Andra Brichacek

Articles

Franklin Lakes, New Jersey-Merck’s pharmacy benefit arm, Merck-Medco, is under fire for switching patients to more expensive pharmaceuticals.

PBMs: Merck-Medco in the Hot Seat

If only two words could be used to describe Big Pharma's promotional spend trends during the past 12 months, they would be "it depends." Budgets are simply tools and the industry uses them as such: to determine just the right spend, on a certain type of product, during a particular phase of its life cycle.  

Although research firms such as Scott-Levin, IMS, and Competitive Media Reporting (CMR) tabulate US pharmaceutical data by quarter, industry insiders are quick to point out that quarter-to-quarter comparisons from one year to the next can be misleading. 

"It's difficult to talk about budgets in general," says Emily Denney, a public relations spokesperson for AstraZeneca (AZ). "A budget is set according to which product you're going to promote and which stage of the product life cycle you're in."

In general, promotional spends in both direct to consumer and the professional sector are still in an upward groove. (See "DTC Gains Ground.") Yet some growth curves seem to have shrunk this year, a phenomenon that some speculate is an unavoidable reaction to the US' economic downturn. 

Others maintain that pharma has been traditionally resistant to the economy's twists and turns. "I know the economy is slowing, but this industry is not like others in which there is an immediate effect, such as the car and transportation industries," says Kathleen Blankenhorn, IMS' director of marketing and market research/IT. "The pharmaceutical industry has typically been insulated from economic downtrends."    

Caveats aside, the numbers still tell a useful story about industry's media mix.  PE presents the data, medium by medium, in its annual spend trends report.  

"Sales forces account for the largest part of promotional spending, followed by DTC advertising," says Kelly Sborlini, associate director of promotional audits for Scott-Levin. "The reps have a lot of muscle. Face-to-face interaction goes a long way in the minds of the pharmaceutical companies, and reps carry the bulk  of the selling expectations."

Long the industry's favorite marketing tool, detailing-and its spend-continues to rise, albeit at a somewhat slower pace than in years past. According to Scott-Levin, the industry's combined full-time sales force added about 4,000 to its ranks so far this year, raising the number of reps in the field to 78,840. Although that's a significant jump, it trails the 19 percent increase (11,945 reps) seen from full-year 1999 to full-year 2000. And IMS reports that the amount of money the top 12 companies put into detailing in the first half of 2001 compared with first-half 2000 rose by only 3 percent. 

In fact, most Big Pharma field forces have neither grown nor shrunk much since the first half of 2000, according to Scott-Levin figures. Pfizer still leads the pack with a force of 6,886, although it has pared that number by 200 reps in the past year. As expected, Pfizer also spends the most on its sales efforts, although it has grappled with Schering-Plough from quarter to quarter during the last year for the industry's biggest share of sampling dollars. And the prize for most growth in detailing spend goes to Pharmacia, which pumped up that portion of its year-to-date June budget by 25 percent. 

According to Sborlini, the number of reps a company keeps on payroll often correlates with its launch activity. "If a company is launching a product, they're probably adding staff," she explains. "A lot depends on the expectations for products coming out or getting new indications."

Nonetheless, IMS data show that the product with the largest detailing budget in YTD June 2001 was the COX-2 inhibitor Celebrex (celecoxib)-which launched in 1999-although the $79.1 million Pharmacia dedicated to face time with doctors actually represents a 7 percent drop from the product's YTD 2000 budget. (See "Professional Product Budgets," page 82.) 

In contrast, GlaxoSmithKline's (GSK) antidepressant Paxil (paroxetine) enjoyed a 36 percent detailing budget boost, Schering-Plough's sales spend for allergy medication Claritin (loratadine) grew by 20 percent, and Ortho-McNeil increased its budget for Levaquin (levofloxacin), an anti-infective, by 18 percent. 

Industrywide, pharma companies spent $431 million more on sending reps to doctor's offices and $52 million more on hospital visits in 2000 than they did the year before, according to IMS. And sampling spend rose by $723 million.  

Scott-Levin has also noted a steady increase in the efforts directed toward nonphysician healthcare providers, such as nurse practitioners and physicians' assistants. "NPs and PAs are expanding prescriber bases," says Sborlini. "They're attracting attention across all areas, mirroring what's going on with physician detailing for newly launched products. There are a lot of NP and PA details for antibiotics, pain medications, and the types of things you might see more often in a primary care setting. The pharma industry is starting to pay a lot more attention to them; they're trying to get the message out to everyone."

Some analysts have questioned the viability of sinking increasing resources into sales forces, a medium that has not demonstrated a high ROI. But for now, companies seem reluctant to reduce the support behind their old standby. 

"We watch detailing all the time to see if it's going to flatten out, but it never does," says Sborlini. "Last year, everybody was saying, 'There's got to be a threshold. There is just too much sales rep saturation out there.' But the industry went right on past that, and there are even more reps out there now."

Blankenhorn says pharma companies rely on reps for face-to-face interaction. "Doctors receive samples and educational materials and ultimately build relationships with them," she says.    

The economy may be having a slightly negative impact on advertising, but it hasn't affected the money pharma companies pour into meetings and events (M/E). This year's first-quarter Big Pharma total saw a small dip from last year-$290 million compared with $320 million-but the second quarter hit a high of $359 million. 

Sborlini says, "Meetings and events have been growing pretty rapidly over the last several years, and we've been watching that trend to see if it would flatten out. It looks like the industry's on a good pace this year to increase its events spend again."

The big spender across the board was Pfizer, with a peak outlay of $71.9 million in the first quarter of 2000. The company's M/E budget was considerably lower in the second quarter of that year--$43 million--but it rebounded to $56 million in the same period this year. Runner-up GSK, on the other hand,  steadily increased its M/E budget all along, from $42 million in first quarter 2000 to match Pfizer's $56 million in the second quarter of 2001. Merck came in a close third with a spend of $54 million during the same period. 

 One noticeable difference in this year's M/E spend compared with last year is the amount of fluctuation from first quarter to second quarter. According to Scott-Levin data, in 2000, the top 12 companies--except for Pfizer--were consistent in the money they allocated to meetings and events during the first half of the year. Comparatively, in 2001, first- and second-quarter numbers jumped substantially, with Hoffman-La Roche the only exception (down from $3.8 million to $2.9 million). In addition to the big spenders already mentioned, Aventis nearly doubled its meeting and events budget from first-quarter 2000 to first-quarter 2001, from $13 to $22 million. AZ escalated its M/E outlay from $22.7 to $29.6 million; its recent launch of Nexium (esomeprazole) is the most likely explanation for that increase. Pharmacia rose from $20.1 million to $25.3 million, and Eli Lilly jumped from $25.3 million to $29.9 million. The hotel and resort industry must have had a great spring.

Journal advertising, once the mainstay of every pharma company's marketing budget, has suffered greatly in the last decade. But IMS data show that, after peaking in 1997, journals seem to have hit a plateau. 

"Journal advertising has been pretty flat this year," says Scott-Levin's Sborlini. "That's a reflection of what's going on in the advertising industry."

That flat growth curve, however, has been the norm for journals for quite a while. The industry's aggregated spend on the medium, which IMS reports rose by an insignificant 3 percent in 2000 from the year before, hasn't fluctuated by more than 11 percent in the past five years. In fact, last year's $484 million spent on the medium represents only a 6 percent growth from 1996 figures. When compared with DTC's skyrocketing 212 percent growth during that time period--131 percent since the rules changed in 1997--journals seem to be old news. 

"There's been a downturn in the last two years, but it seems to be on its way back up," says Blankenhorn. "I think the industry believed that journal advertising would be significantly reduced in the wake of DTC advertising. Many thought it wasn't as strong as the other media and that people would be looking to shift."

To counter such perceptions and win back pharma's support of its first media love, the Association of Medical Publications (AMP) has initiated an industrywide campaign. This year, it published the results of a groundbreaking study comparing journals' ROI with other promotional venues when they are used alone or in conjunction with detailing, DTC, or physician meetings and events. 

Has that campaign still hasn't brought Big Pharma back to the fold. Scott-Levin reports that the top 12 companies posted an average 26 percent drop in their journal ad spending in the first half of 2001 compared with that period of 2000. Of that group, IMS reports that Novartis' outlay more than doubled (112 percent), as did Warner-Lambert's journal budget (116 percent). 

It's interesting to note that, although WL's parent Pfizer reduced its journal ad spend by 25 percent in that time period, Lipitor (atorvastatin)-marketed by Parke-Davis, another Pfizer subsidiary-had the largest journal budget in the first half of 2001, according to IMS.     

But those individual upswings weren't enough to offset huge drops such as Hoffman-La Roche's 78 percent cut and Bristol-Myers Squibb's 69 percent dive to an ad spend that barely broke $1 million, according to Scott-Levin. Whether that bodes poorly for journals' long-term survival is yet to be seen. 

"Products that are early in their life cycles rely on journal advertising to support detailing and sampling," says Blankenhorn, who is one of many who believe that medical journals' role, although smaller than it used to be, still has its place in pharma's media mix.

Traditionally DTC's largest sector, TV ad  spend across the industry dropped considerably in the first quarter of 2001 compared with that period of 2000, according to a CMR audit of 198 top companies. National and regional network ads fell by 61 percent and 60 percent, respectively, and other sectors saw an even more dramatic drop. Cable TV spend decreased by 65 percent, spot TV went down by 63 percent, and national syndication ads plummeted 71 percent. The only broadcast sector to pick up was Spanish-language national network TV, which went from nothing in first-quarter 2000 to just over $4 million in first-quarter 2001.

But quarterly data may not be the best indicator of the medium's popularity and effectiveness. "Campaigns are meant to start and stop," says Blankenhorn. "A company might spend more in one quarter versus another because it had a new product on the market or was anticipating a competitor coming into its space."

According to Scott-Levin's Direct-to-Consumer Promotional Audit of the top 40 pharma companies and CMR, many Big Pharma budgets mirrored the industry's first-quarter slump in television pend. Hoffman-La Roche's figure fell by more than 50 percent in that time period compared with year-to-date 2000, and Merck put 27 percent fewer resources into TV this year. 

AZ's decrease in its first-quarter budget for the medium, although less substantial than its decrease in print, came in 56 percent lower than last year's first-quarter figures. But that drop, according to Sharon DeBacco, AZ's brand promotions leader for Nexium, makes sense in the context of the company's brand strategy. "We had been promoting Prilosec [omeprazole] until the end of last year," she explains. "This year, we've been preparing for the launch of Nexium. So there's probably not much that will show up in the first-quarter data, but that doesn't indicate that we've withdrawn our belief in consumer promotion." (See " DTC Product Budgets.") 

Seven of the top twelve companies, however, increased-some substantially--the number of marketing dollars they dedicated to the medium. Pfizer's TV spend rose by 34 percent, and Aventis increased its budget by 55 percent. Novartis upped its spend from nothing in the first quarter of last year to nearly $7 million in first-quarter 2001. And Eli Lilly, although not the top spender, put 96 percent more money into television ads in this year's first quarter than it did in the first quarter of 2000. 

Such increases often reflect recent launches or seasonal promotion in classes such as allergy treatment. "In launch mode," DeBacco says, "we're likely to spend more on TV because it's the best way to get the message out quickly to the greatest number of potential patients."  

For those reasons, quarterly trends may paint a skewed picture of the industry's use of television as a promotional vehicle. Indeed, the top 12 companies' 1999-2000 spend on the medium increased by 48 percent. (See "Top Ten Consumer Spenders," page 80.) But whether the sector will pick up more advertising dollars in the second half of this year, only time will tell.

Pharma industry spending on consumer magazine ads seems to still follow last year's moderate growth curve. Industrywide, according to CMR, first-quarter 2001 spend rose 13 percent from that period of 2000, a figure that's on par with the 1999-2000 increase of 15 percent. And Sunday magazines such as Parade have enjoyed a slightly higher 19 percent rise in ad dollars.

Scott-Levin's Sborlini, however, predicts that print advertising may suffer in the wake of the economic downturn. "If you're going to trim a budget, you often go to the advertising budget first," she explains. "Some people would debate if it's absolutely critical to do advertising."

Some big companies are already leading the curve into such a trend. Scott-Levin reports that Hoffman-La Roche's magazine allotment for the first quarter trails last year's budget for that period by 66 percent, and AZ slashed its first-quarter magazine spend by 98 percent this year.

AZ's DeBacco says the company's product launch schedule explains the dramatic change in spending: "We didn't have a product in the first quarter.  Nexium wasn't approved until the end of February, and we didn't launch our consumer campaign until June 18." 

Not every company pulled back from print in the first quarter. Aventis' magazine spend was up 83 percent in that period of this year. Likewise, Eli Lilly put 79 percent more into the medium in the first quarter, and Johnson & Johnson's spend rose by a significant 56 percent.    

Magazine advertising gains some security from the unique role it plays as a consumer reference point. FDA requires that TV ads refer viewers to a parallel print ad campaign or a website for more information, because those media can support the mandatory product packaging information that can't be crammed into a 30-second broadcast spot.

"FDA regulations require print advertising to match the reach of TV advertising," explains Blankenhorn. "So if companies roll out a national TV advertising campaign, they must match that reach in a national print campaign. If the TV campaign is regionally based, they can pick a regional newspaper or magazine."

Daily black-and-white pages have taken a beating so far this year. Total spend for the top 12 companies plunged from $30 million in the first quarter of 2000 to 16.8 million in first quarter 2001. The only thing the top 12 companies' newspaper budgets have in common is that each put some money into the category sometime last year.

If only two words could be used to describe Big Pharma's promotional spend trends during the past 12 months, they would be "it depends." Budgets are simply tools and the industry uses them as such: to determine just the right spend, on a certain type of product, during a particular phase of its life cycle.

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