Relates to a cost analysis of pharmaceutical advertising and promotional expenses

Summary of specific provisions

Section one sets out the legislative intent of this measure. Section two adds a new paragraph (u) to subdivision 1 of section 206 of the Public Health Law to require the commissioner of the Department of Health (DOH) to conduct a cost/benefit analysis of the advertising and promotional activities associated with the provisions of prescription drugs in New York State. In performing this function, the commissioner is directed to collect information from pharmaceutical companies (and pharmaceutical companies are directed to provide such information), related to adver- tising, marketing and so-called "drug detailing" activities, including: 1) funds spent on health care professionals, hospitals, clinics, pharma- cy benefits management employees and managed care employees on education materials, food and entertainment, gifts, trips and travel, free samples, seminars and income; and 2) advertising in NYS, including radio, television, the internet and daily and weekly periodicals, bill- boards, signs, and direct correspondence. After collecting this data, the commissioner is required to analyze it and make recommendations to the Governor and the legislature on the costs associated with advertis- ing and promotional activities, on prescription drug utilization, inpa- tient admissions, ambulatory care, invasive procedures, health care visits, premium rates, and quality.

Justification

Prescription drug costs represent a growing component in health care. According to the federal Health Care Financing Adminis- tration (HCFA, personal spending on prescription drugs rose 228% from 1988 to 1998. Some observers see that as a positive trend, arguing that effective drug regimens prevent inpatient admissions and other costly procedures, and that marketing is necessary to inform consumers and health care practitioners about products.

Critics of the practices, however, believe that the rise in prescription drug spending correlates with the amounts pharmaceutical companies are spending on marketing, advertising and "detailing" drugs in the media and directly with health care professionals, and point to some troubling trends with implications for both the quality and cost of health care:

* The number of sales representatives employed by drug companies nearly doubled since 1996, rising from 41,000 to 83,000;

The drug industry sponsored more than 314,000 physician "events" last year, ranging from catered lunches in hospital conference rooms to week- end getaways at resorts, nearly double the number four years earlier; and

Of the drugs responsible for the nearly 19% rise in spending for pharma- ceuticals last year, the four top sellers were among the top ten most heavily marketed drugs.

Some observers contend that the massive amounts spent on these promo- tional activities has led to inappropriate use of some drugs with seri- ous consequences for health care quality, underutilization of less cost- ly generic drugs, conflicts of interest for providers and added unnecessary health care costs. A January study by the Journal of the American Medical Association (JAMA) found that marketing directly influ- ences the drugs that doctors prescribe. And an April 1995 JAMA article concluded that over 10% of the statements marketing representatives made about drugs contradicted information readily available to them.

The purpose of this bill is to authorize the commissioner of health to collect data on the marketing and promotional activities of drug compa- nies, determine impact on utilization of drugs, avoided costs, prescription trends and other matters, and report back to the governor and the legislature on their findings. Furnishing policymakers with up-to-date information on the impact of drug company marketing practices and their effects will help guide decisions on these critical issues.

Fiscal implications

None.

Effective date

Immediate.