It's no secret that doctors often prescribe the newest, most expensive drugs and medical devices to patients when there are often older, better-tested drugs and devices that would do the same or even a better job. One reason for this is that drug and device companies provide huge financial incentives to doctors who prescribe their expensive new drugs and devices.
How big are those financial incentives? An article in today's Now the New York Times gives you a clue. The Times reporters sifted through mandatory reports from the very few states where Big Pharma is legally required to document their "marketing expenditures" to doctors.
One of these states is Vermont, a state with a tiny population and few doctors or hospitals. There are only 11 endocrinologist listed in the yellowpages.com listing for all of Vermont. Though this listing probably misses a few, I'd be surprised if there are more than 30 board certified endos in the whole state.
The New York Times reports that in Vermont Big Pharma paid the top five endocrinologists in Vermont an average of $33,730 each.
This is not counting the cost of free drug samples or the salaries of marketing reps." The reason they only reported what they paid those "top" five endos is this: the law only made the drug companies list the top 100 doctors they made payments to and there were only five endocrinologists on this list. Even so, the median cash amount paid these endocrinologists was the second highest of that paid all specialists. Only the psychiatrists earned more.
For comparison purposes, the per capita income in Vermont in 2006 was $34,264, a mere $534 more than the average amount that Big Pharma paid each top Endocrinologist.
What exactly was Big Pharma paying these doctor for?
The reports do not answer this, but I can tell you from personal experience what some of these payments might have been about. My doctor also has an office in Vermont (the border is only some 10 miles away from my home). Recently she has been signing up patients for a "study" run by a large pump manufacturer. The study involves having patients wear a CMGS for a brief period. The patient cannot see the CMGS display during this trial, but when they return the CGMS the company downloads the information and presents it to the doctor.
I was in my endo's waiting room one day when the chirpy pump company rep was talking with the office manager. I wasn't eavesdropping. This conversation was conducted in the middle of the waiting room at normal conversational volume. I knew this was a pump saleslady, because earlier she'd been sitting right next to me, in the same waiting room, enthusiastically pitching her company's new pump to one of my doctor's patients who, the conversation revealed, already was using another company's (less expensive) pump. She had signed him up for the new pump by the end of the conversation.
The conversation with the Office Manager went like this: Pump Saleslady: "Here's the printout of X's readings. He really needs a pump." Office manager. "Oh, yes!"
The cost of the pump this rep was selling is about $9,500 (much higher than that of competitors) with ongoing monthly costs of several hundred dollars more--which add another ten thousand bucks to the cost of the pump over three years. This "study" very conveniently identifies new customers for the pump--ones whose blood sugars are bad enough that the company will be able to get the insurer to spring for it.
If you believe this study was being done for some more altruistic, research aim, well, I hope you enjoy your visits from the Tooth Fairy.
But after overhearing this exchange, I wondered how much the pump company paid my doctor to participate in this "study" which was so helpful in identifying new customers for their pump product.
Paying doctors to participate in "studies" meant to sell product is a common method that drug companies use to push their products. A spate of reports in the press suggest other ways that the drug companies distribute that money to doctors. They often pay doctors to enroll patients in questionable clinical trials--even signing up doctors who have been censured for killing too many patients or who have been denied hospital privileges for unethical conduct.
After Sanctions Doctors Get Drug Company Pay - New York Times
Drug companies also slip money to doctors via various sleazy "charities" the doctors set up for themselves.
Charities tied to doctors get drug company gifts - New York Times
Another study, this one published in the New England Journal of Medicine queried doctors about the money they received from drug companies and reported that according to the doctors themselves:
- 83% of physicians received food and beverages from pharmaceutical company sales representatives;
- 35% received reimbursement for the cost of attendance at continuing medical education conferences sponsored by pharmaceutical companies; [These conferences are often thinly disguised marketing pitches for the drug company's newest, most expensive drugs, not unbiased educational events]
- 28% received fees from the pharmaceutical companies for consulting, speaking engagements or enrollment of patients in clinical trials;
- 7% received tickets to sports events and entertainment
Statistics taken from: A National Survey of Physician–Industry Relationships
As was the case with the study I observed in my doctor's waiting room, often the "studies" that drug companies pay doctor for involve getting patients to use drugs or devices already on the market, and these "Study," rarely comes up with any result that gets published in a peer reviewed journal.The doctor's payment for participating in the "study" depends on the number of patients they have signed up.
Though the patient may be given a free sample for the rudimentary "study", the idea is that they will keep taking the expensive new drug or buy the device after the very brief "study" is over, when, of course, the cost of continuing the drug or device is paid for by the patient or the patient's insurer.
Lovers of the free market contend that this is how capitalism works. But my question to you--including all you investors who have been visiting this page in droves of late--is this:
If you or a loved one were ill, which would you want: The drug that has been proven to work well for your condition which is reasonably priced and has a ten year safety record, or a brand new drug, rushed through the approval process, which costs 16 times as much as the other drug and whose side effects--some of them fatal--won't become known for another seven years?
And if your doctor were prescribing the more expensive drug for you--one which might kill you because its maker had avoided funding studies that would reveal its flaws--solely because that doctor was being compensated for writing that prescription, would you still be such a fan of the free market?
This isn't a hypothetical question. It's happening every day. And if you making money investing in one of these drug companies, you really should stop and do a reality check and ask yourself, if these drugs are so wonderful, why does the drug company have to pay doctors the equivalent of a years' income to encourage them to prescribe them?