Product Claim Ads
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Transcript Product Claim Ads
Prescription Pharmaceuticals
• Rachel DiDominica
• Thomas Hawing
• Dylan Hull
The Pharmaceutical Industry
The prescription pharmaceutical industry is
primarily engaged in the development of
innovative prescription and over-the-counter
products that are used to prevent or treat
illnesses in humans or animals. Brand-name drugs
are products with patent protection. The industry
is significantly engaged in the research and
development of new drugs.
Industry Competitors
Pfizer Inc.
Johnson & Johnson
Merck & Co.
Bristol-Myers Squibb
AstraZeneca PLC
Eli Lilly & Company
GlaxoSmithKline PLC
Market Share
Major Players
Pfizer
Merck & Co
13.6
30.8
7.5
AsterZeneca PLC
12.8
9.5
7.5
8.9
9.4
GlaxoSmithKline PLC
Johnson & Johnson
Bristol-Myers Squibb
Eli Lilly & Co
Other
Barriers to Entry = HIGH
Knowledge:
Patents
The Patent Protection and Affordable Care act of 2010
Companies have a 12-year patent period on their drugs
Proprietary knowledge is required to compete with other
established companies
Drug Firms keep discovery process very secret
Production and Development of New Drugs
As patents expire new drugs need to be made
Cant have a company with one drug
Research and Development
Pharmaceutical manufacturers invest a higher percentage of sales in R&D than
companies in any other industry
Drug firms invest around 19-25% of total revenue in research and development
Those who do not invest in R&D often end up struggling to survive in the face of stiff
generic competition once their patent protection has expired
One in 5,000 new chemicals discovered actually goes to market
It takes around 10 to 15 years and $1.5 billion to develop a new product and just
two out of ten approved products recover the R&D costs necessary to research
them
HHI Index
699.28
HHI = 10,000 x Σwi2
HHI tells us whether an industry is acting in a monopolistic
behavior or as if it were in a competitive market
An HHI of 699.28 indicates that the Prescription
Pharmaceutical industry is acting as if they were in a
completive market.
Four-Firm Concentration Ratio
CR4 = 45.3
C4 = w 1 + w 2 + w 3 + w 4
The CR4 Index measures the market power of the top 4
companies
This is under 50%
Shows that the Prescription Pharmaceutical industry is a
competitive industry.
Government Regulation = HEAVY
In 1962 the Kefauver-Harris Amendments shifted all Federal
Food, Drug and Cosmetic regulation and promotion from the
Federal Trade Commision to the FDA.
Prescription Drug promotional materials cannot be false or
misleading, must provide "fair balance" coverage of risks and
benefits of using the drug, must provide a "brief summary" of
side effects, and effectiveness and must also meet specific
guidelines for readability and size of print.
The FDA interpreted this as everything must be in print form.
They must disclose where they spend all of their advertising
dollars (Doctor Payments)
A Change in Government Regulation
In 1997 the FDA eliminated the requirement that ads present
the entire "brief summary" taken from the product label.
The advertisements needed only to include:
“major statements” of the risks and benefits of the drug
Directions to information sources in addition to a physician such
as a toll-free phone number, a website or a print advertisement
This removed a major barrier that had made television and
radio advertising infeasible and could only be done through
print media
Television Ad. Occurrence
35000
30000
Count
of Ad
25000
20000
15000
10000
5000
0
Series1
Company Background
Pfizer
Founded in 1849
Lipitor, Viagra, Caduet, Chantix, Advil, Robitussin
2011 Revenue = $67.425 billion
2007 Ad Spending = $1.253 billion
$456.6 million on TV
$225.2 million on Magazines
•
•
•
Heart Medication
$12.7 billion in sales
$220 million spent on advertising
Bristol-Myers Squibb
Founded in 1887
Abilify, Atripla
2009 Revenue = $18.8 billion
2007 Ad Spending = $796.3 million
$201.4 million on TV
$158.3 million on Magazines
Antidepressant
AstraZeneca
Merger between Astra (1913) and British ICI (1993) in 1999
Seroquel, Arimidex, Crestor
2011 Revenue = $33.59 billion
2007 Ad Spending = 697.4 million
$55.6 million on TV
$196.9 million on Magazines
Advertising Strategies
Total Market View
Direct-to-Consumer (DTC) Advertising
Direct-to-Consumer (DTC) Advertising
Targets general public via
lay media
Expenditure has grown
from $985 million in 1996 to
$4,237 million in 2005
Real spending on DTC
advertising increased by
330% from 1996 to 2005
(See Table)
14% of total
promotional
expenditures in 2005
Role of DTC Advertising for Top-Selling
Drugs
Drugs advertised to consumers:
new drugs used to treat chronic
conditions
Manufacturers of proton-pump
inhibitors, statins, and
erythropoietin medications
Spent 34%, 34%, and 31% of
their total marketing budget
respectively on DTC
advertising in 2005
Spending for advertising of
antidepressant agents, seizuredisorder medications, and
antipsychotic agents was lower
Empirical Findings on DTC Advertising
Increases traffic to clinics
May help the sponsoring
brand more than the
competing brand
DTC advertising of
competing firms could
have synergistic effects on
consumers
Demand for prescription
drugs is sensitive to price
Television DTC Advertising
Average American
television viewers see as
many as 16 hours of
prescription drug
advertisements per year
Average ad length: 44.9
seconds
Time above average
Informative- educates
people about health
conditions and
available treatments
Television DTCA- FDA Regulations
Product Claim Ads
Must include name and indication of the drug, major
statement of product risks, and must direct consumers to a
detailed summary of product risks and benefits
Reminder Ads
Shorter
Can mention product name
May not discuss indications, efficacy, or dosage
recommendations
How Ads Attempt to Appeal to
Viewers
Rational appeals
Positive emotional appeals
Depicting unrealistic or surreal scene
Sex appeals
Using puns, jokes, or satire
Fantasy appeals
Evoking negative affect– fear, regret
Humor appeals
Evoking favorable affect
Negative emotional appeals
Providing information about product use, features, or comparison with similar products
Showing characters in an intimate encounter, scantily clad, or using provocative gestures
Nostalgic appeals
Using images from an earlier time, or black-and-white or sepia tone visuals
Study on Television DTCA
Programming Sample: 103 Ads
31 unique product claim ads focus of study
7 unique reminder ads
3 story structures:
44.7%: showed characters before and after taking the
product
39.5%: showed characters only after taking the product
7.9%: showed characters only before taking the product
Study on Television DTCA
Appeals
Product claim ads
100% used rational
appeals
95% used positive
emotional appeals
68.9% used negative
emotional appeals
Reminder ads
Never use rational
appeals
100% used positive
emotional appeals
Conclusions of Study
Most product claim ads made some factual claims
about target conditions and the disease mechanisms
Ambiguous about whether viewers might legitimately need
the product
Offered limited info about risk factors, prevalence of
condition, or subpopulations at greatest risk
Provided info to viewers through rational arguments that
detail product use or potential risks and benefits of use
DTCA focuses on convincing people that they may be at
risk for a wide array of health conditions that product
might help with
Conclusions of Study
Themes about role of lifestyle in achieving and
maintaining health
One quarter of ads: target condition interferes with healthy
or recreational activities
Never described behaviors as a reasonable alternative
More than 56% of the ads showed the product enabling
healthy or recreational activities
DTCA: suggests improvement comes from taking the
medication alone or in combination with healthy activities
NEVER from behavior modification alone
DTCA Advertising Example
Abilify Anti Depression 2011 Commercial
http://www.youtube.com/watch?v=jfPDrNrHAg&feature=related
Issues with DTCA
Television advertising
Use of programs like
TiVo
Commercial skipping
Companies resort to
different strategies
Product Placement
Inclusion of brand into story
line
2004: market for service
increased by 30.5% to
$3.46 billion
Use of Viagra in the film
Love and Other Drugs
http://www.youtube.co
m/watch?v=RNmi5ZNOt
Ys
Celebrity Spokespeople
Speak on behalf of
particular diseases and
mention specific brand
treatments during
interviews
Peggy Fleming on Good
Morning America for Lipitor
Sampling
Sampling
Pharmaceutical
representatives provide
office-based physicians
free drug samples
Accounts for 55% of
advertising expenditures
Totaled $10.5 billion in 2001
Sampling
Samples also being made
available through DTC
advertising venues like TV,
newspapers, and the
Internet
From 1996 to 2005
spending on DTCA and
free samples has risen
as a share of total
promotion
Sampling: Psychological Effects
Belief and attitudinal confidence are found to be higher for
physicians and patients exposed to product sampling alone
than for those exposed only to product advertising
Consumers automatically have a greater affinity to something
they have experienced as opposed to something that they
haven’t
Have been shown to directly affect physician prescribing
behavior
More likely to prescribe brand name medications that they
have free samples of
Provides immediate access to the medication and allows
patients to find out which brand and dosage amount works
best for them
Advertisements in Medical Journals
Advertisements in Medical Journals
Value of professional journal
advertisements
2% of spending
Specific ads targeting
medical profession=
cheaper and just as
effective
Six of the top 10 drugs
advertised through DTC
were also among the top 10
drugs promoted to
physicians through detailing
and medical journals
Advertisements in Medical Journals
Companies are now paying journals to publish articles
with content about their promoted drugs and to suppress
unfavorable study results that would negatively impact
their brand image
1989 study by the Association of Independent Medical
Publications
Journal advertising with effective sales theme increases a
product’s market share of new prescriptions in a predictable
way
Concluded that doctors in study relied on promotional
information rather than scientific material in forming opinions
Method Currently Under Scrutiny
Ability to impact a physician’s prescribing behavior for
the wrong reasons
Major deficiencies in advertisements
Study: Office of the Inspector Study:
Study: General in the Department of
Health and Human Services
Lacked necessary references and information on efficiency,
appropriate populations, safety, and potential side effects
Reviewers rated 60% of the advertisements poor or
unacceptable in terms of scientific references
17%: rejected for publication
24%: required major revisions
50%: little or no educational value
59%: would not lead to proper prescribing if the physician
had no other information
FDA: Regulatory Response
Issue notice of violation and warning letters and
requesting that manufacturers publish corrective
advertisements or send letters to pharmacists and
physicians correcting advertisements
Many medical journals do not review the content of the
advertisements they publish
Detailing
Detailing
Sales activities of drug
representatives directed
toward physicians
$4.8 billion: officebased physicians
$700 million: hospital
based physicians
$5.5 Billion spent in 2001
Detailing
81,000 pharmaceutical
representatives in US
Relationship selling
techniques
Medical science and
product knowledge
Marketers identify group of
physicians most likely to
prescribe particular drug
Detailing is more effective
in determining brand share
Detailing
Combined with other
advertising methods
May provide clinical
information paired with
the presentation of
approved journal
articles and free drug
samples
Interview with Susan DiDominica
Current pharmaceutical
sales representative
“Human informative
advertisement”
Sell yourself and the drug
Works Cited
http://oig.hhs.gov/oei/reports/oei-01-90-00482.pdf
http://www.nejm.org/doi/full/10.1056/NEJMsa070502#t=a
rticleMethods
http://www.kff.org/rxdrugs/upload/Impact-of-Direct-toConsumer-Advertising-on-Prescription-Drug-SpendingSummary-of-Findings.pdf
Analysis and Recommendations
Industry Outlook
Revenue continues decline through 2013
Slow growth after 2014
Increase in sales, decrease in profit
Industry Revenue Growth ($millions)
161,000.00
160,000.00
159,000.00
158,000.00
157,000.00
156,000.00
155,000.00
154,000.00
153,000.00
152,000.00
2012
2013
2014
2015
2016
2017
2018
Patient Protection and Affordable
Care Act
Extends health insurance to 32 million more Americans
2014: more Americans aged 26 to 64 will become
covered by the act
PhRMA deal
Establishes approval pathway for generic biologic drugs
Biologic Drugs
Focus on investing in generic biologics production
Large brand-name companies gain a competitive
advantage
Diversifies and mitigates risk
DTC Advertising
Rapid pace of growth in developing and launching
second and third generation products
Focus on promoting the product
Increases in DTC advertising have contributed to overall
increases in spending on the advertised drug
DTC Spending
DTC Spending
Social Media Advertising
More consumers willing to use social media to seek
medical information
FDA Regulations pending
Pharma Ad Spending
Recommendations
Revenue is relatively steady.
Revenue is expected to drop in the next few years
Future of the industry is unclear
Questions?