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PhRMA finds flaws in NICHM drug cost study, unveils rebuttal research

WASHINGTON, D.C. -- The Pharmaceutical Research and Manufacturers of America (pHRMA) says it has "unmasked" in a new study by the National Institute of Health Care Management (NIHCM) significant errors which taint the Blue Cross/Blue Shield front group's claims about pharmaceutical innovation.

"The NIHCM study, which was riddled with errors but was widely reported as presented, is pure baloney," said Richard Smith, PhRMA's Vice President of Policy and Research. "A study on innovation that ignores major breakthrough treatments like Herceptin for breast cancer, Enbrel for rheumatoid arthritis, and Activase (t-PA) for strokes is deceptive, dishonest, and not in the best interests of patients.

"Today, we are exposing this deception, and are calling on the media to more closely scrutinize future 'pronouncements' by NIHCM." [Eleven of NICHM's twelve board members are CEOs of Blue Cross/Blue Shield insurance companies.]

The following are among many defects Smith identified in the May 28 NICHM study presentation:

  • The report noted, in a minor footnote, that more than half of the 133 biotech medicines now on the market were approved during the past five years -- but the study excluded all biotech drugs and vaccines. That exclusion eliminated breakthrough drugs for breast cancer, rheumatoid arthritis, and many other diseases, thus rendering the study, on this basis alone, incomplete, inaccurate, and misleading.
  • The report is based on the number of medicines accorded 'priority' as opposed to 'standard' classification by the FDA, suggesting that only the former drugs represent true innovation -- a distortion of the FDA's classification system. As the FDA has noted: "It (priority classification) is not intended to predict a drug's ultimate value or its eventual place in the market".
  • The report implies that there is no meaningful clinical value to so-called 'me-too' drugs. One of the most important reasons for having multiple drugs within a therapeutic class is that, for many drugs and particularly those for diseases of the central nervous system, overall response rates are 50 percent or less. The more drugs that are available, the more likely there will be one suitable to meet the needs of particular patients. In addition, new drugs in a class, or new formulations of existing drugs, are frequently priced lower than older drugs and often provide new cost-effective uses, or more efficient treatment for patients.

Smith also attacked the insurance industry's 'frequent refrain' that their premium increases are due to drug spending. He said that analysis of many studies looking at health care premium increases showed that drug spending is a fraction of health care cost spending. [PhRMA's] new research shows that spending on prescription drugs, medical devices, and medical advances combined accounted for 22 percent of the total increase in health-care premiums between 2001 and 2002.

"With other health-care services, including hospitalization, surgery, and doctors' visits, accounting for nearly four-fifths of the premium increases, the insurers are unfairly shifting the blame," Smith said. "Blue Cross and Blue Shield Plans that fund NIHCM need to be honest with their customers about their rate hikes. Until their campaign of deception ends, we will continue to educate consumers and the media about NIHCM's factually flawed approach."

PhRMA says the studies also show that most of the increase in spending on prescription drugs is due to increased use, not increased prices. Spending on prescription drugs represents about 9 percent of total health-care spending, compared to 32 percent for hospital care and 22 percent for physician services.

"Moreover, there is growing evidence that increased spending on medicines, especially newer, more advanced therapies, saves money on other, more expensive treatments such as hospitalization, thereby reducing system-wide health care costs," said Smith.

PhRMA represents the country's leading research-based pharmaceutical and biotechnology companies. For copies of the PhRMA study rebutting NIHCM's claims, and presenting the new analysis of insurance premium increases, go to

Posted: June 2002