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Healthy Medicine For Advertising

Direct-To-Consumer Pharmaceutical Advertising In Puerto Rico Grows 10,000% In The Last Seven Years, Breathes New Life Into Ailing Industry


August 22, 2002
Copyright © 2002 CARIBBEAN BUSINESS. All Rights Reserved.

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Advertising expenditures of pharmaceutical companies in Puerto Rico have grown a staggering 10,304% in the past six years, pushed by the U.S. Food & Drug Administration's (FDA) green light to advertise prescription drugs directly to consumers in 1997.

The newfound ability of pharmaceutical companies to spend big bucks promoting their prescription drugs is providing advertising agencies the opportunity to increase billings. But it also presents them with a new challenge: to develop campaigns that are effective and comply with strict FDA regulations.

Mediafax reported that pharmaceutical companies in Puerto Rico spent $12.8 million to advertise prescription drugs in 2001. Six years ago total advertising was $123,000. So far this year, the figure is up to $5.8 million. Meanwhile, annual ad spending on direct-to-consumer advertising for pharmaceuticals in the U.S. mainland increased from $791 million in 1996 to approximately $2.5 billion in 2000, according to a study published in the New England Journal of Medicine in February. The explosive growth of the pharmaceutical advertising category in the past six years dwarfs the growth of other categories, such as automotive, which grew by 174% during the same six-year period.

Advertising agencies consider acquiring a prescription drug account big business. Ricky Lozada, senior vice president and general manager of Lopito Ileana & Howie (LIH) told CARIBBEAN BUSINESS he expects the agency's television ad billings to increase by 5% for 2002, after acquiring Glaxo SmithKline's prescription drug business. The estimate is notable, considering the advertising industry as a whole is expected to grow very little, if at all this year.

In fact, the economic slowdown has dealt a big blow to the advertising industry in general. Competitive Media Reporting (CMR), a provider of marketing communication and advertising expenditure information, reported that advertising spending for all media in the U.S. was up a meager 0.41% for the first quarter (1Q) of 2002, compared to 1Q 2001. Big advertisers such as Philip Morris and Daimler Chrysler lowered their ad expenditures by 19% and 24%, respectively, according to CMR.

Pharmaceutical companies, however, have upped their advertising efforts, offering much needed relief to agencies that handle those accounts. CMR reports that Pfizer’s advertising was up 38% in 1Q 2002 versus 1Q 2001. "Advertising agencies that handle the most aggressive pharmaceutical advertisers have seen a very significant impact on their business, because pharmaceutical companies have significant advertising budgets," said Fernando Alcazar, vice president and partner at Sajo Garcia & Partners, who manages prescription drug accounts for Schering del Caribe.

"The ethical products category has become the fifth largest advertising category in the U.S.," said Elliott Ramirez, president of ERC Integrated Communications, who has a long history of working with the pharmaceutical industry and currently manages accounts for Wyeth Pharmaceuticals. "It’s a new market that agencies had never looked to because it wasn’t that important. However, it has become very important." Ramirez added that landing a pharmaceutical account is now a coveted achievement for most advertising agencies.

The growth of the prescription drug advertising market has pushed advertising agencies to become highly specialized in that field. In the U.S., agencies have even spun off healthcare divisions to handle accounts that require a profound knowledge of the strict regulations governing the drug-advertising arena. "Agencies that manage pharmaceutical accounts must have a thorough knowledge of FDA regulations and company regulations," said Gretchen Velez, key division manager at Schering del Caribe. "Otherwise, the process of developing ads and getting them approved would be enormously drawn out."

Ad agencies, in turn, are diligently doing their homework. ""We have made a great effort to develop an expertise in pharmaceutical marketing issues," said Hector Ortiz, general manager of WING Latino Group, Merck, Sharpe & Dohme’s advertising agency. "Five years working in this category has given the agency experience at all levels of pharmaceutical marketing."

Creative meets regulator

Creating the ads themselves is a taxing proposition for art directors and creative staff at agencies, because strict regulations tend to damper creativity. (see sidebar) "So many rules and restrictions, the dos-and-don’ts list is enormous, which tends to limit our scope when creating," said LIH’s Lozada. "The big challenge is to always strive to create impressive, memorable campaigns that stand out from what I call ‘the sea of prescription drug ads’ while complying with FDA rules."

"The irony of direct to consumer advertising of prescription drugs is that it is really indirect," said ERC’s Ramirez. "The communication is aimed at consumers, but consumers can’t make a final decision about purchasing the product, because the only one who can diagnose a condition and prescribe medication for it is a doctor."

The strategy seems to be working, but it has also spurred a controversy over the advertising expenditures of pharmaceutical companies. Ramirez told CARIBBEAN BUSINESS that last year 70% of patients who spoke to their doctors about medication they saw advertised received a prescription for it, according to study conducted by the National Institute for Health Care Management and Educational Foundation. He added that the sales of 50 leading prescription drugs that used advertising grew by 32% last year, while sales of medications that did not advertise grew by 14%.

Velez agrees that stepping up advertising efforts positively impacts the company’s bottom line. "Sales of prescription medication have definitely improved since the increase in advertising took place. Clarinex, for example, has the largest market share in its category after only seven months in the market and I think advertising has had a lot to do with it," she said.

Cesar Simich, general manager of Merck, Sharpe & Dohme in Puerto Rico, however, refused to link increased advertising with increased prescription drug sales. "We try to refrain from reaching conclusions on such matters; because the nature of the products we sell precludes consumers from purchasing them without a previous medical consultation," said Simich.

Rationalization aside, the U.S. Senate is considering a bill that would limit the amount of money pharmaceutical companies could spend on advertising, according to Media Post’s Media Daily News. The idea behind the bill is that cutting back on ad expenditures will translate into a drop in prices of widely used drugs, but the bill has encountered staunch opposition from the advertising industry.

According to Schering Plough’s Velez, pharmaceutical companies spend ad dollars for only a small fraction of their prescription medication portfolios. Among the most advertised are drugs to treat allergies, high-cholesterol, depression, and arthritis. Medication categories such as oncology, however, don’t advertise at all and still rely on marketing efforts aimed directly at physicians. "In the end, this is a financial issue," said Sajo Garcia’s Alcazar. "If you have a potential market large enough to justify mass advertising, then you advertise. If your potential market is smaller, your focus must be on below-the-line activities, such as conferences, symposiums, and conventions."

The old fashioned way

Notwithstanding the enormous growth in direct-to-consumer pharmaceutical advertising, there are some drug makers that refuse to jump on the bandwagon. Abbot Laboratories, for example, remains faithful to medical representatives and the marketing formula whereby they inform physicians about medications. "Our primary marketing method is education," said Cynthia Anderson, general manager for Abbott in Puerto Rico.

According to Anderson, medical representatives remain the crucial link between pharmaceutical companies and physicians, who, after all, have the final say on whether to prescribe medication. That is not to say, however, that relying on medical representatives is any cheaper than direct-to-consumer advertising. The <I>Washington Post<I> reported that "the [pharmaceutical] industry gave $8 billion worth of samples to physicians…and spent $4.8 billion on sales visits to hospitals and doctors' offices [in 2000]."

Medical representatives are highly trained to provide doctors with all the information they need about medication. They also take printed information that doctors can hand out to patients at their offices, said Anderson. She added that the effort has a philosophical slant, reflecting the company’s principles. Abbot believes that the direct-to-healthcare-professional approach is better attuned to the pharmaceutical industry’s role as provider to the healthcare industry.

"Promotion to healthcare professionals still accounts for more than 80% of the promotion of prescription drugs," reported the Washington Post. "The focus on doctors reinforces the conventional wisdom that physicians are unlikely to prescribe a drug unless they are familiar with it and comfortable prescribing it."

Abbot’s medical representatives in Puerto Rico have the added advantage of being able to visit the facilities where the drugs are actually manufactured, which refines their knowledge of medications and their effectiveness. Abbot produces and distributes such widely used prescription drugs as Prevacid, Depakote, and Synthroid.

As for economic downturns, industry sources agree that the category is unaffected by recession, particularly in sophisticated societies where medical insurance abounds. In fact, economic turmoil may aggravate some medical conditions, spurring higher sales of certain medications.

This Caribbean Business article appears courtesy of Casiano Communications.
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