As we approach an election with a seemingly forgone conclusion of an Obama victory, it is time to take stock of some new realities. Some are good for our industry, others may be bad. They are realities, however, and we all need to deal with them.

First, Obama is probably no worse for pharmaceutical companies than McCain. Both blame big drug companies for high prices and reduced innovation. Both would try to significantly change the health insurance industry. In either case we should expect more price negotiation and re-importation.

On the positive side is Obama’s commitment to prevention and earlier treatment. This means more drug therapy because more people will be diagnosed. Lower prices for existing me-too drugs means more incentive to find new innovative classes of drugs. While this is a more difficult challenge than producing me-too brands it is a good incentive to find winning compounds.

The second reality for us is that DTC will be more regulated. It will not be banned. It means more involvement of the FDA in deciding what is acceptable in terms of claims and risks. I expect mandatory pre-clearance to be part of new regulation which may be challenged by the advertising industry on First Amendment grounds. I expect more risks required to be disclosed and earlier in the broadcast ads.

The increased vigilance of the FDA may make it more appealing to use vehicles where adding information is cheap such as Internet, print, direct and point of care. It may make television ads more difficult to execute. A more risk laden television ad is going to require more creative expertise from agencies. I do expect television to remain more than 50% of a major brand’s media plan.

The third reality is we have come to expect government help when things go bad. The stock market and Main Street problems have fostered an acceptance of government interference in the free market. It is only a matter of time before we have government single payer care. As I said last week we do have a health care bubble that will burst. That will lead to our electorate accepting European style care. The free marketers have lost. It may take another 10 years but expect it.

Is this a good time to be a drug marketer? Surprisingly, yes. Drug companies need expertise in marketing now more than ever. Consumers will demand, and rightfully so, that higher priced drugs show a reason to justify the branded price. That is a challenge for all DTC marketers. I know it may be depressing to see stock options worthless and layoffs affecting colleagues. It is likely that things will not get worse, but over the next few years get significantly better.

Dr. Bernadine Healy, health columnist for U.S. News and World Report, wrote a thought provoking column this week. It was titled, “Is Healthcare Armageddon Next? “  Dr Healy feels that with healthcare costs rising so fast, it is unsustainable. It is only a matter of time before the bubble bursts on a personal and government level.

Individuals are now spending $13,000 for insurance premiums versus $6000 in 1999. Government programs are swollen and will eat up almost all of government revenues in the future. Dr. Healy has no easy answer to the problem.

She says single payer government controlled healthcare is not the answer. Costs in countries with that system find costs rising as fast as in the United States.  Her solution is to get all stakeholders together without rigid ideological preconceptions to figure out a way to reduce cost. One of the things Healy says we need is better transparency on pricing. Hospital fees vary widely for the same services and vary vastly for individuals depending on insurance coverage.

She also cites prescription drugs as a problem in transparency. Deals are hidden and consumers pay very different prices for the same drug based on negotiations of PBM’s. She also says about half the sources of rising costs are new drugs and technologies.

I do not know if Dr. Healy has all the analysis right. I do know that we have a major problem on affording healthcare that is in fact unsustainable. Much like the housing bubble, when prices rise faster than incomes, something has to give.

In the case of healthcare the burst bubble has several scenarios. The government could nationalize the system.  A crisis of affordability could lead to that action. Mr. Obama says he will lower costs with his program through negotiation with insurance companies. He does not, however, say how he will deal with an aging population using more and more technology and drugs. Is he going to have to ration care?

Another possibility is people minimize coverage to only cover only catastrophic care. This is not a good option for society as people will avoid routine care that is not covered.

Finally, it is possible that the market will become more transparent and competitive. Health care providers may one day sell on price with clear upfront information on fees for services. That would create more competition. Few of us have any clue what we are going to be charged, especially in a hospital. As co-pays rise, however, more of us will want to be informed what our tab will be.

I am afraid there is no easy answer to the healthcare cost problem. It is certain we cannot afford it on the current path. It is a certain bubble that will burst. Here is a case where we know it will happen and will require Government leadership. Given that Congress is dysfunctional, we cannot expect proactive leadership there. Can President Obama provide that vision? He may do just that or he may hold off the bad news until his second term. I hope he deals with it because the healthcare bubble bursting could have serious societal consequences that dwarf the financial crisis.

It looks increasingly likely we will have a Democratic victory in November. That means Mr. Obama and an increased majority in Congress. The drug industry has donated to both candidates in fairly equal amounts indicating their lack of a clear preference and a hedge in their bets. The traditional Republican leaning of drug companies is absent this election because Mr. McCain has a record of criticizing the drug industry as greedy.

The new Democratic administration will build on its financial crisis Main Street theme in relation to taking on drug companies. We will get increased scrutiny of all promotional practices. Pharmalot reported this week that there may be joint hearings on DTC advertising. Senator Kohl wrote Representative Stupak that it may make sense to combine hearings.

Main Street dislikes drug companies almost as much as bailed out banks. Once the political opportunities wane for attacks on financial companies we can expect drug companies to be a nice juicy target. I do not anticipate any bans on advertising. I do expect much more vigorous enforcement from the FDA on drug company marketing practices.

Remember, DTC claims are subjectively reviewed. What may not be seen as misleading now may be in the future. A more vigilant FDA will find more things objectionable in drug ads and send more violation letters. Therefore drug companies will likely produce more conservative ads, both in claims and creative approaches. 

This new conservatism may make broadcast ads less appealing, as more hedged claims and increased risk information are required. It is likely that the more negative information required the more print, direct mail, point of care and Internet will benefit. These media have the opportunity to add more information at no cost, unlike television. On the other hand, increased conservatism will make drug companies hesitant to adopt social media or other new techniques.

Drug companies will not want to anger a new Administration and I expect them to be compliant with the wishes of DDMAC. After all, drug companies do not want accelerated government price controls, re-importation, and Medicare price negotiations. It is likely that drug companies will try to increase price support programs to blunt the issue of Main Street affordability.

The Democratic majority and White House are going to have some revenge on an industry they felt was anti-Main Street for years. I expect C-Span will be full of embarrassing hearings in 2009. I doubt any increased regulatory actions will take effect before 2010. That gives the industry some time for “what if” scenario planning. I hope DTC marketers will use some of 2009 to do just that. DTC will be here for good but the media allocation and creative content may change significantly.