The Over-the-Counter Time Bomb
IT USED TO BE that when you had an allergy attack, you went to your allergist to figure out what was bothering you. Now, anyone with a sniffle can skip the doctor's appointment, pop into the local drug store and self-medicate the symptoms away.
Sounds great, right? That was the general consensus last November, when the Food and Drug Administration approved the popular allergy medication Claritin for over-the-counter use. An unlikely coalition of health insurers, employers and consumer groups applauded the decision, which was expected to cut costs and give consumers easy access to safe medication. So far, the move seems to be a big hit: Since landing on store shelves last December, OTC Claritin has racked up more than $300 million in sales (through June).
But one important group has boycotted the celebration: doctors. They argue that OTC Claritin isn't the panacea others think it is, and that it has set off a chain of events that, if left unchecked, will undermine the best interests of patients nationwide.
There's no doubt that the success of OTC Claritin has encouraged regulators to convert more drugs from prescription to OTC status in the next few years. To wit: Next week, heartburn remedy Prilosec, with $3.1 billion in sales last year, will become available to consumers without a prescription for a little more than 70 cents per pill. Industry experts believe other so-called proton pump inhibitors, including AstraZeneca's Nexium and TAP Pharmaceutical Products' Prevacid, could soon follow. The FDA is also considering adding two new therapeutic categories to the OTC menu: asthma medications and cholesterol-lowering statins. Merck and Bristol-Myers Squibb have already held discussions with the FDA to convert their rival cholesterol lowering medications Mevacor and Pravachol, respectively, to OTC status.
Most doctors would agree that Claritin is a safe drug that produces excellent results in patients who need it. But converting even this low-risk/high-reward medication to OTC status has produced some nasty, unforeseen side effects. Consider Claritin a case study of the negative consequences of the burgeoning OTC trend.
Allergy Relief Just Got More Expensive
Schering-Plough's patent for Claritin expired last December. Rival Wyeth (formerly American Home Products) was prepared to launch a generic version of the drug, called Alavert — a move that would've dramatically cut costs for patients. The typical copay for a 30-day supply of a generic drug averages around $10, less than the $15 or more charged for name-brand drugs. Instead, the FDA allowed Claritin to be sold over the counter, eliminating the need for a prescription and, thus, a doctor's visit. That made the drug instantly available to the estimated 41 million Americans who don?t have health insurance — about 16% of all non-elderly Americans — so long as they could afford it.
For the other 84% of the 65-and-younger population, however, the results have been less positive. Problem No. 1: Insurers don't cover medications that patients can buy without a prescription. So when Claritin went OTC, most insured users ended up paying more than they would've paid had it gone generic — and far more than they were paying when the drug was still under patent protection. When Claritin first hit the allergy aisle, it sold for as much as $1 a pill — roughly $30 for a month's supply. Nine months later, it's still selling for about $22.99 (at Drugstore.com) for a one-month supply. Consumers could save a little by buying Alavert, which was also allowed to be sold OTC late last year, for $18.99 (Drugstore.com). Insurers argue that the price of the generic Alavert is now roughly on par with a typical health plan's $15 copay for preferred name-brand medications. The operable word, of course, is "roughly," since an extra $3.99 a month comes out to $47.88 a year — a noticeable annual premium for a generic drug.
It's not only Claritin that has gotten more expensive. In recent months, most insurers have quietly jacked up the price of other non-sedating antihistamines such as Allegra and Zyrtec by raising their copays, or have stopped covering them altogether. As of January, for example, health insurer Humana raised all prescription non-sedating antihistamines from Level Two to Level Three on its formulary, the list of medications an insurance company covers. This is its most expensive category for branded medications, and is usually reserved for new drugs introduced long after other, cheaper remedies have been available. (Allegra and Zyrtec have been on the market since 1996.) If for some reason a cash-strapped Allegra user can't take Claritin, Humana recommends he or she consult a doctor about one of the following inhaled corticosteroid allergy medications that are more affordable and on Level Two of its formulary: Flonase, Nasacort, Nasonex, Rhincort or Vancenase.
The government, it seems, understands how expensive the OTC movement could become to consumers. On Sept. 3, the Treasury Department and the Internal Revenue Service announced that consumers with access to flexible spending accounts can use pretax dollars to pay for many OTC medications (excluding certain items such as dietary supplements). The changes are likely to go into effect 2004. (For more on flexible spending accounts, see our story.)
"This is a stunning move by the IRS and very positive for consumers," says Jon Kessler, founder of WageWorks, a San Mateo, Calif., administrator of flexible spending accounts. "Americans spend almost $35 billion annually on OTC remedies. [Flexible spending accounts] now give consumers a way to mitigate these medical costs that health insurance will not cover for them."
But the new tax treatment doesn't seem quite so stunning when held up to mathematical scrutiny. Let's assume an American in the highest tax bracket — 35% — will spend $30 a month next year for an OTC statin medication. The new tax rule would reduce the person's net monthly cost by a maximum of $11, to $19, still higher than the typical $15 copay for preferred branded medications. (Our example includes FICA, but not state taxes, which vary widely.) In other words, this wealthy American would still end up paying $48 more for his or her medication in 2004 than in 2003. Multiply this by two or three medications, and it becomes clear that the new tax rule doesn't go far enough.
And for people in lower tax brackets, the rule is even less beneficial. Applying our example to someone in the 10% bracket (with less than $7,001 in adjusted gross income), the new rule would cut the net cost by just $5 a month (again, counting FICA), to $25 — making next year's medications $120 more expensive than this year's. Multiply this number by two or three, and the results are truly frightening.
A notable side effect of the new rule: It doles out more benefits to wealthier Americans than to those with lower incomes, who are less able to pay for medications in the first place. And it won't help most retired Medicare beneficiaries, either, since they generally aren't eligible for employer-sponsored flexible spending accounts.
What's an Allergist?
Not only are most managed-care plans limiting access to prescription antihistamines — they're also restricting access to specialists. Nowadays, doctors can write referrals to specialists only if patients' allergy symptoms don't respond to Claritin, says Dr. William Berger, an allergist based in Mission Viejo, Calif.
While this strategy could help the insurers save money on office visits, it's not doing patients any favors. Without an allergist, the patient may not get a proper diagnosis. In some cases, a sniffle and headache may not be caused by an allergy at all — it could be, for example, a sinus infection, which might require antibiotics. Claritin would mask those symptoms and delay treatment for the real ailment, says Berger. "By minimizing the symptoms, you're doing a disservice to the patient."
Dr. Robert Seidman, chief pharmacy officer at WellPoint Health Networks, pushed aggressively to get Claritin switched to the OTC market. He says the vast majority of people who seek prescriptions for antihistamines already get them from their primary-care physician. "I'm not really in a position to comment when, or when not, there's a treatment failure to an allergy," he says. Having Claritin available without a prescription doesn't contribute to the problem, he argues.
The specialists disagree. More than three-quarters of allergists, according to the American College of Allergy, Asthma and Immunology, believe changes in health insurance coverage adversely affect their ability to treat patients effectively. If the same turns out to be true for, say, heart specialists after cholesterol drugs go OTC, the results could be disastrous. Patients taking statins need to have their lipid levels checked and monitored for liver toxicity and skeletal muscle injury, says Dr. C. Richard Schott, a cardiologist based in Media, Pa. "I fear that just pushing these patients to primary-care doctors allows people not to get the follow-up they would have gotten from a high-level internist or specialist," he says.
Even if someone is suffering from an allergy, Claritin still may not be the best medication available. There are four non-sedating antihistamines on the market, each with a different chemical make-up. While one patient may respond well to Claritin, another may not. For example, Berger says he has observed that Claritin doesn't work as well on patients with hives as Zyrtec does. And while Claritin is approved only for treating outdoor allergies like hay fever, Zyrtec and Clarinex are approved for indoor allergens, such as pet dander, as well. "The idea that they are all alike is ludicrous," Berger says. "We know that's not true."
WellPoint's Seidman says he expects that Zyrtec and Allegra will be available as OTC medications in the near future. In some cases, however, this may simply confuse self-medicating patients even more.
Winners and Losers
Allergists argue that consumers are the real losers in the OTC movement. Of course, facing the prospect of drastically diminished HMO referrals, it would be surprising if they said anything different. Still, it's not easy to write off their concerns as purely agenda-driven, for it's clear that most allergy sufferers are indeed paying more for medication than they used to, and with less medical supervision.
So who wins? The early evidence suggests that the biggest beneficiaries are the insurance companies and the employers who provide health benefits for their employees.
Industry data show that the rate at which managed-care companies are filling prescriptions is starting to slow. Last December, the number of scripts filled by insurers rose 5% year-over-year, according to Fairfield, Conn.-based research and consulting firm IMS Health. Since Claritin has gone OTC, the rate of increase has slowed considerably. In July, the total number of filled scripts increased just 1.9% (on an adjusted basis) year-over-year.
"We see that July IMS data as further confirmation of a sustained slowdown in pharmacy utilization levels that we expect will persist for the remainder of this year and into 2004 driven by a multiple of factors, including the relatively weak pipeline of new products, higher levels of consumer cost sharing in a weak economy and the impact from Claritin switching to OTC," wrote Goldman Sachs managed-care analyst Matthew Borsch on Aug. 13.
The government, too, should benefit handsomely from the OTC movement as the Bush administration tries to come up with an affordable drug benefit for Medicare beneficiaries. By taking all sorts of blockbuster drugs OTC, and thus making them ineligible for Medicare reimbursement, the FDA could save the government billions of dollars annually.
Indeed, some industry experts argue that the FDA is considering more than just drug safety when approving medications for OTC use. Kenneth Kaitin, the director for the Tufts Center for the Study of Drug Development, points out that FDA Commissioner Mark McClellan is both a doctor and an economist, and served in the Bush White House from 2001 to 2002. McClellan was a member of the President's Council of Economic Advisers, where he advised on domestic economic issues as well as serving as senior policy director for health care and related economic issues. If anyone understands the economic issues facing Medicare, says Kaitin, it's McClellan. (The FDA didn't respond to our request for comment.)
In some cases, even pharmaceutical companies could profit from the OTC movement. If a blockbuster product is converted to OTC near the end of its patent-exclusivity period, it could be a financial boon for the manufacturer. The switch could preserve the drug's brand name and help it hold on to some of its market share, argues Tufts' Kaitin. Consider pain reliever Advil. Even though generic ibuprofen has been around for years, more expensive Advil products are still raking in big sales. In fact, Wyeth's consumer health-care division attributed some of last quarter's 12% increase in net revenues to strength in Advil product sales. With some keen advertising, Schering-Plough could produce similarly stellar results for Claritin. And consumers will likely end up holding the bag.
