PE's annual Media Spend Trends

2002 marked the first year that pharma's DTC spend dropped. Prospects look better in 2003 and beyond.
Aug 31, 2003

The economy may still be suffering from the twin shocks of September 11th and a bursting technology bubble, but pharma spending on promotions continues to grow at a double-digit pace.

Total spending-including direct-to-consumer advertising (DTC), professional advertising, detailing, and sampling-grew by 11 percent from 2001 to 2002, from $19.4 billion to $21.5 billion. For the first five months of 2003, the pace of growth in DTC expenditures is a bit slower than the 15 percent average annual growth the industry saw from 1996 through 2002, and considerably less than the astonishing 23.6 percent increase in spending that was recorded from 2000 to 2001. But promotional spending continues to represent about the same percentage of pharma sales: 11 percent in both 2001 and 2001, but down from 15.7 percent in 2000 and 13.2 percent in 1999.

The figures come from an analysis of pharma promotional spending conducted by the research and consulting firm IMS Health and compare the year-end results of 2002 with 2001. IMS collects data from various healthcare sources, such as drug manufacturers, retail outlets, and hospitals, and receives additional information from TNS Media Intelligence/CMR. Tracking firms Verispan and PERQ/HCI also provided data for January through May and June, 2003.

Key insights from the analysis include:

  • Spending on prescription medicine DTC advertising dropped two percent in 2002-the first year it has decreased. But expenditures are up so far in 2003.
  • Spending on blockbuster products remained strong.
  • Journal advertising grew a scant three percent in 2002-a welcome relief for publishers because spending in the sector dropped 11 percent in 2001.
  • Overall spending and sampling grew 13 percent each in 2002.

The numbers raise some important questions for pharma: Has DTC finally hit a plateau? Will professional advertising budgets return as pharma companies gain a more sophisticated sense of the return on investment of various media? And how high is the industry willing to go in its detailing arms race?

"Pharma marketers have become more savvy," says David Blumberg, managing partner for North American health and life sciences at the consulting company Accenture. "They realize which products have more of a consumer focus and which don't, and they react accordingly."

DTC Spending on DTC advertising for brand-name products dropped two percent in 2002 to $2.64 billion, down from $2.68, according to IMS Health. The fall marks the first ever decrease.

Linda Cicarelli of the healthcare marketing agency Sudler & Hennessey and a member of the Association of Healthcare Media Directors, says, "Reports started coming out that the return on investment (ROI) wasn't there, and companies pulled back some of their spending because of it."

Robert Coen, director of forecasting at the media planning firm Universal McCann, put it more succinctly: "If there's a chance their competitors won't advertise for some reason, they won't either."

GlaxoSmithKline outspent its competitors in 2002 with $504.5 million in DTC advertising, a five percent increase from the previous year, because of increases in ads for such products as its diabetes medicine Avandia (rosiglitazone). Pfizer's DTC outlays reached $333.3 million, up four percent in 2002 in support of its statin medicine Lipitor (atorvastatin) and arthritis treatment Bextra (valdecoxib), among others. Merck came in third at $319.2 million, a two percent increase for the year, as it continued to advertise the statin Zocor (simvastatin), followed by Johnson & Johnson at $226.6 million, a 27 percent increase to support ads for its arthritis treatment Remicade (infliximab) and antifungal remedy Nizoral (ketoconazole). And AstraZeneca was the fifth highest spender at $205.1 million, up 43 percent, to increase advertising for its gastrointestinal treatment Nexium (esomeprazole) and migraine medicine Zomig (zolmitriptan). For the year ending March 31, 2003, Lipitor generated $6.3 billion in sales, followed by Zocor with $4.2 billion in sales, IMS says. Rounding out the top ten companies were

  • Aventis, $169.7 million, up 21 percent
  • Schering-Plough, $144 million, up 12 percent
  • Pharmacia, $131.7 million, down 33 percent
  • Bristol-Myers Squibb, $117.4 million, down 31 percent
  • TAP, $82.4 million, up 123 percent.

The wide variations in promotional expenditures among the last three of the top ten spenders were because of several external factors. Pharmacia's DTC spend declined as a result of its pending merger with Pfizer; BMS decreased spending partly because it was mired in financial and legal trouble; and TAP, after paying fines and shedding its legal woes, increased its spend to support the acid reflex treatment Prevacid (lansoprazole). Prevacid was the third highest selling product for the year ending March 31, 2003, with $3.7 billion in revenues.