Very Different Futures
“DTC status quo odds…30%, decline… 20%, growth…50%.”
I love science documentaries about the universe and science fiction about what the earth will be like hundreds of years from now. I am a big Fringe fan. Both genres make you think about potential alternate futures. Forecasts are designed usually to create perceived certainty about the future when in fact many possible outcomes are possible. We like confidence in our forecasts so we can make decisions, but underneath a forecast usually is a mountain of uncertainty.
DTC is here to stay and that is probable in any future scenario. The question is whether it is going to rise or decline? Or, alternatively, meander along where it is, swinging plus a few percent or declining a few each year.
The status quo scenario is possible. That would take a balance of new drugs launched versus drugs going off patent. It would also mean no major new categories launched or new classes of drugs in established categories. Given the health care system cannot stay in its current form because of rising costs and an aging population, one would think staying the same is unlikely. Status quo implies a lot of me-too drugs and incremental improvement at best.
The declining scenario is also possible. Under that we might define it as a 7-10% annual decline in DTC spending. This would mean established categories do not have enough new entrants to balance the decline. Cholesterol might be one like that. Crestor is the only big spender now, but it used to be Lipitor, Crestor, Zocor, Vytorin, and Pravacol. Under this view, drug companies continue in their slump of launching new blockbusters. There would be no breakthroughs in obesity, diabetes, pain, cholesterol, and other major categories. Given the aging population and all the potential drug users, it is hard to imagine that world. We are also seeing more R&D in India and China. Rather than a U.S. and European based R&D world we see more global minds working on new drugs.
The growing scenario is also possible, perhaps likely. There are economic forces at play that will encourage competition to reduce cost. If we cannot continue to spend at the current rate, then we must either go bankrupt or figure out a way to have market forces slow the cost growth down. One way is to advertise our products and their cost advantages which could mean higher price but faster result or better outcome. Obesity might be a category that a really effective drug greatly reduces long term health costs. Genomics may produce drugs that cost a lot to administer but are so targeted they cure a potentially costly regimen of treatment.
We also are going to see a mass push to identify and treat disease at a less costly stage. While preventive tests can be very expensive and are not always cost effective, we can expect increased efforts by drug companies to identify customers. There will be so many on the road to diabetes, heart disease and treatable cancer that drug companies will find ways to subsidize disease awareness and identification.
Finally, drug treatment can be so cost effective that it is bound to grow as a preferred treatment. That means having drugs that make significant differences in outcomes. Assuming science will allow us to get better at drug targeting and therefore effectiveness, we can expect more drugs used earlier on smaller populations. DTC will rise, particularly those media that can effectively slice the pie to mini segments.
Can I out odds on the three scenarios? I will try, but of course the tricky thing about predicting the future are the unknowns that radically change scenarios. A massive pandemic might cause government to nationalize drug research. A major oil crisis perhaps set off by a major conflict in the Mideast might set society on a reverse technology direction and reduction in our health spending. Assuming nothing drastic happens, and using a five year time frame, DTC status quo odds are about 30%, a decline is about 20% and growth is 50%.
That growth may not be in branded mass DTC, but instead in disease identification. It could also be in small drugs that use social media or point of care as the lead media. We could also see a major drug that is mass such as an obesity or diabetes prevention pill that would require massive network television.
What is very unlikely is a ban on DTC. As long as the courts support commercial speech we can expect DTC to be with us. A more liberal and central government friendly court may one day decide to give the government the power to ban DTC on public health grounds. It is highly unlikely but possible.
As I said last week, I remain optimistic about the future of DTC but, in fairness, I decided to devote this week’s column to point out that a positive future is in no way the only possible direction.
Bob Ehrlich, Chairman
DTC Perspectives, Inc.