• Rachel DiDominica
• Thomas Hawing
• Dylan Hull

 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.

 Pfizer Inc.
 Merck & Co.
 AstraZeneca PLC
 GlaxoSmithKline PLC
 Johnson & Johnson
 Bristol-Myers Squibb
 Eli Lilly & Company

Major Players
30,8
7,5
7,5
8,9
13,6
9,4
12,8
9,5
Pfizer
Merck & Co
AsterZeneca PLC
GlaxoSmithKline PLC
Johnson & Johnson
Bristol-Myers Squibb
Eli Lilly & Co
Other

 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

 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

 699.28
 HHI = 10,000 x Σw i
2
 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.

 CR4 =
45.3
 C
4
= 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.

 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

Count of Ad
35000
30000
25000
20000
15000
10000
5000
0 Ряд1

 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

 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

 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

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

 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

 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
 Providing information about product use, features, or comparison with similar products
 Positive emotional appeals
 Evoking favorable affect
 Negative emotional appeals
 Evoking negative affect– fear, regret
 Humor appeals
 Using puns, jokes, or satire
 Fantasy appeals
 Depicting unrealistic or surreal scene
 Sex appeals
 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

 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

 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

 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

 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

 Abilify Anti Depression 2011 Commercial
 http://www.youtube.com/watch?v=jfPDrNrHAg&feature=related

 Television advertising
 Use of programs like
TiVo
 Commercial skipping
 Companies resort to different strategies

 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

 Speak on behalf of particular diseases and mention specific brand treatments during interviews
 Peggy Fleming on Good
Morning America for Lipitor

 Pharmaceutical representatives provide office-based physicians free drug samples
 Accounts for 55% of advertising expenditures
 Totaled $10.5 billion in 2001

 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

 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

 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

 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

 Sales activities of drug representatives directed toward physicians
 $4.8 billion: officebased physicians
 $700 million: hospital based physicians
 $5.5 Billion spent in 2001

 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

 Combined with other advertising methods
 May provide clinical information paired with the presentation of approved journal articles and free drug samples

 Current pharmaceutical sales representative
 “Human informative advertisement”
 Sell yourself and the drug

 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-to-
Consumer-Advertising-on-Prescription-Drug-Spending-
Summary-of-Findings.pdf

 Revenue continues decline through 2013
 Slow growth after 2014
 Increase in sales, decrease in profit
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
Industry Revenue Growth ($millions)
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

 Focus on investing in generic biologics production
 Large brand-name companies gain a competitive advantage
 Diversifies and mitigates risk

 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

 More consumers willing to use social media to seek medical information
 FDA Regulations pending
Pharma Ad Spending

 Revenue is relatively steady.
 Revenue is expected to drop in the next few years
 Future of the industry is unclear