What has raised tremendous concern lately for DTC practitioners is the Rangel comments on cutting the advertising tax deductions. Charlie Rangel, the powerful Congressman from New York, said ending deductibility of ad spending is on the table to help fund the health care reform bill.

Rangel used a $37 billion savings figure which no one in the trade press can make sense of. The real spending on DTC is about 65-70% of the reported numbers by TNS and Nielsen. Since drug companies do not spend Nielsen or TNS dollars but instead pay in U.S. dollars the annual true spending is about $3 billion versus the $4.8 reported. So where does the other $34 billion in savings come from? It could be Rangel is taking a multi-year saving or it could be he means all pharma promotional spending in a full year. Whatever he means, singling out one industry for punitive advertising tax treatment is unfair and probably unconstitutional.

Making commercial free speech more costly seems to be something the Supreme Court would be interested in agreeing to adjudicate if a first amendment case was filed. The drug industry has the right to advertise lawful products and therefore putting tax barriers in the way would likely be challenged by the advertising agencies and media outlets. Obama and the Democratic Congress certainly have a view that the drug companies are the bad guys. The punishment mentality may lead to irrevocably hurting one of our most vital domestic industries.

I can understand Congress wanting to negotiate prices of drugs it pays for or even re-importing cheaper foreign sourced drugs. The $80 billion just announced by Obama “donated” from the drug companies is evidence that prices are being negotiated down. I cannot understand, however, deciding to choose which businesses will be allowed business expense deductions for a lawful purpose. It is a slippery slope when government decides to put barriers on commercial speech. Maybe luxury items should lose their advertising deductions because not all Americans can afford them? Do we end tax deductions for liquor ads because of alcoholism? Or, how about casino hotel ads because gambling hurts the poor? Where does it stop?

My guess and hope is this will not be in the final bill. For a program that costs over $1 trillion, why face court challenges over $3 billion a year? Rangel also needs to understand that if he did remove the deduction, drug companies may not spend anything on DTC and shift it to investments that are still deductible. The government may get no additional revenue. The $37 billion “re-captured” from the drug companies would end up being $0. I think cooler and wiser heads will prevail over this tax deductibility issue, especially when every ad agency and media outlet contact their Congressman in outrage.

Health care reform is clearly needed and everything needs to be on the table to lead to a better system. Knee jerk punishment funding, however, is not the way to get a good system in place. A good system is one that has broad consensus and a lot of public discussion. Ramming a bill through before it can be fully vetted by the American public is a recipe for fiscal and political disaster. I know Obama has the right intentions, but his current plan is not as viable as he makes it out to be. All Americans want better and cheaper coverage. Most agree we need universal coverage. Americans love theoretical improvements. Of course then tell them they will have to pay higher income taxes, miscellaneous service fees, rationing of services, and nuisance taxes and suddenly they are not so enthusiastic.

We can cover the uninsured in many ways that are cheaper and easier to administer than a government alternative plan. We can create disaster illness coverage so no one need go bankrupt from massive health bills. We can give the uninsured tax credits or grants to buy coverage. We can create subsidies for people with pre-existing conditions. We can set up free government clinics in inner cities to replace emergency room use. If we are going to make a once in a generation change, is it critical it be done by August? Slow down Mr. President and you can get more widespread support for what is widely agreed is an essential reform. Ram it through and you will face bitter partisan fights and a potential deficit disaster if cost savings do not appear as you hoped.

A very interesting DTC campaign started this month that shows that marketing and positioning can revive an old concept. That campaign is Abbot’s Trilipix, a new drug for raising HDL cholesterol and lowering triglycerides. The new drug is part of an old class of drugs popular before statins were introduced. Statins primary benefit is lowering bad cholesterol with some minor raising of good cholesterol. Trilipix is the first of this class of drug to be approved with use with statins.

The new DTC campaign tries to re-educate Americans that they need to think as much about the other components measured in cholesterol tests; good cholesterol and triglycerides. Abbott is trying to raise the awareness that all three elements are important to heart health, not just lowering bad LDL’s. Americans have been hammered with lower is better advertising from statins the past 10 years. While doctors know the benefits of raising HDL, consumers associate cholesterol more with LDL.

Abbott is also working on getting a combo statin and Trilipix approved in partnership with Crestor. Clinicals released this year showed excellent results in combination. Once Lipitor loses its patent, Crestor will be the big brand left. Based on the number of ads I have seen Trilipix is spending heavily to establish the importance of HDL and triglycerides. That will make it easier to launch a combo drug. Combo drugs have had limited success in the past because it limits doctor flexibility to vary the proportions of each drug.

As an ad Abbott has chosen a meat and potatoes approach of the standard chart and voice over approach. They clearly do not want to obscure the facts with an overpowering creative device. The name is a bit hard to spell and pronounce. As long as consumers remember Tri, however, the doctor will know what they mean when they ask about it. It is nice to see a major brand launched using a full DTC media plan. After all, restarting growth in overall DTC spending requires the major new launches to use full mass media DTC.

It is nice to see some new action in the largest DTC category. I expect much more as drug companies scramble to find new entries in what will remain a critical health preventative area, especially as we get older and fatter as a society.

First quarter 2009 DTC spending numbers, just released by Nielsen, show a total DTC decline of 11.5% versus year ago. These declines are large but expected and in line with the 12% decline for the total of all ad categories. No DTC media type escaped decline, also expected. Television declined less at 8.3%, with magazines taking a big hit at 16.8%. So we now have annual spending at a running rate of about $4.3 billion for 2009, down from $ 4.8 in 2008.

Media gurus who annually predict the death of network television will be surprised to hear that of all mass media types, network declined the least in 1Q at only 1.1%. It was local and syndicated television that took the biggest declines. The big problem area in magazines was in Sunday supplements down 60%.

The 11.5% decline in the height of a near depression does not look so bad. It shows that drug companies still believe in DTC and one would expect that as the recession ends ad spending should grow. The big question, unique to health care, is the effect of the Obama reform plan on promotion spending. Clearly, the reform plan is designed to cut spending on health care or at least cap growth. This will be done through more public involvement in offering insurance and more hardball tactics in controlling drug prices. Medicare price negotiation and re-importation will put pressure on drug companies to lower prices.

The advertising industry is worried about some serious discussion in Washington that would limit deductions for DTC advertising.  They are also concerned about an advertising moratorium for new drugs being proposed by leading Democrats. My prediction is that DTC will emerge intact, albeit more closely controlled by a more vigilant FDA.

This spending decline in 1Q may not be as large as it looks. If we could have access to look within drug company ad plans, it is probable that media rate declines are allowing for more bang for the buck. That 11.5% decline in dollars may mean less decline in GRPS. Clearly media bargains are there and what matters to advertisers is what consumers see not what companies pay media outlets.

I will go out on a limb and say full year 2009 will be down about 8-10%. My call for 2010 is a decline of less than 5% with 2011 being an up year in the 5% range. DTC is still being used by almost all new brands and that is a good signal that it will still be a vital part of launch plans. Of course if Congress gets a moratorium passed, then media spending will decline at a higher rate. Stay tuned this summer as the future of health care America is decided.

Planning DTC efforts for the next few years has become an exercise in multiple scenarios. First, we have the massive health care reform we are promised by President Obama. Next, the expectation of declining media rates makes the decision to buy upfront or wait for spot prices a tough one. Third, the FDA is tinkering with risk disclosure requirements making creative ads more difficult. Finally, promotional budgets are getting cut as drug companies look to protect the profit line.

These four major uncertainties have an infinite number of offshoot issues. So, how does one deal with developing and executing a DTC plan? For 2009 the job is a bit easier than the out years. The health care reform plan may be passed later this year but will not be implemented until 2011 or 2012. The media rate declines are real as long as the economy stays weak, but premium media properties will maintain their pricing power. Therefore do not expect bargains by waiting for highly viewed shows. The FDA draft risk guidance makes it imperative to start copy development way in advance of launch but DTC as we know it will still be acceptable to FDA. Budget cuts will be a fact of life but not draconian for 2009. As long as ROI is good, drug companies will keep spending.

Uncertainty breeds opportunity. The best marketing departments will use these tough times to be ready for a promotional world that is more restrictive, if not in 2010, then likely in 2011 or 2012. That means testing of how to reach consumers with more detailed and more targeted ads. It also means exploring a new type of risk heavy television ad that may be required in a few years. Marketers should be ready to deal with media budgets that will be 10-20% less in 2 years. I am not saying budgets will be cut that much but smart marketers will test plans with those levels.

Drug companies should all be spending a lot more time and manpower considering the “what if” scenarios. In fact I would dedicate a senior DTC marketer at each company to write an uncertainty plan for each brand. The best drug companies will be the fastest to react to change. That will take the top talent thinking about it well in advance. DTC will be here when the reform dust clears but in what shape needs to be discussed, debated and dealt with at the DTC marketing companies this year. I guarantee it will be a frustrating exercise requiring lots of assumptions but if done right will provide competitive advantage. There has never been a more interesting time to be a DTC marketer.

The recent release of the long-awaited draft guidance on risk is sure to have drug marketers studying the lengthy and nuanced 27 page document. I give DDMAC a lot of credit for attempting to better define what is acceptable and violative in print and television ads. They tried to add some meat to previous guidances so marketers and internal drug company regulators can understand what FDA will be thinking about when they screen ad submissions.

My net takeaway is that FDA will be much stricter on balancing benefit and risk claims in the future. They make a point of saying they are looking at the totality of the ad to determine if it meets the required standards of fair balance. This gives them the old “I’ll know it when I see it” defense to consider an ad unbalanced. I like the fact that the latest guidance gives numerous examples of how an ad can provide balance. I also get the sense that a new FDA sheriff is in town and is going to be giving out more tickets.

The FDA expects that benefits and risks will be balanced not only in the number of words but in how those words are written or spoken. This means that you cannot have large type for benefits and small type for risks. You must not obscure the risks with visual distractions or lively music. You cannot use medicalese when a layman’s word is available. The latest draft guidance is filled with examples and explanations of good and bad ads.

Is the guidance going to be helpful to drug marketers and their agencies? I would expect that the guidance will make marketers more careful about what they test. Clearly many of the ad tests in the early stages focus only on benefit statements. The guidance should incent marketers to spend more time showing concepts with risks and side effects included. It should also point out how necessary it is to start copy development much sooner. Too many companies wait too long to begin ad development and then rush the details which includes risk copy. Given all the copy landmines DDMAC is placing, it will take at least 12-15 months from start to finished ad.

This guidance also makes it imperative that all ads are pre-cleared. There are just too many subjective calls to be made by DDMAC to assume your ad will pass muster. An ad not sent in is an ad asking for a warning letter. The new FDA will be looking to punish violators with corrective advertising. Those who run ads looking to avoid FDA pre-clearance are going to regret it. Hopefully FDA will have the staff to offer timely pre-clearance reviews.

I am sure the new draft will get many comments from agencies and drug companies. It is likely, however, to be implemented without many changes. Marketers and their agencies would be wise to study it(www.fda.gov/cder/guidance/7427dft.pdf )and review current ads in the context of the new guidance. I doubt FDA will be re-reviewing ads they already screened and approved, but watch out in the future. My guess is the newer ads will look and feel very different as FDA strips out the imbalances. That will be a downer for agency creative folks, as internal drug company regulatory and legal reviewers wordsmith copy and criticize layout.

The draft guidance is meant to clarify but I also suspect it is intended to signal increased FDA vigilance under the new leadership in Washington. It will make for challenges in creating DTC ads but not so severe as to discourage DTC as we know it.

Consumer Reports, a publication I have long respected, has been very critical of DTC for years. They have recently started a periodic web review of individual DTC television ads where they deconstruct product claims. The process they use is to have correspondent Jamie Hirsh interrupt the reviewed commercial with video commentary as well as a blog.

The latest review is over Sally Field in the Boniva ad.  Ms. Hirsh takes issue primarily with Boniva’s price. She says other drugs work well for osteoporosis at less cost. The only difference is that you take Boniva once a month says Ms. Hirsch versus weekly or daily for other drugs. Of course that monthly dose is what Boniva is pitching in its ad. The once a month dose is a big benefit since all drugs for osteoporosis may cause upset stomach and require not lying down for up to an hour after taking the pill.

Ms. Hirsh worries aloud about the ethics of using a celebrity and wonders about sally Field’s real use of the drug. She also seems to poke fun at Ms. Field’s air style and that she “looks refreshingly younger than her actual age.” I did not know looking good is a problem in advertising. Would she be happier with a celebrity who looks older than her age?

The web piece is titled “Sally Field and Boniva-Great spokeswoman, misleading ad.” I could not find anything which supported the “misleading” portion in the title. Nothing in the ad misleads consumers unless you believe somehow Sally Field is not using the product. The fact is that Boniva’s claims are vetted by DDMAC for misleading statements. If there are any misleading claims I suggest Ms.Hirsh make her case to DDMAC but that would take facts, not silly reactions to Sally Field’s age or hair.

I guess Ms. Hirsh would like the Boniva ad to point out that other drugs are available at lower cost. I think it would be nice if all companies told you what else is available from competitors, but then that would not be advertising. Advertising is designed to sell products. Given DDMAC , physicians, and competitors are involved, I think the consumer will have ample chance to get alternative drug information.

That is my takeaway from last week’s DTC National in Washington. I saw no indication that DTC is fading away as an accepted technique for pharmaceutical marketing. Of course much of the conference discussion was on the impact of Obama and his appointees on the drug industry. New FDA leaders raise the likelihood of increased regulation but no speaker predicted disaster in terms of bans or restrictions that would make DTC impossible to execute. It is probable new risk regulations or guidances will come out late in 2009 that may add requirements for information. That could make a 60 second ad harder to do but it is not going to be so onerous as to end mass branded television.

ROI seems strong averaging over 2 for the top 25 brands as presented by IMS. Although spending is likely to continue to drop in 2009 attendees seemed optimistic it would stabilize in 2010. There were the usual debates over the media mix. The new media advocates say drug marketers are too slow to adopt modern technology that can personalize communications. The mass media broadcast and print advocates say their media delivers scale and good ROI, and given the age of the target group, still deserves the majority of spending. My take is that drug marketers are open to greater use of modern technology but will move deliberately given regulatory uncertainty.

The recent warning letters over word search raised the issue of FDA not adapting old regulations for new media. The FDA is following the regulations written decades ago before anyone anticipated the explosion of technology. In questions to the FDA raised at the meeting, attendees seemed frustrated over FDA’s lack of customizing the regulations for the medium. I sense this will change over time but for now the FDA will not bend on following the regulations as written. Congress is looking for FDA to clamp down on enforcement and this is not an ideal time for FDA to bend the rules.

I also became enamored with the instant feedback of Twitter. My 23 year old daughter, attending the conference to meet potential employers with her new Masters in Advertising, called my attention to feedback on the conference being twittered around. This twittering was between attendees as well as attendees to colleagues back at their companies. Any speaker comment or attendee question was instantly dissected, criticized and shot across the electronic highway.

What I came away with most was the quality of the people working in DTC. Despite the image of pharma marketers as being profit mad corporate tools, nothing could be further from the truth. I never heard any cynical comments publicly or privately which in any way reflected an anti-consumer tone. These people are dedicated to what they do and care about improving health. They feel more information is better and are proud of communicating their point of view through DTC. It would help if critics softened the populist rhetoric and dealt with how to make DTC better. I know the people doing the DTC are willing to listen and improve it.

So, I am proud to be part of getting 500 plus DTC marketers together every spring.  I hope to keep doing it as long as people are willing to attend. Thanks to all who attended and all those unable to be there but who will learn from the attendees.

The FDA took widespread action against drug companies who have used the popular ad words on Google. FDA rules require that any mention of a drug name with its indication requires full fair balance. Drug companies have been short cutting that rule by assuming the one click away process for ad words was sufficient. For example consumers who type in a disease would see a two line side ad that gave the drug name that treats the disease with a one line description of its effectiveness. If they clicked they would go to the company site loaded with fair balance.

For example, type in birth control and get an ad that says how effective a named medication is for preventing pregnancy. That is illegal under current promotional regulations. Drug companies have been using these ads for a long time and FDA has finally ruled that short ads without fair balance are unacceptable, even with an easy click to fair balance.

On April 3, 14 letters referencing 48 drugs were sent out to many major drug companies telling them to cease and desist from this practice. Obviously, this makes ad words harder to execute. Drug companies will now have to make no claims about a drug or show any indication of what it is for.

Our editor of DTC Perspectives, Mark Tosh, got a response to some follow-up questions on the letters from FDA. They say drug companies can either do reminder ads with nothing mentioned except the drug name or use disease awareness ads. The FDA said that space limitation is no excuse for not including fair balance. They also said that many drug ads had followed the rules when using ad words.

I do not believe drug companies are going to lose much by dropping the indication or a brief claim line. If a consumer enters a disease name and a reminder ad appears with just a brand name, the consumer will still understand the brand is a likely treatment. The letters, however, were a clear warning that a new era is here with increased vigilance from FDA. I doubt drug companies will drop the ad word use and instead will comply using more reminder ads. Perhaps the loss of the indication tag line makes for fewer click troughs but I doubt a significant drop off. It will make an interesting analysis from Google.

There are some critics who hope serious restrictions will be placed on DTC advertising in 2009. These anti-DTC folks include some politicians, consumer advocates, medical professionals, and insurance plans. My guess is they will be disappointed with the slow pace of increased regulation.

Our Congress will take up health care later this year. Extending health coverage and cost containment will be the big issues. We have an enormous cost bubble which will burst unless serious action is taken within the next decade. Drug costs are part of the issue, but given slower rates of drug inflation versus other health costs, it is not the top priority.

We will see action taken short term to put more pressure on drug prices. That includes re-importation and Medicare price negotiation. That should result in drug prices being held down significantly. The DTC specific issues are also important to Congress. Clearly they would prefer it could be legislated away because they believe it causes improper branded drug use and thus raises costs. They also say safety is an issue and want drug advertising delayed for new products until a full in-market safety profile is known. They also know they cannot just ban legal commercial speech so the ban is off the table. The best they can do is place a moratorium on new drug ads and make television ads harder to execute.

If the pace of DDMAC research on DTC is any indication we can expect a slow and measured consideration of change. Their web site lists the upcoming DTC study research dates and it appears much of it will not be out until 2012. Their small staff and budget prevents them from acting faster. Congress blusters a lot about action but then provides miniscule resources to get things done.

Obama says health care action is too important to wait. He is right but the health care issues make banking problems seem simple. The massive administrative bureaucracies both in Medicare and the private insurance sector will take years to change. All the good intent in the world will not make major change happen soon. I would say DTC regulation is way down on the list of changes needed.

What then can we expect for DTC? Probably not much new DTC regulatory action will happen in 2009 or 2010. There is no major problem with DTC being an imminent threat to safety or raising drug cost. FDA will be more active in issuing warning letters and demanding corrective ads.  That should satisfy the increasingly regulatory minded Congress for the next few years.

DTC is almost always used for awareness building. Pfizer is now using it to maintain current users on Lipitor. A radio spot explicitly fights back against plans trying to switch patients on Lipitor to generic statins. I admire Pfizer’s fighting spirit. They say that if you are doing well on Lipitor there is no generic equivalent.  There is tremendous pressure from plans to switch patients to generic  Zocor or Pravachol. Lipitor only has two years left on its patent and will fight to keep sales until the last day.

There are those who argue DTC has no place in medical decisions. Better, the critics say, to leave the decision entirely to doctors. If they were the only ones making decisions then I would agree. The reality in American medicine is different. Managed care and PBM’s get paid to reduce cost. They pressure doctors to prescribe cheaper drugs. Employers pressure their plan administrators to lower drug bills. Government pressures doctors to reduce Rx costs. So, is your doctor always doing what is best for you?

DTC is one of many subjective sources of information. It is biased because it is promoting a particular brand as does all advertising. DTC, however, is needed to balance the “cheaper is better” mantra from insurance companies. Doctors are caught in the middle.  Consumers want the latest, and often more expensive drugs. In some cases the new branded drugs are no better than generics or OTC alternatives. In other cases they are better. Pfizer’s retention ad is a way to balance the generic advocates.

Consumers have a right to know whether they are being cajoled to switch drugs for price reasons. As I said before, there is nothing wrong with hearing about alternative therapies that may be cheaper for patients and plans. Drug reactions and benefits are sometimes quirky so it is a big deal to switch a patient doing well on a drug to another so-called equivalent. Pfizer has every right to use DTC to alert patients to the practice of switching for cost savings that save plans money and their new spot is a good investment.