Spend Trends 2007: Hang 10

Published on: 

Pharmaceutical Executive

Pharmaceutical Executive, Pharmaceutical Executive-05-01-2007, Volume 0, Issue 0

Direct-to-consumer advertising officially becomes a "tweenager" this August-and, oh my, how it has grown. DTC was officially born in 1997 when FDA gave the green light to companies to advertise their drugs to consumers. In the first year, pharmaceutical marketers bounded onto the scene and spent more than $1 billion. Years passed. Debates ensued. Patients learned more about drugs. And, yes, spending grew. The latest available figures for 2006 show that the industry spent $4.8 billion on DTC advertising, a 13 percent increase over 2005 and the second year of double-digit growth.

Direct-to-consumer advertising officially becomes a "tweenager" this August—and, oh my, how it has grown. DTC was officially born in 1997 when FDA gave the green light to companies to advertise their drugs to consumers. In the first year, pharmaceutical marketers bounded onto the scene and spent more than $1 billion. Years passed. Debates ensued. Patients learned more about drugs. And, yes, spending grew. The latest available figures for 2006 show that the industry spent $4.8 billion on DTC advertising, a 13 percent increase over 2005 and the second year of double-digit growth.

Television is still the darling when it comes to DTC dollars, accounting for $2.7 billion of the total spend. But magazine advertising grew the most, rising 24 percent in 2006 over the previous year. As much as consumers still love watching the tube—or HDTV on flat screens—the numbers indicate the growing emphasis pharma is placing on the printed word to reach healthcare consumers.

Stephenen Gerard

"There is definitely an extra feeling of credibility conveyed by magazines," says Tim Kelly, practice leader of promotion management for IMS Health. "There's something tangible that resonates with people with print advertising. It's something they can hand to their doctor."

Dr. Dot-Com

Whereas 10 years ago a pharmaceutical company's "being on the Web" meant having a prescription insert (PI) posted online, life science marketers are now fully engaged in the medium and are having success. The Internet has become the first touch point at two crucial moments in the healthcare decision-making process: Consumers and patients very often go online after seeing a direct-to-consumer drug ad or after the doctor hands them a diagnosis.

Fine Print: Magazine DTC Spending Outpaces TV

Twenty-seven percent of today's online dollars for patients are spent on educational "sponsorships," according to the benchmarking consultancy TGaS Advisors. (Web sponsorships are primarily defined as an ongoing deal with a third-party site—like WebMD—involving some tool or editorial content.) Two-thirds of these deals achieved or exceeded their target goals in 2006, says Stephen Gerard, founder of TGaS Advisors, and investment is expected to increase in 2007 and 2008. Other areas of investment include banner ads and paid search, which when taken with sponsorships, make up 61 percent of the total online DTC budget.

Search-engine marketing is still in vogue, but the opportunity there is dwindling. Years past saw pharma companies buying up keywords on major search engines like Google and Yahoo! and focusing on search-engine optimization. Companies that weren't early movers were early losers.

"Search terms are like oceanfront property," Gerard says. "There's only so much of it—and most of it has been bought up. Where you once had pharmaceutical companies buying 20 or 30 search terms and misspellings associated with the name of their drug, you're now seeing them buy 300, 400, 500 'lifestyle' terms associated with the drug." These lifestyle terms can include any words that are closely related to or associated with a disease or drug.

Peter Nalen

As in previous years, paid online banner advertising has remained a staple in the marketing mix as biopharmaceutical manufacturers continue to find the Web a good place to reach their target audience. The more complex drugs become, the more likely consumers and patients will spend time searching the Web for health information. And as drugs on the whole become more specialized, particularly with targeted therapies in oncology, this online marketplace of healthcare information is expected to deliver even more value.


Digital Detailing

It used to be that pharmaceutical marketers thought doctors anxious to embrace the Internet or any form of electronic communication. But physicians' practices have truly changed. Not only are more doctors showing up online, but they're also taking handheld personal digital assistants (PDAs) into their office exam rooms right along with their stethoscopes and thermometers.

Big Spenders: New brands, more dollars for DTC

"The Internet used to be perceived as a consumer vehicle," says Peter Nalen, president and CEO of Compass Healthcare Communications. "But in the last two years, we've found 85 percent of healthcare professionals have broadband access and 62 percent of them use handheld devices." Nalen and others attribute this change to specific factors: Older doctors are finally following their patients' cue to go online for information, while newly minted healthcare professionals have grown up with the Web in medical school and now depend on it for information.

Until recently, pharmaceutical sales reps have outnumbered patients in many doctors' waiting rooms, but now pharma's "contact" dollars—in other words, detailing—declined for the second year in a row. (See "The Detail Drop.")

"We're seeing big cuts in professional sales-force spending because of a cutback in the 'arms race,'" says IMS's Kelly. "Pharmaceutical companies found they weren't getting their reps in front of doctors as frequently, and the quality of their message was coming down. You're starting to see an older, more knowledgeable, more clinically educated sales rep calling on doctors now."

Most industry experts stop short of saying digital detailing has filled the space created by the slow-down. But all agree sales force reps are expected to work faster and smarter.

David Coman

"The overall trend of pharmaceutical companies is to try to gain more efficiencies in their current sales force," says David Coman, vice president of global marketing for Dendrite International, a provider of sales, marketing, and clinical solutions. "There is a clear desire to get more out of the sales reps that are out there."

Certainly, digital tactics will help, but it is still too early to accurately predict how online detailing could impact the traditional feet-on-the-street pharma sales-force model. "We see e-detailing as being completely complementary," Coman says. "What we've seen and heard is that doctors are becoming a lot more sophisticated in seeking drug information in an alternative manner. Therefore, the more channels you can combine, the more you create a holistic marketing approach and a perfect supplement to the field sales-force representative."

Compass Health Care's Nalen says the decline in sales force spending doesn't just come from layoffs. "Companies are looking more toward outsmarting the competition as opposed to outspending them," says Nalen. "Some doctors like to work with reps, others don't. Some would rather attend an online 'dinner' meeting with a key opinion leader than visit a restaurant—and industry regulations say you can't spend more than a certain amount on dinner for a doctor anymore, anyway."

Virtual Reality Relationships

Analysts interviewed for last year's Media Spend Trends Report (see Pharmaceutical Executive's "Media Spend Trends: Change the Channel," April 2006) predicted 2006 would be an "infrastructure-building year" for companies. At the heart of it, they predicted that the industry would be building up the skill sets and tools to focus on more sophisticated disease-awareness and medication-compliance efforts. This prediction seems to have come to pass both on the professional and on the consumer side, with pharmaceutical companies actively embracing "relationship marketing"efforts.

The Detail Drop: Sales Dollars Decline Again

Company executives see this wave of relationship marketing focusing on medication compliance and adherence strategies and getting patients to fill a prescription—whether it is for the first time or the 50th. "We found that 20 percent of people who type a brand name into an Internet search engine are already holding what we call an 'unfilled first script' in their hands," Nalen says.

One of the hallmarks of relationship marketing is constant, steady, and strong messages to stakeholders. In this way, if pharmaceutical marketers want relationship marketing to work, they need to take a tip from the tactic they are seeking to employ, and stick with their marketing efforts for the long-haul. "Pharma is finding that relationship marketing is a trust account that is not susceptible to the winds of the day," he says. "So they need to make a commitment and put it at the 'adult' table."

One might say that at 10 years old, DTC is growing up.

Diane West is a freelance contributing author. She can be reached at wordsworthnyc@aol.com.

One Decade of DTC Advertising

Companies hone their communication craft to focus on the next 10 years of DTC challenges

Direct-to-consumer advertising has come a long way in its first action-packed decade. "There was a big lack of knowledge in both the approach to DTC advertising and the measurement of its effectiveness 10 years ago," says Tim Kelly, practice leader of promotion management for IMS. "Pharma companies had a lot of money to throw at it, and they did."

Journal Spending: Bumpy Ride

If pharma companies were throwing money at consumer advertising, then their aim has gotten better. "The ad agencies who did early DTC were the same ones that advertised laundry detergent—so they didn't really know how to drive someone to the physician to talk about a condition," says Kelly. "But companies became smarter and quickly formed whole brand teams around the drugs they were promoting."

Looking to the next decade, Kelly sees three key issues that DTC must face. The first is adherence to PhRMA's Guiding Principles on Direct-to-Consumer Advertising. Announced in August 2005, the Principles urge healthcare companies to follow industry-generated guidelines for responsible DTC. "Some companies follow the principles religiously," Kelly says. "Safety issues are a public relations nightmare, so it's actually better to wait until the second year before making a big marketing push."

The second issue is regional managed care networks. Marketers must wrestle with understanding if their advertising can be effective in the face of high co-pays. Says Kelly: "What good is the best advertising in the world if patients don't have access to the drug because of a $30 or $50 co-pay?"

The last is a continued emphasis on understanding prescriptions from the patient's point of view—and why patients might (or might not) comply with a drug's dosing.

Wide Awake

Insomnia Marketers Not Asleep at the Switch (But Consumers May Be Asleep at the Wheel)

One thing's for sure—insomnia marketers weren't asleep when it came to driving DTC advertising in 2006. According to TNS Media Intelligence, the brand team for Sepracor's Lunesta (eszopiclone) spent the biggest bucks on consumer advertising, knocking AstraZeneca's heartburn drug Nexium (esomeprazole) right out of first place—and into fifth. Rival Sanofi-Aventis's Ambien CR (zolpidem) followed hot on the heels of Lunesta in terms of spending. Still another sleep aid, Takeda's Rozerem (ramelteon), debuted on the high-spenders list, coming in 12th. Insomnia drugs, according to David Kweskin, senior vice president and practice area leader for TNS, have become the new cholesterol drugs: They are fiercely jockeying for market share in a crowded category. "When Lunesta first stepped in, it forced a reaction from Ambien," Kweskin says. "Then Ambien CR stepped in, so Rozerem stepped up."

David Kweskin, TNS

The more visible the ads, the more scrutiny they receive. FDA recently ordered sleep-aid makers to warn consumers of the risk of "severe allergic reactions and complex sleep-related behaviors, which may include sleep-driving." (Yes, driving in your sleep.)

With this cross-category warning, marketers must differentiate their respective products from the pack. "But being unique is not tantamount to success," warns Kweskin, pointing to Rozerem's quirky ads featuring a talking beaver. "They grab your attention—but does it create recall?"