DRUG FIRMS' TV ADS FUEL RISE IN COSTS AND DEMAND

Health: Direct appeals to consumers have created new requests for
medications. There are benefits, but spending on prescriptions has
increased 84% in five years.

WASHINGTON - When the Food and Drug Administration decided in 1997 to let
prescription drug companies advertise directly to consumers on television,
it unleashed a surge in demand. Patients are requesting expensive
brand-name drugs more often and doctors are willingly - if not always
happily - prescribing them.

The upside is that many patients are being treated with the most up-to-date
medications for conditions - such as high cholesterol - that they might not
have even known they had until an advertisement drew them to a doctor's
office.

But the trend has a price. Americans spent $100 billion for prescription
drugs in 1998, an 84% increase in five years. Two reinforcing trends are
driving this worrisome component of medical inflation, and television
advertising is contributing to both:

* The average price of a prescription climbed 40%, to $37.38, during the
last five years, propelled in part by the cost of advertising. Overall
consumer inflation during that period was only about 15%.

* Americans are consuming more medication. New and better drugs are being
brought to market at a record pace, thanks to accelerated development by
the drug companies and a fast-track approval system by government
regulators. And advertising has encouraged consumers to buy them.

Beset by rising costs, health maintenance organizations, insurers and
employers are laying most of the increase off on the public. Consumers with
insurance might pay $20 toward each prescription instead of $10, and the
consumers' payment might go even higher for drugs not on their health
plan's list of approved medications.

"If current trends continue, this growing inflation [in drugs] will soon
overtake the cost of all other health benefits," according to a recent
report prepared for the Blue Cross-Blue Shield Assn., whose member health
plans cover 67 million Americans. "Paying for these services will pose a
major threat to U.S. employers' global competitiveness."

Patients' rising out-of-pocket costs could generate a new surge of consumer
anger and result in government action. Both President Clinton and
congressional Republicans have proposed adding prescription drugs to the
list of services covered by Medicare, and the issue seems likely to become
a major topic of debate in next year's presidential and congressional
campaigns.

The dynamics of the situation are fairly simple.

Schering-Plough Corp., for instance, spent a whopping $97 million in the
first seven months of this year to promote Claritin, a prescription drug
that relieves allergy's sniffing and wheezing. Merck & Co. Inc. shelled out
$56 million advertising Propecia as a baldness cure, and Pfizer Inc. paid
$50 million for publicity for one prescription medication that scarcely
needs any: Viagra, the anti-impotence compound.

And doctors are reluctant to stand in the way of the kind of popular demand
such promotion gives rise to.

Doctors Go Along With Demand

"When the patient says, 'Give me something, give me something,' physicians
often acquiesce because they are afraid they may end up losing the
patient," said Dr. John C. Nelson, an obstetrician-gynecologist in Salt
Lake City.

The pharmaceutical industry says these developments are nothing to be
embarrassed about. Medication is almost always preferable to surgery and
prolonged hospitalization, said Judy Bello, executive vice president of the
Pharmaceutical Research and Manufacturers of America.

"Don't jump to the conclusion this is a bad thing," she said. "It can be a
wonderful thing for the health of patients."

About 395 new medicines have been introduced in the last decade, compared
with 231 in the previous 10 years. And now in various stages of development
are more than 450 medications just to fight the big killers: heart disease,
cancer and stroke.

As the baby boom generation moves into middle age and beyond, demand will
inevitably mount for drugs dealing with arthritis, osteoporosis and a host
of other chronic problems of the elderly. The boomers, the 76 million
Americans born from 1946 through 1964, will be increasingly receptive
targets for pharmaceutical promotion campaigns.

Drug advertising had long been limited to medical journals and other
specialized publications for experts. As far back as 1985, the FDA
permitted the drug industry to advertise in general-interest newspapers and
magazines. But the big boom didn't begin until 1997, when the FDA eased the
rules to allow promotions through television. Spending, a scant $55 million
in 1991 for all direct-to-consumer advertising, immediately boomed.

"Evidence demonstrates that all this advertising works. In fact, it works
exceedingly well," said the Blue Cross-Blue Shield report. It noted that
the 10 most heavily advertised drugs accounted for 22% of the total
increase in spending by consumers for all drugs in the last five years.

About 70% of people who visit a doctor's office walk out with a
prescription, said Edward Kaplan, a vice president of the Segal Co., an
employee benefits consulting firm.

"There is a high demand as people read about the new drugs in the papers
and see the commercials on television," Kaplan said. "Doctors want to keep
people happy; they want them to come back."

Advertising Sends People to Doctors

Dr. Les Zendle, associate medical director for Kaiser Permanente in
Southern California, said advertising drives into doctors' offices many
patients who didn't know they needed to be treated for such conditions as
diabetes and high cholesterol.

Another under-treated group motivated by advertising is the population
suffering from depression. Many are embarrassed or afraid to seek help.

"There has been a stigma about depression," said Mary Graham, vice
president of the National Mental Health Assn., an advocacy group.
"Advertising gets consumers talking to physicians and seeking help."

Moreover, when men go to a doctor's office for a Viagra prescription, for
example, they will get help with other medical problems they may not have
known they had. Doctors commonly find cases of prostate cancer, diabetes
and high blood pressure when they do the physical exam that most doctors
require before writing a Viagra prescription.

The bad side of advertising is that heavy promotion of particular drugs can
distort health care spending, crowding out dollars that could be better
used for other purposes.

Too often "people will ask for things they don't need," said Zendle of
Kaiser. He said he worries whether doctors, already hard pressed to find
enough time to spend with patients, will use some of those precious minutes
to explain why a drug that has been promoted on television might not be any
better than an older, cheaper medication.

New drugs typically cost twice as much as older drugs used to treat the
same problems, according to the Blue Cross-Blue Shield report, called
"Keeping Pharmacy Coverage Affordable." Imitrex, a nonnarcotic pain
reliever, cost an average of $154 for a prescription last year, compared
with an average price of $21 for one of the older pain relief compounds.

For years, the standard drug for treating ear infections in children has
been amoxicillin, a highly effective and reasonably priced antibiotic. But
one company was heavily promoting another medication, aiming its
advertising at worried parents, said Zendle. The federal government's
Centers for Disease Control and Prevention stepped into the debate and
issued a bulletin reminding doctors that amoxicillin remains the drug of
choice.

The hottest market for direct advertising involves allergy medications.
Four of the 10 most heavily advertised medications--Claritin, Zyrtec,
Nasonex and Flonase--are in this category.

Claritin, with a huge advertising campaign, has become a universally
recognized brand among consumers and physicians. Yet much cheaper compounds
will do essentially the same job of relieving allergy symptoms, according
to experts; Claritin's only advantage is that it does not cause drowsiness.

The only other difference is price. At a Kaiser system pharmacy, a 30-day
supply of Claritin costs $65.40, compared with $1.40 for a supply of
chlorpheniramine, an over-the-counter compound.

Medications on the Airwaves

These are the most heavily advertised drugs, as measured by spending during
the first seven months of 1999. Figures are in millions of dollars.

Drugs Spending

Claritin (allergy) $97.1

Propecia (baldness) $56.2

Viagra (impotence) $50.4

Zyrtec (allergy) $43.4

Prilosec (ulcers) $40.8

Lipitor (cholesterol) $40.8

Meridia (weight reduction) $38.2

Nasonex (allergy) $35.7

Detrol (urinary control) $33.3

Flonase (allergy) $32.5

Source: IMS Health