A new study done in Colorado in health clinics questions DTC effectiveness. The study done in 22 practices using 1647 patient encounters shows only 3.5% requests for specific drugs by name. Media reports(MSNBC online) are using headlines to report the study such as “DTC ads are losing their punch”. 

Like most research this study can be criticized as a flawed approach. Dr. Lisa Schwartz a professor of medicine at Dartmouth says the patients from public health clinics may not be the best audience for DTC since their drug choices are most limited by formulary.

I think we can assume that drug ads have become so commonplace that any uniqueness factor is long gone. Consumers, who in the early years of DTC found the ads a curiosity, now see them as just regular ads. One would expect that influence of drug ads has been reduced over time.

The issue of effectiveness, however, is measured by many controlled studies. Most DTC ads are measured for ROI by the leading market research houses. As far I know they still deliver the 2 to 1 payback on average. Therefore making any conclusions on DTC effectiveness from one small study is dangerous. I would rather trust that drug marketers, who have a lot of data on ROI, are making rational choices. The brands that continue to spend are very likely to have a positive ROI.  Management in these times is going to demand objective evidence of DTC effectiveness.

The long term viability of DTC effectiveness is under debate among industry watchers, particularly the use of mass media. There are numerous media gurus who tell us mass media is dying. They want to see the drug industry adopt the new forms of communication such as social media and one- on- one marketing. On the other hand, mass media is still the dominant form of most big sending DTC plans.  Our DTC conferences are always debating the merits of both mass and targeted communications.

It is an objective of every drug company to better target potential and actual users for awareness and retention programs.  No drug marketer wants mass media waste. The issue has and will be how to reach enough potential users to move market share. To date mass media has been needed, waste notwithstanding, to move share. DTC effectiveness in my remaining lifetime will likely require both mass and targeted programs.  It is not an either or debate but one of mix.

The Colorado study, flaws and all, may still be correct in concluding that DTC ads are becoming less effective. After all we are not seeing a lot of new drug categories introduced or breakthrough drugs in current categories. Most drug brands have been advertising for years and keeping those ads fresh is becoming harder to do. On the other hand the increasingly aging population will swell the target group for the drug ads of current categories. That bodes well for DTC being a useful tool for years to come. The Colorado study is useful because it inspires debate about the impact of DTC. What is clear is that DTC is not the influence monster the critics say it is. It is still the doctor who is the brand king maker, not the consumer.  

I have to comment on a John Mack blog of 1/16 with the heading “DTC Spending Will Be Decimated in 2009, Experts Say.” I have accused bloggers of sensationalizing issues in the past. Here is just such an example. The only person quoted in the piece is me. I predicted up to 10% declines in 2009. I do not consider that level as fitting the common understanding of the term “decimated.” That term fits what has happened to banks stocks, housing prices, and my financial portfolio.

John says he earlier predicted an 11% decline and my latest forecast is higher than it was several months ago when I said 6-8%. Whether the decline is 6%, 10%, or 11% that does not describe the end of DTC. I get the feeling John and other industry watchers are hoping for severe declines in spending, particularly in mass media. Many bloggers think the drug industry is backward in not adopting social media faster.

I have never been against social media or any targeted media. I just think that mass media works. The issue is how to find a mix that optimizes spending. It is dangerous to be on the side of any type of media as being best. Rooting for or against media types reflects a bias that helps no one except sellers of that type

I know people feel passionately about “their” media. I am dispassionate about all media. Media is just a tool to get more awareness and eventually scripts. As a consultant to many drug companies I never pushed one media type over another. I based my recommendations on a blend of media types to maximize ROI. I have customers from all media types and try not to root for one over the other. I think it is job one for any media seller to prove their ROI. To date it is impossible to deliver good results with only mass or targeted media. The issue is and will be what recipe is the best.

Bloggers would have more credibility if they talked less in absolutes. People are not idiots if they do not adopt a particular media type. Most drug marketers are evidence based in their decisions. Good evidence will eventually take hold. Once again let me say I think the future of DTC remains bright. It is not decimated but undergoing a short term economic based reality facing all industries.

Let me boldly predict that by 2012 we will see the $5.7-$6.0 billion spending level reached for DTC up from $4.8 estimated in 2008. That spending will evolve each year to more targeted media as it should. DTC spending is declining short term but decimated, John, absolutely not.

A lot has been made of a 1/10/09 Wall Street Journal story quoting Glaxo CEO Andrew Witty saying they will cut investment in DTC television in 2009. Mr. Witty would not say how much will be cut. The drug industry is under increased pressure to rein in promotional spending for branded drugs. The Journal cited criticism of DTC as one of Witty’s reasons for the proposed cut.

The critics’ desire to have big drug companies reduce marketing is based on their belief it raises demand for unnecessary branded treatments. Reduced marketing, they feel, will cut consumer generated requests and encourage use of either generics or no drug intervention. All phases of drug marketing are under scrutiny including medical meetings, physician paid lectures, sampling and handouts of freebies to doctors. DTC is part of that scrutiny and is seen as the most visible symptom of drug marketing gone wild.

Is the Glaxo announcement indicative of a general trend? Certainly, one would expect 2009 to be a time of utmost caution for drug marketers in terms of keeping a low profile. The Waxman wing in Congress, however, will not be satisfied until there is no branded advertising. Cutting just a bit will not make the critics less hostile to DTC. My feeling is that drug companies will continue advertising on television as long as ROI remains above their goals. Congressional actions on DTC are not dependent on whether the drug companies cut or add 20% to their television budgets. My guess is Glaxo is cutting to protect profits or because they have found better ROI in other marketing tactics. I doubt pacifying critics was the main reason for Witty’s decision but, like some other CEO’s recently, he seems to think mass television DTC has been over used.

Despite some political considerations most big drug companies will make DTC television decisions entirely on a financial return basis. I expect many big pharma companies will renegotiate 2009 media rates and try to get more for less. The deteriorating consumer ad market will likely open a lot of media time from industries cutting back on advertising. Drug marketers can probably buy that time at much reduced rates from their fall 2008 planning assumptions. Therefore we may see big DTC brands spending less than in 2008 but getting more GRP’s in 2009.

Critics of DTC television and proponents of alternative media will likely be cheered by Witty’s comments. My expectation, however, is that television use will decline slowly and be the majority of most media plans for many years to come. Of course, Congress could try to make television impractical to do in 60 seconds by adding risk disclosure requirements. If that happens, then drug companies will cut back significantly on television DTC. I do not expect to see that happen in the next few years as FDA will study the issues for several years before adding any draconian regulations.

I expect a decline of about 10% in total DTC in 2009 as drug marketing budgets are cut to protect profit. I do not see DTC getting cut more than other marketing tactics. No doubt that 2009 will be a year of squeezing more out of marketing budgets. DTC marketers will need to show skill in defending their budgets to their management as everything will be on the spending cut table.

The Centers for Medicare and Medicaid Services(CMS) recently released annual report on health spending showed some good news for prescription drugs. Cost increases in 2007 were only 4.9%, the lowest increase since 1963. Medicine costs remain at 10% of total health spending, the same as in the 1960’s. The reasons for these lower growth rates are increased use of generics, and smaller price increases for branded drugs.

The CMS report is certainly good news for the drug industry in terms of helping to reduce criticism of high drug costs. It is clear that the U.S. health care system will not significantly reduce costs by taking draconian regulatory actions against drug makers marketing practices. This reported reduction in cost increases, however, will not cause drug pricing issues to completely disappear.

While overall drug cost increases were reduced, the core price issues will remain. The costs of drugs for U.S.  consumers are still 30-40% higher than in Europe and Canada. For consumers who need a branded drug the monthly outlays are still high given increased co-pays. For those Americans uninsured, branded drug costs remain at levels making then largely unaffordable for many. It is unlikely then that the juicy political pricing target offered by the drug companies will go away.

The Obama administration will still proceed with plans to negotiate drug prices through Medicare. It is also likely that some re-importation bill will pass. Drug companies will therefore face continued squeezed margins on topline revenue. This means continued cost cutting across the board. Marketing budgets will certainly face increased scrutiny over the next few years.

For DTC marketers we can expect demands for higher ROI through more targeted spending. That does not mean mass media will disappear, just that the overall returns will need to be more efficient. Increasing efficiency will likely lead to a media mix change over time.  That will happen slowly as DTC professionals look for targeted programs with enough scale to move market share. Mass media companies will need to do more to show that they can improve efficiencies. For example, which day parts and which of their shows offer the best returns for specific drug categories?  Mass media outlets will have to do more research to show they can better target for clients.

The next few years will be challenging for all drug marketers as pipelines get slowly refilled. Squeezing more out of less will be the credo for awhile. While that may not be fun, it is the reality all of us face. Drug companies and their media suppliers will need to come together to succeed in squeezing the budget lemon. I expect drug management teams to be ruthless in cost cutting, making budget defense a key skill for marketers. That means DTC marketers need to explore more alternative media plans and understand the many new options for reaching potential users.  That means more time spent reviewing media alternatives and more demands on agency expertise to identify those options. It also means establishing more quantitative and comparable measurements across media types. That is not easy but will need to get done. The demands over the next few years lead me to conclude that DTC is no longer a place for rotational training for inexperienced marketers. While that has happened many times in the past, the budget challenges require both seasoned brand and agency DTC marketers. Based on the number of brands still expected to do DTC, that experience may be in short supply.