1. Advertising in the Pharmaceutical Industry
Carolina Fieldcamp, Charlotte Laville, Arnaud Louiset & Kristin White

2. Agenda Industry Background Competition Advertising Strategies
Industry Advertising Trends
Raw Data Analysis
Recommendations: Investment and Advertising

3. Industry Background

4. Advertising Strategies
Industry Overview
ACTIVITY:
Develop and produce pharmaceutical products and medications
TECHNOLOGY:
Capital intensity: HIGH (facilities, research laboratories, machinery, technology equipment)
Technology change: HIGH (keep renewing equipment as innovative technologies are introduced)
R&D (20% of revenues)
Industry Background
Competition
Advertising Strategies
Advertising Trends
Raw Data Analysis
Recommendations

5. Advertising Strategies
Industry Overview
KEY FIGURES:
Revenue: $158.7b
Profit: $31.1b
Businesses: 2,400
Industry growth: 1.5%
Exports: $46.5b
Imports/Demand = 38%
KEY DEMAND DRIVERS:
Median age of population
Private health insurance
Federal funding (Medicare/Medicaid)
Regulations
R&D expenditures
Industry Background
Competition
Advertising Strategies
Advertising Trends
Raw Data Analysis
Recommendations

6. Demand will increase, as number of older customers is increasing
SOURCE: US CENSUS DATA
Industry Background
Competition
Advertising Strategies
Advertising Trends
Raw Data Analysis
Recommendations

7. Advertising Strategies
Exports/Imports
EXPORTS
IMPORTS
$46.5B
$71.1B
Exports: high and increasing
Import: high and steady
Industry Background
Competition
Advertising Strategies
Advertising Trends
Raw Data Analysis
Recommendations

8. Pharmaceutical Manufacturing Stages
TWO MAJOR STAGES:
Primary Processing: Production of the active ingredients or drug
Secondary Processing: Conversion into product suitable for administration
PRODUCT FORM:
Tablets, capsules, liquid, creams, ointment, aerosols…
Industry Background
Competition
Advertising Strategies
Advertising Trends
Raw Data Analysis
Recommendations

9. Suppliers and Distributors
Chemicals from: Biotechnology/bioinformatics firms
Equipment from: Medical device and instrument manufacturing firms
Cleaning products from: Soap and cleaning compound manufacturing firms
DISTRIBUTORS:
Pharmacies and drugstores
Supermarkets and grocery stores
Drug, cosmetics and toiletry wholesaling
Hospitals
Industry Background
Competition
Advertising Strategies
Advertising Trends
Raw Data Analysis
Recommendations

10. Supply Chain PATIENTS RAW MATERIALS SUPPLIERS FINISHED PRODUCT
HOSPITALS CLINICS PHARMACIES
PACKAGING
DISTRIBUTOR
PATIENTS
Industry Background
Competition
Advertising Strategies
Advertising Trends
Raw Data Analysis
Recommendations

11. Advertising Strategies
Product Segmentation
Brand name vs. generic
OTC (over-the-counter) vs. POM (prescription only medicines)
Brand name: discovered and developed by the company, patent protected (20 years)
Generics: after patent expiration, cheaper copies, same exact product
Industry Background
Competition
Advertising Strategies
Advertising Trends
Raw Data Analysis
Recommendations

12. Competition

13. Industry Analysis: Competition
Industry Background
Competition
Advertising Strategies
Advertising Trends
Raw Data Analysis
Recommendations

14. Advertising Strategies
Major Competitors
YEAR EST.
1887
1888
1849
REVENUES ($M)
$17,432
$11,329
$10,958
MARKET SHARE
11.1% 7%
6.9%
EMPLOYEES
128,000
21,000
78,300,000
2014 NI GROWTH RATE
18.02%
-57.03%
-20.15%
PROFIT MARGIN
27.7%
8.9%
18.4%
BRAND EQUITY
$7.72B
$4.15B
Industry Background
Competition
Advertising Strategies
Advertising Trends
Raw Data Analysis
Recommendations

15. Low Market Concentration
No. of companies in industry: 2,410
HHI =
HHI = 10,000 x Σwi2
10 largest companies represent 70.2% of the market
CR4 = 36.9
C4 = w1+ w2+ w3+ w4
Source: IBISWorld
Industry Background
Competition
Advertising Strategies
Advertising Trends
Raw Data Analysis
Recommendations

16. Competitive Landscape
Barriers to Entry: HIGH (Government, R&D, capital, patents)
Barriers to Exit: HIGH (Fixed, Sunk, contracts, liquidity)
Degree of Rivalry: HIGH (Product innovation, prices, marketing)
Product differentiation: HIGH (Generic vs. patented, drug form, brand differentiation)
Industry Background
Competition
Advertising Strategies
Advertising Trends
Raw Data Analysis
Recommendations

17. Advertising Strategies

18. The Food and Drug Administration (FDA)
Concern: public health
Products: Assures the safety, effectiveness and security of products, including human prescription drugs
Promotion: Helps consumers get accurate, science-based information needed to use medicines appropriately and improve health
The FDA oversees both the approval and marketing of prescription drugs in the United States.
Industry Background
Competition
Advertising Strategies
Advertising Trends
Raw Data Analysis
Recommendations

19. Advertising Regulations
Non-prescription (OTC): sold directly to the consumer.
Regulated by the FTC
Prescription: medical professionals supervise its use.
Regulated by the FDA
Federal regulation of drugs began in 1906 and was expanded in three major pieces of legislation between 1938 and The most recent amendments in the late 1990s created the DTCA market for pharmaceutical products.
Industry Background
Competition
Advertising Strategies
Advertising Trends
Raw Data Analysis
Recommendations

20. Promotional Strategies
Direct-to-Consumer
Professional Promotion
Product claim ads
Detailing
Reminder ads
Samples
Help-seeking ads
Educational and Promotional Meetings
Promotional materials (brochures, mailings)
Journal and Web Advertisements
Clinical Trials
Data from:
DTCA and other forms of pharmaceutical promotion are heavily regulated by the FDA, as its authority to regulate advertising is closely related to its authority to approve prescription drugs, the primary means through which the FDA ensures public health and safety in the use of pharmaceuticals. The FDA has different requirements for different types of DTC ads, of which there are four: product claim ads, reminder ads, help-seeking ads and other promotional materials.
Industry Background
Competition
Advertising Strategies
Advertising Trends
Raw Data Analysis
Recommendations

21. Professional promotion dominates ad budgets
Left graph: influence of professionals, they are the one writing prescriptions - illustrates the extent to which advertising is aimed at influencing doctors’ prescribing practices.
DTCA of prescription drugs has increased from $166M in 1993 to $4.2B in 2005.
The industry average spent on DTC is 13% of total ad spending
Industry Background
Competition
Advertising Strategies
Advertising Trends
Raw Data Analysis
Recommendations

22. Professional Promotion
Detailing
Samples
Meetings
Journals
Data from:
DTCA and other forms of pharmaceutical promotion are heavily regulated by the FDA, as its authority to regulate advertising is closely related to its authority to approve prescription drugs, the primary means through which the FDA ensures public health and safety in the use of pharmaceuticals. The FDA has different requirements for different types of DTC ads, of which there are four: product claim ads, reminder ads, help-seeking ads and other promotional materials.
Industry Background
Competition
Advertising Strategies
Advertising Trends
Raw Data Analysis
Recommendations

23. Direct to Consumer Advertising (DTCA)
Product Claim
Reminder
Help-Seeking
Promotional Materials
Industry Background
Competition
Advertising Strategies
Advertising Trends
Raw Data Analysis
Recommendations

24. Advertising Strategies
DTCA: Content
Story structure of advertisements:
44.7% of ads showed characters both before and after use
39.5% of ads showed characters only after use
7.9% of ads showed characters only before use
Industry Background
Competition
Advertising Strategies
Advertising Trends
Raw Data Analysis
Recommendations

25. Message Appeal: Informative
Rational appeals  risk disclosure required by the FDA
Risks and benefits
Prescribing information
Reminder ads: not informative
Product claim ads: 100% presented factual information
Industry Background
Competition
Advertising Strategies
Advertising Trends
Raw Data Analysis
Recommendations

26. 40-55

27. Message Appeal: Emotional
95% of ads use emotional appeals
69% of ads target negative emotions, such as fear
95% of product claim ads & 100% of reminder ads target positive emotions, such as motivation
Industry Background
Competition
Advertising Strategies
Advertising Trends
Raw Data Analysis
Recommendations

28. Advertising Strategies
Message Appeal: Fear
Scares viewers into thinking certain “normal” symptoms may be indicative of a significant medical issue
Encourages viewers to speak to their doctor if symptoms are exhibited
Industry Background
Competition
Advertising Strategies
Advertising Trends
Raw Data Analysis
Recommendations

29. Advertising Trends

30. Companies are spending more on advertising and sales than on R&D
8.2B
6.6B
5.5B
17.5B
11.4B
5.7B
7.5B
2.9B
R&D spend
9.5B
4.3B
Sales & Marketing Spend
Industry Background
Competition
Advertising Strategies
Advertising Trends
Raw Data Analysis
Recommendations

31. Relatively High Ad-to-Sales Ratios
Industry Background
Competition
Advertising Strategies
Advertising Trends
Raw Data Analysis
Recommendations

32. Significant decrease in print advertising
In 2012 we saw a greater overall drop in promotional spending than we observed the previous year, with 90% of decline attributable to detailing, sampling, and DTC. Spending in nearly every channel saw decline year over year in 2012, the only exception being mailings, which continued an upward trend.
Industry Background
Competition
Advertising Strategies
Advertising Trends
Raw Data Analysis
Recommendations

33. Steady increase in online ad spend
Industry Background
Competition
Advertising Strategies
Advertising Trends
Raw Data Analysis
Recommendations

34. Raw Data Analysis

35. Industry uses particularly long advertisements
Industry Median
Industry Background
Competition
Advertising Strategies
Advertising Trends
Raw Data Analysis
Recommendations

36. Seasonality: Ex. Seasonal Illnesses
Seasonal illnesses (higher in the winter). Adjustment of advertising with the time when people need the product
Industry Background
Competition
Advertising Strategies
Advertising Trends
Raw Data Analysis
Recommendations

37. Industry advertises predominantly during drama shows
Industry Background
Competition
Advertising Strategies
Advertising Trends
Raw Data Analysis
Recommendations

38. Raw Data: Case Study Analysis

39. Pfizer: two competing drugs
CASE STUDY 1
Pfizer: two competing drugs
Industry Background
Competition
Advertising Strategies
Advertising Trends
Raw Data Analysis
Recommendations

40. Pfizer: two competing drugs
CASE STUDY 1
Pfizer: two competing drugs
Ask the teacher for explanations.
Maybe Celebrex is usually giving more information so it need more time
Industry Background
Competition
Advertising Strategies
Advertising Trends
Raw Data Analysis
Recommendations

41. Pfizer: two competing drugs
CASE STUDY 1
Pfizer: two competing drugs
Pfizer use a similar methodology to advertise similar products
Celebrex advertise more overall than Zeljanz
Industry Background
Competition
Advertising Strategies
Advertising Trends
Raw Data Analysis
Recommendations

42. Pfizer: two competing drugs
CASE STUDY 1
Pfizer: two competing drugs
Both drugs are advertised on the same kind of shows. It targets older people (arthritis) and usually sport or movie are watched by kids or young adults, so that’s why they don’t advertise on those shows.
Industry Background
Competition
Advertising Strategies
Advertising Trends
Raw Data Analysis
Recommendations

43. Pfizer: two competing drugs
CASE STUDY 1
Pfizer: two competing drugs
Networks (some channels are more expensive to advertise on)
Celebrex advertises more (more frequently) but on shows with a lower CPM
They advertise Xeljanz on higher CPM shows as the drugs is more expensive than Celebrex, so they want to target the right people.
Besides, as the products are almost, people would logically buy the less expensive (Celebrex), so they need to advertise Xeljanz when and where it will have a higher impact. (so they spend more)
Industry Background
Competition
Advertising Strategies
Advertising Trends
Raw Data Analysis
Recommendations

44. Pfizer: two competing drugs
CASE STUDY 1
Pfizer: two competing drugs
Complementary type of advertising.
Both drugs are also advertised less in the Fall (people suffer more when it’s humide and it rains usually more in the spring)
Industry Background
Competition
Advertising Strategies
Advertising Trends
Raw Data Analysis
Recommendations

45. Same drug advertised by two competitors
CASE STUDY 2
Same drug advertised by two competitors
Industry Background
Competition
Advertising Strategies
Advertising Trends
Raw Data Analysis
Recommendations

46. Same drug advertised by two competitors
CASE STUDY 2
Same drug advertised by two competitors
Humira may be more advertised than Stelara overall. Same patern and trend
Industry Background
Competition
Advertising Strategies
Advertising Trends
Raw Data Analysis
Recommendations

47. Same drug advertised by two competitors
CASE STUDY 2
Same drug advertised by two competitors
Industry Background
Competition
Advertising Strategies
Advertising Trends
Raw Data Analysis
Recommendations

48. Same drug advertised by two competitors
COST PER AD
$227,615
$194,208

49. Advertising to different target audiences
CASE STUDY 3
Advertising to different target audiences
Testosterone gel
Target audience: older men
Menopause symptom relief
Target audience: older women
Industry Background
Competition
Advertising Strategies
Advertising Trends
Raw Data Analysis
Recommendations

50. Advertising to different target audiences
CASE STUDY 3
Advertising to different target audiences
Flighting strategy
Brisdelle: Sept  November (does menopause onset more here?)
Androgel: April  May
Both have a break in the campaign; brisdelle advertises more sparsely; androgel advertising is very concentrated
Brisdelle is advertised in longer chunks maybe because it is harder for women to adjust, whereas men see the advertisement and want to act on their problem
PULSE?
Industry Background
Competition
Advertising Strategies
Advertising Trends
Raw Data Analysis
Recommendations

51. Advertising to different target audiences
CASE STUDY 3
Advertising to different target audiences
Brisdelle advertised later in the night: trouble sleeping ? Lol
Brisdelle: women busy until 8pm? (different activities)
Androgel  advertised when sports are on
Industry Background
Competition
Advertising Strategies
Advertising Trends
Raw Data Analysis
Recommendations

52. Advertising to different target audiences
CASE STUDY 3
Advertising to different target audiences
Male-targeted drug (androgel) – sports & news
Female-targeted drug (brisdelle) – comedy & reality
Similar for drama, for aforementioned reasons
Industry Background
Competition
Advertising Strategies
Advertising Trends
Raw Data Analysis
Recommendations

53. Advertising to different target audiences
CASE STUDY 3
Advertising to different target audiences
Maybe guys watch tv more on the weekends? Check for data
No new episodes of original content targeted towards women on the weekend
Saturdays and Sundays tends to be sports
Industry Background
Competition
Advertising Strategies
Advertising Trends
Raw Data Analysis
Recommendations

54. Advertising to different target audiences
CASE STUDY 3
Advertising to different target audiences
Graph 1
Why does Brisdelle advertise on ABC but androgel doesn’t? Different demographics?
Androgel more focused on one network – touching same consumer several times, whereas Brisdelle tries to touch several different consumers (through different networks)
- ABC: More female-oriented drama and programming in general, while CBS has more variety
Industry Background
Competition
Advertising Strategies
Advertising Trends
Raw Data Analysis
Recommendations

55. Recommendations

56. Investment Advertising
High level of competition
But growth potential with median population age increasing (more need for product)
Severe limitations from regulation
Move more towards mobile and online advertising
More celebrity endorsements
Industry Background
Competition
Advertising Strategies
Advertising Trends
Raw Data Analysis
Recommendations