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DTC-In-Perspective by Bob Ehrlich

DTC in Perspective: Ad Spending Down in 2017

March 23, 2018 0

Kantar Media reported full year 2017 DTC spending declined 4.6%. Is this decline any reason for concern among the DTC industry? No, not really. DTC spending has become an integral part of drug brand marketing. There is no drug industry talk of ending it or reducing its importance. There was such talk during the temporary decline of spending about five years ago but that never took hold.

Bob Ehrlich
“Growth in any given year will depend on new brand entries…”
-Bob Ehrlich

There were several CEOs then who were questioning whether DTC was hurting the drug industry in terms of image. There was joy among the critics that maybe drug companies would end the practice of creating consumer demand. I think the drug companies recognized that the critics would not change their negative views even if DTC was ended. The critics did not like drug companies before the 1997 spending surge and although DTC angered them more, that is not their biggest issue. It has been and is about price. Unless drug makers agree with critics they make obscene profits and cut their prices to generic levels; there will be no peace with the critics. If there were no DTC, price issues would remain. DTC is a convenient talking point and used by critics to lead the public to believe they are being manipulated by greedy drug makers.

So back to the decline of 4.6%. Kantar reported that magazines and Internet companies shouldered the whole decline. In fact television DTC was up over 6% in 2017. The print media industry has a selling job ahead to keep their publications profitable. This is not just about their share of drug ads but a fight for viability of traditional hard copy magazines. Print is still a place to see greater detail on drug benefits and risks and I expect the major print conglomerates to innovate to keep readers and advertisers.

DTC is now a mature ad category. Growth in any given year will depend on new brand entries and when brands are going off patent. We can therefore expect years with growth and years with decline. The 4.6% decline is not the start of any long term trend down. As long as drug companies see a positive ROI DTC ads will continue. We saw the rise of diabetes drug ads the past few years along with the end of erectile dysfunction ads as they go off patent. That is what we will continue to see in DTC spending with some categories accelerating and some ending their ads.

Of course there are existential threats to DTC which could make spending decline dramatically. Those include an outright ban, putting a moratorium on for new brands, taxing it by making it non-deductible, or going to single payer healthcare. None of these will happen in the next few years. That being said, a Democrat House and Senate majority could make it very possible that DTC will be a casualty of healthcare reform. Mr. Trump might sign a bill accepting limitations on DTC as part of a bigger bargain on free market practices.

In the meantime, we will see DTC remain strong in total and see spending shifts within media categories.

Certainly media innovators are looking at new digital platforms such as virtual medicine, point of care opportunities, and new ways to gain efficiency from television and print.

Bob Ehrlich

DTC-In-Perspective by Bob Ehrlich

DTC in Perspective: A World Without DTC

July 14, 2017 0

Imagine there was no DTC advertising because of a government ban. Let’s put aside the free speech issues for a moment and assume the courts supported a ban. Also let’s assume the health care system is similar to what we have now. That is, it is still a mix of private insurers, Medicare, Medicaid, with free market pricing for drug makers. I am not saying a ban will happen but it is possible given the hostility towards drug companies.

Bob Ehrlich
“A world without DTC will not make the patient better off.”
-Bob Ehrlich

Let’s examine what this world of no DTC means for the constituencies of health care. First, what would happen to drug sales? If we assume an ROI of $2 per $1 invested in DTC which is probably in the ballpark then drug companies will lose about $7 billion in annual sales. That is based on an actual estimated drug company DTC spending of around $3.5 billion versus Nielsen reported at $5.2 billion. Why? Drug makers get large discounts not accounted for in the reported numbers. Insiders tell me they spend about 70% of reported numbers.

That $7 billion dollar loss is only about 2% of total drug sales so it is not an industry killer. It does hurt newer drugs more because they use DTC to accelerate the awareness curve. It may also hurt high price drugs more because advertising those drugs puts pressure on insurers to cover them.

Congress would likely be happy with no DTC because they falsely think demand would decline for branded drugs. Unfortunately, they would soon find out that drug makers will ramp up physician promotion instead and make up for lost consumer awareness. Consumers would be back to having less information and trusting that physicians and insurers have their best interests at heart. We know physicians may not be up to date on newer drugs and insurers do not want to pay for expensive drugs. So, I am afraid consumers may not be informed there are newer drugs available.

Physicians may like a ban because consumers will not ask them about an advertised drug. On the other hand, DTC brings patients in the door and that means opportunities to do reimbursed tests and services. I am sure dermatologists, psychiatrists, ophthalmologists, podiatrists, cosmetic surgeons, and other specialties benefit by increased traffic from DTC. Physicians need to get used to the new world where patient information is widely available and trying to restrict it is just not practical.

Insurers would love a no DTC world because they can negotiate without those pesky consumers wanting to know if they cover expensive drugs like Harvoni, Keytruda, or Opdivo. Drug companies will try to negotiate fast access but I suspect formulary access will be delayed without consumer pressure.

What will happen to price under a DTC ban? Drug companies will not lower prices because there is no DTC. There is a general misconception that DTC expenditures are a cause of high prices. That is false. DTC, if successful, raises demand that more than offsets the cost. Therefore sales will be less without DTC so why would a drug maker lower prices? DTC allows new brands to enter faster and create competition which will lead to lower prices. Banning DTC ensures the established brand can keep its leadership longer and prices higher.

Banning DTC may make critics feel better but will have very minor impact on demand, pricing, and overuse. Instead less information will be available to consumers who will now have to trust biased insurers and busy doctors to suggest what is best for them. We all recognize DTC is meant to advocate use of a drug and is not unbiased information. Our healthcare system, because it is a mix of profit making entities and government payers concerned about budget, is inherently subjective. Therefore, banning DTC just leaves other constituencies to their push their own biases about what is best for patients.

A world without DTC will not make the patient better off. Drug critics were complaining about drug prices before DTC and will continue even if it is banned. Unfortunately, DTC has become an easy target and will remain in the crosshairs of legislators, physician groups, and insurers. As a DTC community, we must tell lawmakers the facts and the dangers of limiting speech.

Bob Ehrlich

DTC-In-Perspective by Bob Ehrlich

DTC in Perspective: Pharmacists Join AMA in Calling for DTC Ban

June 24, 2016 0

The AHSP, the organization that represents 43,000 pharmacists and technicians in hospitals and other acute care settings, called for banning DTC. This was a change from previous positions that supported DTC in limited use. The AHSP does not represent retail pharmacy but it is still an important voice in health care. Along with the AMA this call for a ban adds fuel to the political fire related to drug company bashing over pricing and marketing.

Bob Ehrlich
“The AHSP..cites.. much misstated data on drug marketing..”
-Bob Ehrlich

The AHSP statement calling for a ban cites the much misstated data that says drug companies spend more on marketing than research. They also say that DTC can be misleading. Therefore they feel that pharmacists and other clinicians can best help consumers with drug selection. This reasoning is faulty. Drug company marketing data includes sales force expense, sampling costs, physician ads, as well as DTC. The drug companies spend over $50 billion on R&D. That is ten times the amount spent on DTC.
Are drug ads misleading? FDA requires all claims to be clinically supported and requires fair balance. They review all ads for accuracy. While advertising is designed to sell, drug ads are the most scrutinized of all advertising categories.
Despite the facts, the anti DTC forces are a major concern for drug advertisers. Hilary and Trump are not friends of the drug industry. It is clear from their statements that neither has their facts straight. Hilary sees drug companies as her enemy, an evil profit hungry industry. Trump sees drug companies as one of his vendors to be squeezed like a mattress supplier for his hotels.
What drug company employees and their media and agency partners must do is let Congress know the facts. Take the time to educate your Congressional representatives how important drug advertising is and why it is important to consumers. Have them understand that DTC does not raise prices. Banning commercial speech for lawful products is a bad idea. What category will be next?
The call for a ban by hospital pharmacists is hypocritical given the huge investment hospitals are making in DTC. Almost every hospital advertises these days. These same hospital based pharmacists think it is acceptable to advertise surgery on television but not drugs.
DTC advertising is not perfect but deserves to be one way for patients to get information. If pharmacists think banning information helps patients, they are wrong. Their input is valuable but to say they and the physician should have a monopoly on patient communication is unrealistic in the Internet era.

Bob Ehrlich