DTC INSIGHTS News Alert
October 2, 2008
Rep. Emanuel Wants to Change
Tax Status of DTC Marketing
| DTC INSIGHT * A proposal to eliminate the business-expense deduction for DTC is not likely to stand up in court, but it could create a messy situation for brand advertisers and media companies in the short term. More importantly here, however, are the signals that anti-DTC sentiment is being ratcheted among Democrats, which could lead to serious trouble in 2009. |
Rep. Rahm Emanuel (D-Ill.) has warned advertising industry leaders that the business-tax deduction for DTC spending could be taken away in 2009 tax legislation. Rep. Emanuel's comments are seen as an important indicator of how a Democratic-controlled House could step up the pressure on DTC under a new administration in 2009.
In a September meeting with the Government Affairs Committee of the American Association of Advertising Agencies, Rep. Emanuel was said to present two options for the pharmaceutical industry in new tax legislation: retain the tax credit for research and development spending, or keep the business expense deduction for DTC advertising -- but not both. "He said this without any tinge of satire, so you have to accept him at his word," said one advertising industry advocate familiar with the meeting. (Note that an average pharmaceutical company spends roughly 10 times more on R&D efforts every year than is actually spent on consumer promotion.)
Rep. Emanuel's office was asked to comment on the topic earlier this week, but had not responded as of Thursday morning. Rep. Emanuel sits on the House's Ways and Means Committee, which controls and writes all tax legislation, and he also chairs the House's Democratic caucus.
The idea of "taxing" DTC advertising has been around for many years, most notably in a bill sponsored in each Congress by Rep. Pete Stark (D-Calif.), the second ranking Democrat on the Ways and Means Committee and chairman of its health subcommittee. Stark's proposal has not gained traction in the past.
If the Ways and Means Committee were to move toward a change in the tax status of DTC, the industry would argue that such a move is unconstitutional. "The motivation, it can be clearly argued, is not sound tax policy, but the motivation is to suppress speech," said Jim Davidson, a Washington-based attorney with the firm Polsinelli. "When you use the Tax Code to suppress speech, that is a violation of the First Amendment."
September 10, 2008
Nielsen's 'Reported' Spending Total
Shows 9% Drop for Second Quarter
| DTC INSIGHT * The market decline is temporary and will recover with new-brand introductions. There is no indication companies are abandoning or rethinking DTC as a key promotional device. The fact that Lipitor came back to DTC is a good indicator of its value. |
With seven major DTC brands cutting $40 million or more from their consumer budgets in the first half, the total “reported” spend for DTC dropped 9% in the second quarter and 4.8% for the January-June period, according to Nielsen Monitor-Plus. The total “reported” spending fell by roughly $130 million in Q2 after a flat “reported” spend in Q1. (Note the Nielsen Monitor-Plus totals do not include online promotion in either period.)
The seven brands that significantly reduced first-half spending (and the amounts of “reported” cuts) are: Lunesta ($99.2 million), Rozerem ($88.5 million), Requip ($78.7 million), Lipitor ($62.9 million), Zetia ($50.6 million) Nexium ($48.8) and Vytorin ($44.9 million). Total spending in the first half was $2.6 billion.
Marketers also significantly cut back on disease education advertising in the first half, trimming roughly $51 million (or 30.6%) from their unbranded marketing budgets in the period. Among the campaigns with the steepest cuts in reported spending were Roche's ads for the flu virus and ads about depression sponsored by Wyeth.
"These declines show that big pharma will start looking to do more with less and that will require more analysis and understanding of how to squeeze media value," said Bob Ehrlich, chief executive of DTC Perspectives and chairman of the upcoming DTC in the Era of Consumer Choice Conference. (The conference is scheduled for Oct. 29-30 in Livingston, N.J., and, among the modules, several presentations will address media mix and improving ROI in a new consumer environment.)
This is the second time in the past three quarters that DTC advertising has recorded significantly “down” results, according to Nielsen Monitor-Plus data. While DTC spending fell less than 1% in Q1 of 2008 (or less than $1 million on a base of roughly $1.3 billion), the drop in last year's Q4 was a more daunting 15.2%.
MORE INFORMATION:
June 19, 2008
Pressure Mounts on Drug Marketers
To Impose New Restrictions on DTC
|
DTC INSIGHT * The move to mollify Dingell and Stupak could put PhRMA on a slippery slope, even if most companies already voluntarily follow a limited moratorium policy. However, giving any further concessions is not a move that will be met with popular support among the DTC marketplace. Dingell and Stupak are certainly powerful adversaries, and this will be a tough fight, but one that's critical to the future direction of DTC marketing. |
None of the companies – Pfizer, Merck, Johnson & Johnson and Schering-Plough – would agree to the two-year moratorium request, but had instead agreed to a six-month waiting period. The companies also declined to accept the Congressmen's request that no DTC ads run until after a valid outcomes study of the product is completed and the results are public.
The exchange between the companies and the Congressmen, however, seemingly does not take into account many of the DTC-related provisions of last year's FDA Amendments Act (which did not include a moratorium on DTC ads). “I am concerned about the direction we're heading,” said Jim Davidson of Davidson & Co., a
John Kamp, executive director of the Coalition for Healthcare Communication, said he respected the companies decision on the six-month moratorium, but raised concerns about whether First Amendment rights were being surrendered. “The First Amendment is not just good law, it's smart public policy,” Kamp said. “It's time for some politicians to give consumers and the First Amendment more respect.”
More DTC hearings ahead?
Representatives of the four companies had testified at a May 8 Congressional hearing on DTC marketing before Stupak's subcommittee of the House's powerful Energy and Commerce Committee. Dingell and Stupak commended the companies for voluntarily accepting two of their requests – to follow AMA guidelines on use of physicians in ads and not to include off-label claims in DTC ads.
However, these and other issues will have to be resolved. Dingell noted in his response that this exchange “is the first part of an ongoing review of DTC advertisements… Our investigation is not over, as more work clearly needs to be done on this issue.”
June 3, 2008
Shows No Growth in First Quarter
|
DTC INSIGHT * Given the current economic climate, the Q1 reported spending data should be viewed as a positive development for media companies and ad agencies that are heavily focused on DTC advertising trends. The big decline in DTC advertising in last year's Q4 is beginning to look more like an anomaly rather than the start of a downturn. DTC INSIGHTS continues to forecast a 0 to 3% growth rate for reported DTC spending in 2008. |
The “reported” spending for DTC advertising was off slightly in the first quarter of 2008 (declining less than $1 million on a base of roughly $1.3 billion), according to Nielsen Monitor-Plus data. Even with no ad-spending growth in the quarter, however, the results marked a turnaround for DTC marketing from last year's fourth quarter, when reported spending declined 15.2%. That marked the first time in 10 years of DTC that reported spending dropped in a quarterly period.
The spending in Q1 2008 as reported by Nielsen Monitor-Plus was $1.2927 billion, compared with $1.2935 billion in the year-ago quarter.
The two top media channels struggled in the Q1 period, with DTC advertising on network TV falling 3.3% (excluding pharma corporate advertising) and print DTC in consumer magazines down 2.5% (again excluding corporate ads). Network TV captured almost 34% of all measured DTC advertising in the period.
Among brands, a decline in spending by the leading sleep remedies was offset by major campaigns from five “new” brands (they did not advertise in Q1 2007, all of which had reported spending of more than $20 million): Veramyst (GSK), Celebrex (Pfizer), Mirapex (Boehringer Ingelheim), Chantix (Pfizer) and Symbicort (AstraZeneca).
The sleep treatments Lunesta (Sepracor), Ambien CR (Sanofi-Aventis) and Rozerem (Takeda) trimmed DTC spending in the Q1 period by 42%, 33% and 74%, respectively. The aggregate total spending cuts for the three leading advertisers was more than $80 million, according to Monitor-Plus data.
MORE INFORMATION: The June issue of DTC INSIGHTS will publish a more detailed analysis of the Q1 spending trends. For information on subscribing, send an e-mail to Jennifer@dtcperspectives.com.
May 1, 2008
For Important Hearing on DTC Ads
|
DTC INSIGHT * This hearing is bound to generate headlines and news coverage showing DTC in an unflattering light. The key question is whether it will lead to a re-opening of last year's discussion of a DTC moratorium for newly approved drugs. We believe it will not, given that the economy, the election and war in Iraq are of higher precedence as this session of Congress winds to a close. |
DTC advertising is expected to come under intense scrutiny Thursday, May 8, as a subcommittee of the House's Energy and Commerce Committee examines the role DTC advertising plays in marketing to consumers and its influence on physician prescribing. The subcommittee on Oversight and Investigations is chaired by Rep. Bart Stupak , a Democrat from Michigan who was highly critical earlier this year of Pfizer's use of Dr. Robert Jarvik as a spokesman for Lipitor.
Stupak, who works closely with Energy and Commerce chairman Rep. John Dingell (D-Mich.), has been looking into DTC advertising for the past several months, and has noted in statements that ‘drug companies should know that they will be held accountable for the representations made in their ads.” Rep. Henry Waxman (D-Calif.), another foe of DTC advertising, also is a member of this subcommittee.
Representatives from Pfizer, Merck, Schering-Plough and Johnson & Johnson are expected to testify at the hearing. The subcommittee also is expected to hear from Kaiser , the Government Accountability Office and American Medical Association . In addition, linguist Ruth Day from Duke University is expected to make an opening statement to the subcommittee.
If the official title of this hearing is an indication – “Direct-to-Consumer Advertising: Marketing, Education, or Deception?” – the mood of the Capitol Hill get-together could be tense for pharmaceutical company executives fielding the questions. The advertising of Vytorin, co-marketed by Merck and Schering-Plough, also is expected to be a key focus of the legislators.
MORE INFORMATION: To view details about the hearing, see the Energy and Commerce Committee's Web site and hearing schedule at the following URL: http://energycommerce.house.gov/membios/schedule.shtml.
February 25, 2008
Reporting ‘Side Effects' as of March 25
|
DTC INSIGHT * This new requirement technically is in effect for all magazines that carry April cover dates, although it seems unlikely DDMAC will issue violation letters on this requirement right out of the gate. Expect perhaps a minimum one-month grace period, but understand that there's a risk involved with any delay. For broadcast ads, given that there's a required study on the topic, it's unlikely such a requirement could be put in place before late 2009. |
Marketers using "published" DTC ads in their media plans beginning March 25 are required to include specific information in the ads on how to report adverse events to the FDA, and this information must be printed "in conspicuous text." The new requirement, established in last year's FDA Amendments Act (FDAAA), affects only print ads at this time. The requirement is not applicable to Internet or television advertising, according to a DDMAC official, but the rules could change in the future.
Kristin Davis, deputy director of DDMAC, provided an update on the adverse-event reporting requirement at last week's Drug Information Association conference in New York. (See the required wording for this text at the bottom of this Alert.) Asked about the agency's recommended placement of this text within the print ad, which is not defined in FDAAA, Davis said:
- "To satisfy that requirement, we do consider it extraordinarily likely that it should be in the main body of the advertisement…. One place that would make a lot of sense is after you list your adverse events because it's about reporting adverse events."
There have been many questions about what types of advertising the requirement applies to, Davis acknowledged. She noted that the statute is specific to "published" advertising. "If it's a labeling piece, and considered that way or if it's not defined as advertising, then we don't consider [the statute] to apply, but you are certainly welcome to include the statement in those materials." With respect to broadcast ads, the FDA expects to conduct a study at some point in the future to determine whether this statement is appropriate to for TV advertisements.
"If we do decide that this is appropriate for TV ads, we will have to issue regulations requiring it to be in TV ads and also determining a reasonable length of time for displaying it," Davis said. Asked about enforcement plans and penalties for not complying with the statute as of March 25, Davis told DTC INSIGHTS, "It would be a violation [and] we could take action. But at this point, we're not ready to say we will."
MORE INFORMATION: The wording of the required text for print ads is: "You are encouraged to report negative side effects of prescription drugs to the FDA. Visit www.fda.gov/medwatch, or call 1-800-FDA-1088."
To view a copy of the FDA Amendments Act, click on the link below. This new requirement is outlined in Section 906, Title IX, of FDAAA. http://www.fda.gov/oc/initiatives/HR3580.pdf.
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