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Some drug makers are curtailing TV ad spending
Monday, May 16, 2005

After years of plowing a small fortune into television ads, some drug makers are concluding that they have overspent and are scaling back.

Pfizer Inc. says it is re-evaluating its TV-ad strategy for Viagra after prescriptions for its impotence drug fell off only slightly when the Food and Drug Administration ordered the company to stop running its principal TV campaign last fall. TAP Pharmaceutical Products Inc., which spent about $91 million advertising heartburn drug Prevacid on television in 2004, pulled the plug on TV commercials for the treatment late last year to focus on print media. The pullback represents "a strategic business decision," and is part of a plan to increase efficiency in marketing, the company said in a statement.

AstraZeneca PLC, one of the heaviest TV advertisers on such brands as heartburn medication Nexium and cholesterol drug Crestor, says it is committed to the medium but is rejiggering its spending. "We've definitely changed our mix, and we have more online activity than we have ever had," says David Brennan, president and chief executive officer of AstraZeneca's U.S. unit. "In broadcast, you wonder how many things you can actually get across."

Pharmaceutical advertising has been one of the fastest-growing areas for television, so even a small change in strategy by drug makers -- which ranked 11th in TV ad spending by industry last year -- could have outsized implications for the medium. Drug marketers, for competitive reasons, are reluctant to reveal details of their advertising strategies, but the rethinking at some companies reflects a sharper focus on the return on the money spent as well as a increasing public and regulatory backlash against TV ads for prescription medicines.

Even a modest move away from TV could buoy the fortunes of alternative outlets, such as newspapers, magazines and the Internet. These other media allow deeper communication with consumers than TV, particularly on drug features and risks, some advertisers say.

The pharmaceutical industry spent $4.45 billion on advertising to consumers in all media last year, a 27 percent increase over 2003, according to TNS Media Intelligence. It's too early to say whether a slowdown in TV ads is in full swing, and the launch of newly approved drugs, such as Sepracor Inc.'s. sleep aid Lunesta, and other medicines later this year could give TV spending a boost.

But second thoughts are rising as evidence mounts that drug sales don't necessarily rise or fall as TV ads are boosted or reduced. One reason is that, unlike with other products such as cars or fast food, a consumer can't buy a prescription drug without a doctor's signature. So drug makers continue to advertise to physicians and send more than 100,000 salespeople to their offices.

The closer look at TV spending comes as many drug makers, struggling to maintain profits, are lowering costs across the board. Pfizer, the world's largest drug company, has embarked on a restructuring that aims to save $4 billion a year. Meanwhile, television advertising faces tough questions about its value from marketers across industries, as consumers ignore the spots, pass over them with personal video recorders such as TiVo or skip the tube altogether to surf the Internet.

Drug makers are also mindful of the intensifying heat that direct-to-consumer advertising is drawing from regulators and the broader public, especially in the wake of the safety controversy over highly advertised painkillers Vioxx from Merck & Co. and Celebrex from Pfizer. In February, the chairman of a panel of advisers to the FDA on the safety of these medicines said the group was trying to send a message that advertising them to consumers would be inappropriate. At the FDA's request, Pfizer halted all consumer ads for Celebrex late last year.

After the FDA chastised Pfizer for a misleading TV campaign for Viagra that featured a married couple shopping for lingerie early last November, the company pulled the commercials. The campaign, the regulators said, implied Viagra was more effective than clinical tests had proved and failed to mention side effects.

Despite the pullback in TV ads, new prescriptions for Viagra in the U.S. fell just 3.8 percent to 383,000 in March from 397,000 in October, the last full month that TV ads ran, according to data from NDCHealth in Atlanta. Since Viagra lost a five-year U.S. monopoly in 2003 as the only pill for impotence, sales of the drug have been under pressure, and the rate of erosion has held fairly steady -- whether the company advertised on TV or not. Pfizer boosted spending on Viagra newspaper advertising to $3.3 million in February from less than $700,000 in October.

Six months after the FDA's decision on Viagra, Pfizer is still mulling its return to widespread TV advertising for the drug. "It's not like we're being hurt in a major way by not being on TV right now," says Patrick Holmes, a Pfizer marketing vice president responsible for Viagra. At the moment, the drug appears on TV only in a modest campaign limited to Hispanic networks. "A few years ago people might have said all you really need in this category is effective TV advertising," Mr. Holmes says. "I think that's been proven incorrect."

After Viagra went nearly dark on TV, television spending on competitor Cialis, from Lilly-Icos, a joint venture between Eli Lilly & Co. and Icos Corp, rose to $19.4 million in February from $7.7 million in October, and new monthly prescriptions rose 18.4 percent to--8,000. But the drug has gained share even faster in overseas markets where ads to patients aren't permitted. In France, for example, Cialis's sales to pharmacies surpassed those of Viagra early this year, Lilly-Icos said. Meanwhile, Levitra, sold by Bayer AG and GlaxoSmithKline PLC, saw new prescriptions slip slightly to 85,000 in March from 88,000 in October, despite heavy advertising featuring a sexy middle-age woman touting the tonic effects of the pill on her man and their relationship.

In the long history of advertising to consumers, drug makers are late to the game. The companies have been free to take their messages to the masses only since 1997, when the FDA relaxed regulations on advertising. And many marketers feel TV remains a critical part of brand building, especially for drugs new to the market.

"Broadcast TV, I believe has to be part of the overall media mix," says Stuart Klein, president of Quantum, a unit of ad giant WPP Group PLC that specializes in health-care products, including prescription drugs. "What I'm seeing is the recognition by companies that the last 5 percent to 10 percent of TV spending is much better spent on relationship marketing or on the Internet, where you can have a deeper dialog with people." Relationship marketing includes coupons for frequent users and brochures sent to people who call a toll-free number seeking information.

The intensely competitive market for heartburn pills shows that some companies that have virtually skipped advertising to consumers have done almost as well as those that have spent lavishly. Wyeth's Protonix, a leading heartburn pill, is hardly a household name. The company has done little to build the brand's awareness among consumers since its launch in 2000. "We have never, ever done television ads," a Wyeth spokesman says. Last year, the company spent only $200,000 on Protonix advertising that wasn't aimed at doctors, according to TNS Media Intelligence. Instead, Wyeth has offered bargains on Protonix, including hefty rebates, to insurers. That has given the drug a solid 20 percent-plus share of new prescriptions in the category.

"I think the $100 million branded TV advertising campaigns are over," says David Gascoigne, a consultant to drug marketers at IMS Health in Plymouth Meeting, Pa. Even before Merck's withdrawal of Vioxx from the market last September, drug makers were rethinking mass-market ads, Mr. Gascoigne says, citing his work for several companies. As marketers, the drug industry was the last to use TV and has gone through considerable growing pains, he says. "It's not the case of throwing dollars at TV anymore," he says, predicting TV spending will "plateau and possibly decline in the near term."

First published on May 16, 2005 at 12:00 am