Some state delegations are pushing the AMA to adopt a position to push drug makers to include the retail price in their ads. They feel full disclosure will inform consumers that some drugs are very expensive up front. The physicians pushing this idea feel drug makers will be held more accountable by the public if they disclosed prices in their ads.
Clearly these advocates hope that forcing drug makers to disclose price in ads will create pressure on drug makers to keep prices in check. The question I have is, is disclosing price a net positive or negative at the stage of awareness advertising? Consumers are entitled to know prices of what they are being prescribed. Does upfront price disclosure help them make a better decision or just add confusion?
In a world where the advertised price is what you pay, then disclosing it makes sense. In the drug world, however, consumers do not pay retail prices. There are many net prices to consumer depending on insurance, co-pays, formulary position, and discounts offered by drug makers. The retail price is only relevant if the consumer pays it. I understand that many expensive drugs are not a viable option unless the consumer has good reimbursement. That viability is rarely known by the consumer until they take that prescription in to be filled.
Advertising price generally will not be a net positive for consumers. An expensive drug that says it costs $100k a year may scare consumers away from asking about it even though it may in fact cost them nothing. A $20 a month drug may sound cheap but a consumer may be paying full price for it because of coverage. The only intent of this potential AMA policy is to embarrass drug makers of very high price drugs. Pressuring drug makers on price is fair game for insurance companies, PBMs, and government payers. Retail price disclosure will only cause angst and confusion among consumers.
I also have concerns that consumers are not experts on price/value of drugs. Does curing Hep C for $80,000 cost less than liver transplant, or long hospitalization? Does paying $100,000 for an extra year of life make sense for a cancer patient? These decisions are complex and required an informed factual basis. It makes sense to have independent medical third parties do research on drug price/value and have consumers and doctors made aware of those analyses. I can even support ads being required to have a web site posted that has those analyses.
I understand doctors are frustrated with drug prices. I also know some drug companies have gone too far in aggressive pricing. The solution is in self-restraint, tough negotiations by payers, and well done research on cost/benefit of drugs. Advertising retail price will not help consumers and in fact may discourage them from seeking treatment because they assume they cannot afford the drug.
Merck’s cancer drug Keytruda recently began its DTC campaign competing with Bristol Myers’ Opdivo. What is significant is that highly targeted drug categories continue to invest heavily in DTC. Keytruda is a biologic injection that has indications for non small cell lung cancer, advanced melanoma and head and neck cancer.
The market is small by size compared to mega categories like diabetes and cholesterol where sufferers are in the tens of millions. Lung cancer cases number about 200,000 newly diagnosed annually. Of course, when the treatment price is around $100,000 per year for biologic lung cancer treatment versus less than a thousand for cholesterol drugs; the DTC payback is certainly achievable.
Roughly the numbers show a $50 million ad campaign for Opdivo and Keytruda need only gain 500 new patients from DTC to break even on a revenue basis. While consumers are the DTC apparent target, these ads also reach oncologists. Once an oncologist knows patients are seeing the DTC and will ask about the drugs, it clearly provides the motivation to consider using them.
The Keytruda ad is very different from Opdivo. While Opdivo used a headline dramatic announcement approach, Keytruda chose an individual patient story. Using an actor portrayal Keytruda showed a 60ish age woman named Sharon telling her story in a tv production studio. Sharon says she learned her type of lung cancer could be treated with an alternative to chemo. She tells how she was given only months to live but a year later after treatment she is still there with her family.
The commercial is filmed in black and white which adds to the seriousness of the presentation. Sharon’s story in this 90 second ad is told very well. It is very informative and understandable using Sharon and supers emphasizing the key benefits. What is interesting is that they are showing Sharon in the production studio both telling her story and in the makeup room preparing to be filmed. Her family is also at the studio watching her being filmed telling her success story.
The sell portion of the ad is about 30 seconds with fair balance risks and warnings in the last minute. Clearly the ad is technical in terms of disclaimers about who can take the drug and one wonders if patients who have non small cell cancer are aware of their biomarkers and gene types mentioned in the ad.
Given the high prices for treatment stock analysts see Keytruda generating revenue in the billions. A DTC campaign costing $50-100 million for a drug bringing in billions is a small risk for Merck. Opdivo had been criticized by some doctors for advertising to patients in an area best left for oncologists. This is a fair question but advertising breakthrough therapies does help potential patients become aware of their options. It also puts pressure on insurance companies to cover the large expense.
Keytruda has done an excellent job in its DTC ad. This campaign will get attention and is very different in executional style from Opdivo, an ad I also think is very good. The broader concern is whether advertising $100,000 drugs to consumers causes Congress to look more critically at both drug prices and DTC ads. While individual patients get extra months and in some cases years longer to live, government payers and insurance companies are paying a lot for that life extension. While no one wants to put a price on those months, unfortunately it is a calculation needed to be considered by policy makers.
After years of unbranded ads for shingles, Merck is now promoting its vaccine by brand name. Why the change? Glaxo just filed for approval for its shingles vaccine and Merck now needs to build up the brand Zostavax. When doctors had one choice Merck did not need consumers to ask by brand name. Soon asking doctors about shingles will not necessarily mean getting Zostavax.
Merck’s Zostavax ad is very different from the Terry Bradshaw disease awareness ads. It shows an active senior aged woman swimming and a voice over describing a slower immune system can lead to shingles. The ad is using British accented actors to represent the virus and the vaccine. I guess there is something about a British accent that adds gravitas.
There are only a few vaccine ads using DTC. Theraflu, Fluzone, and Prevnar 13 are some that have used television. Vaccines are a tough area for DTC because of the relatively low revenue stream they provide. A shot annually, or every five to ten years, does not lend itself to easy payback. Prevnar 13, based on its ongoing spending, appears to be very successful in generating sales. Flu commercials are done only in season so they have a short burst media strategy which helps ROI metrics.
Shingles is a year round problem. It is relatively rare arising in 200,000 people annually. That is about 10 cases for every 1000 people age 60+. About only 28% of the senior population have been vaccinated so there is a lot of room to grow. Clearly Zostavax has the goal to get their brand awareness up in advance of a Glaxo entry. This new 75 second ad is well done as it illustrates what shingles is and how is occurs. Its tone is serious and informational. The swimmer never speaks as the audio track is a play between the voice of the virus saying it is lurking inside and the vaccine saying how it will help prevent outbreaks.
The disease ads previously had Bradshaw and others discuss the painful outbreaks they faced. This ad is more of an announcement type ad relying on the basic information of what shingles is and how Zostavax works. I liked the real people testimonials in the disease ads but understand why as an announcement ad for the brand Merck went this way.
My guess is Merck will shift back to testimonials after establishing strong brand awareness. Their priority now is to get the name Zostavax strongly remembered as the shingles solution. Once Glaxo is out there with its version, Merck will need to offer competitive differentiation. For now, this ad will get the job done.
Everyone has an opinion on drug ads. From skits on Saturday Night Live, to the halls of Congress we hear critics mock DTC. Last week I criticized the 9/12 Ad Age story citing terror tactics used by drug marketers. The managing editor, Ken Wheaton, of Ad Age decided to write a follow up column telling pharmaceutical marketers to take a chill pill because he was surprised how they defended their ads in their “terror” story. Ad Age decided to double down in their criticism of drug marketers.
Mr. Wheaton says drug companies are jacking up ad prices to pay for the advertising. This is why these anecdotal stories are so off base. Mr. Wheaton has decided that it is obvious that DTC raises drug prices. Why? Because he says it must be so from his experience. He may be very knowledgeable about general advertising as his title would suggest. He is dead wrong that drug advertising causes high prices. The facts do not support his views. Drug marketers spent a bit over $5 billion on DTC in 2015. That is only about 1.5% of sales. Drug companies do not set their prices based on ad budgets. That might be true in advertising driven consumer brands where ad budgets make up 30% or higher of sales but not where multi billion dollar brands are spending a $50-100 million.
Mr. Wheaton makes some fair points that the drug industry has a reputation problem. He is certainly on point that drug makers must be aware of the negative impact high prices have on this industry image. They have not helped themselves with the recent EpiPen pricing hearings or Martin Shkreli smirking during his hearing day in Washington. Drug companies have the unenviable task of justifying higher prices in the United States versus price controlled developed countries. The American consumer does not like paying more but they also want drug innovation. While the media and political critics doubt the claim that cutting prices will reduce innovation, the economics of the drug business say otherwise. If drug prices were cut 30% to match Europe and Canada, that is coming right out of the bottom line. I challenge any business to reduce its profit in its biggest market by 30% and not affect R&D.
Advertising, however, is not the cause of the pricing issue. Drug companies have had this problem pre and post DTC advertising. Drug ads have become a convenient symbol for criticism of the entire industry. Drug companies do weigh the pros and cons of advertising in terms of causing criticism versus the projected sales increase. What is disturbing is Mr. Wheaton making the unsupported statement that only drug marketers and their marketing partners support their right to advertise. Where is his data that says that? Many consumers would be happy to see drug ads banned, and those folks may even be greater in number than those who want to see drug ads remain on air. Clearly it is not a unanimous view and I suspect many consumers against drug ads feel that way because they think that DTC ads raise their prices.
Mr. Wheaton recommends drug makers stop their ads. Does he feel the same about ads for other products often criticized? What about fast foods, violent video games, beer, explicit music, unproven health supplements, and many others often criticized for causing harm? Mr. Wheaton has taken drug marketers to task for lawfully trying to build awareness of their highly regulated products where every word in their ads is reviewed by FDA. There is no doubt that drug ads are meant to sell product. Drug makers are in the profit business. Profit leads to investment. Advertising allows new competitors to compete with the category leaders.
In a world of no DTC, drug makers will still price as high as the market will bear. That is the same strategy used by every business including what Ad Age charges their advertisers. Mr. Wheaton is very convinced in his anecdotal and observational argument. Ad Age’s Mr. Wheaton is wrong about the facts, however, and in his cynicism about the value of drug ads.