Drug Makers Find a Windfall Testing Adult Drugs on Kids

Mary Robinson, a Philadelphia X-ray technologist, received $300 and a $50 gift certificate to Toys "R" Us as an incentive to enroll her seven-month-old daughter in a drug trial to treat a form of indigestion babies can get.

Merck & Co., the maker of the medicine, also received an incentive: about $290 million. That's the estimated revenue Merck will pocket from six months of additional marketing exclusivity it won.

Its drug, Pepcid, was slated to lose its patent protection last October, opening the way to low-priced generic competition. But, as a reward for conducting the first formal studies of Pepcid in infants, the federal government has given Merck a half-year of extra protection from generics. And the gains are even greater for some of the other companies rushing to take advantage of a 1997 law meant to encourage pediatric trials of adult medicines.

That law, by giving drug makers an incentive to test on children, is producing important new prescribing information for pediatricians, the Food and Drug Administration says. Labels have been changed on 14 drugs to reflect new data. Some pediatricians are delighted with the results and are lobbying to extend the law past its scheduled expiration at year end.

But a close look at the law shows that it is also producing an unintended consequence: a drug-industry financial bonanza.

The studies required to gain six more months of marketing exclusivity are relatively small and inexpensive, costing anywhere from $200,000 to $3 million. But the extended exclusivity that results can be very valuable. It will boost drug-company sales by more than $4 billion, by the Journal's calculations, which compare six months of sales while a drug has marketing exclusivity against typical six-month sales of the drug after generic competition hits. Generics typically knock a strong-selling brand-name drug's sales down roughly 75%.

Benefits of Pediatric Testing

Here are six of the drugs granted extended marketing exclusivity under a 1997 law and estimates of how much extra revenue the extensions could produce.

Drug	Maker	Type	One-Year Revenue*	6-Mo. Addition to Revenue**
Claritin	Schering-Plough	Antihistamine	$2.60 billion	$975 million
Prozac	Eli Lilly	Antidepressant	$2.21 billion	$831 million
Glucophage	Bristol-Myers Squibb	Diabetes	$1.73 billion	$648 million
Pepcid	Merck	Antiulcer/heartburn	$775 million	$290 million
Vasotec	Merck	Hypertensive	$850 million	$318 million
Buspar	Bristol-Myers Squibb	Antianxiety	$759 million	$284 million

* 2000 U.S. sales except for Vasotec sales, which are 12 months through June 30, 2000

** Calculated by Wall Street Journal by assuming revenue would be 75% lower in the six months if there were generic competition

Sources: The companies, WSJ Research, IMS Health (Buspar)

The $4 billion of projected extra revenue is just for the first 26 drugs tested under the program. About 200 proposals to test more drugs on children or infants are pending at the FDA. If they get an FDA go-ahead, they could add $6 billion more revenue to drug-company coffers, says Chris Milne of the Tufts Center for Drug Development in Boston. And over the next 20 years, if the law remains in effect, producers of brand-name drugs could gain added revenue of nearly $30 billion, according to an FDA analysis.

As the numbers suggest, companies are first testing mainly their big-selling drugs, where extended market exclusivity is a potent lure. Only now are some companies moving to test lesser-selling drugs about which pediatricians have long wanted data.

Critics complain that drug companies are sometimes gaining the six-month bonus by testing drugs that treat conditions uncommon in children, such as arthritis, ulcers and hypertension. Another complaint is that the law sometimes lets companies win extra exclusivity without doing much new testing. At the same time, the law does nothing to promote child testing of drugs that are already off-patent or no longer marketed by a sponsoring company. An example is dopamine hydrochloride, which neonatal nurseries rely on to stabilize blood pressure in critically ill babies, but which has never been subjected to formal pediatric trials.

¹How the Journal Calculated Its Revenue-Gain Estimates

Meanwhile, makers of generic drugs come out losers. They could lose $10.7 billion in sales over 20 years as a result of the six-month extensions, the FDA estimates. The agency sees ill effects for retail pharmacies, too, because their markup on brand-name drugs isn't as large as on generics. The six-month extensions could cost pharmacies $4.9 billion in revenue over 20 years, the FDA estimates.

There is a public-health impact, as well. The longer a drug maker fends off generic competition, the longer patients -- particularly the poor and the uninsured -- will be burdened by premium prices for their medicines. The FDA estimates that the incentive law will raise the cost of prescription drugs $695 million a year, or one-half of one-percent of the nation's $100 billion annual pharmaceuticals bill.

"Pediatric exclusivity has created a system of bribing companies into doing what the government deems scientifically and medically necessary," contends Abbey Meyers, president of the National Organization for Rare Disorders.

For their part, drug makers say they are being appropriately compensated for meeting FDA requests under the 1997 law. They didn't seek this law. But since its passage, pediatric trials have become a key part of strategies to squeeze every dollar out of strong-selling drugs nearing patent expiration, some drug-company executives acknowledge.

"I won't deny it's been a win for industry," says Ian Spatz, Merck's executive director of public policy, "but it's also been a win for kids."

The law arose from frustration by pediatricians and regulators who for decades couldn't persuade drug companies to test many adult medicines on children. Doctors often prescribed them anyway, cutting pills in half or grinding medicines into applesauce, hoping to come up with doses for children that were both safe and effective. Between 70% and 80% of medicines have never been formally tested in a pediatric population.

Attempts at requiring testing have been largely unsuccessful. Twenty years ago, the FDA ruled that drug makers had to submit substantial safety and efficacy evidence to label a medicine for use in children. The result, instead of more pediatric trials, was more labels with disclaimers saying effectiveness in children hadn't been established.

To the industry, testing drugs on children is risky and burdensome. "You're talking about a small population where you have to take a lot of care and pay a great deal of attention to the design, documentation and monitoring and have adequate staff resources to ask and answer the right questions," says Merck spokesman Greg Reaves. The obstacles, former Amgen Inc. Chairman Gordon Binder told a 1997 congressional hearing, also include liability concerns and the challenge of getting informed consent. And if a child in a clinical trial reacts badly, negative publicity could batter the drug's sales in every age group, adds Art Ammann, a former research director at Genentech Inc.

Dr. Ammann is now a San Francisco Bay Area pediatrician who works on AIDS issues -- a role in which he and others have "fought and fought the industry" to get more testing of AIDS drugs in children, he says. An associate in this struggle was Elizabeth Glaser, wife of actor Paul Michael Glaser of the old "Starsky and Hutch" TV series. Ms. Glaser had contracted HIV from a transfusion and unknowingly passed it during pregnancy to her daughter, who died of AIDS. In 1994, Dr. Ammann introduced Ms. Glaser to David Kessler at the FDA, and she urged the then commissioner to force drug makers to test emerging AIDS medicines on children. Ms. Glaser died later that year.

Soon, Dr. Kessler announced an FDA rule he hoped would finally move the drug industry. It said that to get drugs labeled for use in children, companies in many cases no longer had to conduct large, expensive efficacy trials with children. They could do simpler tests to establish safety and dosing ranges. Despite the relaxation, companies continued to forgo label changes rather than pursue pediatric clinical trials.

With few options, Congress and regulators warmed to the notion of financial incentives. "We were stuck. We had tried everything possible, every kind of other incentive, and nothing worked," says Dr. Kessler, now dean of Yale medical school. Congress took up a bill to give companies extended market exclusivity in return for studying medicines in children. According to people involved in the effort, lobbyists for the drug industry initially wanted five extra years of marketing exclusivity, then two years and then one year, eventually agreeing to six months.

Dianne Murphy, the FDA's associate pediatrics director, says that some important dosing, safety and formulation data have emerged from studies spurred by the law. For instance, research on the obsessive-compulsive disorder drug Luvox, marketed by Solvay Pharmaceuticals Inc. of Brussels, found that doctors were prescribing doses at least twice as high as necessary in preadolescent girls. A new study of Ziagen, an HIV drug marketed by GlaxoSmithKline PLC, resulted in its approval for patients aged three months to 12 years. American Home Products Corp. found a new market for its Lodine arthritis drug: children six to 16 years old.

And data will continue to emerge. The FDA has pushed pediatric testing even further, adopting a rule regarding not-yet-approved drugs that might benefit children. Manufacturers can tack on a six-month marketing extension if they do pediatric trials with such drugs. And under the FDA rule, if companies refuse, the agency says it now has authority to take them to court to force testing.

For pediatricians who had long pressed in vain for more data, the revenue windfall some companies get through extended marketing exclusivity is a small price to pay for the tests and information. "This law is a spectacular success," says Ralph Kauffman, a director of medical research at Children's Mercy Hospital in Kansas City, Mo.

The law's critics say it has loopholes that undermine a laudable intent, such as allowing a financial benefit for studies that would probably be done anyway. For instance, Eli Lilly & Co. is winning Prozac six more months of defense against generics -- worth an estimated $831 million in added revenue -- by submitting a clinical study that had already been completed in 1995, two years before the law was passed, plus results of three studies that had already been initiated.

A Lilly spokesman, Ed West, says that while protocols for those three studies had been written before the law passed, the final decision to proceed with them came only after the financial incentive was in place. He won't comment on the estimate of added sales. In any case, Lilly couldn't have gained credit for the tests if the FDA hadn't let it. The agency interprets the law as permitting a company to submit certain already-conducted tests -- and gain more marketing exclusivity -- as long as the test results provide important new data.

In other cases, companies are doing pediatric testing with drugs for conditions that aren't common in juveniles. Consider Bristol Myers-Squibb Co.'s Glucophage for adult-onset diabetes and Merck's Vasotec hypertension pill. Both have carried labels saying safety and effectiveness hadn't been established in children. According to market-research firm IMS Health, of 24 million Glucophage prescriptions in the U.S. in the past year, just 133,000 were written by pediatricians. For Vasotec, the numbers were 11 million in all, 70,000 of them from pediatricians. But makers of both drugs tested them in children and won extra marketing exclusivity, potentially worth nearly $1 billion in added revenue.

Critics from the generic-drugs industry find another aspect of the incentive law troubling. A predecessor company to GlaxoSmithKline won added exclusivity for the ulcer drug Zantac by doing a study that gave an injectable form of it to newborns with a condition called acid reflux. The tests didn't involve the Zantac pill. But they yielded a six-month extension for that blockbuster pill anyway, because the FDA interprets the law as applying to a drug's active ingredient.

Even the FDA acknowledges that there are still some flaws in the process, which begins when a company or the FDA expresses interest in a clinical trial. At that point, the agency gives the company a written request for studies. In a majority of cases, companies initially propose studies that are unacceptable to the FDA, the agency's Dr. Murphy says, or the companies reject FDA-proposed studies as too large and costly.

For instance, one of the companies that merged into GlaxoSmithKline rejected an FDA request to do a large pediatric study of its Nicoderm nicotine patch, coupled with a broad behavior-modification study of smoking habits in kids under 18. "It was an extensive program, it was impractical and I wouldn't do it," says David Schifkovitz, director of regulatory affairs at the smoking-cessation division of the newly merged GlaxoSmithKline.

In another case, Bristol Myers proposed getting an extension of marketing exclusivity for Taxol, its strong-selling cancer drug, even though published studies had found that Taxol was less effective than other drugs in treating children with cancer. Bristol Myers spokeswoman Tracy Furey says the company is still evaluating the use of Taxol in children and considers all information about this proprietary.

Some of the sharpest criticism is that companies use the law to extend their exclusivity on hot-sellers, while often not testing other drugs that could help children but aren't large revenue producers. The American Academy of Pediatrics says there are still hundreds of drugs, on patent and off, that need to be tested in certain age groups.

In the mid-1990s, Dr. Kauffman pleaded in vain with Hoffmann-La Roche Inc. to test its Toradol pain killer on children, and finally did such a study himself -- finding the drug to be as effective as morphine for postsurgical pain, with fewer narcotic side effects. But the manufacturer, a unit of Roche Holding Ltd., hasn't changed the label. A spokesman says Toradol is "not one of our promoted products."

The extra market exclusivity the law provides is especially valuable for top-selling products. By conducting pediatric tests of Vasotec, Merck fended off generic competition for this blood-pressure drug for six more months last year, gaining about an extra $318 million in revenue. After Vasotec's patent and the six months of extra exclusivity finally expired in the fourth quarter, the drug's U.S. sales fell 73%, Merck says.

Pepcid has been another big seller for Merck, and the company won an extension through pediatric testing despite having already shown Pepcid was safe and effective in children aged one to 16. Doctors could have given seven-month-old Julia Robinson an off-label Pepcid prescription in the form of a liquid with a cherry banana mint flavor. Instead, she became part of a clinical trial designed to test a diluted version, after a doctor at Children's Hospital of Philadelphia recruited her mother.

"They explained that it hadn't been approved for kids under one and that's why she had to be in the study in order to get it," Mrs. Robinson says. Julia's condition improved, but the trial found that in most infants, the diluted form wasn't as effective. Despite those results, the FDA let Merck fend off generic competition for an added six months for all forms of Pepcid.

Merck says the study's findings were valuable data that simply wouldn't have been produced without the six-month incentive.

Schering-Plough Corp. should receive one of the bigger boosts from the law -- an estimated $975 million in extra revenue from Claritin. U.S. sales of the antihistamine last year were $2.6 billion. The drug is so important to Schering-Plough that the company spent millions on lobbyists and political donations in an effort to win special legislation extending its patents, which start expiring in mid-2002.

That effort didn't succeed. But the company did get an extension of its marketing exclusivity through the pediatric law -- even though Claritin was already approved for children aged six and above and was being widely prescribed for them. Pediatricians wrote 3.6 million Claritin prescriptions in the 12 months through November 1999.

Six extra months of protection from generics in a case like this upsets Carol Ben-Maimon, chairwoman of the Generic Pharmaceutical Industry Association. "If you're testing kids for valuable information, that's one thing, but if you're testing them just to make another half billion, that's exploitation," she says.

Schering-Plough spokesman William O'Donnell declines to comment on the projection of added revenue for Claritin. But he says the pediatric study, by establishing that Claritin could be used safely in children under six and setting a proper dose, "met the intent and spirit of the provision."

At the FDA, Dr. Murphy acknowledges that a few companies will make "quite a lot of money on this." But, she says, "that's the price you pay."

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Drug Makers Find a Windfall Testing Adult Drugs on Kids

Page One Feature

Drug Makers Find a Windfall Testing Adult Drugs on Kids

Benefits of Pediatric Testing

Drug Makers Find a Windfall
Testing Adult Drugs on Kids