Product Claim Ads

Report
Prescription Pharmaceuticals
• Rachel DiDominica
• Thomas Hawing
• Dylan Hull
The Pharmaceutical Industry
 The prescription pharmaceutical industry is
primarily engaged in the development of
innovative prescription and over-the-counter
products that are used to prevent or treat
illnesses in humans or animals. Brand-name drugs
are products with patent protection. The industry
is significantly engaged in the research and
development of new drugs.
Industry Competitors
 Pfizer Inc.
 Johnson & Johnson
 Merck & Co.
 Bristol-Myers Squibb
 AstraZeneca PLC
 Eli Lilly & Company
 GlaxoSmithKline PLC
Market Share
Major Players
Pfizer
Merck & Co
13.6
30.8
7.5
AsterZeneca PLC
12.8
9.5
7.5
8.9
9.4
GlaxoSmithKline PLC
Johnson & Johnson
Bristol-Myers Squibb
Eli Lilly & Co
Other
Barriers to Entry = HIGH
 Knowledge:
 Patents
 The Patent Protection and Affordable Care act of 2010
 Companies have a 12-year patent period on their drugs
 Proprietary knowledge is required to compete with other
established companies
 Drug Firms keep discovery process very secret
 Production and Development of New Drugs
 As patents expire new drugs need to be made
 Cant have a company with one drug
Research and Development
 Pharmaceutical manufacturers invest a higher percentage of sales in R&D than
companies in any other industry
 Drug firms invest around 19-25% of total revenue in research and development
 Those who do not invest in R&D often end up struggling to survive in the face of stiff
generic competition once their patent protection has expired
 One in 5,000 new chemicals discovered actually goes to market
 It takes around 10 to 15 years and $1.5 billion to develop a new product and just
two out of ten approved products recover the R&D costs necessary to research
them
HHI Index
699.28
 HHI = 10,000 x Σwi2
 HHI tells us whether an industry is acting in a monopolistic
behavior or as if it were in a competitive market
 An HHI of 699.28 indicates that the Prescription
Pharmaceutical industry is acting as if they were in a
completive market.
Four-Firm Concentration Ratio
 CR4 = 45.3
 C4 = w 1 + w 2 + w 3 + w 4
 The CR4 Index measures the market power of the top 4
companies
 This is under 50%
 Shows that the Prescription Pharmaceutical industry is a
competitive industry.
Government Regulation = HEAVY
 In 1962 the Kefauver-Harris Amendments shifted all Federal
Food, Drug and Cosmetic regulation and promotion from the
Federal Trade Commision to the FDA.
 Prescription Drug promotional materials cannot be false or
misleading, must provide "fair balance" coverage of risks and
benefits of using the drug, must provide a "brief summary" of
side effects, and effectiveness and must also meet specific
guidelines for readability and size of print.
 The FDA interpreted this as everything must be in print form.
 They must disclose where they spend all of their advertising
dollars (Doctor Payments)
A Change in Government Regulation
 In 1997 the FDA eliminated the requirement that ads present
the entire "brief summary" taken from the product label.
 The advertisements needed only to include:
 “major statements” of the risks and benefits of the drug
 Directions to information sources in addition to a physician such
as a toll-free phone number, a website or a print advertisement
 This removed a major barrier that had made television and
radio advertising infeasible and could only be done through
print media
Television Ad. Occurrence
35000
30000
Count
of Ad
25000
20000
15000
10000
5000
0
Series1
Company Background
Pfizer
 Founded in 1849
 Lipitor, Viagra, Caduet, Chantix, Advil, Robitussin
 2011 Revenue = $67.425 billion
 2007 Ad Spending = $1.253 billion
 $456.6 million on TV
 $225.2 million on Magazines
•
•
•
Heart Medication
$12.7 billion in sales
$220 million spent on advertising
Bristol-Myers Squibb
 Founded in 1887
 Abilify, Atripla
 2009 Revenue = $18.8 billion
 2007 Ad Spending = $796.3 million
 $201.4 million on TV
 $158.3 million on Magazines
Antidepressant
AstraZeneca
 Merger between Astra (1913) and British ICI (1993) in 1999
 Seroquel, Arimidex, Crestor
 2011 Revenue = $33.59 billion
 2007 Ad Spending = 697.4 million
 $55.6 million on TV
 $196.9 million on Magazines
Advertising Strategies
Total Market View
Direct-to-Consumer (DTC) Advertising
Direct-to-Consumer (DTC) Advertising
 Targets general public via
lay media
 Expenditure has grown
from $985 million in 1996 to
$4,237 million in 2005
 Real spending on DTC
advertising increased by
330% from 1996 to 2005
(See Table)
 14% of total
promotional
expenditures in 2005
Role of DTC Advertising for Top-Selling
Drugs
 Drugs advertised to consumers:
new drugs used to treat chronic
conditions
 Manufacturers of proton-pump
inhibitors, statins, and
erythropoietin medications
 Spent 34%, 34%, and 31% of
their total marketing budget
respectively on DTC
advertising in 2005
 Spending for advertising of
antidepressant agents, seizuredisorder medications, and
antipsychotic agents was lower
Empirical Findings on DTC Advertising
 Increases traffic to clinics
 May help the sponsoring
brand more than the
competing brand
 DTC advertising of
competing firms could
have synergistic effects on
consumers
 Demand for prescription
drugs is sensitive to price
Television DTC Advertising
 Average American
television viewers see as
many as 16 hours of
prescription drug
advertisements per year
 Average ad length: 44.9
seconds
 Time above average
 Informative- educates
people about health
conditions and
available treatments
Television DTCA- FDA Regulations
 Product Claim Ads
 Must include name and indication of the drug, major
statement of product risks, and must direct consumers to a
detailed summary of product risks and benefits
 Reminder Ads
 Shorter
 Can mention product name
 May not discuss indications, efficacy, or dosage
recommendations
How Ads Attempt to Appeal to
Viewers

Rational appeals


Positive emotional appeals


Depicting unrealistic or surreal scene
Sex appeals


Using puns, jokes, or satire
Fantasy appeals


Evoking negative affect– fear, regret
Humor appeals


Evoking favorable affect
Negative emotional appeals


Providing information about product use, features, or comparison with similar products
Showing characters in an intimate encounter, scantily clad, or using provocative gestures
Nostalgic appeals

Using images from an earlier time, or black-and-white or sepia tone visuals
Study on Television DTCA
 Programming Sample: 103 Ads
 31 unique product claim ads focus of study
 7 unique reminder ads
 3 story structures:
 44.7%: showed characters before and after taking the
product
 39.5%: showed characters only after taking the product
 7.9%: showed characters only before taking the product
Study on Television DTCA
 Appeals
 Product claim ads
 100% used rational
appeals
 95% used positive
emotional appeals
 68.9% used negative
emotional appeals
 Reminder ads
 Never use rational
appeals
 100% used positive
emotional appeals
Conclusions of Study
 Most product claim ads made some factual claims
about target conditions and the disease mechanisms
 Ambiguous about whether viewers might legitimately need
the product
 Offered limited info about risk factors, prevalence of
condition, or subpopulations at greatest risk
 Provided info to viewers through rational arguments that
detail product use or potential risks and benefits of use
 DTCA focuses on convincing people that they may be at
risk for a wide array of health conditions that product
might help with
Conclusions of Study
 Themes about role of lifestyle in achieving and
maintaining health
 One quarter of ads: target condition interferes with healthy
or recreational activities
 Never described behaviors as a reasonable alternative
 More than 56% of the ads showed the product enabling
healthy or recreational activities
 DTCA: suggests improvement comes from taking the
medication alone or in combination with healthy activities
 NEVER from behavior modification alone
DTCA Advertising Example
 Abilify Anti Depression 2011 Commercial
 http://www.youtube.com/watch?v=jfPDrNrHAg&feature=related
Issues with DTCA
 Television advertising
 Use of programs like
TiVo
 Commercial skipping
 Companies resort to
different strategies
Product Placement
 Inclusion of brand into story
line
 2004: market for service
increased by 30.5% to
$3.46 billion
 Use of Viagra in the film
Love and Other Drugs
 http://www.youtube.co
m/watch?v=RNmi5ZNOt
Ys
Celebrity Spokespeople
 Speak on behalf of
particular diseases and
mention specific brand
treatments during
interviews
 Peggy Fleming on Good
Morning America for Lipitor
Sampling
Sampling
 Pharmaceutical
representatives provide
office-based physicians
free drug samples
 Accounts for 55% of
advertising expenditures
 Totaled $10.5 billion in 2001
Sampling
 Samples also being made
available through DTC
advertising venues like TV,
newspapers, and the
Internet
 From 1996 to 2005
spending on DTCA and
free samples has risen
as a share of total
promotion
Sampling: Psychological Effects
 Belief and attitudinal confidence are found to be higher for
physicians and patients exposed to product sampling alone
than for those exposed only to product advertising
 Consumers automatically have a greater affinity to something
they have experienced as opposed to something that they
haven’t
 Have been shown to directly affect physician prescribing
behavior
 More likely to prescribe brand name medications that they
have free samples of
 Provides immediate access to the medication and allows
patients to find out which brand and dosage amount works
best for them
Advertisements in Medical Journals
Advertisements in Medical Journals
 Value of professional journal
advertisements
 2% of spending
 Specific ads targeting
medical profession=
cheaper and just as
effective
 Six of the top 10 drugs
advertised through DTC
were also among the top 10
drugs promoted to
physicians through detailing
and medical journals
Advertisements in Medical Journals
 Companies are now paying journals to publish articles
with content about their promoted drugs and to suppress
unfavorable study results that would negatively impact
their brand image
 1989 study by the Association of Independent Medical
Publications
 Journal advertising with effective sales theme increases a
product’s market share of new prescriptions in a predictable
way
 Concluded that doctors in study relied on promotional
information rather than scientific material in forming opinions
Method Currently Under Scrutiny
 Ability to impact a physician’s prescribing behavior for
the wrong reasons
 Major deficiencies in advertisements
Study: Office of the Inspector Study:
Study: General in the Department of
Health and Human Services
 Lacked necessary references and information on efficiency,
appropriate populations, safety, and potential side effects
 Reviewers rated 60% of the advertisements poor or
unacceptable in terms of scientific references
 17%: rejected for publication
 24%: required major revisions
 50%: little or no educational value
 59%: would not lead to proper prescribing if the physician
had no other information
FDA: Regulatory Response
 Issue notice of violation and warning letters and
requesting that manufacturers publish corrective
advertisements or send letters to pharmacists and
physicians correcting advertisements
 Many medical journals do not review the content of the
advertisements they publish
Detailing
Detailing
 Sales activities of drug
representatives directed
toward physicians
 $4.8 billion: officebased physicians
 $700 million: hospital
based physicians
 $5.5 Billion spent in 2001
Detailing
 81,000 pharmaceutical
representatives in US
 Relationship selling
techniques
 Medical science and
product knowledge
 Marketers identify group of
physicians most likely to
prescribe particular drug
 Detailing is more effective
in determining brand share
Detailing
 Combined with other
advertising methods
 May provide clinical
information paired with
the presentation of
approved journal
articles and free drug
samples
Interview with Susan DiDominica
 Current pharmaceutical
sales representative
 “Human informative
advertisement”
 Sell yourself and the drug
Works Cited
 http://oig.hhs.gov/oei/reports/oei-01-90-00482.pdf
 http://www.nejm.org/doi/full/10.1056/NEJMsa070502#t=a
rticleMethods
 http://www.kff.org/rxdrugs/upload/Impact-of-Direct-toConsumer-Advertising-on-Prescription-Drug-SpendingSummary-of-Findings.pdf
Analysis and Recommendations
Industry Outlook
 Revenue continues decline through 2013
 Slow growth after 2014
 Increase in sales, decrease in profit
Industry Revenue Growth ($millions)
161,000.00
160,000.00
159,000.00
158,000.00
157,000.00
156,000.00
155,000.00
154,000.00
153,000.00
152,000.00
2012
2013
2014
2015
2016
2017
2018
Patient Protection and Affordable
Care Act
 Extends health insurance to 32 million more Americans
 2014: more Americans aged 26 to 64 will become
covered by the act
 PhRMA deal
 Establishes approval pathway for generic biologic drugs
Biologic Drugs
 Focus on investing in generic biologics production
 Large brand-name companies gain a competitive
advantage
 Diversifies and mitigates risk
DTC Advertising
 Rapid pace of growth in developing and launching
second and third generation products
 Focus on promoting the product
 Increases in DTC advertising have contributed to overall
increases in spending on the advertised drug
DTC Spending
DTC Spending
Social Media Advertising
 More consumers willing to use social media to seek
medical information
 FDA Regulations pending
Pharma Ad Spending
Recommendations
 Revenue is relatively steady.
 Revenue is expected to drop in the next few years
 Future of the industry is unclear
Questions?

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