The Wall Street Journal did a front-page story Monday on cutbacks in consumer health spending. The number of prescriptions filled fell 2% in the second quarter, along with a 1% decline in physician visits. The Journal cited a survey that indicated economic concerns are leading 22% of consumers to say they will visit doctors less often. The same survey said 11% said they will use less Rx drugs.

This data is not surprising given the continuing shift of rising health care expenses from employer to employee. Consumers are spending more on healthcare as a percent of income. The real fear of additional economic declines are rationally causing consumers to be more careful about expenditures.

What does this mean for drug marketing? First, branded drugs will need to clearly justify the price premium over generics. This has always been the case but consumers will increasingly challenge physicians to prescribe a cheaper drug. Every business is being squeezed for profits, so employers will also demand better deals for branded drugs. The pressures on drug companies to lower price will be intense.

Second, there is no doubt that drug marketing budgets will be cut. This includes all areas of marketing, including DTC. As I said last week, I do not think the cuts will be dramatic but will be significant. Therefore, marketers will be called on to drill deeper into alternatives that increase ROI. All media suppliers will be asked to prove their worth. Drug marketers will take fewer chances on unproven tactics and that may hurt new media companies trying to establish a foothold. I do not see a major shift in media allocations, but there will be more pressure on mass media to prove their network or title is better than direct competitors. That calls for a knowledgeable sales force to defend the merits of a particular media company.

Third, this is probably not a fun time to be a DTC marketer. Management will be increasingly skeptical of increased DTC investment and demand re-justification for DTC. That is never an enjoyable experience. DTC marketers may grow restless and find other industries to use their skills. I do fear a brain drain of experienced people out of DTC. We are at a time where experience is critical to spend more wisely. This brain drain may also affect agencies that are being squeezed by drug companies to do more with less.

The general financial malaise and daily gyrations on Wall Street clearly are impacting Main Street . Unfortunately health care is often viewed by consumers as a discretionary expenditure, particularly for preventive care and for chronic disease treatments. This is not good for society if people decide to not spend money to diagnose and treat non-symptomatic illnesses like high blood pressure and cholesterol. Hopefully all the negative economic factors will improve by late next year so we all can see a more normal business climate.

Is DTC is in a recession? One might conclude that from the latest Nielsen summary for the second quarter that shows a 9% decline versus year ago. The first half 2008 is down about 5%. This decline was not unexpected given the general cuts in promotional expenses across all categories. Drug companies are hurting so all spending categories are under scrutiny.

The key issue for DTC is whether the second quarter 9% decline is the start of a long term drug company reassessment of DTC. On a macro basis I see no evidence that DTC is losing its effectiveness as a promotional tactic. I know of no data that would reflect declining ROI. The Canadian study I discussed last week is one, but it is not representative of the many studies that show DTC still averages 2 to 1 ROI.

When one looks into the 9% decline there are reasons to still be optimistic. Much of the decline was in one major category. The sleep aid Rozarem decided that DTC did not work. Lunesta also decided their business results did not support their massive spending. Those two brands alone explain much of the first half declines. First half spending declined for 30 big brands and was up for 22 brands defined as brands spending at least $20 million a year.

Big declines for established brands were seen in Nexium down from $69 million to $21, Requip from $84 to $5, Imitrex from $35 to less than $1, Astellin $26 to 3, and Boniva $65 to $45. Established brands that were up significantly were Viagra from $28 to $74, Lyrica $30 to $94, $34 to $56, Advair $71 to $95, Cialis $60 to $80 and Crestor $44 to $65.

The good news for DTC was that there were a number of new brands or relaunched brands heavily using DTC. Those new brands were Januvia, Reclast, Chantix, Vyvanse,Lybrel, Veraymst, Mirapex, Orencia, Aciphex and Symbicort. The new brands added $340 million in spending, which was 13% of total spending.

The net from the analysis was that there is no indication of a long term decline. The declines among established brands were balanced by spending increases from other established brands or new products. It is easy for those critics predicting the end of DTC to look at the 5% first half decline and predict a long term trend. The closer analysis reveals a much more favorable picture of brands both entering and leaving DTC.

Remove the sleep aid category and DTC would be up 3% first half instead of down 5%. The fact that Lipitor and Evista came back strong with DTC, after a hiatus , is a good indication that it is still a key marketing tactic. The real health of the DTC market depends on the number of new brands approved for marketing. Any major new brand entry means $30-80 million in spending. It also means established competitors need to ramp up their spending to maintain share of voice. I do not expect significant increases or declines in DTC for 2009. My guess is the 2009 DTC market will be up slightly, maybe 3%. The double digit growth days are over for now, and will only reappear with a renewed R&D golden period of product launches. One day that may happen as the genomics revolution bears fruit, but not likely for the next few years. That means most brands will be trying to find more efficient ways to spend their limited budgets which will require more analysis and experimentation.

So, I would come down on the side of calling the latest decline a blip. Of course if the financial services meltdown continues who knows how badly that will affect drug industry sales? Certainly as main street gets more affected by bank failures and tight credit, consumers will use less branded Rx drugs. Then that blip could become a trend.

In what must qualify as the strangest study ever done in DTC, two Harvard professors decided to test the usefulness of DTC by tracking Canadian consumers.  They thought the U.S. market was no longer pure since no control group exists who never saw DTC. They got around this by using French Canadians as a control group since most watch French language television and compared that to English speaking Canadians who saw some American DTC media spill into Canada and Canadian non-branded category ads.

What? I do not get it. Canada’s drugs are on government formulary with entirely different prescribing parameters and cost. There is no relationship to how U.S. consumers and their physicians make drug choices. The Harvard researchers decided that the data said DTC does not work based on three drugs.  The drugs were Enbrel(arthritis), Nasonex(allergies) and Zelnorm(irritable bowel syndrome). The researchers saw no difference in prescribing from the U.S spill and the French Canadian control group. They made the conclusion that DTC may not work.  

Now, can they tell me how much media spill these test groups saw? How many GRP’s? Pre- and post awareness levels of the ads? No, they just tracked retail prescription data and assume English speaking Canadians are, as they say in their press release of the study, “swamped” by U.S. ads.  Swamped is not good enough for research. The study’s press release is way over the top in self-congratulations on finding the “true” way to determine if DTC works. We need to know what the English Canadians actually saw and took away from the spillover ads. We need to know whether English Canadians would ever bring up what they saw in U.S. ads with their Canadian doctors who are totally anti-DTC. We need to know a lot of things not done or measured here.

 I decided to comment on this questionable study because much of the trade and business media picked it up and ran it as a big story. Some senior drug company managers may see “Harvard” and DTC “not effective” and question their DTC groups as to why they are still doing DTC.

The answer, Mr. Executive is that there are many good U.S. studies that show it works well, including other Harvard studies done in the good old U.S.A. Somehow; I think these Harvard professors who used Canada as their laboratory are naïve and misguided. This study is low in value in my opinion. They have produced nothing here that adds to the body of good ROI research. Every major research house in the U.S. has studies that put ROI on average at about 2 to 1. They use rigorous research methods and do account for GRP’s, other non-consumer promotions, competitive activity, formulary differences and other factors. They are good studies.  It is true that the U.S. studies show that about 20% of DTC brands produce negative returns, but the implication of the Canadian study is that it is zero for most brands.

The Kaiser Family Foundation did a study with Harvard that said DTC ROI was over 4 to 1. That was a little high in my estimate. So if we average the two Harvard studies, one zero the other four dollars we get: voila $2. Only joking but I put my money on the hundreds of ROI analyses that say DTC works across all media types. If we are going to give publicity to a study that says ROI is bad, then let it be one done by someone who has experience in DTC research.

Beware, my DTC colleagues of research that is flashy but faulty.  By all means read this flawed study and add it to your assessment of DTC ROI.  I am sure the study authors can explain it better than I can.

Lipitor DTC is finally back after the long Jarvik motivated hiatus. I have watched the new television ad about five times. The new ad is very straightforward and is a very standard DTC style. There is not inherently anything wrong with the formulaic style. Here we see everyman John in a black and white scene describing how he regrets not listening to his doctor to do more about his high cholesterol. He had a heart attack at 57. Now he vows to do more and takes Lipitor.

Ok. Simple and straight forward. No doctors, celebrities, animals, icons, or other potential distractions. I get the message clearly. Lipitor, says the ad, has been around for 16 years (although launched in 1997), has many clinical studies and is good for a preventing heart attacks and strokes. That is about it.

This ad is in that meat and potatoes category. It is safe, logical, and easily understandable. I assume it tested well with consumers, but I suspect most easy to understand ads do. I am afraid; however, it looks somewhat like a concept board. It may lack the stopping power of some of the earlier Lipitor campaigns. Will this commercial stand out among the many other Rx ads on the evening news?

Those concerns said, here is an ad that will do the job of keeping the brand name out there, not get Congress angry, and is extendable beyond white male John to other demographic groups. That is probably enough to get a good ROI out of this campaign. The football analogy, given the start of the season this week, would be ball control. Run the ball, no fumbles. This commercial is ball control.

I will be curious to see if this ad is just a bridge ad or actually lasts a year or so. I thought the Jarvik campaign had the look of a category leader, but with this one I am not as sure. The ROI results will tell all, not that Pfizer will ever make that information public. If it runs for a year, I must assume it is meeting their goals. I have always said ads do not need to be flashy or gimmicky and meat and potatoes are fine as long as that works. Pfizer needs to keep Lipitor strong for the remaining few years of patent life, so this new ad is important to continued success.

The commercial, I assume for its creative impact, uses both black and white and color. The former is used during the set up and the latter during the side effect discussion. We see the usual bike in the country visuals and the “it’s great to be alive” picnic scenes with the spouse and child during the fair balance.