Hello, Dr. Keith Smith with you once again on behalf of the Free Market Medical Association, joined by my good friend Chad Schmidt. Chad, thanks for being with us once again.
It occurred to me watching the Super Bowl that the only people that seem to be able to buy ads are, government agencies, not-for-profit hospitals or pharmaceutical manufacturers and I wonder as a physician, why would pharmaceutical manufacturers directly contact patients in that way? It seems like a patient would present an issue and a physician would respond with a treatment. This is almost like ginning up a demand for some service or product. What’s going on?
Chad: It’s called a 10-to-1 return on investment. If we’re sick, we want to go find a cure for that ailment or something to make it better and they know we are susceptible to that kind of advertising, whether we need it or not.
Keith: So, the advertising is to gin up demand for a certain drug or pharmaceutical product, the need for which is questionable. I could see, as a physician, if a patient were demanding something how it would be more difficult for me to say no, particularly if it fell in that gray area.
How does the money flow and who profits from this primarily? Most people would think the drug company sells the drug and somebody pays for it, and that’s it. It’s more complicated than that, isn’t it?
Chad: Certainly, the drug company makes money on that. You also have your middle man, the pharmacy benefit manager (the distributor) that is contracting that drug as a preferred item on their formula and allowing that item to be dispensed based on plan design.
Keith: At a price that is much greater than what they purchase it at from the drug manufacturer.
Chad: Correct, because they have rebates involved.
Keith: They then get money back that may or may not be disclosed to the buyer.
Chad: In part or in total, correct.
Keith: The only other point I’ll make in my suspicion is that many times I’ve felt like the pharmaceutical companies buy advertising to be such a giant customer of big media, that big media is less likely to do awful stories about all the rest of what they do.
That’s speculative, I’ll just throw that out there and we’ll end this video blog there. Thank you for joining me, Chad thanks again for being with us and we’ll see you next time.