The latest from DTC Perspectives

The DTC Ad Fall Off

Ad Age ran a projection of DTC spending in 2008 using the first 8 months of TNS data. Writer Rich Thomaselli says 2008 may be down 9% based on the projection. That would put the DTC spending back to 2005 levels and under $5 billion. Ok I will not quibble with the Ad Age estimate. I think it will be slightly better because the networks and local media will be offering some incredible deals on ad rates. The numerous ad declines from auto, tech, travel, and retail will lead to some opportunistic spending by pharma. I'll call the year down 6-8%. We also need to see the brand by brand data to see if we have a general decline or one concentrated in a few categories or a few big brands stopping DTC.

That is not a great number but not anything to get alarmed about. In general Rx sales have fallen by about 2% and may be higher by year end. Drug company marketing budgets are being cut as they are for most businesses. So, is this something that we can expect to continue in 2009? I would guess we will see a further drop of about 5% in 2009 which could be improved with a big brand launch or two.

The macroeconomic environment is only a minor contributing factor to what pharma spends on DTC. The two major drivers going forward will be the number of new products launched and FDA regulation/guidances. If a regulatory mad Congress and FDA decide to make DTC tough to execute, then we will see marketing money shifted to other drug marketing areas. Can they make it tough? Yes, they can interpret guidances differently or create new regulations adding oodles of risk requirements. That would make the 60 second ad very hard to do while still selling any product. If Congress had its way DTC would be 59 seconds of fair balance.

The ad lobby will very likely manage to save broadcast DTC by agreeing to voluntary moratoria, increased risk disclosure, and “voluntary” pre-clearance. The drug companies have gotten used to DTC and despite all the negative talk about ROI from some studies, DTC still delivers a nice return. While DTC is still secondary to medical marketing, it has an immediacy and reach that medical education does not. Most brands desiring to be a blockbuster will need DTC to succeed. The decline in spending, even by 5-7% will put the squeeze on any medium that cannot justify its ROI value. I am afraid some experimental media will be victims of the lost budget. That will make it harder for health care media start-ups to get traction. I doubt 2009 will be a year of risk taking. What will be done will be what worked in 2008. I can also predict that 2009 will not be the year of the Internet shift. Many of our conference speakers have predicted the end of mass media for pharma. I think given the lower costs of mass media due to the general decline in advertising, pharma will find bargains galore on network, cable and print. Point of care will also see increases because of the targeted higher ROI.

I remain very optimistic about the long term financial success of the industry and DTC. Obama gets us more covered consumers buying more drugs. It is true they will be at lower prices but pharma has been cutting overhead costs and can live with lower prices. It has also been making numerous deals with smaller and more nimble R&D houses. Pipelines will get better. The golden age may not reappear for a few years but when it does expect a new boom in marketing spending. Fortunately, the pharma recession preceded the general downturn and that means pharma will be coming back before the other sectors. The downturn in DTC spending is not something to cheer but is relatively mild and expected. I'll take down 9% for 2008 and 5% in 2009 given what some other industries are seeing.