentee may well make a ‘reverse payment’ and still agree to an entry date that is better for consumers because it is earlier than the expected outcome under the litigation alternative: risk aversion, divergent views about the strength of the patent or future market developments or the time value of money are some of the factors that can engender this outcome.” Addanki suggested that passage of S. 214 was an overreach, stating in his prepared testimony that “S. 214 in its current form needs to be modified in three respects if it is to lead to the right economic outcomes. First, a reverse payment does not necessarily imply any anticompetitive effect, so the presumption of anticompetitive effects should be dropped. Second, the relevance of the underlying patent suit to any competitive analysis of a given settlement of that suit needs to be recognized explicitly and given due weight in the analysis prescribed by the bill. Finally, and perhaps most important, the bill needs to acknowledge the importance of the monopoly power screen and give due weight to that screen in the analysis of any settlement.”

An Outright Ban?

None of the subcommittee witnesses would take the bait of Committee Chairman Sen. Amy Klobuchar (D-Minn), who seemed interested in gaining support for an outright ban of these pay-for-delay agreements, rather than the mere presumption of invalidity contained in S. 214.   

Patent Struggle Over Breast Cancer Test Continues Even After Supreme Court’s Decision

Following last month’s ruling by the U.S. Supreme Court in Assoc. for Molecular Pathology v. Myriad Genetics, Inc., which held that a naturally occurring DNA segment is a product of nature and not patent eligible merely because it was isolated, Myriad Genetics filed two lawsuits against competitors that have begun to offer genetic testing for breast cancer risk.

The decision spurred various competitors to announce that they would bring to market tests for the two genes BRCA1 and BRCA2 that were indicators of future breast cancer. Myriad had controlled the testing for almost two decades and the newly announced tests were expected to cost less than the $4000 that Myriad charged for full analysis.

Myriad’s lawsuits filed this week against Ambry Genetics and Gene by Gene did not assert claims based on the two genes, but instead focused on the other patent claims that were not invalidated by the Supreme Court, including the synthetic DNA used as probes and on methods of testing that the high court noted in its opinion were not invalid. Myriad had already received backlash from some segments of the public, as the original litigants, comprised of patients, medical societies, and researchers, argued that Myriad’s monopoly on the tests impeded research and denied women options to test for breast cancer susceptibility. Earlier last week, Myriad had announced that it would not impede noncommercial academic research or stop labs from doing a test to confirm results produced by Myriad.

The lawsuit was filed in the U.S. District Court for the District of Utah where the company is based. The company was joined by the University of Utah and three other organizations that receive royalties from Myriad for BRCA-related patents licensed to it. Myriad is seeking a preliminary injunction to stop the further marketing of competitor products.