Study: Pharma Spending Pattern Unrelated to Sales Goals

A study by Cutting Edge Information of marketing spending by nine pharmaceutical brands in their first three years on the market has found that, despite correlations between total spending and peak sales, year-over-year budgets displayed no direct connection to product sales goals, company size, clinical profile or other brand characteristics.

Instead, brands followed different spending patterns suited to unique commercial needs. In "Post-Launch U.S. Marketing: Promotional Mix, Decision Support and Market Access," four of the budgets climbed from year one to year three; another four budgets declined. The ninth brand followed a completely different path by reducing spending after peaking in year two because it had secured a predetermined percentage of the market.

One brand increased allocations from $1 million in year one to $4 million in year three after using that time to expand from limited release to full-market availability. Another brand decreased budgets, from $18 million to $12 million, and was still able to succeed in educating a market about its innovative first-in-class status and clinical advantages.



The differences in the brands' year-over-year spending strategies is because of the unique challenges individual brands may face, says Eric Bolesh, research team leader at Cutting Edge Information a North Carolina-based business intelligence firm.

"In order to achieve a brand's full sales potential, spending allocations must be finely attuned to their products' strengths and weaknesses, including the realities of a market," he says. "First and foremost, there's no by-the-book formula that's going to guide any brand."

Each brand needs to consider its unique, individual challenges and develop a customized brand plan. "From one quarter to the next, if they find something that isn't working they can quickly change their tack," he says.

Information for the study was developed from both primary and secondary sources. The research team conducted primary interviews and quantitative surveys with marketing executives and brand teams at the following pharmaceutical and biotech companies: Luitpold Pharma, Pamlab, Oscient, Specialty Pharmaceutical Company, Stiefel Labs, Daiichi Sankyo, Genentech, Human Genome Sciences and Johnson & Johnson.

The study provides a comprehensive breakdown of brand promotional spending, excluding sales force budgets, in the first three years on the market.

The report details the most critical areas of brand investment, including: promotional mix (such as detail aids, samples, speaker programs and journal ads); decision support (market research and competitive intelligence); market access (reimbursement and pharmacoeconomics).

Two of the brands surveyed are "blockbuster brands" with peak annual U.S. sales projected to exceed $1 billion dollars, Bolesh says. One brand was expected to reach $750 million sales in a year, three of the brands were expected to peak at $500 million and three were expected to reach $250 million sales in a year.

The study looked at marketing spending for promotional, decision support and market access. It does not include sales force costs for pharmaceutical reps, Bolesh says.

Total spending in those categories for the two blockbusters in years one through three of the brand each totaled $150 million to $200 million, while the three brands with $500 million in sales each totaled $25 to $45 million for the three years, the three brands with $250 million peak sales and the brand with $750 million peak sales each totaled $10 million to $30 million for the three years of marketing spending that was examined in the study.

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