A prescription for direct drug marketing
by Murray Aitken , Frazier Holt The billions so far laid out on direct-to-consumer ads for prescription drugs have mostly failed to deliver. Yet the successes of a few companies show that failure is hardly inevitable. On August 17, 1997, executives around northern New Jersey's "drug corridor"--where most of the international pharmaceutical companies have their headquarters--mobilized for action. For on that day, the US Food and Drug Administration issued temporary guidelines that, for the first time, permitted the drug makers to specify the uses of their prescription remedies in their radio and television advertisements. The ruling was a major advance for consumer involvement in health care and represented a breakthrough in the industry's ability to use direct-to-consumer (DTC) marketing to reach Out to a vast, untapped consumer segment. Reach out the industry did. By the time the new regulations became permanent, in August 1999, medications and proprietary remedies had broken into the top five categories of ad spending, along with heavyweights such as cars, retailing, movies, and financial services. Last year, pharmaceutical companies were expected to spend $2 billion on TV, print, radio, and outdoor DTC ads, up from $1.2 billion in 1998. As a group, those companies are now boosting their DTC expenditures by 25 to 35 percent annually (Exhibit 1). This media onslaught has yielded some extraordinary results. Schering-Plough's anti-allergy drug Claritin, for example, with $1.9 billion in US sales, is now a household name. But the real news is that most pharmaceutical companies have had trouble executing their DTC strategies, and overall industry results have been mixed at best. Consumers are frequently confused; ad campaigns have sometimes angered and alienated doctors; and many of the industry's biggest names are struggling as they try to add an entirely new approach by marketing directly to consumers. Nonetheless, many senior pharmaceutical executives believe that drug companies can find dramatic new sources of value through DTC marketing, which (in addition to TV and radio commercials) includes print advertising, promotional efforts, public relations, and Internet communications. [1] There is a powerful logic to this optimistic view. An aging population, easy access to medical information, and the current skepticism about health care systems have increasingly made consumers--not the trusted family physician--the arbiters of what prescription medications they take. This trend will probably gain momentum. Drug makers are likely to find the consumer increasingly at the center of their strategic thinking as they search harder and harder for blockbuster drugs that can generate the revenues needed to sustain their high market multiples. One place where they will certainly focus is developing remedies for the largely unmet medical needs of aging baby boomers. Between 1996 and 1999, AstraZeneca,[2] Pfizer, and Schering-Plough increased their DTC spending by at least $100 million each, and Merck added $50 million (Exhibit 2). In a few cases, DTC represents the lion's share of the marketing mix. Estimates suggest that at least half of the marketing expenditures of three drugs--not only Claritin but also Prilosec, which relieves gastrointestinal distress, and the hair loss treatment Propecia--are directed at consumers rather than professional health care providers. As much as 83 percent of Propecia's budget, and 69 percent of Claritin's, may be allocated to consumer advertising. [3] But marketing to professionals still dwarfs DTC spending by a ratio of 10:1 in almost all therapeutic areas, and companies have found it difficult to decide when DTC makes most sense as part of their marketing mix. In the first half of last year, only 7 of the top 20 pharma companies were supporting more than two products with DTC campaigns, and just 6 supported more than three products at a significant level. In only five therapeutic areas--allergies, arthritis, contraceptives, diabetes, and HIV--were three or more products marketed directly to consumers. The allergy therapeutic area alone represented 30 percent of total DTC spending. Why hasn't the fervor for DTC evident in 1997 been translated into skyrocketing growth? One reason is that many companies have been paralyzed by bad early experiences. In the first six months of 1999, drug makers were maintaining DTC campaigns for just 48 products, three fewer than in 1997, and just nine companies were responsible for 80 percent of all DTC product support. More worrisome, many pharmaceutical companies clearly lack the internal organization and cultural flexibility to develop effective consumer-marketing approaches. One result: pharma companies are plagued by an extremely high and costly rate of churn as they waste money on short-term DTC campaigns that typically prove ineffective. Of the 51 drugs that pharma companies backed with at least $1 million in DTC spending in 1997, 21 had their DTC support cut back to less than $1 million or, in some cases, to nothing within a year. Two of the retreaters--Bristol-Myers Squibb and SmithKline Beecham--cut their total DTC spending by 30 percent and 81 percent, respectively, from 1997 to 1998. In the first six months of last year, pharma companies pulled the support plug on 23 more drugs they had backed with DTC campaigns in 1998 (Exhibit 3). In an effort to understand why drug companies are having such difficulty in the transition to the DTC era, we recently undertook a series of conversations with senior managers, marketing executives, advertising agencies, and external observers of drug companies. We found that to take full advantage of DTC marketing's potential, the industry will have to undergo an organizational and cultural upheaval. Needed: A cultural revolution Pharma companies are learning that their skills at promoting drugs among physicians are not transferable to consumer marketing and that, in general, they don't have the skills and experience needed to market their products to this new audience. Senior managers, most of whom came up through the ranks of R&D or sales organizations, often lack insight into consumer behavior and don't understand what it takes to get people off their sofas and into the offices of their physicians, preferably with the names of specific drugs in mind. Moreover, advertising agencies are finding it hard to work as creatively within the regulatory constraints of the DTG marketplace as they do in other markets. In fact, DTC campaigns often confuse consumers. A Prevention magazine study found that 21 percent of them thought that ads for prescription drugs were unclear. Other consumers found the product and risk information inadequate. Often they didn't know what an ad was for, even when they suffered from the relevant disease. In one survey, 79 percent of respondents suffering from a high cholesterol count didn't know, after watching ads for Pravachol, that the remedy was indicated for their condition. The coming of the DTC era has also strained relations between drug makers and the medical profession. At first, physicians found it irritating when patients demanded medications they had read about in magazine ads or heard about on TV. Although physicians have now grown more comfortable with such demands, many remain unhappy about having to spend time dealing with requests from patients. Physicians fear as well that advertising will induce patients to demand medicines they don't need and to become dissatisfied when the results they expect don't materialize. Drug companies must also deal with a difficult regulatory environment. True, the FDA's landmark 1997 rule change did allow prescription drugs and their uses to be advertised everywhere. But there was a major qualification. Until then, the disclosure of full product information about side effects and risks had been possible in print, but the details had proved unintelligible on TV. Yet when the new guidelines became final last summer, the provisions that drug makers had hoped would guide their efforts to create acceptable TV and radio ads remained vague. As a result, DTC drug marketers have had difficulty satisfying the FDA's demand that ads contain a "fair balance" of information about benefits and risks. A key question is often whether an ad communicates risk information as clearly and prominently as the benefits of the product it touts. Frequently, the answer is a subjective one that comes down to how different people assess the impact of typefaces, graphics, audiovisual distractions, and other esoterica. This subjectivity has led to uncertainty. Upon seeing and hearing the ads that drug makers put on the air within weeks of the new regulations in 1997, the FDA promptly ordered most of those ads pulled. Zeneca, for example, had to modify its Accolate TV ad because the actions of the characters in it implied an indication--for exercise-induced asthma--that the product didn't warrant. The FDA also cited the ad for not prominently displaying risk information. More recently, TV advertising for Relenza, a new treatment for flu, had to be redone after the FDA charged that the drug's efficacy had been presented in a misleading way. [4] In the first ten months of last year, the FDA filed violation notices for one in four products supported by DTC ads, in some cases substantially complicating marketing campaigns just as they were being launched. This, in turn, has driven up marketing costs by making it hard for pharmaceutical companies to buy media time in advance, [5] and hence at a discount, since they often can't anticipate how long the FDA regulatory review will last. Building FDA review into ad-buying processes can add as much as four to five months to a campaign, making it extremely difficult to react to market changes. Lessons Against this backdrop of organizational, cultural, and regulatory problems, it is understandable that the list of successful DTC marketing campaigns is so short. Indeed, it may be too early to tell if even the successes to date will hold up against superior new products marketed to physicians. Nevertheless, some valuable lessons can be learned from the experience of companies that have used DTC marketing campaigns to establish new brands, to drive the behavior of patients and physicians, and to generate superior performance. Claritin, for example, has fundamentally transformed the allergy market, formerly dominated by over-the-counter remedies, into one in which 53 percent of allergy sufferers now buy prescription products. That success is largely the result of Schering-Plough's determination in designing and executing its multifaceted effort to build the brand. Over the past few years, the company has made substantial investments--$155 million in 1998 and $93 million in the first six months of 1999, for example--while it broke new ground by using morning talk show host Joan Lunden in its ads and developing a sophisticated World Wide Web site to support its mass-media campaign. Nor has Claritin been the only success. By combining consistency and continuity with significant spending on DTC programs, ads for Premarin, which treats osteoporosis, and the antidepressant Prozac achieved awareness levels of 70 percent among consumers who might need these products. Polling data show that DTC programs can change the behavior of both patients and physicians: Prevention recently reported that of 163 million adults who had seen a DTC ad, 13 percent were moved to speak to their physicians about their conditions for the first time. One-third of those people claimed to have spoken to their physicians about the advertised brand, either asking for more information or requesting the drug in question. Why then has most of the pharmaceutical industry had such a tough time in the DTC era? Perhaps because it is an uphill battle to find the talent and build the commitment needed to make DTC marketing work. The first challenge is to expand the traditional pharmaceutical marketing mindset to include a sophisticated focus on consumers. To do so, top management must invariably hire and deploy world-class consumer-marketing talent. But this is hard to do in an industry that, in most instances, has regarded marketing as a temporary assignment for high-performing salespeople on their way to senior management positions. In fact, many drug firms now hire managers with consumer-marketing expertise, typically from advertising agencies or consumer goods companies. But these specialists are still relatively few in number and often rank several levels below senior management. Pfizer, for example, has created a small consumer-marketing department. But its role is purely advisory--product teams may tap this source of in-house consumer experience, but it isn't necessarily an integral part of the planning process. Drug marketers that hope to make DTC campaigns work should also prepare for sticker shock when they see the prices of some of the consumer tools they will probably need for success. Privacy is part of the problem, since consumers fear having their health records used for commercial purposes. But the problem is also a question of numbers. Pharmaceutical companies know physicians--where they work, how they practice, what they prescribe. Lists of target physicians might include a few thousand people, easily reachable through a standard sales force. But the people in consumer target segments are likely to be numbered in the millions. Even if you know who your potential customers are, no sales force in the world is large enough to visit each and every one of them. The alternative is TV and other mass-marketing tools. But those with the greatest reach carry the highest price tags. When do you need DTC? A DTC-savvy organization begins by identifying which drugs in its portfolio would benefit most from DTC marketing. This selection process is essential, since (excepting drugs used exclusively for acute episodes or in hospital settings) nearly every therapeutic area and drug might be a candidate for DTC, depending on the marketing objective and mass media chosen. The first step in determining whether a prescription drug is an appropriate candidate for DTC marketing is to decide if new demand for that drug can be created by expanding its market or if its current market position can be defended in the face of changing circumstances. There might be a chance to expand the market if, for example, a drug can be differentiated from the competition or if it can treat unrecognized or unmet medical needs with its profile, indication, or formulation. A drug's current position must be defended if, for example, its patent is approaching expiration or it is about to become an over-the-counter medication. Next, consider the extent to which patients can influence the choice of the drugs prescribed for them--something that depends heavily on how amenable physicians are likely to be to their requests. Marketers typically expect physicians to be more receptive when products are regarded as comparable to their competitors, adherence to the prescription regimen is typically poor, the condition is chronic, and the product has quality-of-life implications. Once the strategic objective of a DTC marketing program has been determined, the construction of 1 the marketing strategy can begin. The first step must be to integrate the DTC effort with the other elements of the marketing mix--that is, the professional marketing and detailing program, the managed-care strategy, and the approach to public relations. Coordination isn't just a buzzword; it is essential. Bristol-Myers Squibb launched an extensive DTC campaign for Pravachol but didn't follow through at doctors' offices. The campaign expanded the cholesterol reduction market by prompting patients to ask doctors for prescription drugs to lower their cholesterol. But Pravachol didn't get its share of this market growth, because physicians largely prescribed Lipitor, which was marketed only to them. [6] Last year, Bristol-Myers Squibb eliminated its DTC spending for Pravachol. In part to prevent such unintended help for competitors, Pfizer reports that it asks physicians to preview consumer-marketing messages during their development phase and then routes that feedback through the sales force. In this way, the company seeks to build trust between itself and physicians and to lower the risk that unexpected consumer inquiries and demands will surprise them. Determining the level and mix of expenditures for consumer-marketing programs is among the most contentious aspects of the marketing process. How much should a company lay out to build a consumer pharmaceutical brand? New-product launches in the consumer goods industry require advertising investments ranging from $10 million to $100 million, depending on the objectives of the launch, the competitiveness of the segment, and the size of the market. The same levels are required for DTC campaigns. Pharmaceutical companies must realize that a onetime advertising blitz can't build a brand, change the perceptions of consumers, and inspire them to behave required, and the budget must be set accordingly. in new ways. A sustained and consistent effort is Over the years, the brands best supported by DTC campaigns have remained fairly consistent, both in their continuous use of this approach and the high level of spending they devote to it. These brands are now reaping the greatest benefits from their support. Inevitably, then, the issue is to know whether DTC marketing money is well spent--a difficult challenge for the executives of drug companies. As one DTC manager told us, "The natural checks and balances that would reside in a consumer goods company do not exist[ldots]especially in light of the magnitude of the decisions we are making. The comfort levels of senior management are much less, because the personal and corporate experience is just not there." All companies that mount DTC programs are struggling to define appropriate performance metrics. Attempts to measure increases in prescription sales resulting directly from DTC efforts, or calculating a single return-on-investment number for a particular DTC program, are usually frustrating and can be misleading as well. Instead of a single measure for the investment return on DTC marketing--one as predictable and measurable as the return from adding incremental detailing calls to doctors--the DTC game calls for a new kind of metric focusing only on the specific goal of each DTC program. If, for instance, a DTC campaign attempts to persuade a certain segment of patients to visit their physicians about a problem or a specific product for the first time, the campaign's measure of success should be defined in those terms. If the goal is unprompted brand awareness within a target segment, the right approach would be to measure that awareness with a tracking survey. Despite the promise held out by direct-to-consumer marketing, it hasn't produced the results most drug makers had hoped for, and there is skepticism about whether it will ever take off. But DTC drug marketing won't go away. Only by demonstrating a higher level of commitment will the industry master the cultural, organizational, and regulatory crosscurrents to take advantage of this sea change in consumer marketing. Murray Aitken is a principal and Frazier Halt is a consultant in McKinsey's New Jersey office. (1.) When executives from Glaxo Wellcome and SmithKline Beecham announced their merger plans in January, they underlined the role that DTC campaigns on Internet sites would play in their strategy going forward, (2.) Astra and Zeneca merged in April 1999. (3.) Matthew Miller, "DTC Pharmaceutical Spending Tops $1.3 Billion in 1998," Response TV, May 1, 1999, p.24. (4.) The FDA's letter said, "Specifically, the images misleadingly suggest that Relenza has been shown to eliminate the flu more quickly and completely than has been demonstrated" (emphasis added). (5.) Purchases in advance entail a commitment of national TV media space at least six months before an ad runs. (6.) Carol Ukens, Drug Topics, June 21, 1999, p. 25. | |
The growth of DTC spending
$ million
Number of products with more
than $1 million in DTC spending
1994 242 N/A
1995 313 N/A
1996 596 46
1997 844 51
1998 1,172 48
2000 [1] 2,300
(1.)Estimated.
Compound annual growth rate = 57%
Source: Med Ad News; McKinsey analysis
Big Spenders: Top DTC marketers, 1999
$ million
1999 spending [1] Increase (1997-99)
Schering-Plough 258 187
Glaxo Wellcome 196 42
AstraZeneca 166 97
Pfizer 161 71
Merck 120 41
Johnson & Johnson 106 63
(1.)1999 total spending estimated by doubling actual
spending as of June 30, 1999.
Total $1 billion spent in 1999
Source: Med Ad News
Pulling the plug on DTC product support
Number of products with more than $1 million
in annual DTC spending
Average spending
per product,
$ million
1997, products 51 16
suported
Support reduced 28 11
or eliminated [1]
New products 29 24
supported [1]
1999, products 52 30
supported [1]
(1.)Through June 1999.
Source: Med Ad News; McKinsey analysis
Total DTC
spending,
Includes $ million
Pravachol 67
Fosamax 30
Prozac 23
BuSpar 22
Serevent 22
Propecia 104
Meridia 73
Lipitor 72
Nasonex 71
Detrol 54
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