Pharmaceuticals: Big Stakes and Big Money

by , Oct 21, 2002, 12:00 AM
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If you’re in the movie business, you’re looking for the next Spider-Man or Harry Potter. In the packaged goods category, you make your numbers for a whole decade on a product like Crest Whitestrips. If you’re in the pharmaceutical business, you want a Vioxx, or a Viagra, or a Prozac, or a Nexium. And if you’re in the ad business, you want one of those accounts, because it could mean more than $100 million in billings for one brand in one year.

It’s the home run mentality. The blockbuster approach to corporate revenue. Advertising has become a key element in turning pharmaceutical formulas into cash money as big drug companies continue to focus the next "big thing" on a health-conscious public. According to some industry estimates, for every 1,000 projects that start out in R&D labs, only one will make it to the pharmacy. Think Botox, which is now the responsibility of Grey Healthcare. Three drugs broke the $100 million ad spending barrier last year. More than 160 accounts were up for grabs. And this year the category is on pace to spend more than $2.4 billion in ad dollars across all media. If you’re a planner or buyer for one of these accounts, it’s possible you could be working on the biggest account of the year.

"It has become an intensely competitive market," says Dilip Fadnus, CEO of pharmaceutical marketing consultant The Rowin Group. "Every company has a huge R&D budget. There’s a tendency to do everything fast, from getting government approval to getting doctors to prescribe a drug. It hasn’t always been that way, but now the competition is tough."

Planners and buyers also face a whole new set of challenges in this category. Knowledge has become king for pharmaceutical work, more so than in any other product category. Today’s successful media professional has to be part doctor, part patient, and part pharmaceutical expert in order to master this game. Not only are the products complex, but the information sources available to the consumer are an unwieldy mix of expertise, incompetence, and conflicting interests.

"You absolutely must know everything there is to know," says BBK Healthcare director of creative strategy Matt Kibby. "Account planners especially have to be as facile as some physicians are. Depending on the drug and target audience, you need to know the advocacy groups, newsletters, magazines — everything. If there’s a new psoriasis drug, you need to know where people who have that condition go to get information. Is it the National Psoriasis Foundation? Or is it the network news? This is much more complex than selling sneakers or soda."

And right now the effective approaches are more complex than for sneakers and soda. If you place a 60-second spot about a new allergy drug, Food and Drug Administration (http://www.fda.gov/) regulations state that you have to fully explain the potential side effects. That basically means you get 30 seconds to say what’s great about the product and 30 more to explain how it can hurt someone. Try doing that for sneakers and soda.

"It’s a balancing act," says Reema Vyas, director for account planning at TBWA/Chiat/Day’s health care division. "There are a lot of psychographics involved, and you’re trying to balance the factual and the emotional. You have a limited amount of time to make your claim, and a limited amount of time to communicate the side effects."

Because the situation is so sensitive, many in agency health-care specialist divisions look closely at two strategies. In the first, the advertising is trying to make an audience aware of a "disease state." That’s why many allergy campaigns show sneezing and suffering. By making you understand and connect with symptoms, the brand is confident that it will get its share of business. The other strategy shows relief. The print campaign for the anti-depressant Zoloft shows a dad playing with his son under the tagline "A Zoloft Saturday." The planning strategy for each campaign needs to be specifically tailored to the audience.

"You have to carefully consider the disease state and what it portrays," says Andrew Schirmer, president and executive creative director of Merkley Newman Harty Healthworks. "In general people don’t want to be reminded of bad things. They want to see good things. They want to see something that they would like to be. So much in this business is driven by that."

Schirmer has been involved with health care and the media since 1987. He has no magic recipe for effective media planning in this category. But he does say that he favors advertising in media properties that are perceived to be an authoritative and objective source. Branded health care information works — provided it’s a strong objective brand. He particularly respects Jane Brody’s New York Times<\I> column, women’s magazines, AOL Health, and Yahoo! Health. Perhaps lost in all the controversy and money is the consumer. Most of the research conducted in this area shows that consumers respond positively to pharmaceutical advertising, regardless of its format or message. In January of this year, the National Health Council said that direct-to-consumer ads "outweighed any negative impacts." The NHC research showed that pharmaceutical ads raised consumer awareness about treatment options, alerted them to potentially serious symptoms, and helped them have better discussions with doctors.

More specifically, a Prevention magazine survey in 1999 showed that 76% of its readership felt that ads allowed them to be more involved with their health care and educated them about risks and benefits of prescription medicines. Another survey, this one by Scott-Levin, showed that DTC ads attract patients who might otherwise have gone untreated, according to more than half of the doctors surveyed.

"We keep a close eye on the fundamentals," Kibby says. "We need to motivate people to learn more and make sensible decisions about their health. That varies from condition to condition. But we continue to focus on knowing where the consumer goes to learn more."

Sidebar:

Clampdown: Congress Poised to Act on Drug Ads<\B>

Potential Federal regulation poses a credible threat to the pharmaceutical advertising category, according to the American Association of Ad Agencies. "There is a prevailing opinion in Congress that the amount of advertising the drug companies spend on must somehow be correlated to the pricing of prescription drugs," says AAAA SVP and counsel Adonis Hoffman. "It’s a very difficult hurdle to overcome and it is absolutely untrue."

Yet a bill from Michigan senator Debbie Stabenow is making substantial progress. In Stabenow’s own words, "Advertising is increasing dramatically and leading to soaring drug prices. In 2000, 11 Fortune 500 drug companies spent an average of 30% of their revenues on marketing, advertising, and administration and only 12% on research and development. Drug companies can deduct from their taxes the amount spent on advertising and the amount spent on research and development…. I have introduced the Fair Advertising and Increased Research Act — also known as the FAIR Act — that will limit the amount of tax deductions pharmaceutical companies can take for advertising expenses to the same amount of tax deductions they can take for research and development. American taxpayers should not have to subsidize excessive advertising that only leads to higher prices at the pharmacy counter."

Hoffman has several problems with the bill and has vowed to challenge it legally if it passes. The first problem, in his view, is that it violates the First Amendment of the Constitution by restricting the right to free expression by the drug companies. The second is that it violates tax law by tying R&D deductions to advertising deductions. "They are both legitimate business expenses," Hoffman says.

Ad agencies and brand advertisers should be aware of and concerned about the bill and the attitude of Congress, Hoffman says. "There is a view that they must do something," he says. "We had made Congress aware of our view and we will continue to. Should it become law, we will challenge it. We feel like we have a very sound basis to make a legal challenge to it."

Secondary effects from the publicity surrounding have already affected the business. The Food and Drug Administration, which regulates the type of advertising drug companies are able to run, may be poised to reevaluate its 1997 decision that freed drug makers to advertise to consumers in the first place. It has issued an unprecedented "request for comment" on its policies.

According to Dilip Fadnus, CEO of pharmaceutical marketing consultant The Rowin Group, "There is a lot of soul-searching going on among the big drug companies." They’re under a lot of pressure from their boards and from other groups to revisit their ad plans not only for ethical concerns, but because their efficiency is being questioned. "Spending 34% of revenue in promotion and advertising is not acceptable to the top management of many companies," he says.

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