Drug-pricing pushback will hurt DTC spend in 2017: Consultant

Drug-pricing pushback will disrupt the pharma advertising business next year, says one consultant, whose firm is forecasting a downturn in spending for 2017.

DTC ad budgets will likely shrink because of the increased uncertainty in the industry, Richard Meyer, chief digital strategy officer at Strategic Marketing Solutions, predicts.

Specific factors including political calls for change, consumer uproar over pricing, insurers' demands for discounts, research that shows TV advertising is less effective and worries about online ad fraud. Those add up to an uncertain climate in which to plan marketing budgets.

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Meyer's pharma-focused team recently spent time calling and interviewing more than 15 large and small pharma and biotech company executives about their marketing plans for next year. The collective conclusion was that DTC spending will drop next year, with TV being especially hard hit, Meyer said.

“I think the days of launching big drugs with big budgets are over,” said Meyer, who remembers working on the $250 million launch of Eli Lilly’s erectile dysfunction treatment Cialis. “Now it’s about 'here’s your budget and you’ll get more, but first you have to prove what you’re spending is driving new RXs.' … It requires a lot of time now to convince management that DTC is essential.”

When asked about pharma companies possibly shifting ad budgets to digital marketing from TV and other traditional placements, he said he doesn’t expect to see it happen.

“They don’t understand the digital realm. To them it’s a black hole where a lot of money goes in and rarely any comes out,” he said.

There are some pharma companies working to push digital forward and making way for empowered patients, but more often a traditional mindset prevails, with management coming up with more reasons not to make digital changes, Meyer said.

The pharma marketers interviewed said that they will likely continue to spend the most money on TV ads but will switch from national advertising buys to less expensive and more targeted spot cable and regional buys.

They're also looking for deals, Meyer said, noting that “they’ve challenged their agencies to integrate media and come to them with bundles.”

His predicted downturn in spending would come not long after pharma advertisers have re-driven ad spending totals into the stratosphere. While the total isn’t in for 2016 yet, pharma companies spent more than $5 billion on DTC advertising in 2015, according to both Nielsen and Kantar Media calculations, which is a bounce back to pre-recession spending.

- read Meyer's blog post

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