TV Execs Welcome Drug Ads With Open Arms

But the lucrative commercial category is under attack by regulators

Eight years after the federal government relaxed rules restricting ads for prescription drugs aimed directly at consumers, the category has become a panacea for both Madison Avenue and the media industry at large—especially television. Now a spate of new regulatory issues threatens to severely limit or even ban some forms of prescription-drug ads.

What Ails you?
Here is a list of how many drugs are in active development to alleviate specific ailments or to meet needs of a specific demographic group. The list suggests that this advertising category will be healthy for a while:
Source: Greenwich Consulting Partners
79new medicines for HIV/AIDS
245new medicines for diseases that disproportionately affect the nation's 35.3 million Hispanic Americans
249new medicines for diseases that disproportionately afflict African-Americans or for diseases among the top 10 causes of death for the demographic
371medicines for diseases that disproportionately affect women
800new medicines for diseases related to aging
176new medicines for neurological diseases
122new medicines to treat heart disease and stroke, two of the top three causes of death in the United States

Chief among the ad industry's concerns is the regulatory fallout surrounding the public disclosure of serious heart-related side effects caused by two of the largest prescription-drug brands: pain relievers Vioxx and Celebrex.

The debate over the relationship between prescription-drug side effects and advertising is but one in a series of regulatory threats facing the $4 billion-plus prescription-drug ad industry, which has also been under attack for inflating the cost of proprietary drugs to defray the cost of big advertising budgets, and are even facing broadcast-indecency challenges for airing ads for drugs designed to improve people's sex lives.

Drug Money
What major pharmaceutical companies spent on TV advertising in 2004
Rank Company Total
SOURCE: Nielsen Monitor-Plus
1 Pfizer Inc.$676,219,163
2 GlaxoSmithKline PLC$670,387,477
3 Astrazeneca PLC$440,162,942
4 Novartis AG$407,323,158
5 Sanofi-Aventis$402,919,878
6 Merck & Co. Inc.$338,913,940
7 Johnson & Johnson$303,332,036
8 Lilly Icos LLC$175,818,750
9 Bayer AG$156,060,917
10 Tap Pharmaceutical Pdts.$125,816,192

The regulatory talk surrounding the pharmaceutical advertising category is also adding to the uncertainty surrounding the TV advertising business, especially the 2005-06 upfront network marketplace, which is just weeks away from breaking.

The Heat is Rising

The prescription-drug business itself is—excuse the pun—extremely healthy. A bounty of new remedies treating a wide array of diseases are ready to hit the market, but the regulatory scrutiny could cause some of the biggest and highest-profile prescription-drug brands to ease up on their advertising plans.

“The big wild card is if the government legislates anything radically different,” says the top media executive at a major prescription-drug marketer that has been part of the consumer-advertising boon. The executive, who asked not to be named, says that regulatory concerns would likely cause many pharmaceutical marketers to cut back on ad spending.

“I wouldn't look for huge growth,” he says, adding, “Things are going to level off. Number one, we've been growing at such high rates. And number two, there have been some issues. Several big spenders have had to pull product, and that affected revenues. And number three, we're operating in a fishbowl, and nobody wants to do anything that would lead to more regulation.”

As bad as that might be for pharmaceutical marketers, it could be devastating to the media industry. Ever since 1997, prescription-drug ads have been the one constant growth engine in the consumer-media marketplace, particularly for TV, which has quickly displaced print as the preferred ad medium for Rx-marketing.

Even during the worst points of the post-9/11 ad recession, the so-called direct-to-consumer (DTC) ad category continued to boom. The growth came from established drugs that were free to liberally use consumer media to advertise, as well as from a deluge of new drugs being released on the market. The category, according to estimates compiled by the Association of National Advertisers (ANA), in 2004 represented nearly $3.7 billion in TV-ad spending.

“There's no question that the heat has risen substantially with respect to the DTC category,” says Dan Jaffe, head of the ANA's Washington office, and the ad industry's top lobbyist.

Jaffe says the ad industry is most concerned by the mixed signals surrounding side effects, noting that critics of prescription-drug advertising “claim that, even after a drug receives marketing approval by the Food and Drug Administration, incipient dangers still may only become apparent once these products become widely available. The best way to protect against such dangers, these critics argue, is to impose an advertising moratorium on new drugs.”

In fact, the ANA was apoplectic when industry weekly Advertising Age ran an editorial calling for a one-year mandatory moratorium on advertising all new prescription drugs. ANA President Bob Liodice was prompted to chastise the trade magazine in a recent blog entry on the ANA's site: “This posture is an outright proxy for the FDA saying, 'We think the new drug is OK—but we aren't totally sure—so we'll try it out in market and hope no one gets hurt. And just to be sure we don't mess up too much, let's not advertise the product so the impact will be small.'”

“The Spotlight is On”

Or, as former Federal Trade Commission Chairman Timothy Muris said during a speech at the ANA's legal-affairs conference in January, “Pressed to the extreme, this is an argument that says new drugs are fine, as long as consumers don't know about them.”

That could be an anathema for marketers, agencies and media outlets that are depending on new prescription-drug brands for sustaining the category's growth, because established brands are likely to keep a low profile while the regulatory debate is waged.

“I don't know if there is going to be a cutback in the category, but they are going to be very careful in how they advertise now that the spotlight is on,” says Jaffe, adding that Madison Avenue is fighting a number of other critical regulatory attempts, including a bill that would impose a ban on some of the biggest TV-ad spenders—the erectile-dysfunction drugs like Viagra—on the basis that they are indecent to advertise on television.

The legislation, introduced by Rep. Jim Moran (D-Va.), would ban ads for erectile-dysfunction drugs Viagra, Cialis and Levitra on broadcast media from 6 a.m. to 10 p.m. because, he claims, they are promoting sexual behavior.

Another potential threat that would affect broadcast media are prospects that the FDA would require more disclaimer copy on prescription-drug ads. It was the relaxation of such disclaimer rules in 1997, in fact, that permitted drug ads on television and radio.

“Already, disclosures are fairly sizable,” notes Jaffe. “I don't see how you can have this endless list of disclosures and still effectively advertise on broadcast media.”

Another complaint about DTC advertising—that pharmaceutical marketers mark up the costs of prescription drugs to defray the costs of big advertising budgets—has been put on the back burner, but the ANA's Jaffe says it is still part of the regulatory dialogue, with some lawmakers threatening to take away tax deductions for prescription-drug ad expenditures.

But the ANA has compiled a body of research showing the benefits of consumer advertising. By encouraging consumers to visit a doctor in the early stages of a disease or ailment, Jaffe says, advertising actually reduces long-term health care costs.

A Boomer Turns 60 Every Six Seconds

Fortunately for the pharmaceutical industry and the advertising and media companies, which tend to dote on younger viewers, Americans are getting older, more obese and sicker—and that is leading to greater long-term demand for remedies.

“There are some compelling demographic facts that support long-term growth for the DTC advertising category,” says Dan Hodges, managing director of Greenwich Consulting Partners, Greenwich, Conn. “A baby boomer turns 60 every six seconds, and the life expectancy today is in the 90s, as opposed to the 70s and 80s for the World War II generation.”

The combination of longevity, greater inactivity and obesity is leading to older Americans who suffer many more diseases and maladies over the course of their lives.

“Obesity creates many other disease states: heart disease, mental-health depression, sleep disorders, arthritis—just a general decline in health,” says Hodges, concluding, “The good news for the pharmaceutical category is, we are getting sicker. The challenge for the regulators and for the pharmaceutical companies is to find the right balance between communicating the benefits of prescription to the population [and disclosing] the risks.”

An Abundance of New Drugs

According to Greenwich Consulting Partners research, there will be abundant new drugs to communicate in both the near and long terms.

During 2005 alone, three potentially “blockbuster” drugs will be introduced: Sanofi-Aventis' Acomplia, a product for obesity management, smoking cessation and cardiovascular-health management; Bristol-Myers Squibb's Abatacept, which treats rheumatoid arthritis; and Eli Lilly and Amylin Pharmaceuticals' Exenatide, a drug that treats Type 2 diabetes.

In the more distant future, Hodges points out, there are hundreds and potentially thousands of new drugs in the “pharmaceutical pipeline” that are being developed to treat HIV/AIDS, aging, neurological diseases, heart disease, strokes, and ailments afflicting various ethnic groups.

“Long term, prescription drugs are a high-growth industry,” projects Hodges. “The only question is how much of it will be supported by direct to consumer advertising.”