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US DTC spend trends analysed

Learning from what happened in 2008 and anticipating what's coming in 2009

Cupped hands containing various pills

Spending by pharma companies on Direct-to-Consumer (DTC) advertising is influenced by a number of factors such as the prevalence of the condition that the drug is intended to treat, the number of indications for which the drug is approved, and the potential for negative press .

In November 2008, TNS Media Intelligence published a new white paper - Advertising Investment Trend Report: Direct-To-Consumer Pharmaceutical Industry, revealing five significant trends in DTC spending patterns in the US: 

· Pharmaceutical ad spending slowed during the first eight months of 2008
· Spending levels for new drug launches were down sharply, while established brands (those with one+ years of advertising activity) were up through 2007
· Narrower drug indications limited ad spending in 2007
· Television regained share of spend through the first eight months of 2008
· Pharmaceutical companies have begun waiting longer before advertising new drugs, according to data from the first eight months of 2008.

The white paper, which analysed DTC spend data throughout August 2008, shows a 3.1 per cent decline in DTC spending. The sharp down-stepping continued for the rest of 2008, with the country in the throes of a worsening recession. For the full year, DTC advertising dropped by 10 per cent compared to 2007, and entering 2009 the decline not only continued but accelerated. It's important to note that this downward trend was not isolated to DTC advertising. During the same period, total advertising spend in the US fell by 2.6 per cent, according to Nielson data. 


DTC Pharmaceutical Ad Spending ($m)

MEDIA 2007 2008 % change
Television 2,957.6 2,860.5 -3.3
Magazine 1,877.7 1,453.2 -22.6
Internet (display ads) 95.8 127.0 +32.5
Newspaper 98.4 108.5 +10.3
Radio 50.6 25.0 -50.5
Outdoor 4.1 3.3 -19.6
TOTAL 5,084.3 4,577.6 -10.0

Source: TNS Media Intelligence ©2009


Increasing caution and narrower indications help drive decreasing spend
Part of the reason overall DTC spend is declining is the dramatic decrease in spend levels for new drugs. Although launches traditionally draw the highest promotional investment, companies are clearly becoming more cautious about promoting new treatments. In the face of negative press and ongoing calls for DTC moratoriums, they are postponing major DTC campaigns. Therefore, while established brands are seeing an increase in DTC spend, new drugs, those on the market for 12 months or less, are not receiving DTC support.

Caution is not the only reason, however, that DTC spend around launches is falling. Many of the new drugs being introduced are for less prevalent conditions. Because, they have limited potential, they receive less promotional investment. The trend toward narrower indications is being reinforced by the slower rate of new drug approvals. Without launches to drive revenues, companies often seek new indications for their existing drugs, and again, these new indications often affect only smaller segments of the population. Narrower indications have smaller potential, and therefore, draw lower DTC support. 

In addition to the spend declines around new drugs and new indications, the industry is seeing a significant drop in non-branded advertising. Although it accounts for only 7 - 8 per cent of overall DTC spend, non-branded advertising had a substantial effect on the downward spend spiral, plummeting by 47 per cent in the first eight months of 2008. Branded advertising actually rose 3.5 per cent during the same period.           

Magazines take the biggest hit
Magazines advertising fell by 22.6 per cent in the full year 2008. In contrast, TV network and cable combined are weathering the recession storm fairly well, dropping by just 3.3 per cent. In fact, according to Nielson, network TV did not decline at all. The slight decrease came from cable outlets.  

What to expect in 2009
Many factors will impact on what happens to DTC in the year ahead:

· Governmental issues
For the most part, unlike the non-DTC world, DTC often catches considerable flak from some congressional members. For example, Henry Waxman (D-California), now head of the powerful House Energy & Commerce committee that has jurisdiction over consumer protection and healthcare programmes, has made it clear that he is no friend of DTC. The actions he'll take are still unknown, but they could have a major affect on the DTC environment going forward. In addition, the White House has vowed to focus on healthcare reform. Are the criticisms of DTC coming from the government just jawboning or will they result in regulatory changes? It is too soon to be certain. One thing is sure, however. The speed at which the recession crisis can be tamed will have a direct bearing on the speed with which legislative and executive branches bear down on other priorities, such as healthcare reform and its spin-offs.

· Drug approvals
One of the greatest drivers of DTC is the speed at which new drugs for broader indications are approved.  Drugs with true blockbuster potential certainly generate higher DTC spend. The number of breakthrough brands for common ailments that get approved will be a major factor in determining DTC spend levels in 2009.
· Budgets
Regardless of any other factors, the level of DTC investment rests heavily on how deeply marketers believe DTC money is worth spending - how certain they are that DTC delivers real Roi. In 2008, there were several 'attacks' on the value of DTC spending from pundits within our own industry. Though much of the research and data on which these were based can be called into serious question, there has been some poisoning of the atmosphere. Nonetheless, there is plenty of good evidence that DTC dollars often have a positive Roi and DTC advertising can be a very effective tool for driving sales. While the anti-DTC forces often capture the headlines, the facts show that, for the right products, DTC can make a real difference.

· Media choices may change 
Since the age target for most DTC campaigns is the graying set, and since old media habits die slowly, it is reasonable to expect that traditional media, such as television, will continue to benefit most from DTC dollars. At the same time, the 'rules of the game' could change if Fair Balance or other FDA restrictions become repressive, making other media more suitable. Still, while we have begun to see growth in online DTC, our judgment is that it will not supplant traditional channels any time soon. Rather, it will become a growing part of the overall, marketing mix. In fact, it is important to note that display ad dollars in 2008 were the main growth area, albeit off a small base. 

DTC faces many challenges in today's environment - from increasing government scrutiny, to more cautious marketers, to slower drug approvals, to louder voices questioning its value. Yet marketers who have used it well have seen the positive results. Whether or not DTC is the right approach to take will vary by brand and indication, but certainly, DTC will remain a powerful and viable option for the right products.  

The Author
David Kweskin is senior vice president, practice area leader, Brand and Communications at TNS Healthcare, A Kantar Health Company.

20th May 2009


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