• by Joe Mandese  @mp_joemandese, June 13, 2007

The threat of regulatory oversight appears to be having a profound effect on one of the most dynamic advertising categories of the past decade - direct-to-consumer prescription drug ads - and if another category facing scrutiny follows a similar pattern, the major media could see big shifts in advertising plans by food marketers. Those are some of the preliminary conclusions being drawn by analysts at ad tracking firm TNS Media Intelligence as it begins drilling into some of the micro economic data that have been influencing the U.S. advertising expansion, or in the case of the first quarter of 2007, a lack thereof.

"Pharma seems to be little farther along than food advertising, but we are starting to see some interesting patterns," says Jon Swallen, senior vice president-research at TNS MI, which Tuesday issued a revised forecast, reducing expectations for U.S. advertising growth this year (see related story in today's edition).

Swallen says the impact of regulatory oversight appears to have already affected advertising spending, as well as the mix of media used by pharmaceutical advertisers. That conclusion is drawn from a "deep dive" into data for the category that TNS MI has just completed, and it reveals some interesting patterns. For one thing, except for a brief scaling back in total ad spending that occurred when the pharmaceutical industry adopted a voluntary code of conduct for advertising prescription drugs to consumers, ad spending has actually skyrocketed. During 2006, pharmaceutical ad spending surged 14%, and according to TNS MI's most recent data, it jumped another 6.7% during the first quarter of this year.

"Initially, it seemed that drug companies were following through on their pledge to delay the introduction of new drugs, and to conduct more testing before they began advertising new brands, but in retrospect it represented a finger in the dam," says Swallen. "All it did was defer, not eliminate ad spending for new drugs. After the voluntary deferral period, that pent-up money for new product introductions came back into the marketplace and DTC pharma ads shot up 14% in 2006."

But the surge has not benefited all media equally, and the voluntary code appears to have an even more significant impact on the mix of media used by the DTC category. To make good on its pledge to provide more detailed information to consumers about the effects of prescription drugs, as well as on alternative forms of treatment, pharmaceutical marketers appear to be favoring media that allow them to tell long-form advertising messages. That, in turn, has led to a bonanza for magazines, as prescription drug marketers have begun buying additional pages to provide additional disclaimer and informational copy to accompany their image and brand advertising claims.

That trend suggests that a major factor in the overall growth of consumer magazine ad spending this year has been a surge in ad pages purchased by prescription drug brands. Magazines were the second fastest growing ad medium behind the Internet during the first quarter of this year, according to estimates by TNS MI, Nielsen Monitor-Plus and the Magazine Publishers of America, and Swallen suggests that increased pharma spending is a key reason. During the first quarter of 2007, total DTC spending rose 6.7% to $1.2 billion among the media tracked by TNS MI, but spending in consumer magazines soared 25.5% to $376.2 million.

While broadcast and cable TV spending was also up, its rate of growth was more moderate than in magazines, and Swallen thinks that also has to do with the effects of the pharmaceutical industry pledge to provide more information to consumers. Instead of buying 30-second TV advertising units, the major DTC brands have been buying 60-second TV commercials to provide more information, but have cut back on the total number of units they air.

"We kind of associate DTC advertising with TV, but magazines have been benefiting more than television, and the chief reason is the code of conduct and an effort to be more conscientious about providing extra information to consumers," says Swallen. "As a result, DTC advertising has become more information-rich and that has favored magazines vs. TV, and longer commercials in TV."

Interestingly, that strategy has not been a boon for other media capable of telling long-form advertising messages, especially newspapers, which plummeted 65.3%, and Sunday magazine supplements, which dived 40.8%. It also has not been a major benefit to the Internet, which would seem to be an ideal medium for telling long-form advertising messages, or for driving traffic to DTC brand Web sites for more information. DTC spending on the Internet rose only 4% during the first quarter.

TNS MI's Swallen says it's still too early to tell how regulatory pressures surrounding obesity and food marketing might impact total ad spending and the mix of media used by food marketers, but he says the shifts could be equally as profound as with prescription drugs.