Elections have consequences and this election is no different. During the campaign, Robert Francis Kennedy Jr. (RFK) announced that, as Trump’s Health Chief, he would advise Trump to ban Big Pharma from advertising on TV.
“There’s only two countries in the world that allow Pharmaceutical advertising on the airwaves … and we have the highest disease rate, and we buy more drugs, and they’re more expensive than anywhere in the world.”
This announcement, no doubt, sparked anxious conversations behind closed doors at agencies that handle drug advertising because RFK’s words have far more weight in light of the election. This is why it is time to objectively look at the impact this move can have on ad agencies so the industry can respond responsibly and thoughtfully.
The Backdrop.
Few can remember those blissful days, way way back in the 1970s, when there was no TV advertising for prescription drugs. Tobacco companies reigned as the single largest product advertiser on television back in the 1960s and 1970s. As we know, their reign ended in 1970 when cigarette advertising was banned from the airwaves.
The loosening of the rules to allow prescription drug advertising on TV started in 1990’s so that by 2007, the FDA permitted TV advertising of prescriptions drugs in the U.S. The facts about the impact of prescription drug advertising must shape how we think about a future free from an endless torrent of ads from brands whose contrived names can only be remembered via saturation campaigns.
Prescription Drug Advertising Dominates.
In 2023, the pharmaceutical industry in the United States spent a gob smacking $15.58 billion on advertising, a 21% increase from the previous year. This ranks number 4 in advertising by category, (Figure A) with pharmaceutical/ healthcare advertising beating spending on consumer goods (FMCG) and even Business Services.
Figure A
When you drill down to see which brands are the biggest spenders we find, not surprisingly, that some drug brands, like Skyrizi and Dupixent, have more awareness than everyday consumer brands. The ad spend to promote these brands is massive, often surpassing budgets of large organizations.
Some of the top brand advertisers for 2023 are:
- Skyrizi (psoriasis, Crohn’s disease, ulcerative colitis), was up 154% YoY, spending $579.7 million
- Dupixent (eczema) spent $502 million up 33% versus previous years
- Rinvoq (rheumatoid arthritis) spend was $495.3 million up 18%
- Entyvio (Crohn’s disease and ulcerative colitis) spent $226.1 million
- Rybelsus (oral diabetes drug) ad spend was $191 million
- Ozempic (Injectable GLP-1 Type 2 diabetes drug) spent $187.4 million in advertising
- Sotyktu (for plaque psoriasis) 2023 spend was $183.3 million spending a lot in just one year after getting FDA approval
- Nurtec (for migraine) spent $177.9 million
At first blush, it is hard to imagine how profitable these sizable ad budgets can be. So let’s break it down to understand what is really at stake.
First, we notice a critical pattern that these drugs are chronic, requiring ongoing use over years. As Baby Boomers age, this fight for market share can realize a bonanza in profits.
Next, let’s take note of the prices of these drugs. Skyrizi for example is about $20,000 for a year. If a patient is using the drug for three or four years, the profits increase substantially.
Finally, when you analyze the ROI for TV advertising, the numbers are insanely high. Staying with Skyrizi as our example, some simple math tells a startling story as follows:
- There are roughly 8 million people in the U.S. with psoriasis.
- At an advertising spend level of $580 million and assuming the advertising converts 5% of the affected population – this means each new patient cost about $1,500 to acquire.
- If a patient is on the drug for one year alone at an annual cost of $20,000 – the ROI is an astonishing 1328.57% (or for every $1 spent to acquire a customer, $13.29 is generated in return).
- Since this disease is a chronic condition, it is reasonable to assume that many (perhaps most) are on the drug for years. The CLV (Customer Lifetime Value) is $60,000 after three years. All for an investment of $1,500.
Yes, that is how much money is at stake which leaves us with a vexing question: Are these ads serving consumers as well as drug companies? Data helps shape a viewpoint.
The 20 Year Experiment: Outcomes.
Since the U.S. and New Zealand are the only countries to allow prescription drug advertising on TV, we have a near perfect test scenario for understanding the impact of advertising in this category.
Supporters of prescription drug advertising (including agencies) argue that this spending is good for consumers. The contours of their argument are this:
- Consumers would seek out medical care for illnesses they did not know might have treatments options.
- This empowers consumers to be more in control of their healthcare needs thus increasing engagement and treatment initiation.
- Information from advertising could encourage medication adherence.
Dr. Richard Kravitz, who authored the only randomized experiment in 2005 was a cheerleader for allowing prescription drug advertising. He framed his argument that direct-to-consumer ads for treatments such as anti-depressants held benefits for consumers: “The benefits of advertising will tend to dominate when the target condition is serious and the treatment is very safe, effective, and inexpensive.”
However, with 20+ years of data, the case for allowing prescription drug TV advertising collapses in a morass of corporate greed and consumers getting the short end of the stick. It turns out, when Big Pharma creates demand for their drugs by advertising – bad things happen – both qualitatively and quantitatively.
Qualitative Downside of Prescription Drug Advertising.
Qualitatively, prescription drug advertising has real downside for consumers:
- Consumers seek out drug therapies when, sometimes, all that is needed is some time as in the case of antidepressants.
- Healthy people begin to think they are unhealthy and seek out medical treatment without a real need.
- Consumers can become addicted to certain drugs due to over prescription.
- Doctors must address an increasing deluge of consumer requests for medication that may be not in the consumer’s best health interest.
- Advertising campaigns shift the market toward newer drugs, which are more expensive and possibly riskier, as we recently saw in new Alzheimer drugs.
- Drug companies are motivated to create drugs for a wider, fairly healthy market who could want to take the medicine. This drains resources away creating remedies for diseases that are often deadly but affect relatively few people.
Quantitative Downside of Prescription Drug Advertising.
The data paints an even darker picture of the effects of prescription drug advertising once we take the blinders off and look at the situation directly.
1. Price of Drugs Accelerated Faster than Cost of Living.
Consumer price Index went up 87% from 1997 to 2023. Overall, medical care (not just prescription drugs) went up about 134% over that same time period. This increase is higher than housing or cars or even computers. Only education and childcare increased more.
Figure B. Source: https://ourworldindata.org/grapher/price-changes-consumer-goods-services-united-states
2. Demand creation causes more pervasive use of prescription drugs which may not be medically warranted.
Unfathomably, according to a CDC study, nearly 70% of adults aged 40-79 in the United States used at least one prescription drug in the past 30 days. This number is astonishing especially when compared to 2000 when only 22% of adults over 40 used prescription drug regularly. By advertising drugs to consumers, the pharma industry could more easily create demand and thus accelerate the sales of new drugs.
3. Price of Drugs Are Higher in the U.S.
The data most damning is here. Any which way you look at it, the cost of all the advertising is directly hitting consumers who use prescription drugs causing a real access/ affordability crisis. Most staggering is that drug prices in the U.S. are 3x times (278%) higher than the international average. https://www.rand.org/news/press/2024/02/01.html
The graphic below makes the point most starkly. As advertising budgets ballooned so did the cost of drugs U.S. consumers took. From Big Pharma’s perspective – mission accomplished. From consumers’ perspective, we became hooked on prescription drugs. Not a good outcome at all.
Figure C. Source: Leonard D. Schaeffer Center for Health Policy & Economics, March 2023; https://healthpolicy.usc.edu/article/should-the-government-restrict-direct-to-consumer-prescription-drug-advertising-six-takeaways-from-research-on-the-effects-of-prescription-drug-advertising/#:~:text=In%201996%2C%20%24550%20million%20was,2020%2C%20reaching%20%246.58%20billion%20annually
Cause and Effect.
Pull back the lens even further, this chart (Figure D) exposes the 50-year trend.
The U.S. cost for healthcare accelerated much faster than other countries in sympathy with a loosening of the rules that permitted prescription drug advertising on TV.
By mid-2000’s just as rules were lessened allowing prescription drug advertising on TV, the cost gap between the U.S. and other countries widened significantly.
Figure D. Source: https://www.healthsystemtracker.org/chart-collection/health-spending-u-s-compare-countries/#Health%20expenditures%20as%20percent%20of%20GDP,%201970-2022
The Fallout Cascades All Over the Place.
One dominant negative knock-on effect of this artificial “demand generation” system is the emergence of ‘for profit’ coupon companies like Good RX, SingleCare, and WellRx who have built businesses out of helping consumers game artificially inflated drug prices. That is nuts when you stop to think about it. Imagine, for example, people having to find coupons to reduce the cost of surgery or other life savings procedures. The sad truth is that many companies who benefit from prescription drug advertising have a vested interest in pushing as many drugs to as many people as possible.
As a result, we have become a drug dependent culture.
Nearly 70% of adults aged 40-79 in the United States used at least one prescription drug in the past 30 days. That number is mind blowing.
We see drugs now in our waste water and in our school rooms. We see that the vast majority of Americans – young and old – are likely to be taking some prescription drug or another. This is decidedly unhealthy in the long term. Our drug dependencies costs us more than many Western countries. The numbers tell a devastating story. Health expenditures per person in the U.S. were $12,555 in 2022, which was over $4,000 more than any other high-income nation, Figure E.
Figure E. Source: https://www.healthsystemtracker.org/chart-collection/health-spending-u-s-compare-countries/#Health%20expenditures%20per%20capita,%20U.S.%20dollars,%20PPP%20adjusted,%202022
The sadder reality though is that the more we spend more on healthcare, the worse our health outcomes seem to get. In fact, for all the money spent, our outcomes lag behind many other countries.
Figure F. Source: https://www.commonwealthfund.org/publications/issue-briefs/2023/jan/us-health-care-global-perspective-
All this data points to a broken system. The U.S. spends more on healthcare per person but we are less healthy and more likely to die from preventable diseases than comparable countries, Figure F.
The implication is obvious. Instead of drug companies looking to optimize our health, they are incentivized to create demand among as many consumers as possible to optimize their profits.
Caught up in this chase for profits are people who have niche medical issues that get scant attention or research from drug companies.
No wonder RFK has aimed a warning shot over the advertising bow. There is a lot of damning data to suggest he is right.
What Is The Responsible Response from Ad Agencies?
When cigarette advertising was banned from TV, ad agencies most keenly felt its effect since they were flourishing in the economic bubble while it lasted. Now that prescription drug TV advertising may also get banned, are there lessons to be learned this time around?
The answer is yes because last time, agencies fought the cigarette advertising ban despite growing evidence about how dangerous cigarette smoking really was. Even as information came out about how cigarette companies suppressed the damaging data, ad agencies for their part, doubled down – using all the tools of trade to fight this legislative initiative:
- Public Relations: They utilized public relations tactics to shape public opinion, downplay the health risks of smoking, and discredit scientific evidence linking smoking to diseases.
- Lobbying Efforts: Ad agencies worked closely with tobacco companies to lobby government officials and lawmakers to resist stricter regulations on cigarette advertising.
- Legal Challenges: They challenged government regulations on advertising, arguing that they infringed on free speech rights.
However, as consensus grew that TV advertising for cigarettes is a public health issue, there was no offramp for agencies when, in 1970, President Nixon signed legislation to ban TV cigarette advertising.
This resulted in one of the most massive purges of ad folks ever. Some agencies went under but many agencies felt the impact in very tangible, far ranging financial terms.
Yet here we are with another potential extinction event for many agencies and their people. Are we going to, again, just sit back and take the hit or we will create a footbridge to a new model where advertising for prescription drugs can be a healthy part of the advertising ecosystem? (Yes – pun intended.)
Agencies’ Gameplan for a New Age.
The fallout from cigarette advertising prohibitions, give us a roadmap about how to respond to this time which should be different than our response in the past. Perhaps this time, agencies can become the advocate for the consumer with these strategic shifts.
1) Focus on next generation media platforms where consumer privacy is a priority.
There is an emergence of new medical advertising platforms that allow for better consumer protections. An example is Branchlab (https://branchlab.com/) – a data science company providing solutions to increase return on ad spend while enhancing consumer privacy. Advertisers can be a leader in privacy compliance to ensure that consumer privacy is a priority unlike some of the for profit “coupon” companies.
2) Focus on talking to doctors – not consumers.
I really like Watzan (https://www.watzan.com/) in this category because it adapts mainstream media services for the unique needs of healthcare practitioners. For example, the company introduced Medspoke, the #1 talk platform amongst healthcare professionals (HCPs) to discuss breaking news, emerging science, and best practices by leveraging short-form audio. Diverse media formats such as audio provide innovative approaches that are both well-aimed and well-received.
3) Agencies can lead the media mix change.
I get it. TV has big budgets and splashy creative, (who hasn’t seen the singing dance troupe waxing poetically about Jardiance). Financially, TV budgets are easy to plan requiring a minimum of labor and maximum profits for the agency.
Yet, here is real innovation can play role. Instead of TV advertising, agencies can explore creating new types of “authority sites” that are content rich to help consumers understand and manage their illnesses. Using topic data that is really useful for consumers, there can be a myriad of content plays to educate consumers that can include health calculators or health monitoring apps. Content syndication becomes the lifeline for getting the content out to broad-based audiences.
Leaning Into a Healthier Future.
The momentum against prescription drug advertising on TV is building. Aside from JFK, the American Medical Association also wants the FDA to ban prescription drug TV commercials. After 25 years of data, it’s clear there is an expiration date for prescription drug TV advertising. By creating a transition gameplan now, agencies can avoid a lot of the trauma the industry endured when cigarette advertising was banned. Maybe now agencies can transition from being a prescription drug dealer to becoming “Judy Consumer’s” health advocate.
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Additional resources: FDA history of drug regulation – https://www.fda.gov/files/drugs/published/A-History-of-the-FDA-and-Drug-Regulation-in-the-United-States.pdf
