Thursday, August 16, 2007

New England Journal Study: DTC Ads Increase

A study published in today's New England Journal shows that despite some predictions, industry spending on direct-to-consumer (DTC) ads have steadily increased over the past several years, both in absolute dollars and as a percentage of total advertising costs. An unlooked-for finding is that in 2005, for the first time, spending on drug detailing dropped from the previous year. (The figures were obtained from PhRMA and from various commercial firms that track industry marketing trends.)

Specifically, DTC ads fell off a little in 2002 but then rebounded from 2003 to 2005 (the last year for which data are available). In 2005, the industry spent $4.2B on DTC, which was 14 percent of total promotional spending. By contrast, in 2004, the industry spent $7.6B on detailing (26 percent); the next year this figure dropped to $6.8B (22.6 percent), all figures being converted to 2005 dollars.

Total spending for promotion in 2005 was $29.9 B, which increased from $11.4B in 1996. That represented 18.2 percent of total industry sales revenues.

While DTC ads expanded, the ability and/or willingness of the FDA to police them dropped off. In 1997, the FDA issued 142 notification letters for violation of regulations in advertising; this had fallen to 21 in 2006. The authors note data from the FDA that make it much more likely this drop was due to lack of personnel than to improved compliance.

The authors also provide data to show that the DTC budget is skewed toward a few heavily advertised drugs. The list of leading drugs for DTC is headed by Nexium, Lunesta, Vytorin, Crestor, Advair, and Nasonex. Nexium, as the top drug, had $224M spent in DTC ads. By contrast, drug #7, Flonase, had only $111M, and drug #20, Prevacid, got only $71M.

Comments: The total promotional spending figure of almost $30B is news; previous articles had tended to repeat the earlier figure of around $21B. According to the analysis offered by Marcia Angell in her book, The Truth about the Drug Companies, the true figure is still higher than this and probably tops $40B, due to so many of the true promotional costs being hidden. I also believe that this figure is low because of the author's claim that companies spend only 18 percent of revenue on promotion; for reasons explained in HOOKED, I think the better estimate is nearer 30 percent.

It had been widely predicted in recent years that DTC spending had topped and was about to drop, due to the public apparently having become saturated with ads so that they were losing effectiveness. The makers of that funny stuff called "Head On" seem to have figured out that annoying the heck out of you with their ads is actually a good way to sell theior product, and maybe Pharma is reading out of the same playbook.

While noting that DTC still represents a small slice of promotional costs compared to detailing and "free" samples, it is proportionately growing, especially now that costs of detailing have actually dropped-- apparently due to recently announced layoffs in sales force as the reps trip over each other all trying to see a limited number of physicians. If so we might see even lower figures for detailing costs when 2006 and 2007 numbers become available.

Donohue JM, Cevasco M, Rosenthal MB. A decade of direct-to-consumer advertising of prescription drugs. New England Journal of Medicine 357:673-81, Aug. 16, 2007.

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