Dose of reality

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Once believed recession-proof and on a path of inexorable growth, the direct-to-consumer advertising category is exhibiting signs of a slowdown. n Total dollars by the top 10 DTC spenders for the first quarter of 2001 grew 10% over the same period the year before, according to Taylor Nelson Sofres' CMR-a big falloff from the torrid growth clip of the past few years. Spending for the top 10 shot up 74% from first quarter 1999 to first quarter 2000, on top of a 62% boost in first-quarter outlays from 1998 to 1999. Through April of this year, however, the DTC ad growth rate for the leaders rose a bit, to 15% over the same period last year. The spending leaders for this year's first quarter were GlaxoSmithKline, Merck & Co., Bristol-Myers Squibb, Pfizer and Pharmacia Corp.

The category, however, has lagged during this year's upfront TV buying period, according to a media executive familiar with the category. "It's not like it was, it's just that simple," the executive said. Another, who purchases ads for a major drug company, said while his client's budget for the upfront is so far ahead of last year, the situation could change, leaving the client's dollar outlay flat to slightly down.

So is DTC truly facing a growth plateau?

Most industry executives believe there's been no change in the zeitgeist, and major drug companies continue to believe DTC is an effective marketing tool. The category's $653.3 million spending heft in the first quarter still makes it a force. But the executives say the DTC category has become cyclical, and a confluence of factors-from a dearth of market-altering launches to government hold-ups of approvals for new drugs and their advertising-has ushered in the slowdown.

The industry also faces some patent expirations on high-spending drugs. "It's sort of like a double-whammy," said Denise Favorule, publisher of Rodale's Prevention. "We didn't see any major drug launches and more drugs are going off patent."

Eli Lilly's Prozac, facing generic low-priced competition next month, was supported by only $2.3 million in this year's first quarter following the $23 million full-year outlay in 2000 for the antidepressant. Lilly has spent $50 million on Sarafem-Prozac essentially refashioned to treat severe premenstrual syndrome-since its mid-2000 launch, but it is unclear whether heavy spending will continue because savvy physicians who want to save patients money can direct them to a generic.

AstraZeneca's heavily advertised Prilosec also faces patent expiration, and the company halted ads behind the drug in December. It did, however, launch a major effort behind its successor, Nexium, in mid-June.

Schering-Plough's Claritin, which generated the most spending of any prescription drug in 1998 and 1999 and was No. 3 last year, did not even make the top 10 in this year's first quarter. Schering-Plough planned to spend millions behind its successor Clarinex, but the U.S. Food and Drug Administration will not clear the drug for marketing until the company fixes manufacturing problems.

The FDA has also made moves to force three leading allergy drugs to switch to over-the-counter status, which could lower spending considerably. Profit margins for OTC drugs are generally lower than for prescription drugs, so ad expenditures would likely drop accordingly. The FDA failed to approve potential category-drivers such as Novartis' irritable bowel syndrome treatment Zelnorm.

"There's been a little bit of softness in the FDA getting approvals out the door," said Mary Morgan, publisher of Time Inc.'s Health.

Although the growth-rate decline is alarming, the category still outpaces ad spending at large. Spending across all categories, according to CMR, slipped 5% in the first quarter to $22.6 billion, compared with a 16% gain from first quarter 1999 to 2000. And when the FDA does allow new drugs to hit the market, the category's growth clip could accelerate again.

This week, co-marketers Pharmacia and Pfizer awarded big budget accounts to Interpublic Group of Cos.' Deutsch and WPP Group's J. Walter Thompson, both New York, for arthritis drugs valdecoxib (scheduled for a 2002 launch) and already hot-selling Celebrex, respectively, suggesting those marketers aren't retrenching. And several potential blockbuster cholesterol-lowering drugs could receive FDA approval over the next year or so, including AstraZeneca's Crestor, and the drug known as ezetimibe, co-marketed by Merck and Schering-Plough. As a result, marketers of hot-selling drugs in that category-such as Pfizer's Lipitor-may boost existing spending levels to compete.

Contributing: Ira Teinowitz and Lisa Sanders

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