Glaxo shops called in for evaluations

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GlaxoSmithKline is conducting a full exam of roster shops on prescription-drug accounts worth more than $425 million in a classic case of a newly merged company looking to achieve cost savings by trimming the fees it pays agencies-and maybe the number of agencies themselves.

The drug giant, formed in late 2000 by the marriage of Glaxo Wellcome and SmithKline Beecham, is asking agencies to provide information about themselves and the work they do for the company, people familiar with the situation said. An initial request for information was due last week. A second, more-detailed document is due later this month.

Agencies are generally working under contracts that expire in midsummer, the people familiar with the matter said, suggesting any agency changes could come then. A Glaxo spokeswoman, reached late May 11, had no immediate comment.

One person involved in the process said Glaxo has "thoroughly emphasized it does not want to upset any of the businesses." But a number of agency executives participating in the evaluation said they expect the roster to be trimmed at some level, adding it would be unusual for a top-to-bottom evaluation to be undertaken with no consolidation resulting-especially when cost-savings goals and a tough economy collide. It was unclear if accounts would just be shifted among the roster or if reviews might be launched with nonroster shops.

Glaxo's direct-to-consumer creative is split among a handful of agencies. Grey Global Group's Grey Advertising, New York, had more than $200 million in Glaxo billings last year, estimated Taylor Nelson Sofres' CMR, with brands including Flonase, Flovent, Imitrex and Zyban.

Interpublic Group of Cos.' McCann-Erickson Worldwide, New York, had the $92 million account for Paxil. Havas Advertising's Messner Vetere Berger McNamee Schmetterer/Euro RSCG, New York, has the $40 million Valtrex account. CommonHealth's Quantum Group, Parsippany, N.J., works on the $34 million Avandia diabetes account. WPP Group's Ogilvy & Mather, New York, handles Advair Diskus, a new drug. Glaxo also employs a range of agencies.

All agencies that handle either health care-professional or direct-to-consumer accounts are participating. Billings for just the DTC accounts were an estimated $425 million last year, according to CMR. Over-the-counter assignments for SmithKline Beecham Consumer Healthcare are not believed to be involved.

"One of the ways you save money is by cutting down your agency roster and trying to get more efficient pricing from the agencies that are left," one roster-agency executive said.

It appears the process is being driven by a desire to slash agency fees and standardize compensation. Roster agencies that worked for both former companies had a range of fee arrangements.

In March, the merged company consolidated media buying at Grey Global's MediaCom. At the time, the company said planning was not included. But one person familiar with the matter suggested some planing consolidation could also be on the horizon.

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