DTC Spending Falls for Second Consecutive Year

Recession, Regulation and Fewer Blockbusters Mean Less Ads

By Rich Thomaselli

Published: November 12, 2008

NEW YORK (AdAge.com) -- Big pharma might not be so recession-proof, after all.

Throughout previous economic downturns in the advertising world, the one bellwether of hope was always the pharmaceutical industry. Even as the dot-com boom went bust in the early part of this decade, and overall ad spending began to drop, direct-to-consumer (DTC) spending by drug companies continued to rise every year.

But not this time.

According to a new study by TNS Media Intelligence, DTC spending is down for the second consecutive year and likely will not reach the $5 billion mark by the end of 2008 that many media companies had counted on.

Total down 6.3%
In "Advertising Investment Trend Report: Direct-to-Consumer Pharmaceutical Industry," TNS reports that in the first eight months of this year, total measured DTC ad spending was down 6.3% to $3.175 billion compared with the same time period last year. That projects to $4.76 billion in total spending through the end of 2008, compared with $5.26 billion in spending in 2007, which would be a drop of more than 9%.

DTC spending trends 1998 $1.2 billion 1999 $1.6 billion 2000 $2.5 billion 2001 $2.7 billion 2002 $2.6 billion 2003 $3.1 billion 2004 $4.4 billion 2005 $4.6 billion 2006 $5.4 billion 2007 $5.2 billion 2008 $4.7 billion* *Projected by year's end Source: PharmaMarketing News and TNS Media Intelligence

This would be the second consecutive year that DTC ad spending fell after reaching a peak of $5.4 billion in 2006.

"The pharmaceutical category is closely watched within the ad industry for indications of the health and direction of marketing budgets," Jon Swallen, senior VP Research for TNS Media Intelligence, says in the report. "When drug-makers sneeze, ad buyers and sellers worry about catching a cold."

They're probably worried about catching the flu right about now.

Non-branded worst off
TNS reports that the cutbacks were most pronounced in non-branded advertising by pharmaceutical houses, including their corporate promotion messages and ads to promote awareness of specific conditions. The annualized rate of spending for this segment has plummeted by 63% since 2006.

But DTC prescription ad spending was down 3.6% in the first eight months of the year. The projected $4.76 billion ad spend for this year is $700 million less than the peak of 2006 and is almost back to 2005 levels of $4.6 billion.

The reasons for the decline are many and varied. The economy is certainly one problem, with drug makers among the many companies slashing staff -- including sales reps.

Fewer drugs launched
In addition, pharmaceutical experts and observers have been saying for years that the drug pipeline in virtually every company is dry, which means fewer drugs are being brought to market. Simply put, the blockbusters just aren't there. In 2007, the top three marketing launches of the year -- Veramyst (allergy), Orencia (arthritis) and Vyvanse (ADHD) -- had a combined ad spend of $210 million. Compare that with 2006's top three of Rozerem (insomnia), Gardasil (cervical cancer) and Spiriva (allergies), which spent a combined $400 million. Or 2005's Lunesta (insomnia), AmbienCR (insomnia) and Boniva (osteoporosis), which had a combined ad spend of $594 million.

And, certainly, the continuing debate in Washington, D.C. regarding prescription medication safety, labeling and marketing restrictions remains a thorn in the side of the industry. With the increased Congressional scrutiny of the last three years, TNS found that the lag time between Food and Drug Administration approval of a new drug and its first appearance in a DTC ad campaign has increased dramatically -- from 6.1 months in 2004 to 12.4 months in 2007, and a projected 14.1 months for drugs introduced this year.