Consumer advertising has proven to be enormously effective, which explains why the top 13 drug companies spent nearly $13.8 billion in 2005, marketing both prescription and OTC remedies, according to Advertising Age and TNS Media Intelligence data. That represents a slight drop of 0.5 percent compared to their 2004 ad figures. Wide swings in spending are evident, however, from a 25.7 percent increase by Abbott Laboratories to a nearly 30 percent decrease by Merck. The changes are partially due to the volatile nature of the category, which is influenced by the number of new drugs coming to market and the numbers that are losing patent protection.
One casualty of the new PhRMA guidelines are "reminder ads," those 15-second TV spots that urged viewers to ask their doctor about a drug while not disclosing the disease or condition the drug was supposed to treat. But before the new rules took effect January 1, 2006, pharmaceutical marketers spent 36.7 percent of their ad budgets on network television in 2005, totaling $2.4 billion in measured media. Consumer magazines were next, with 22.6 percent and nearly $1.5 billion in advertising. Cable and syndicated television each received significant portions of pharmaceutical ad budgets, at 17.1 percent and 8.4 percent, respectively. Internet display advertising accounted for 2.6 percent of ad spending, although TNS did not track search advertising for the Advertising Age report.
Internet advertising by pharmaceutical companies as a category has fallen behind that of financial services and telecommunications in recent years. The Interactive Advertising Bureau and PricewaterhouseCoopers no longer report on pharmaceutical spending, although in 2004, the last year it was tracked, pharmaceuticals made up six percent of total internet advertising, or $58 million, a 98 percent increase from the $29 million reported in 2003. By comparison, the media and entertainment category equaled pharmaceutical spending online in 2004, while financial services accounted for $1.63 billion and telecoms spent $38 million online.
Jack Barrette, category development officer, pharma, Yahoo! Inc., wrote in an email interview on July 21, 2006, "If in fact pharma slipped below six percent of all online spending, it's likely due to extraordinary growth in other sectors. In an informal review of Yahoo!'s spending and various data sources, I have estimated pharma spent three percent to five percent of its $5 billion in DTC online in 2005."
The 13 major pharmaceutical companies spent $170.1 million in measured online advertising in 2005, or 2.6 percent of their measured media spending, according to Advertising Age/TNS data. Taking "unmeasured" media into account, that share falls to just 1.23 percent of the total advertising budget estimated by Advertising Age. Online advertising by these companies dropped 15.1 percent in 2005, a much steeper decline than the slight drop in overall ad spending that year. Still, TNS does not include search advertising in its online measurement, which is a tactic of major importance to pharmaceutical companies, and could easily account for an additional 40 percent of prescription drug online advertising.
Although internet advertising took a dip in 2005, spending was up in the first quarter of 2006. According to TNS data alone, online display spending by the top 12 pharmaceutical companies rose 11.2 percent, to $39.6 million, compared to the same period in 2005 when $35.6 million was spent online. Still, TNS does not measure search advertising.
That growth trend was echoed by Matt McNally, vice president of media at Medical Broadcasting Company (MBC), in the May issue of OMMA magazine. This year, Mr. McNally said, some of MBC's larger clients had moved 10 percent to 15 percent of their marketing budgets online, compared to just one percent to three percent in the last few years. He expects that percentage to hit 20 percent to 30 percent within 18 months. In the same article, Brad Aronson, executive vice president at Avenue A/Razorfish, said more than half of the agency's 30 pharmaceutical clients had doubled their online budgets in 2006. Citing three examples, he said online budgets had increased from $5 million to $9 million, $1.7 million to $7 million, and $7.5 million to $12 million.
Lisa Phillips is a senior analyst at eMarketer. This article is drawn from her new report Pharmaceuticals Online: Direct-to-Patient Becomes a Reality. Contact eMarketer directly.
