Powerhouse DTC starts to plateau

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While the economic slump has walloped a multitude of marketers, the pharmaceutical field still manages to pack a powerful punch.

As other businesses across the nation face dwindling ad budgets, industry observers expect drug companies to continue to spend. Even in the dismal financial conditions of 2001, six drug marketers ranked among the top 50 ad spenders, according to Advertising Age's ranking of Leading National Advertisers. Measured U.S. ad spending for medicines and proprietary remedies climbed 2.4% last year to $5.21 billion, according to Taylor Nelson Sofres' CMR. Direct-to-consumer promotional spending doubled from 1998 to $2.68 billion in 2001 according to IMS Health.

"Healthcare is the one industry that is strong and growing," says Mel Sokotch, exec VP-director of consumer healthcare at Interpublic Group of Cos.' Foote, Cone & Belding Worldwide, New York. Mr. Sokotch notes pharmaceuticals have remained robust as others crumbled.


Drug company executives and ad agency health experts say aging consumers, the growth of minority groups, increased competition among pharmaceutical companies and the sheer necessity of medicines are all factors in maintaining the industry's vitality.

As customers cut back on dispensable items such as clothes, cars and entertainment, they continue to consume medicines, industry observers say. Many times, costs such as prescriptions are covered by insurance, and even when they're not, these items are thought of as life essentials. Healthcare "is more isolated than other industries," says Mr. Sokotch. "When it comes to life and death, or your health, people will spend."

Merck & Co. Executive Director of Integrated Marketing Communications Charlotte McKines points to "consumer empowerment" as providing the industry with a boost. "The aging population is really going to drive U.S. prescription sales," she says.

Dean Mitchell, president of U.S. primary care at Bristol-Myers Squibb Co., says many companies in the industry are suffering from losses due to the expiration of patents and other market exclusivities. "Our own experience with Taxol, BuSpar and Glucophage is a good example of this phenomenon," says Mr. Mitchell. "In the past, generic competition eroded our industry's sales in a gradual way. Now the declines in branded product sales are precipitous-90% or more-following the introduction of a generic equivalent."

The time and economic pressures to succeed aren't the only challenges these marketers face. In response to drug withdrawals of late, the Food & Drug Administration is further scrutinizing medical data and has slowed the approval process.

Mr. Mitchell says the drug industry is feeling the pinch from fewer new-product launches, despite record sums of money being invested in research and development-$30 billion in 2001 alone. "Last year, the [FDA] approved only 28 genuinely new drugs, the smallest number since 1994," he says.