A Prescription for Direct Drug Marketing

By Aitken, Murray; Holt, Frazier | The McKinsey Quarterly, Spring 2000 | Go to article overview

A Prescription for Direct Drug Marketing


Aitken, Murray, Holt, Frazier, The McKinsey Quarterly


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. …

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