'Pharmageddon' Ends as Floodgates Open for Drug Ads

Shops See Surge of Spending From Once-Hot but Long-Dormant Category

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Some called it pharmageddon. In 2012, health-care ad agencies were coming off a billion-dollar drop in annual drug advertising over five years with little hope in sight: A host of blockbuster medications were about to lose patent protection and there were pessimistic projections for the pipeline ahead.

The world's largest agency groups were feeling the pain. Interpublic CEO Michael Roth said during an earnings call then that the health-care sector was marked by "industry-wide softness."

But health care got a different kind of shout-out during IPG's most recent earnings call, when Mr. Roth called it the company's fastest-growing area and cited year-over-year growth of 13%.

Only a couple years after pharmageddon left agencies with the ruins of a stable and lucrative trade, budgets are back as health-care marketing defies earlier predictions and delivers one of the best comeback stories in advertising. The resurgence has been fueled by a combination of factors: shops' efforts to diversify their services in health care and the arrival of valuable new blockbuster drugs -- that demand elaborate digital content marketing to sell them."

Health care is one [area] where we're seeing strength; it was in a lull for a while as patents were expiring," Mr. Roth said on the recent earnings call. "We're seeing new products. And there in particular, I think content is a very important part of what we're doing with respect to the health-care clients."

The PR giant Edelman said its health-related revenue increased more than 20% in the year ending last June, after seeing "moments of leveling out" during pharmageddon."

The pharma industry is roaring back from pharmageddon," said Kym White, global sector chair of Edelman's health business.

Global spending on medicines is forecast to reach nearly $1.3 trillion by 2018, an increase of about 30% over 2013, according to the IMS Institute for Healthcare Informatics.

Despite fears of a pipeline gone dry, or at least populated with limited-appeal products, the Food and Drug Administration approved 41 medicines in 2014, more than in any year since the '90s, Ms. White said. Among some of the launches are Gilead's Sovaldi; Biogen Idec's Tecfidera; Lundbeck's Brintellix; and Celgene's anti-rheumatic drug.

Plavix and Lexapro are among the mega-drugs that were facing expirations in 2012 or in coming years. But the year ahead is brighter for blockbusters. "For 2013, of the drugs that were approved, there were estimates that anywhere between 10 to 12 would be billion-dollar blockbusters," Ms. White said. And unlike some hot drugs in the past that were variations on a theme of treatment, some of the "class of 2013" address new unmet areas of needs with years of patent life ahead of them, said Ms. White. Others are particularly complex and more difficult for generics to eventually emulate.

When the pharma category was tough going, agencies sought to make up the deficit by diversifying their work and clients within the health-care field. Edelman, for example, now works not only with more specialty drugs but more consumer health brands and hospitals.

"We diversified our product offering, investing more in our branding group, our digital and technology departments, and expanded our proprietary offerings, too," said Dana Maiman, FCB Health CEO.

"When Big Pharma was spending less, we went elsewhere," said Publicis Health Group President Michael du Toit. The shop added more midsize and diverse biotech brands, among other types of clients. Now, its portfolio is about evenly split between Big Pharma and non-drug clients, he said.

Like any agency in a crunch, moreover, Publicis Health Group revamped its structure to maximize efficiency, putting smaller teams to work on more-specialized products and centralizing its digital-media buying to expand the capabilities of traditional shops in the group like Publicis Lifebrands.

That integration of digital media dovetailed with perhaps the biggest driver of growth in health budgets -- demand for digital content and services, from marketer-owned publishing platforms to digital video and targeted digital-media buying.

"We're going into next year expecting double-digit growth because consumer health has absolutely shifted efforts not just to digital but real-time marketing and content," said Becky Chidester, president of Wunderman World Health.

The WPP customer relationship marketing giant is experiencing a surge in health business compared with last year, when clients were pulling back due to a tough economy, Ms. Chidester said. "They were going back to tried-and-true methods of general advertising -- things they had metrics around," she said. "Pharma was going back to some of the [traditional] sales-force activities."

As individual consumers take on more decision-making and financial responsibility for their care, however, marketers are increasingly adapting their strategies to fit.

For McCann Health, the demand for digital support is driving the development of new platforms and IP, and digital formats are replacing paper print production, said John Cahill, global CEO of the group. The need to target a broader range of stakeholders, including health professionals, pharmacists and patients, has also led to more specialized projects for the shop that include digital content.

"Right now I have three major RFPs on my desk and all are asking for similar versions of [content support]," said Edelman's Ms. White. "They want to figure out how to tell a story and through what." There's interest in using platforms like Instagram and Pinterest, she said.

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