Media brace for DTC drop

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The ad and media business is bracing for a loss of more than half a billion dollars of DTC marketing spending by the end of 2005 as pharmaceutical companies face the expiration of a number of their most valuable patents.

Drug companies spent $2.4 billion on direct-to-consumer advertising through November of 2002, according to Taylor Nelson Sofres' CMR. But the pharmaceutical giants don't usually execute large-scale DTC campaigns for patent-expired drugs. Marketing budgets for drugs in the pipeline or awaiting Food and Drug Administration approval could replace the outgoing dollars, but the time it takes to get them to market is lagging behind the loss of several blockbusters.

GlaxoSmithKline, for instance, will have lost five prescription drugs to patent expiration between December of 2002 and December of this year. The patent for Merck & Co.'s Singulair, a drug it spent more than $44 million to advertise to consumers last year, expires this month. In December 2005, its antidepressant Zoloft also loses patent protection-two blockbusters that represent more than $3 billion in annual sales.

Since late 2001, patents on Eli Lilly & Co.'s Prozac, Astra-Zeneca's Prilosec and Schering-Plough's Claritin have all expired, and what has also gone away is about $244 million spent advertising those drugs to consumers in 2000.

"It's a fast and slippery slope," said Mike Guarini, president of WPP Group's Ogilvy & Mather HealthCare. "You come off patent and you lose 65% to 75% of your business in the first year. And most companies don't see the benefit of doing [DTC] advertising on a patent-expiring drug."

"It definitely is a trend," said Anne Devereux, president of the newly created BBDO Health Work, a division of Omnicom Group. "Pharma companies are pretty realistic and know there will be a pretty big drive toward the generic product when drugs come off patent. The amount of money spent on DTC wouldn't result in a positive ROI when a generic is available. It's easier to [market] to the doctor."

Pharmaceutical companies have 20 years from the date a patent is filed to profit from that drug before competitors are allowed to produce a generic version. That means if it takes 10 years to gain approval from the FDA, a company is down to 10 years to build the brand name.

Sometimes the life of a product can be extended. Schering-Plough spent a combined $200 million on allergy drug Claritin in 2000 and 2001, according to Taylor Nelson Sofres' CMR. In 2002, when the patent on Claritin expired, the company spent $220,000. But when Claritin made the shift to an over-the-counter product, Schering-Plough introduced the second-generation Clarinex as its DTC prescription successor and spent $128 million in measured media on the product.


Schering-Plough spokesman Bill O'Donnell said: "The approval of Clarinex provided us with an opportunity to establish that as the premiere prescription antihistamine, and to establish Claritin in the OTC category. We support both products."

But most pharmaceutical companies aren't so lucky. Some drugs can't be converted to OTC because the FDA feels they are too strong to take without a physician's approval. Compounding the problem is that drug companies are struggling to maintain strong pipelines and have failed to develop new blockbuster drugs.

Burt Alper, founder of Catchword Branding, San Francisco, estimated that two-thirds of the drugs approved by the FDA in the last 10 years are modifications of an existing drug. Yet, he added, "one blockbuster drug pays for the failures of a dozen others. So they will continue to pump more into research and development. Whether it pays off remains to be seen. You can lose a patent and survive if you've built brand equity. Let's face it: some people are willing to pay more for Sprite or 7UP instead of the generic lemon-lime soda."

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