Is Direct-to-Consumer TV Advertising a Losing Proposition?

2014 was a banner year for TV direct-to-consumer (DTC) advertising in that it saw the highest percentage spent on TV since at least 2001 (see chart and read "Pharma Ups Its Investment in TV DTC Advertising").

A few weeks ago I said "Forgettaboutit! The numbers are not yet in for 2015, but if it's anything like 2014 -- and judging by personal experience -- the drug industry will be spending even MORE money on TV DTC ads."

UPDATE (3 Mar 2016): The numbers for 2015 are here (see charts and "Annual Spending on Direct-to-Consumer Drug Advertising Nearly at an All-Time High"). My prediction was correct: Since 2011, the portion of DTC spending on TV has was 69% in 2015 versus 61% in 2014.

The Top 10 TV DTC Rx advertisers spent $876.3 million in 2015 (see insert below). The question is: Is it worth it?

My answer: No! How do I know? Click on "Read More" after the insert below for my analysis of TV DTC ROI (return on investment).

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TV DTC Advertising Spending

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Analysis of TV DTC ROI
According to Beth Snyder Bulik writing for Fierce PharmaMarketing "However, it [the money Johnson & Johnson spent advertising Invokana on TV in 2015; $101.2 million] might have been money well spent. U.S. sales of Invokana spiked upward with J&J reporting $348 million in fourth-quarter revenue for the brand, up 80% when compared with the $193 million in U.S. sales for the same quarter of 2014" ("New brands, stepped-up spending drive big TV-ad outlay for diabetes in 2015").

J&J spent $66 million more on Invoking DTC advertising in 2015 than it did in 2014 ($102.2 - $35.2). If we assume all that increased DTC ad spend accounted for the $155 million in increased Invokana sales in Q42015 v. Q42014, then the ROI would be ($155 million)/($66 million) = 2.3 (J&J made $2.30 for every dollar spent on TV). Pretty good.

BUT WAIT!

We must assume that marketing to physicians (lots more $ is spent on this marketing) and other forms of DTC advertising (e.g., print) also played a role in increasing Invokana sales. I think it would generous to say that DTC TV ads were only responsible for 40% of the increase in sales; i.e., $62 million. That would mean the TV ad ROI is more like ($62 million)/($66 million) = 0.9 (J&J made only $0.90 for every dollar spent on TV; negative ROI); i.e., a losing proposition!

This is not to say that all DTC TV ads have a negative ROI. But, for some brands - and Invokana may be one of them - DTC TV advertising may not be the best way to spend your advertising dollars.

P.S. Perhaps the Invokana ads themselves are to blame. The people in them look like zombies!