Spending Hits a Wall

Promotional growth peaks in 2001, marketers hold their breath for 2002
Sep 01, 2002

Pharma companies invested a hefty $12 billion in promoting to physicians and consumers in 2001, according to Scott-Levin. But after the highs of 2000, spending in 2001 seemed stunted-a growth rate of 9 versus 13 percent. Although industry observers point out that pharma spent promotional dollars at a time when most sectors didn't, the macroeconomic downturn and September 11th affected companies' fourth quarter spending much like other sectors and proved that pharma is not "recession-proof" as many analysts once thought.

Total promo spending
Wall Street's speculations as to when advertising will increase vary widely. However, with squeezed pipelines resulting in fewer blockbusters, indeed, fewer launches of any kind-promotional spending across the board will be affected for several years. Much more nebulous is the long-term effect on industry's promotional spend as a result of the media spotlight on increasing prescription costs and consumer groups' accusations that pharma spends more on marketing than on R&D.

"Will pharma marketing people change their strategies because of the attention?" asks Robert Coen, senior vice-president, director of forecasting for Universal McCann and a leading ad industry prognosticator. "Unless it's terribly depressing and destructive to their business or has political consequences, most marketers won't give a damn-they want results."

"Pharma still wants to maximize opportunities and treat as many patients as it can, and it needs to use a mix of promotional vehicles," says Kathleen Blankenhorn, IMS' director of marketing research/IT. "Although there has been considerable attention paid to the industry's promotional practices, it will not keep companies from using these methods to reach the right patients with the right product information, while at the same time creating a positive return."

Physician Promotion Pharma companies continued to rely on detailing, meetings and events, and sampling to both introduce and augment product sales. In 2001, journal advertising, once the cornerstone of prescription launches, decreased after staying flat for the last few years.

A Look back-and to the future
Pharma spent more than $6.5 billion for detailing in 2001, an increase of 4.6 percent over 2000, which in turn followed a year of 7 percent growth, according to Scott-Levin. Sales force sizes continued to expand, increasing 8.6 percent in 2001 to 81,500 reps. That growth was also slower than 2000, when the number of reps increased 19 percent.

"Sales force sizes aren't getting cut, even as of July 2002," says David Johnson, Scott-Levin's executive director of product management. "Merger and acquisition activity are creating really large field forces like those of GlaxoSmithKline (GSK) and what you'll see with Pfizer/Pharmacia."

Pfizer led the industry in detail spending for the second year in a row with $696 million, up 5.3 percent from 2000. GSK, which overtook Pfizer as the largest sales force for Q4 2001, spent $616 million. Other top detail spenders included Merck ($480 million) and AstraZeneca ($370 million).

Top Ten Spenders
Scott-Levin's data also show that most of the sales force growth is aimed at detailing office-based physicians, while promotion to hospital-staff physicians, hospital residents, nurse practitioners, and physicians' assistants stayed essentially the same.

"Over the next five years, clients will allocate more of the rep's time to other areas such as managed care and PBMs," says Blankenhorn. "As the difficulty in getting face time with physicians increases, companies will look for other influencers."

Another important part of the detailing spend equation is sampling. IMS Health reported that between March 2001 and March 2002, reps gave away $10.8 billion in samples, a 20 percent increase over the same period the previous year-repeating the growth seen in 2000. Blankenhorn predicts that branded sampling will continue and that generics companies may soon follow suit to entice patients to switch.

Meetings and events (M/E) continued to be a strong part of pharma's promotional budget, growing 12 percent in 2001 to $2.1 billion. The number of events climbed 18 percent. Pfizer and Pharmacia hosted a combined 9,000 events for their co-marketed arthritis treatment Celebrex (celecoxib), up 40 percent from 2000. Forest Laboratories followed with 7,996 activities for its depression therapy Celexa (citalopram), up 44 percent. Merck sponsored 7,607 events for osteoarthritis treatment Vioxx (rofecoxib), an increase of 17.1 percent. AZ hosted 4,739 gatherings for its second-generation proton-pump inhibitor Nexium (esomeprazole), a new product in 2001. And GSK increased its spending for asthma therapy Advair Diskus (fluticasone) 223 percent, with 4,635 events.

"Meetings and events are the most interesting piece of the puzzle. Spending increased quite a bit in 2001 and has been escalating for the last ten years," says Johnson. "However, the self-imposed [PhRMA] guidelines, effective as of July of 2002, may cause a decline. Much of the increased spending included rep-involved activities, such as dinner meetings with speakers, which is not allowed under the new code."

Journal advertising is the only promotional line item that decreased. Scott-Levin reports that companies reduced spending in 2001 by 20 percent to $400 million. Because journal ads are considered a staple in raising awareness of new products, some media spenders blame slower FDA approvals and decreased launch activity for the reduction. Others note the Association of Medical Publications' ROI Analysis of Pharmaceutical Promotion (RAPP) study's failure to convince the industry to increase journal advertising spend.

"People were blown away by how much journal advertising was down last year," says Linda Cicarelli, media director for Sudler & Hennessey and former president of the Association of Healthcare Media Directors. "This year, things will be down even more, although some products are coming out that will keep specialty journals afloat. For 2003, it might stabilize, but it won't be better.

"The big launches that we saw three or four years ago are now few and far between. But it's more than just the lack of big launches. Healthcare practitioner dollars are diminishing and going toward DTC-and that's not news. That's been happening over the last few years, and it will continue to happen." (See PE, "Flexing Their Budgets," September 2001.)

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