When drugmaker Sepracor Inc. (SEPR)launched its insomnia drug, Lunesta, this past spring, the company kicked off an advertising blitz. Sepracor blanketed the airwaves with a campaign that could top $70 million this year. But in September, when rival Takeda Pharmaceuticals North America rolls out its own sleep aid, Rozerem, it won't spend a penny on TV ads. Why not? Despite the lavish spending for Lunesta, the overall market for prescription sleep medication "doesn't seem to be growing," says Richard J. Daly, senior vice-president of marketing for Takeda Pharmaceuticals North America Inc. Takeda will instead devote its marketing firepower to pitching doctors directly.
Takeda is hardly alone in taking a hard look at consumer ads. According to ad researcher TNS Media Intelligence, consumer ad spending by drugmakers was about flat, at $1.9 billion for the first five months of this year vs. the same period in 2004. While it's true that millions of dollars in advertising for the Cox-2 inhibitors were yanked after the painkiller Vioxx was pulled from the market, even the unaffected companies have cut back. Ad spending has fallen for 7 of the top 10 drug advertisers, including GlaxoSmithKline (GSK) and Novartis (NVS). If the trend continues in the second half, chalk 2005 up as the year drug companies put the brakes on advertising after a decade of nearly relentless growth.
So why the pullback? For starters, there just aren't that many new Big Pharma blockbuster drugs coming to market like Lipitor or Viagra that lend themselves to broad marketing campaigns. At the same time, many drugmakers have cut back on ad spending in the face of growing congressional criticism following the Vioxx debacle. Increasingly, leaders in Washington have charged drug companies with overhyping the benefits and underplaying the problems in ads for many prescription drugs. But what's most surprising of all seems to be the simple realization within the industry that saturation advertising simply doesn't work as well as was once believed.
In fact, Big Pharma seems to be rethinking its entire approach to reaching consumers. It's pulling away from network-TV advertising and gravitating toward more targeted channels, such as cable TV and the Internet. "I think there was a big overshoot in terms of the spending" on consumer ads, says Philip A. George, managing partner at consulting firm Accenture Ltd. (ACN) "Companies are questioning how effective is that additional $15 million."
While some advertising executives suspect spending will pick up again as companies figure out what works in the tougher regulatory environment, no one expects growth to come back to the 20%-plus rate of the last few years. TV networks could be particularly hard hit. Already they've seen spending on drug ads slow to a greater extent than the advertising market overall: For the first five months of the year, drug dollars funneled into network TV have fallen 5%.
HEADING OFF THE FDA
No doubt heat from Washington is tempering the industry's appetite for flashy TV spots. A bill has already been introduced in Congress that would give the Food & Drug Administration more sway over consumer ads. And politicians, including Senate Majority Leader Bill Frist (R-Tenn.), have been arguing for greater restraint when it comes to drug pitches. At the same time the FDA is undertaking a review of its requirements for drug ads. That could lead to tighter rules.
Many drug companies aren't waiting for marching orders. In an attempt to head off FDA action, the industry's trade group, the Pharmaceutical Research & Manufacturers of America, announced on Aug. 2 its own new code for advertising. The rules call for the industry to target ads to age-appropriate audiences. That could mean fewer -- or even no -- commercials for impotence treatment during big football games. They also demand a more balanced presentation of the risks and benefits of drugs in ads. David Brennan, executive vice-president for North America at AstraZeneca PLC (AZN), who will take over the chief executive position next January, says his company is already developing more nuanced, educational ads. New commercials for the cholesterol-lowering drug Crestor, starring actor Mandy Patinkin, focus almost obsessively on the medication's side effects. Brennan acknowledges, though, that the new approach "makes it more challenging to get a message across."
Compounding that headache: Some campaigns just aren't working that well. The marketers of erectile dysfunction drugs Cialis, Levitra, and Viagra cut their spending in the first five months of 2005 after massive campaigns last year failed to spark the expected growth in demand. Indeed, despite a combined $400 million spent on consumer ads for those drugs in 2004, U.S. sales were up only about $100 million, according to market research firm IMS Health Inc. (RX)That market has become saturated, with most of the people who were willing to consider treatment already trying these medications, says SG Cowen & Co. analyst Stephen M. Scala. Moreover, a reduction by one company often has ripple effects. AstraZeneca's Brennan says his company may run fewer TV spots for its anti-ulcer drug Nexium this year because rival TAP stopped TV advertising for Prevacid, a competing product.
As drugmakers labor to develop more educational and balanced pitches, they're also trying to better target their messages. Companies wishing to reach female audiences, for example, are placing more ads on cable outlets such as Lifetime and Oxygen. Consultants say that's one reason cable-TV spending has jumped 35%, to $335 million, in the first five months of this year. Cable is also a big draw because it's less pricey than the networks, based on the number of people reached per ad, says Thomas H. Chetrick, vice-president for advertising and marketing services at Bristol-Myers Squibb Co. (BMY).
The move to direct ads better has also fueled Internet spending. While still tiny at about 3% of the $4 billion-plus spent overall on consumer drug ads, it's growing at a healthy clip. According to TNS, drugmakers shelled out $56 million for Internet ads in the first five months of this year, up from $49 million last year. That figure, though, doesn't include deals with search engines to give drug company Web sites preferential placement when someone does a search on a specific disease. But more companies are turning to such techniques. Pfizer Inc. (PFE), for example, struck a deal with WebMD Corp. (HLTH) that guarantees that when anyone searches for information on migraines they get referred to a Pfizer-sponsored site on the condition. There they can retrieve information on Pfizer's migraine drug, Relpax.
So far, the industry has only dipped its big toe into the rising tide of Internet advertising. "This is still in its infancy," says Gino Santini, senior vice-president of global strategy and development for Eli Lilly & Co. (LLY). Pharma may one day jump in with both feet, but for now the days of go-go growth for drug advertising are a thing of the past. zz
By Amy Barrett in Philadelphia and Arlene Weintraub in New York, with Michael Arndt in Chicago