How to Make a Billion Dollars in the Pharmaceutical Industry
This article was written by James Young, a ClassAction.com attorney who is nationally known in the areas of pharmaceutical litigation, health fraud, and consumer protection. Along with John Yanchunis, Mr. Young is now in the process of filing lawsuits against opioid distributors, doctors, and state Boards of Pharmacy on behalf of several counties in West Virginia, as well as the state of Kentucky.
James Young presented a version of the following in a live video for ClassAction.com's Facebook page.
Pharmaceutical companies approach new drugs with one question in mind: How do we make $1 billion?
Big Pharma’s push to create the next blockbuster drug is a highly sophisticated campaign that relies on numerous tried-and true tactics—some aboveboard and some fraudulent.
Big Pharma's focus on profits often comes at the expense of patient safety.
Given the attention to detail that goes into developing and selling pharmaceuticals, when a drug produces serious, unwarned against side effects, it’s hard to believe manufacturers when they claim ignorance. And as drug lawsuits are often able to show, burying unfavorable safety data is in many cases part of Big Pharma’s marketing calculus.
A compound’s path from initial approval to blockbuster drug typically follows the eleven steps outlined below.
1. Take an existing drug or patent-protected medication and expand its use. Or, create a disease.
Pharmaceutical companies have intellectual property in the form of drug formulations. But they can’t make any money off a formulation until it is approved by the FDA to treat certain symptoms of a disease. So the first step is to approach the FDA and seek permission to use a drug for a particular treatment. The general timeline to complete research and approvals for a new drug is four-to-six years.
If there is no disease criteria consistent with the symptoms that a company’s drug treats, then the company creates a disease.
If there is no disease criteria consistent with the symptoms that a company’s drug treats, then the company simply creates a disease. They pay for physicians and research institutions and universities to come up with different disease criteria that are consistent with the symptoms that the drug treats. At the same time, they’re building grassroots support with patient support organizations they either created or funded that demand more medication options.
2. Hide data and obtain broader approvals.
In addition to clinical trials, drug companies also conduct their own tests called “surveillance” of the existing use of these drugs in the population. Drug surveillance produces very robust data sets that reveal to manufacturers the harmful side effects of drugs. Manufacturers are supposed to warn the public about the harmful side effects of drugs in the drug’s label.
But they don’t always do that. When they don’t, it leads to product liability litigation against the pharmaceutical company.
By hiding data—including safety data—companies are able to obtain broader approvals or indications for the use of their drugs. A company can’t make a billion dollars on a drug if they can’t sell it to a broad market.
Purdue Pharma’s OxyContin, for example, was initially approved to treat end stage cancer pain, or “breakthrough” pain. But because the market for breakthrough pain was too small to create a billion-dollar drug, Purdue got the FDA to sign off on using OxyContin for chronic pain, which is very different than breakthrough pain and has a much larger patient pool.
3. Broaden the market by creating false front or support groups.
Let’s say you’re an American pharmaceutical company and you want a patient advocacy group to promote the approval and use of your product. If an advocacy group won’t do that or doesn’t exist for the disease or symptoms your drug targets, you just create it. You fund the group through various non-transparent sources and create grassroots support, such as people demanding more pain medications for veterans coming back from Iraq.
The reality is, many of the support groups and patient advocacy groups are funded by Big Pharma itself. Many are not legitimate.
4. When in doubt, just pay kickbacks.
Since it’s a crime in this country to pay a physician a kickback for writing a prescription, drug companies use various workarounds.
Physicians make a lot of money doing these events.
For example, a drug company approaches a doctor and says, “We would really like you and your team of physicians at your clinic or hospital to use our product. In exchange, we’re going to allow you to conduct a clinical trial at your facility. And we’re going to pay you on a per-patient basis to do that. And we’re going to give you free products to use in the offices, so your patients won’t pay out of pocket at all.”
That’s a form of kickbacks. It is sometimes allowable when done openly and transparently, but quite often it’s not.
Another form of kickbacks is recruiting physicians to be speakers for your pharmaceutical company at conferences and events. Physicians are paid to travel to and speak in luxurious resorts in places like Maui, South Beach, and Las Vegas. They also have “lunch and learns” and CME (continuing medical education) events in their own locations.
Physicians make a lot of money doing these events.
5. Conduct stealth or guerrilla marketing using key opinion leaders.
When a drug company pays kickbacks to a physician, they’re only trying to get that physician’s patients to use a product. Using something called “key opinion leaders” allows a drug company to buy much broader influence.
By using stealth and guerilla marketing to target key opinion leaders—to figure out who they are, track their movements through social media and sales representatives that call on them in the office, by paying them kickbacks and paying them to speak—you develop a key opinion leader that everyone else will follow.
For example, “Dr. Smith” is the number one physician in New York City for a particular disease. If a drug company can get Dr. Smith to start using and recommending their product, all the other doctors that listen to Dr. Smith will follow suit.
Big Pharma finds a key opinion leader not just in one city, but in every city across the United States.
6. Enter into collusive agreements with pharmacy benefit management companies (PBMs) or the competition.
Pharmaceutical companies enter into antitrust or collusive agreements with insurers or PBMs (Pharmacy Benefit Management Companies, the insurance component of your pharmacy benefit) and pay rebates or kickbacks to them in order to lower their price and become number one on the formulary.
Drug companies rig the system by paying the competition to keep their products off shelves.
They’ll also do collusive agreements with the competition. These are sometimes called “co-marketing” or “co-branding” agreements. Maybe Company A is first to market with a particular product, but the competition is right behind them. If they come into market they might make $100 million in the first year. Company A can pay the competition not to market their drug and to instead co-market with Company A. They still get the $100 million but their product doesn’t hit the market.
There’s another variation of this involving generic drugs. When generic drugs come on the market, there’s no need (assuming that they’re the equivalent) for the branded version of that drug to continue to be on a PBM’s formulary. But quite often it remains. You can be sure that, behind the scenes, some type of co-marketing or co-branding has taken place.
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7. Engage in pricing fraud.
Martin Shkreli is infamous for acquiring intellectual property or licenses to use different drugs and then drastically increasing the price by 1,000 percent in some cases. We also saw this recently with the EpiPen. Mylan, the owner of the EpiPen, not only jacked up the price but they also sold them in packages of two, so you couldn’t buy a single EpiPen. You had to buy two.
Or, if you need 5mg for a therapeutic dose of a drug, but it’s only available in 7.5 mg dosages, you can’t split it in half because that’s not five. Companies actually do manipulate the dosing strengths of these drugs in order to prevent patients from splitting doses.
8. Lobby Congress for help.
Pharmaceutical companies are very good at putting pressure on Congress, the FDA, and the DEA to allow them to do whatever they want.
One of the ways they do this is they tell the FDA that they’re taking too long to approve drugs. They get a room full of patients who are affected by this unique disease to go and lobby Congress, to march outside the FDA headquarters and say, “We want our drugs and we want them now!”
The reality is, the FDA has a very important role. They need to determine the safety and the efficacy of each drug before granting approvals. This requires robust clinical trials with real human data to make sure that five years down the road, patients who take the drug aren’t dying of heart attacks or some other serious side effect.
By lobbying Congress to speed up the process, companies are in essence shortening the time for approval and undermining the FDA’s ability to determine safety and efficacy.
9. Pay to delay generic competition.
Another type of antitrust or collusive agreement is “pay to delay.”
Imagine that a drug company has a branded drug called “The Acme Pill.” At the end of this year The Acme Pill is going to lose patent protection and a generic equivalent is going to come on the market. The moment a drugmaker loses patent protection and the generic is licensed to come on the market, no insurance company is going to reimburse or allow their insureds to use The Acme Pill because of the price difference.
Drug companies cheat consumers by forcing them to buy branded medications when a generic is available.
To keep generics from entering the market, drugmakers enter a “pay to delay” agreement. In other words, they pay off the generic company to ensure its generic equivalent sits on the sideline.
Drug companies that do this are cheating the American consumer and forcing them to buy branded medications when a generic is available.
10. Introduce new combinations or formulas to extend your patent life.
Manufacturers can get renewed or extended patent protection and stave off generic competition by creating a new product called a combination product.
Maybe the manufacturer adds fish oil or aspirin to a blood pressure medication. Those ingredients are combined in a single pill, fast-track FDA approval is obtained, and the product has brand new patent protection, thus keeping the generics from taking market share.
Even though the generic still exists, marketing representatives go around convincing physicians to use and write prescriptions for the new “improved” combination product.
11. If you lose your patent protection, just push new drugs and criticize the generics.
Rather than creating a new combination drug, a pharmaceutical company can move away from that compound completely and move to the second or third generation of the drug, or the atypical version.
The new drugs may have very serious side effects, resulting in product liability litigation.
This occurred with antipsychotic medications like Risperdal. For many years there were great drugs to treat bipolar disorder and schizophrenia. Pharmaceutical companies came out with several new compounds, but they realized they couldn’t market them because the generics were very cheap.
So they did robust studies—some of which were based in fraud, and some which were based in fact—to support the renewed use of these “atypical antipsychotics” such as Zyprexa, Risperdal, Seroquel, and Geodon. The sales reps for those drug companies then criticized the generic equivalents, the predecessor drugs or original antipsychotics.
But the new drugs may have very serious side effects, resulting in product liability litigation. Those side effects are now listed on the label as a result of litigation.
12. Rinse and repeat.
After all these steps have been completed, drug companies repeat the process with a whole new product, a whole new compound, a whole new disease, and they send their marketing teams out to promote.
These companies hire the best and the brightest people to go out and market their drugs. They hire attractive people who know how to get into the minds and the decision-making of physicians.
Drug companies know that if they spend X amount of dollars, they can obtain X percentage of market share. It’s simply a business matter for them.
So what can the healthcare consumer do?
What can you, as a healthcare consumer, do with this information?
For starters, use the Open Payments database—a federal government database that tracks all of the payments that pharmaceutical companies make to physicians. Find out who is paying your physician to influence their prescription writing. Ask yourself if the company that is paying your doctor the most is the same company making the drug that he just prescribed to you.
Check your doctor's payment history, talk to them directly, be observant, and always read drug labels.
You can also have direct conversations with your physician or healthcare provider. Ask them: “Have you been paid to promote this product? Are you a key opinion leader for this drug company? Have you gone to any resort locations to promote this product? What is it about this branded drug that you think is beneficial and therapeutic to me above and beyond the generic equivalent?” These are difficult questions, but if you don’t ask you will never know what goes into your doctor’s decision-making.
You should also be observant in the office. Pharmaceutical companies leave detail pieces, things like coffee cups or pens. If you notice that the drug your physician is prescribing you is also on the coffee cup he’s drinking out of and the pen he’s writing the prescription with, this tells you that the sales reps have been there, resulting in you getting a drug you may not even need.
Finally, always read the label on the drug you’re prescribed. The label contains all the warnings that the pharmaceutical companies are required to provide to you, but almost nobody reads it. Within the warnings you’ll see whether or not the symptoms and the disease that you have are actually approved and on the label.
For example, if you have a migraine headache and the physician prescribes a particular product, you should know whether or not that product has been approved by the FDA to treat migraines. It may be a tranquilizer that is not approved to treat migraines. It may be some other type of drug for some other disease state or symptom, and this physician is convinced—and it may be clinically supported—that it will be helpful for you in your case.
It may be. But you should know that in advance.
Hold Big Pharma Accountable
In their quest for market dominance, pharmaceutical companies routinely put profits over patients. But you do have the power to fight back and hold companies accountable.
Drug lawsuits can not only result in stronger warning labels; they also serve as a reminder to drug companies that their actions have consequences.
If you have been injured by a drug or medical device, ClassAction.com can help. Our knowledgeable and experienced attorneys have taken on and succeeded against some of the biggest drug companies in the world. Contact us for a free case review.