Thursday, April 03, 2008

Is DTC Bankrupting Pharma?


These are troubling times for the U.S. economy in general and for the pharmaceutical industry in particular. The Wall Street Journal Health Blog asks "Will 2008 Set a Pharma Layoff Record?" Last year, pharmaceutical advertising DECREASED by by 4.1% compared to 2006 (see "Pharma Ad Spending Shrinking!"). Meanwhile, 60% of respondents to a poll of readers of Pharma Marketing Blog say the drug industry is currently (54%) or soon will be (6%) in a recession.

There are many drug industry deficiencies that can be blamed for the present state of affairs: generic drug competition, lack of new drugs in development, increased regulatory scrutiny, decreased access to physicians, etc.

But no one is mentioning the extraordinary wasting of money due to ineffective Direct-to-Consumer (DTC) advertising!

No one except me that is! Last week, I posted speculation about the ROI of Speracor's Lunesta DTC advertising and related that to the drop-off in its share price (see "Lunesta Moth Being Mothballed as a Result of Negative Marketing ROI").

It's Either DTC or Jobs
: What Do You Expect Pharma to Jettison?

I think everyone would agree that now is not the time to waste money. Most companies will save money by laying off people (eg, Schering-Plough). Some companies, like Sepracor, will also cut back on DTC advertising (see "Sepracor Not So Keen to Spend Big on DTC for Its Next Product!").

It seems to me that there is a lot of negative ROI fat in DTC -- especially TV based DTC. Smart marketers will take $ out of TV and invest in more cost-effective media such as the Internet.

If the industry cut only 25% of the TV DTC budget and diverted 25% of that savings to the Internet, the total spending on Internet-based pharma marketing would increase by about $200 million -- which is 4X what it is now (see "Pharma Recession, Part Deux: Online Ad Spending Sinking!")! The industry would still save about $600 million, which is almost enough to bring one NEW drug to the market or save the jobs of about 1200 sales people!

P.S. Some notes from the field: ie, Sepracor message board at CafePharma

Thread: Displaced % Still Unemployed? [In December, 2007, Sepracor eliminated about 300 sales positions in an effort to pare down its costs.]
"We had layoffs because upper management spent to (sic) much money and over extended themselves in the ablility (sic) of lunesta. Less DTC and more managed care would have been a good idea. In addtion (sic), they overhired and had several launch failures that had nothing to do with the field."
Thread: Negativity
"Executive Name (2008 Salary/ 2008 Target Bonus)

Barberich $960,000/80%
Adams $1,050,000/100%
Corrigan $545,000/50%
Southwell $530,000/50%
Koven $525,000/50%
Scumaci $520,000/50%
Iwicki $500,000/60%

While they cut budgets and try to slash our merit increases because sales came in below target, they take HUGE pay raises and bonuses, not to mention stock options that we don't get......"
Thread: New Name for Company [PG-13 edited version]
"Stupricor
Crapricor
Dumbricor
Idon'tgiveadamnricor
Thiscompanywillgodowninpharmaloreacor
downthecrappercor
BANKRUPTICOR"

1 comment:

  1. As I wrote today John marketing is always the first to get cut as senior management sees marketing as an expense. All the time DTC marketers have been spending getting buy-in on the value of marketing and DTC marketing especially may have been for nothing. Pharma continues to use outdated business models and refused to look to new media.

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