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Spending Up So Far

Spending Up So Far

 

“The DTC market is stable.”
-Bob Ehrlich

Nielsen spending numbers for nine months in 2011 show a nice result for media companies. Spending is up 3.2% and I expect it to be in that range for the entire year. The total is just over 3 billion so far. That does not include Internet spending not reported in the Nielsen numbers.

Despite the hopes of the new media, traditional media remains dominant. Television remains the king of spending with a 63% share. This is down slightly from last year’s 63%. Magazine share is 30%, up from 29% last year. Newspaper dropped slightly to 5% from 6%.

Spending in 2011 was concentrated among the top 20 brands spending 53% of the total. New brands or new indications for old brands were heavy spenders accounting for $313 million of the total. It appears that any new brand hoping to be a blockbuster is relying on a DTC budget of at least $50 million.

A big question is how long Lipitor continues to spend given its new generic status. Lipitor is defending its brand with major price support in the smart decision to keep much of its business. After all, some sales are better than no sales. Lipitor costs pennies a pill to make so selling 30 at $4 dollars is better than none at $60 dollars. Lipitor is advertising heavily so far in 4Q pushing its $4 dollar co-pay card. It makes sense to continue advertising at $100 million levels if Lipitor can keep a billion or so in sales.

While 3.2% increases in spending are not earth shaking, at least the DTC market is stable. As always,new brands are needed to replace drugs going off patent or older brands out of launch mode. Drug spending looks like it will remain at the $4 billion level for the foreseeable future. That means there are still many opportunities for new media companies who can target better or reach the masses more efficiently. The challenge in this environment is ensuring the ads themselves are the best they can be because research shows a top quality ad can generate a lot in media effectiveness.

While running a good ad seems to be an obvious goal, by definition most ads are just average. That could result from a compacted ad development time frame, too little testing, poor creative effort, or a lack of understanding of the consumer decision process. When one spends $50-100 million a year on media, it is worth spending an extra few hundred thousand on copy development and testing.

Another area of DTC opportunity will be in prevention of disease. The government, under Obamacare, is going to need to diagnose earlier and treat cost effectively. That means more pills earlier particularly for silent killers like high blood pressure, high blood sugar, and high cholesterol. I expect drug companies to add to their DTC spending in disease education. That should provide some growth in the total DTC spending for the next few years. With intense pressure to reduce their drug prices, the big pharma companies will need to add volume. Getting more people tested and treated is a way to make up the sales loss from lower prices.

The Nielsen numbers are good news, and while 3.2% is not a boom in spending, it is not bad in this lousy economy.

Bob Ehrlich, Chairman
DTC Perspectives, Inc

Bob Ehrlich
Chairman & Chief Executive Officer at DTC Perspectives
Bob Ehrlich has over 20 years marketing experience in pharmaceutical and consumer products. Bob is the CEO of DTC Perspectives, Inc., a DTC services company founded in 2000. DTC Perspectives, Inc. developed the DTC National Conference, the largest DTC conference in the industry. DTC Perspectives, Inc. also publishes DTC Perspectives, a quarterly journal dedicated to DTC issues and practices. In addition DTC Perspectives, Inc. does DTC consulting for established and emerging companies, and provides DTC marketing plans for pharmaceutical companies.
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