The latest data from FDA shows warning letters on drug promotion almost doubled in 2009 to 41 from 21 in 2008. That is not surprising given the changes in Washington. Clearly the Democrats are demanding more enforcement actions against drug companies, which they saw as lax under Bush.

FDA has indeed speeded up its process to issue warning letters. The new head of FDA Dr. Margaret Hamburg has pledged to step up enforcement. Most of the letters are for inadequate fair balance. Obviously, there is always a desire from drug companies and advertising agencies to stress the positive. No one wants ad space dedicated to stressing negative points. The law, however, requires balance and some drug ads were non-compliant.

No one can argue against a vigilant FDA. The public needs it and drug companies are better off if violators get caught. The more warnings issued the more likely Congress will realize that the FDA is vetting drug ads, thoroughly and quickly warning offenders to end their campaigns. Companies who fully comply expect FDA not to let their competitors get away with unfair balance.

What FDA needs to do is continue to issue guidances and educate drug companies with examples of acceptable and unacceptable treatments of fair balance. As long as FDA is consistent and clear in what is violative the drug companies will have no problem complying. It is clear that most new drugs are using DTC in their launch campaigns. Therefore the guidances on what is acceptable treatment of risk are critical to brand teams developing DTC. No drug company wants a warning letter and its possible consequences and I believe they do want to comply. In the past there have been inconsistent decisions as to what is a violation. I hope the FDA reviewers are huddling with each other to ensure standards for one category are the same as others.

So go to it FDA, and if warnings increase in 2010 from 41 to 81 so be it. All the industry can ask is for clear standards, fast pre-clearance and sensible negotiation over disagreements on what is fair balance. That requires continued quantitative studies as to what consumers take away from drug ads so we all know what is fair disclosure. It is not in the public interest to overwhelm consumers with information as studies have shown less can be more in terms of risks and warnings. Drug companies have a right to sell their products through DTC and it is in everyone’s interest to have a well staffed FDA overseeing it.

While the traditional definition of DTC advertising is for pills, inhalers, devices and injections to treat medical condition or illness; the growth drivers may come from other DTC categories. One of the major growth areas will be in aesthetic products. A new report from Global Markets Direct predicts solid annual growth from cosmetic procedures forecast at 6.5% per year through 2016.

Obviously, this category thrives on DTC advertising because demand creation is critical for an elective treatment not covered by insurance. Our aging population seems to demand perfection. Look at the shows from the Real Housewives series as examples of a society driven to look good. Most of the women profiled are proud to talk about their numerous enhancements. Men are also increasingly using Botox and getting facelifts and hair transplants.

What is interesting is that there is a huge potential international market long term as developing countries will increasingly be able to have enough discretionary income to support enhancements. Currently 60% of cosmetic enhancements come from the United States. That means long term opportunity in the emerging middle class markets. I am sure Real Housewives of Beijing will want to emulate Orange County in breast size and smooth skin.

Another potential boom category for DTC is preventive testing. Early diagnoses and treatment will grow as government puts more effort into cost effective treatments at early stages of disease. This means genetic testing companies will see a boom in sales as they get better at identifying subsets of the population that will benefit most from Rx and medical device treatments.

I still see a healthy DTC market for traditional pills for existing categories. Our society is still getting fatter and more prone to diabetes, high blood pressure, heart disease, impotence and other diseases. Major drug companies will see price pressure from government and other payers. Therefore market expansion will be crucial to success and DTC is great at creating awareness. More users, even at lower prices, will keep drug company profits strong and society will be healthier.

So whether in traditional DTC categories or new or expanding ones, it is highly likely DTC advertising will grow significantly over this decade. It is also likely other countries will be more liberal in allowing health ads from drug companies, although in the disease prevention and treatment area, not in branded ads.

The tsunami of independent voter discontent evident with the last three elections in Virginia, New Jersey, and in this week’s Scott Brown Massachusetts win means major reconsideration of health care reform. I have called for reform and meaningful reform. We must not let our citizens go broke paying for health care. We must not deny care to people with existing problems. We must not let insurance companies use the practice of rescission because someone forgot to report a minor past health detail when they applied.

All these things can be done and should be done with a strong bi-partisan consensus vote. Republicans must understand that doing nothing is unacceptable to the majority of Americans. On the other hand a Democrat led only bill was also unacceptable to the American people who know that government cost figures are always suspect. Few believed that the current bill would solve their cost problems.

My health plan wish list would allow anyone to get free preventive and emergency care at government subsidized clinics. It would allow national competition for health insurance. It would reform malpractice insurance. It would require portability of health insurance from job to job. It would require full fee disclosure from doctors and hospitals so consumers can decide if co-pays are worth it. We need to be sensible and solve the problem with as little government involvement as possible.

The Brown win will convince most moderates to back off the current plan no matter how much pressure Obama puts on Congress. These moderates know the Massachusetts vote is a referendum on discontent with health reform and other issues. Ignoring Massachusetts would be political suicide for Democrats. If they were smart they would vote out Pelosi and Reid and replace them with more centrist leaders. The infuriating negotiations which led to sweetheart payments to several states to buy their votes were the final nails in the coffin. Americans know politics is messy but they thought we were getting a new process where reasonable people in Congress would do what is best for the people. Instead we got complexity and pork. More of the same was what we got.

I want reform and want it this year. How about letting the centrists develop a plan that can get 75% of the votes in the Senate and House? There is wide agreement on what is bad about the current system. The problems can be solved. Obama was elected to change the process. Here is another opportunity to prove he is the transformative President. To do that he must insist that a bi-partisan bill is required rather than a one party plan. That means he must lead and inspire legislators. Change we can believe in must be made a reality.

The media stories on DTC are still frequent. USA Today ran a story on banning DTC on 8/10. This follows the New York Times story on 7/27. Obviously, the mass media finds DTC a subject that interests its readers. Despite evidence on DTC’s relatively small impact on sales, albeit positive, the popular belief is that DTC is greatly contributing to improper utilization and higher drug prices. I saw the USA Today story was mentioned by a website call the Consumerist. There were over 20 mostly anti-DTC consumer comments on the story that all were on variations of the two issues mentioned above. I am afraid consumer activists need a lot of continuing education on the real impact of DTC.

As I explained in this story to the reporter, DTC has no impact on raising consumer prices. How can $4 billion of advertising on a $291 billion drug outlay really affect prices? Let’s take Lipitor as an example. The drug does about $8 billion in sales and probably spends about $100 million on DTC. That is about 1.25% of sales. So, assuming Pfizer would stop ads and rebate the entire DTC cost; that would be only a 1% reduction. That is not what would actually happen if DTC was banned. Pfizer would not lower the cost because the government forced them to curtail DTC. That money would go to other promotion or drop to profit.

I think the drug lobbyists need to argue that in fact DTC lowers consumers’ prices. If the government or private insurers want to negotiate, they need brands familiar to consumers to play one brand against the other. DTC creates awareness and also creates acceptance of alternative brands. Once consumers are equally aware of several brands, it is easier for a doctor and plan to substitute the lower cost version. Lipitor knows they have to compete with Crestor, and generic Zocor and Pravachol. That competition lowers prices.

The other argument against DTC that still has traction is that DTC somehow interferes with the doctor’s ability to prescribe what they want. That assumes doctors have all available information and data and are objective. In reality, doctors are not always up to speed on available drugs and rely on habit many times. They are also controlled by insurance plans as to what drugs will be covered and at what co-pay. DTC serves as an alternate source of information that provides a check on what the doctor/insurance plan does. Maybe a consumer inquiry based on DTC gets a doctor to study a new drug or give it a try.

The other frequently argued issue is that the U.S. and New Zealand are the only countries to allow DTC. If it is good for the consumer why does the U.S. stand nearly alone in allowing it? That is because countries that are single payer want control over what their citizens learn about drug treatments. They want no pressure from their citizens on what to allow them to get. That makes sense in a single payer world most interested in providing adequate care to the entire population at a fixed cost. The issue for Americans is do they trust that government can best decide which drugs they can get. DTC is very American by providing an alternative to government provided information. The system of tiered co-pays allows the payers to encourage cheaper drug choices without banning information on newer, branded drugs.

I am afraid that the media interest in whether DTC is good or bad will continue for a long time. As long as some Congressman wants to hammer drug companies DTC will get coverage. All heath care providers now use advertising. Hospitals, doctors, and medical test centers advertise. One could argue that no one should be able to advertise health care products and services covered by insurance. That may reduce demand for health care and save money. That argument can be made for many products government would rather not have us buy. Is that the way we want to go? I hope not because it is a very slippery slope.

By government regulation prescription drug advertising is under much greater scrutiny than other health advertising. While that is the way it is, one has to question the logic. A consumer, who is barraged by all types of health product ads, is somehow less protected from claims made by OTC’s, supplements, weight loss products, exercise equipment, and physicians and hospitals.

A hospital can claim it has brilliant doctors who can cure your cancer. A weight loss supplement can claim it reduces deadly belly fat. An exercise device can claim rock hard abs in minutes of daily exercise. Somehow Congress in their infinite wisdom treats prescription drugs as something worthy of super regulation while letting numerous other medical products skate free of providing proof of efficacy and free of risk disclosure.

Most disturbing is the freedom doctors and hospitals have to boast great success and expertise in their ads without any substantiation. Not regulated, they can use anecdotal stories at will showing patients boasting of cancer cures. They need not clutter their ad with any statistics on success rates or risks of staying at their institution. A recent (12/16) New York Times Article by Natasha Singer profiled the problems with hospital advertising and the lack of regulation.

Consumers need and deserve consistency in how medical ads are regulated. If we can have once in a hundred year health care reform we should be able to figure out how to put health care products and services on a fair footing in terms of benefit and risk disclosure. Prescription drugs are serious medications and should be regulated heavily in ad claims. I would argue that choosing a hospital or treatment center is also deadly serious and deserves the same level of claims review. Many supplements are downright dangerous taken incorrectly but escape serious scrutiny from regulators. If our goal in America is to provide better quality care at lower cost, then all health care advertising needs to be regulated whether it is a product or service.

Congress, as part of a final health reform bill should give FDA or another part of the federal government jurisdiction over health claim advertising. Americans are wasting precious health care dollars on products that do not work as advertised and potentially dangerous. Prescription drug advertising, although widely criticized, is at least scrutinized by FDA for accurate information. There are powerful lobbies designed to keep many health products free to make unsubstantiated claims. A Congress that claims to want to protect the “little” guy needs to act to equalize claims requirements.

This year promises to be a transformative one for health care. Once Congress finalizes a reform bill we can expect a number of things to change, albeit not immediately. The reform bill will not take effect until 2013 or 2014 but preparations for change will take place in 2010.

First, for drug makers it is clear their market will expand as more people get coverage and will get more affordable prescriptions. That broader coverage means more need for awareness ads, particularly for drugs for younger people who are more likely to be currently uninsured.

Second, it is also clear that drug companies will face more intense negotiation from insurance companies and other payers. The margins for payers will be squeezed under health reform and they will try to recoup that margin from suppliers of services and products including drug makers. That means drug companies will carefully assess promotion budget allocations. We can expect more management demands for proof of ROI.

Third, there will be an increased emphasis on prevention in the hopes that costs will be better controlled. The reform bills mandate coverage for well care check-ups. That is good for drug makers because many people will be diagnosed for the first time with treatable diseases such as high cholesterol, diabetes, and blood pressure. That means more ads for condition awareness and screening from drug makers with products in those categories. It also means growth in home diagnostics and genetic tests to identify likely disease sufferers. That means more consumer ads for diagnostic products.

Fourth, with doctors getting their government reimbursements increasingly squeezed, I would expect them to be more marketing oriented to figure ways to increase their incomes. That should lead to numerous promotional partnerships with drug companies and service companies. Although doctors will deny being influenced by added revenue opportunities, they are just people trying to maximize income. For example, they may want to charge companies to send patients literature and product information. Drug stores charge drug makers for those mailings, so why not doctors?

Now, as for DTC spending I think 2010 will be a pretty good year. Once we have some clarity from the final bill, drug makers will be able to plan with more certainty. DTC looks safe from Congressional limitations, as well as other traditional marketing such as detailing and meetings. Given a general economic improvement, we should see DTC spending at least equal to 2009 with a possible increase of 1-3%. I believe the DTC budget bleed is over. In fact I would expect DTC spending to once again pass $5 billion by 2011.

DTC spending is of course dependent most on new drug launches. We have had some weak years recently and one can only hope that we are closer to break through drugs in the near future. Given our massive issue of medical costs, finding drugs to better treat and/or prevent illness seem to be our only real hope for affording to treat an aging population. I remain quite bullish on drug company prospects and that means I expect a healthy dose of promotional spending. Things look a lot clearer than at the beginning of 2009 and that allows for better planning from drug companies and their suppliers.

The Senate voted down an amendment to allow drug re-importation this week. Democratic Senators from states with drug company headquarters made the difference voting against the measure. The supporters of re-importation think getting drugs from Canada and Europe will lower prices for Americans. Opponents worry about counterfeiters that cause safety concerns.

The myth rarely discussed is that re-importation will lower prices. If the bill was passed, drug companies would limit production in Canada and Europe to what is actually consumed in those markets. Any product diverted for re-importation would create supply shortages in those markets. While some cheaper supply may make its way to the U.S. initially, drug companies would quickly adjust production to prevent it. Canada and Europe would likely want to prevent exports to the U.S. if it led to shortages there.

The safety concern is a valid one. There is no safety issue if the drugs are real. It is the same drug whether it is produced in European or U.S. plants of multinational drug companies. The problem is that counterfeit drugs are a big problem and criminals are good at making them look real. The risks of phony drug s are high in that they can cause death from adulterated ingredients. Allowing imports would open the door for more opportunities for criminals to infiltrate the distribution system.

Congress needs to encourage drug innovation by allowing drug companies a chance to make good return on investment. The American drug industry is one of our few remaining manufacturing competitive advantages. Congress needs to understand that finding ways to force lower prices will only lead to less innovation, more domestic job cuts, and a high likelihood that the American drug industry will quickly become the Chinese or Indian drug industry. It is politically easy to demand lower prices in the U.S. market. It is loaded with negative long-term effects, however, and the American people will be better off long term with a vibrant U.S. led drug industry. Ask Americans if they want their next pandemic vaccine sourced from China, and I am sure they would rather depend on American companies. Congress did the right thing defeating re-importation.

The DTC spending declines seen in the last few quarters seem to be over. TNS reported growth of 15% in 3Q after a 6% decline in first half. While not at the levels of DTC peak spending it appears we will have stabilization if not modest growth for 2010. Drug companies can now see the health care reform bill emerging with some more clarity. This will help in their planning process.

It is clear that at least in the Senate, there is a more pro-business attitude than in the House. Therefore, it seems clear the Senate will not allow a bill that destroys the health care for profit businesses. That being said, drug companies are not out of the woods completely. There is still talk of re-importation of cheaper drugs and the ending of tax deductions for DTC.

My guess is we will see modest growth in total DTC spending in 2010 after what looks like a flat 2009 if 4Q looks like the 3Q trend. The good news is that big brands are still using DTC and the talk of switching to other non-consumer promotional techniques is materializing.  Some recent studies that have suggested DTC is not that effective have caused some angst about the future of DTC.  These studies, however, are limited in scope and not convincing.

There will be the continued evolution of targeted media, albeit slowly. The FDA will not quickly make social media or web search easy for drug companies. We will see mass media still a key part of media plans for the foreseeable future. Given the need for cost reduction, I would expect more DTC on disease prevention, diagnosis and early treatment. This may not be evident in 2010 but I am convinced it is a long term trend for makers of health products.

What is clear is that consumer communication of health products will be a booming field in the next decade. There is consensus that we cannot remain an ever fatter, less active society and have any money for anything other than treating our aging population.  Government, providers and suppliers of health products will need to be innovative to change the health behaviors of the American public. Much of that innovation will be in how to market products and services that facilitate that behavioral change. That bodes well for the careers of health marketers in the next decade.

The parade of anti-DTC studies continues. This one says prices of Plavix were raised just before DTC started. The study is one of the many done by academics who are implying DTC is bad for the public because it raises prices for consumers. Here, the Harvard researchers looked at Plavix sales pre and post DTC for Medicaid patients. They found that despite heavy DTC spending, no increase in sales was noticed. They seemed quite concerned that Plavix took a 12% price increase just before the DTC started and feel the motivation for the price increase could have been to fund the DTC.

It is too bad the authors are so off base. It is too bad so many media outlets jump on a study like this to imply DTC causes price increases. Nothing could be more incorrect. First, drugs take price increases and charge the maximum price they can whether or not DTC is done. All businesses price to maximize profit. They charge what the market will allow. Price increases were common before the DTC explosion in the late 1990’s.

Second, Medicaid patients are not the target of DTC. People with private plans who can afford co-pays are their target. Drug companies do not target people who have very little influence in prescribing decisions as in Medicaid. It is no surprise sales did not increase in that group.

Third, Plavix has been running DTC for years. I am sure they are seeing incremental sales for their DTC investment or else it would have been discontinued years ago. The fact that Medicaid sales were flat is no test of DTC success.

Here we have a case where the authors, without any real relevant facts, are raising a concern that has never been proven. DTC creates competition. Competition usually lowers prices. Of course drug companies need to price to cover all their expenses and DTC is one of those expenses. That does not mean they can automatically take price increases to cover DTC. What they expect is that incremental sales will cover the cost of advertising and they can recover that investment without price increases.

Most large drugs that use DTC are in categories with at least 2-3 major competitors. Their pricing power is weak and they can take price increases only if the market forces allow it. Most provide large discounts to volume buyers. I am quite confident consumers pay less because of DTC but we need a wide scale multi-brand study to prove it. Single brand studies done with an impoverished audience is not particularly relevant. Of course, the main media will jump on this study as an example of nefarious drug company marketing practices. That is the danger of this one study. I am sure we will hear anti-industry forces quote this study as proof that consumers are paying high prices to fund television campaigns. I hope the drug industry will provide the facts about the link between pricing and DTC. If not, I fear ending the DTC tax deduction will gain traction.

Business Week did an article (11/9) on how DTC spending may not produce a positive ROI. The study used to support that assertion was a Verilogue report based on audio recorded conversations between patients and physicians. In only 23 of 12,500 conversations did patients ask for a drug by name. On that basis Business Week questions the effectiveness of DTC.

I know this Business Week report will create senior management questions to the DTC marketers at drug companies. Why should we do this anymore if no one is asking for our products? The reality is that DTC effectiveness is a combination of many factors. Patients need not ask for a brand name but merely ask about treatments for a condition for DTC to be effective. Leading brands are helped by category discussions initiated by patients. Second, DTC creates a set of well-known brands and if a doctor mentions a drug, consumers are more receptive because they have heard of it through DTC. Third, having DTC accelerates physician awareness and education as no physician wants to seem unaware of a new advertised drug. Finally, DTC can help get on a formulary as plans know they will receive requests for new drugs from their members.

There are numerous quantitative studies showing average effectiveness of 2 to 1 return. There is one cited often from Harvard that says 4 to 1. These studies measure all variables affecting DTC effectiveness, not just patient initiated conversations. There is no doubt some brands get negative returns on their DTC as the many prior quantitative studies conclude. DTC is clearly not for every brand but most brands still see excellent ROI.

The good news in this Verilogue study is that critics can see they vastly over state the threat of DTC and at least the study should show Henry Waxman there are more important things to worry about. As I said in numerous prior columns DTC is a tactic to improve sales not the fundamental driver of sales. For blockbuster drugs like Lipitor DTC may account for an incremental 1-2% of sales. I hope critics see this Verilogue study as proof that DTC is not a threat to health care cost control. DTC is, in most cases, a profitable promotion tactic and does not create blockbusters. The best DTC campaigns may provide a higher boost to sales, maybe up to 10% of the total for lifestyle drugs. The bottom line is that DTC may account for about $10 billion of added sales out of a total of over $200 billion annually spent on Rx drugs.

DTC supporters should welcome any new data and I am sure the Verilogue study will be dissected for useful ideas to improve DTC. As for a measure of ROI, however, I would trust the major research houses’ hundreds of well-controlled brand studies indicating for most brands’ DTC does indeed pay-out.