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Measuring Marketing
STACY LAWRENCE
Increasingly, it seems as though drug companies are in the room with doctors and patients—and sometimes they literally are. A recent surge in marketing expenditure has resulted in some questionable practices, including arrangements in which pharmaceutical sales representatives sit in on doctor-patient consultations. Physicians may receive compensation for this time with sales reps, and patients are usually unaware that an “intern” is really a salesperson.
This spring, the U.S. Department of Health and Human Services issued a formal warning against such “shadowing.” But the practice—an extreme version of “detailing,” or sales reps visiting physicians—is just the latest tactic adopted by companies hungry for a marketing advantage in an ever more competitive field. Overall U.S. spending on pharmaceutical marketing has more than doubled since 1996, to almost $22 billion last year, and if this rate of increase continues, budgets for marketing will outpace those for research and development by 2009. Physician visits and drug samples account for four-fifths of the current total, as they have consistently since 1996.
Detailing does boost the number of prescriptions written for a particular medication, at least briefly. No wonder then that each major pharmaceutical company is continuing to expand its sales force. The return on investment for detailing, however, has shrunk over the last several years, as inflated budgets have forced more sales reps to compete for ever-dwindling physician time and attention. Returns on promotional investment for the top 14 pharmaceutical companies declined by an average of 24% between 1998 and 2001, according to the market research firm Datamonitor.
Although the lion�s share of spending will continue to target doctors to get at patient dollars, drug companies are also discovering the power of cutting out the middleman: direct-to-consumer marketing, almost solely a U.S. phenomenon, accounted for $2.6 billion last year, more than triple the $800 million spent in 1996. Last year all direct-to-consumer spending went to just 68 drugs, or one-fifth of major branded prescriptions. Advertising seems to be working: a study by the Henry J. Kaiser Family Foundation found that, on average, every 10% increase in direct-to-consumer spending increases drug sales by 1%.
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Additional charts accompanying text include:
Marketing and Research and Development in the U.S. Pharmaceutical Industry
Distribution of Promotional Spending Among U.S. Pharmaceutical Companies
Percentage of Average Marketing Spending, by Research Phase
Current Products in the Research Pipeline
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