Under Pressure

If you work in the pharmaceutical industry, you know what it's like to work under pressure. The industry's biggest blockbusters have lost patents or are facing patent protection, and new product approvals aren't able to replace the lost revenue. What's more, threats of external regulation and legislation are looming over both direct-to-consumer advertising and professional detailing. The pressure is building, and that's apparent in promotional spending, which dropped nearly 5 percent in 2007 after a 5 percent increase the previous year.

The Big Ten

But the downturn in promotional spending isn't just a reflection of industry-wide belt tightening. The most recent available numbers reveal that companies aren't just spending less, but looking to spend a whole lot smarter.

Play it Again: DTC Media Mix 2007

Take samples. Last year, the industry distributed 4.1 billion doses—3 percent fewer samples than in 2006. At first glance, this dip looks like a simple case of trimming the fat. But a closer look shows that while some companies rolled back their sample spend, the 10 most sampled brands actually increased their sampling activity by 8 percent, according to IMS. This suggests that rather than cutting back, companies are reallocating resources where they've seen the greatest response.

"The whole combination of circumstances is making companies sit back and reflect on where they should put their sales and marketing resources," says David Gascoigne, vice president of global promotion management at IMS. "Companies are having to work much harder to get the bang for the buck that they had before."

When it comes to the sales force, 2007 will be remembered as a year of massive layoffs, particularly for primary care reps. Aside from a downturn in spending, one would think that marketing would be going through even more drastic changes, particularly with all the talk of e-health consumers and the efficiency of the Web. But in 2007, there were no sudden moves: Companies continued to rely mostly on traditional formats, albeit with a twist.

The Spending Sag

"There's been greater diligence by the pharma companies in terms of the different forms of consumer commercial activity," says Gascoigne. "We see branded advertising based on acquisition of new patients. We see more disease-awareness advertising, we see more advertising focused on compliance and persistency, and we also see the traditional DTC activities being integrated with CRM-based initiatives and Web-based initiatives."

It's hard to know if 2007 reflects a momentary pause in spending, or if it signals the beginning of the end to big-budget pharma marketing. What we do know is that execs need to rewrite the rules of promotion to withstand the changes in the healthcare landscape. Let's just hope they work well under pressure.

MD Promotion: Slash and Burn

Pharma companies have been retreating from the sales force arms race since the height of spending in 2004. IMS reports that the pharma industry spent 7 percent less on sales forces in 2007 compared with 2006—and 15 percent less than the high of $7.3 billion in 2004. (See "The Spending Sag".)

Primary Care: Detail Drop

The scaleback makes sense given the hefty bills associated with maintaining large field forces, the scarcity of physician face time, and the growing power of managed markets to dictate prescribing. It seems that detailing simply doesn't work as well. According to a 2007 IMS study, detailing for brands launched after 2000 is 13 percent less effective when compared with brands that were launched before 2000.

That said, many of the cuts have been to primary care sales forces—in Abbott and Bristol-Myers Squibb, for example—which are refocusing their pipeline on specialty drugs that require fewer field forces. There was only a marginal retreat in specialty detail spending after healthy gains in 2006.

"It's been well documented that there was saturation with respect to detailing activity across the pharma industry," says IMS's Gascoigne. "There are only so many specialists," he says. "So there could be a saturation point, but we're not seeing a step-back."

The decline in detail and journal spending—10 percent from 2006—may also reflect changing attitudes about the best ways to reach physicians. Rather than bombarding customers with messaging, more marketers are looking at ways to let doctors choose the method and timing of communication. "Two or three years ago, we would talk about finding our target and surrounding them 360 degrees with our message, so no matter where they turned, that message would be there," says Anne Devereux, CEO of LyonHeart and TBWA/WorldHealth. "The goal now is to find the five to 10 degrees within the 360-degree radius where you have the most relevance and impact."

New technologies play a big role in this scenario, but not in the way pharma professionals may have predicted years ago. E-detailing, for example, generates a lot less buzz than social media sites for docs, like Sermo. "It's hard for a rep to communicate information from thought leaders," says Devereux. "Actually capturing the messaging and images of those thought leaders and putting it on the Internet—where people can create their own community, listen to the messaging when they choose, get the depth of data they're looking for—has been a big change."

DTC: TV is Still the Media Darling

After a double-digit spending spike in 2005 and 2006, the industry's promotional outlay for DTC advertising has cooled. According to TNS Media Intelligence, in 2007 pharma companies decreased DTC spending to $5.1 billion, a 3 percent drop from the previous year.

Jon Swallen, senior vice president of research for TNS, attributes this to the rising cost of mass media advertising and a greater desire for ROI accountability. "Consider the volumes of money being spent by some of the major brands—ad budgets in the range of $200 million a year," says Swallen. "As the guy who's approving that spending, you want to know that you're getting good value for your dollar. And whether you're talking about a $200 million budget or a $10 million budget, the pressure is there to deliver a good return on investment."

With the change in companies' product portfolios, some predicted that DTC spending would take a bigger hit. Bruce Grant, senior vice president of business strategy at Digitas Health, points out that the drugs that fueled the rise of DTC were indicated for relatively simple conditions such as allergies, acid reflux, and erectile dysfunction, where patients could have more influence on their prescription than they could with a more complex disease like cancer. "Some key products that were very successful on the strength of DTC are facing patent expiration, and pipelines are now much more heavily weighted toward higher-science, specialty products," Grant says. "The messages are more complex, harder to drive home within the confines of a 60-second spot or a print ad."

Since the rules around DTC relaxed in 1997, the practice has been under fire. Last year was no different, as stakeholders continued to argue the need for ad moratoriums and more oversight by FDA. "You wonder whether there's some breaking point," Grant says. "There might be some event that tips the balance, and leads to more severe restrictions on drug companies' ability to undertake consumer marketing. With healthcare being a campaign issue and an issue for the next Congress, whichever party wins the presidential election, the pressure on DTC will certainly not ease."

Despite all the talk of new ways of reaching consumers, companies spent the most by far on TV and magazines as a vehicle for their patient outreach efforts. (See "Play It Again".) In those channels, 2007 spending was fairly consistent with 2006. Much bigger drops were observed in newspaper and radio spending—a whopping 53 percent and 38 percent, respectively.

"TV and DTC still have a very important role, and you can't ignore the power of the television medium," says Joan Mikardos, media director at Sanofi-Aventis. "For some categories, it's really critical. But for others, you could probably eliminate TV completely, or skim a little money off and do something that's a little more personal for the patient. I think the biggest trend is acknowledgement that it can't be one-size-fits-all for every brand."

Online: High Potential, Low Commitment

While online promotion is the talk of the town, for the most part, it's still just talk. TNS data show Internet display advertising dollars down five percent, from approximately $167 million in 2006 to about $159 million in 2007. This represents just over three percent of the total DTC spend. So why is the Internet generating so much excitement but so little investment?

One would think that with the shine coming off mass-media advertising and large sales forces, marketers would see the Internet as a promising avenue to promote their brands. Bruce Grant notes how the format allows companies to better target consumers and healthcare professionals in a cost-effective way. And given the Internet's growing role in consumers' lives and physicians' practices, sources seem to agree that the future is on the Web.

One explanation is a simple lack of comfort with the medium and a lot of uncertainty around regulatory compliance, especially beyond the well-traveled waters of basic Web sites, banner ads, and search advertising. "The industry as a whole is behind," says Sanofi-Aventis' Mikardos. "We haven't figured out what role we can play with social media. That's a huge area that's getting talked about a lot and has a major influence in healthcare. But for a highly regulated industry, it's very difficult to navigate that space."

Another possibility is that insufficient investment has caused some companies to underestimate the potential of online advertising, making it a common casualty of budget cuts. As newcomers like Revolution Health and Everyday Health join Yahoo, WebMD, and MSN, Debrianna Obara, vice president of media at Avenue A|Razorfish, has seen competition for online content heat up. "It's more and more difficult to purchase the online inventory that's appropriate for the client or disease state," she says. "Prices are being forced up, and because pharma marketers are not increasing their online budgets drastically, they're getting less and less for their investment each year and I think some of them are reaching the false conclusion that online's not working."

More than one source indicated that by the end of 2007, many pharma companies were beginning to embrace the idea that physicians (rather than being technophobes) are often early adopters, and that the Internet is becoming integral to the way they practice medicine. In that case, the problem may be that the quality of the pharmaceutical industry's online offerings doesn't yet measure up to what doctors have experienced elsewhere on the Internet. "Even today, in too many cases the use of rich media, video, rich animation, and other engagement devices is lower than physicians have come to expect," says Grant.

Still, companies are reshaping at least some of the Web tools used to target physicians. This most often takes the form of special sections on product Web sites, Web sites just for physicians, and paid searches utilizing technical terms. "In the last year, we've begun seeing companies dip their toes in the water," says Obara.

Blurring the Lines

Looking beyond the boundaries that separate different kinds of promotion is one way marketers can move toward more integrated messaging. Devereux sees a future in which DTC and professional promotion are blended using online programs that facilitate physician/patient dialogue, reps are armed with interactive messaging tools, and marketing silos merge to allow a more efficient, coordinated effort. "Even today, there's the person who runs professional promotion, the person who runs direct-to-consumer, the person who runs CRM, the person who runs Web initiatives," says Devereux. "In the best case scenarios, they work as a well-oiled, integrated machine—but they all still have their own budgets and goals."

Despite the slow pace of change, this is an exciting time in the industry. Even though the need for new marketing models has become more apparent, in a competitive arena it can be risky to be the first one to tinker with a model that's worked for years. "I'm not sure anybody ever got fired for bringing forward a marketing plan that emphasized direct-to-consumer advertising and the use of field sales reps to drive physician prescribing," says Grant. "But that's changing, and with those options less available than they've been in the past, marketers are asking, 'Where can I make up some of the impact on sales?'"

Current troubles might present just the opportunity pharma needs to shake things up. The trick will be to find the right balance between frugality and investment. "It's a very thin line between efficient marketing and insufficient marketing," says Devereux. "If we become too efficient, we won't be able to create those truly unique, memorable, breakthrough communication events. We get lost in the media bombardment."

Susan Vargas is a freelance writer for Pharmaceutical Executive and Pharmaceutical Representative magazines. She can be reached at susan.r.vargas@gmail.com