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The New Year Prognosis

The New Year Prognosis

 

“2012 will be a decision year for the type of health care we get in America
-Bob Ehrlich

I am happy to be back writing in 2012 after a two week hiatus and hope all of you had a nice holiday season. I’ll start the year giving my thoughts on events affecting DTC advertising and the broader pharmaceutical market in 2012.

First, the biggest issue is the survival or fall of Obamacare. The Supreme Court will decide on the individual mandate that underpins the program. If the Court rules against it, one would expect a significant re-evaluation of its viability and may open the door for a completely new effort. I expect that the Court will rule 5-4 against the individual mandate. That will mean a significant change in how the program is funded. The reality, however, is Obamacare will survive or die based on the 2012 election. If re-elected, no matter what the Court rules, Obama will find a way to keep the program intact. That will mean more covered Americans and more pressure to cut costs. In any scenario drug costs will be a target.

Second, DTC will not face any life or death legal or regulatory challenges. The tax deduction for DTC advertising will be kicked around again in Congress but will not be adopted. The FDA will not try to regulate DTC out of existence in 2012. I do not expect any guidances which will make DTC harder to execute. As for social media and other web promotions, FDA will not liberalize use, despite the ease of clicking for additional information which is so different from mass media. Their recently announced guidance on dealing with off-label requests was not an answer to the social media companies request on how to make better and more practical use of modern technology.

Third, DTC spending will be flat, give or take a percent or two. New brands are using DTC, while brands going off patent will stop creating a balance hard to quantify in percent terms. There is no trend towards switching out of DTC as part of a launch strategy which seemed to be a concern a few years ago. There is no indication that ROI is significantly changing for brands with large user bases. Like in past years, most DTC will return a positive ROI, but some will fail and a few will have ROI’s above 3 to 1. The average will be about 1.5-2.0.

Fourth, big pharma will face more pricing squeezes from all payers. Given high insurance premium increases, drugs will be a place of emphasis to cut price and switch to cheaper generic and branded alternatives. The bar will be set higher for new brands to get reimbursed and “me-too brands” will face intense review. I think big pharma is getting used to the idea that “me-too brands” cannot survive unless they offer lower price, greatly improved efficacy, or reduced side effects.

Fifth, and a product of number four, consumers are paying more of the bill as employers cap their contributions. This means consumers will pay a larger share for high cost drugs. That means drug companies will have to do some added value selling to convince consumers that their branded drug is worth the added cost. With comparative effectiveness research coming under Obamacare, consumers and doctors will be able to see what drugs are recommended and many will not be new brands. Drug companies should be working on ways to delight their users through relationship care programs.

Finally, we will see more of an emphasis on multicultural marketing. There are tremendous opportunities to better understand and market to the unique needs of growing Hispanic and African American populations. While this has been a trend for decades, marketers will decide to more seriously study a reallocation of media. As America goes more for prevention through education and early diagnosis we will see drug companies get on the bandwagon in the minority communities.

In sum, 2012 will be a decision year for the type of health care we will get in America for years to come. The big issues of who is running and paying for health care are coming to a head. The election will have major consequences for drug companies and their media suppliers that are much bigger than DTC.

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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