The latest from DTC Perspectives

2010 What Will Change

This year promises to be a transformative one for health care. Once Congress finalizes a reform bill we can expect a number of things to change, albeit not immediately. The reform bill will not take effect until 2013 or 2014 but preparations for change will take place in 2010.

First, for drug makers it is clear their market will expand as more people get coverage and will get more affordable prescriptions. That broader coverage means more need for awareness ads, particularly for drugs for younger people who are more likely to be currently uninsured.

Second, it is also clear that drug companies will face more intense negotiation from insurance companies and other payers. The margins for payers will be squeezed under health reform and they will try to recoup that margin from suppliers of services and products including drug makers. That means drug companies will carefully assess promotion budget allocations. We can expect more management demands for proof of ROI.

Third, there will be an increased emphasis on prevention in the hopes that costs will be better controlled. The reform bills mandate coverage for well care check-ups. That is good for drug makers because many people will be diagnosed for the first time with treatable diseases such as high cholesterol, diabetes, and blood pressure. That means more ads for condition awareness and screening from drug makers with products in those categories. It also means growth in home diagnostics and genetic tests to identify likely disease sufferers. That means more consumer ads for diagnostic products.

Fourth, with doctors getting their government reimbursements increasingly squeezed, I would expect them to be more marketing oriented to figure ways to increase their incomes. That should lead to numerous promotional partnerships with drug companies and service companies. Although doctors will deny being influenced by added revenue opportunities, they are just people trying to maximize income. For example, they may want to charge companies to send patients literature and product information. Drug stores charge drug makers for those mailings, so why not doctors?

Now, as for DTC spending I think 2010 will be a pretty good year. Once we have some clarity from the final bill, drug makers will be able to plan with more certainty. DTC looks safe from Congressional limitations, as well as other traditional marketing such as detailing and meetings. Given a general economic improvement, we should see DTC spending at least equal to 2009 with a possible increase of 1-3%. I believe the DTC budget bleed is over. In fact I would expect DTC spending to once again pass $5 billion by 2011.

DTC spending is of course dependent most on new drug launches. We have had some weak years recently and one can only hope that we are closer to break through drugs in the near future. Given our massive issue of medical costs, finding drugs to better treat and/or prevent illness seem to be our only real hope for affording to treat an aging population. I remain quite bullish on drug company prospects and that means I expect a healthy dose of promotional spending. Things look a lot clearer than at the beginning of 2009 and that allows for better planning from drug companies and their suppliers.