The GAO report states:The amount that drug companies spend on DTC advertising increased twice as fast as spending on promotion to physicians or on research and development. IMS Health estimated that, from 1997 through 2005, spending on DTC advertising in the United States increased from $1.1 billion to $4.2 billion -- an average annual increase of almost 20 percent. [See "Total U.S. Promotional Spend by Type, 2005."] In contrast, over the same time period, IMS Health estimated that spending on drug promotion to physicians increased by 9 percent annually. Further, PhRMA reported that spending on the research and development of new drugs increased by about 9 percent annually during the same period. While spending on DTC advertising has grown rapidly, companies continue to spend more on promotion to physicians and on research and development.The DTC estimate includes TV, magazines, newspapers, radio, and outdoor advertising, but not Internet based advertising (for more on that, see "Pharma eMarketing in a Slump"). Physician promotion includes estimated spending on office - and hospital-based promotion to physicians and journal advertising. These estimates do not include other spending, such as drug company spending on meetings and events (eg, CME and advertising at CME events, which could be as much as $1.5 billion), or spending on promotion that targets medical professionals other than physicians, such as nurse practitioners and physicians assistants.
The GAO was careful to point out that more is spent on promotion to physicians than to consumers -- a lot more; 71% more, to be precise ($7.2 vs. 4.2 billion). It emphasized, however, the rate of growth difference; namely, 20 percent average annual growth for DTC spending vs. 9% for DTP (ie, direct-to-physician) spending.
At what point, I thought, would DTC spending surpass DTP spending if those rates of growth continued? I did the calculations and plotted the results and found that, under these assumptions, DTC spending would surpass DTP spending in 20011!
This was interesting, so I looked at the raw data again to see if the 20% vs. 9% numbers were valid assumptions. What I was thinking was that there was practically NO DTC prior to 1997, so any spending would represent a huge percentage increase for years afterward. Maybe it wasn't fair to use the 8-year average of 20% growth. It might be better to look at the last 5 years only, for both DTC and DTP, and redo the calculation.ADVERTISEMENT
Today's show airs live! at 1 PM Eastern US time. The topic is Disease Mongering. Click here for details about the show and instructions for tuning in via your computer or downloading the audio archive afterward.Before I get to that, I'd should mention that I could not verify GAO's numbers exactly. I calculated an average of 19.13% rate of increase in DTC spending from 1997 through 2005 (GAO said it was 20% -- actually, 19.6% rounded up) and an 8.25% average increase for DTP (GAO said 9.0%). Rounded down, my numbers were 19% vs. 8%. Using those numbers adds 1 more year to the estimate of when DTC will surpass DTP. I also do not understand how GAO got a total percentage increase in DTC spending from 1997 through 2005 of 296.4%. When I do the math, it comes out to 281.8%. It makes me nervous -- GAO is supposed to be accountants!
Any hoo, if you look at the percent change in DTC and DTP spending year-vs-year, you find there are wide fluctuations, as shown in the following chart:
For example, DTP spending dropped precipitously in 2005 vs. 2004. Wha happened? I leave that up to you as an exercise.DTC spending seems to be cyclical - rising and falling with the political tide!
So, who knows what the future holds for DTC and DTP spending? Things are in flux with the new Congress (see "Congress vs. Pharma: Trouble Ahead?"). However, let's use recent rates of increase (2000 through 2005; 11.5% for DTC and 5.4% for DTP) as a basis for predicting when DTC spending might overtake DTP spending and see what we get.
What we get is 2015. That is the year that I predict DTC spending will surpass DTP spending ($12.4 billion vs. $12.2 billion, respectively):
So, what's the point of this exercise? Nothing really, except perhaps that the GAO could have included a chart like the above to emphasize further where DTC may be headed in the not too distant future and what the FDA may be up against trying to keep up with it all.BTW, using my 11.5% growth rate number for DTC and the 6.0% growth rate that GAO reports for R&D spending, I predict DTC spending will outstrip R&D expenditures in 2045, well after many of us are gone and the whole issue is moot to us!
There could be any number of reasons for the precipitous drop-off in growth of both dtp and dtc expenditures beyond politics. The blockbuster drugs have been on the market for a number of years, so the need to drive home awareness is far less (and what can you really say about a drug that prevents the jimmy legs?). Maybe drug companies are refining their advertising methodology, finding the more efficent channels for DTP/C.
ReplyDeleteUltimately, I feel their spending, and what they're spending on, is less the issue. I think the bigger issues are how truthful the ads are, and, likewise, why are so many in Congress interested in limiting both doctor and consumer choice and knowledge by threatening to "crack down" on DTC/P.
These comments are mine alone, and do not reflect the opinions or thoughts of FDAnews, the editors, management, staff, or anyone else on the planet.
James,
ReplyDeleteThanks for the comments. I especially like the "jimmy legs" -- a phrase my straight-talking mom would have used!
Why is Congress interested? It's the money! Another reason why I did this analysis. Such vast sums put the issue on the front political burner.
Perhaps if pharma companies utilized more cost-efficient means to reach consumers -- may I say Internet? -- they could DECREASE DTC/P spending by 5% very year!
That doesn't sound unreasonable, does it?
But before they do that, they need to agree to the ground rules for Internet advertising, of which there currently are none!