 |
To begin with, Big Pharma’s argument against the ban was a transparent ruse. They claimed such a ban would have represented an unconstitutional infringement of free speech, although most Constitutional scholars argue that the case law permits such a restriction. The right to speech is not absolute or entirely free of government regulation. Thirty-seven years ago the federal government prohibited tobacco companies from advertising cigarettes on television and radio. The courts have upheld that legislation as part of Congress’s right to regulate interstate commerce.
More importantly, while DTC advertising does bring benefits to the industry, these are principally short-term. They consist of: (1) supplementing promotional push to physicians with consumer pull-through; (2) creating earlier awareness and, potentially, faster uptake for new products and; (3) developing new market segments for established products.
Accomplishing No. 3 (developing mass markets) is at best a mixed benefit for the pharmaceutical industry. The scandals that have badly tarnished the industry’s reputation in recent years, such as Vioxx and the numerous off-label promotion violations, largely involve efforts to develop mass markets (the blockbuster goal) for products whose utility is properly confined to narrow patient segments. DTC advertising has accomplished No. 1 and No. 2 (consumer pull-through and earlier awareness), for numerous products. As a result, DTC has increased sales penetration, but it has done so at the cost of making the pharmaceutical industry one of the least respected in the U.S. In a recent survey, the industry was accorded esteem comparable to that of used car salesmen by the American public.
The harmful consequences for drug companies of this low public esteem already are apparent. For example, even as the U.S. public believes the world AIDS crisis is coming under control, nearly 60 percent of Americans in a recent Harris Interactive survey (sub. required) claim Brazil was justified in breaking a patent on a Merck AIDS drug. In another poll conducted on the pharmaceutical blog Pharmalot, 68 percent of respondents said they feel Abbott is wrong to sue Act Up Paris for attacking an Abbott web site.
Another example of Big Pharma’s bad public image harming its business occurred when Merck submitted Arcoxia, a follow-on to Vioxx, to an FDA advisory committee last month. Merck’s spokesman told the panel that he recognizes the COX-2 inhibitor should not be used by everyone as an all-purpose analgesic/anti-inflammatory. But one committee member, Warren Wexelman of Maimonides Medical Center in Brooklyn, which had banned Vioxx as unsafe, told Matthew Herper of Forbes that he didn't trust Merck's promise: "Why should I think Arcoxia is any safer than Vioxx, coming from the same group of people?" The advisory committee then voted 20-1 against approving the Merck product.
Public esteem is essential if the pharmaceutical industry wishes to maintain profitability. Fifteen years ago the Inquirer’s Marian Uhlman and Donald Drake (“Making Medicine, Making Money”) demonstrated that pharmaceuticals was the world’s most profitable industry, whether measured by earnings/equity, earnings/assets or earnings/sales. Over six consecutive years in the 1990s, for example, the annual earnings/equity for New Jersey’s Schering-Plough approached an astounding 50 percent. The public will condone such returns for an industry that it believes is advancing the length and quality of life, but not for one whose public communication and image make it comparable to beer or laundry soap makers.
The pharmaceutical industry should be careful about what it seeks from DTC because such promotion will also make the industry vulnerable to another type of risk. One of the largest purveyors of consumer advertising in the world is Procter & Gamble Co. (NYSE: PG) and it is no coincidence that P&G is also one of the largest distributors of discount coupons. This is because the public will inevitably demand price competition on products advertised directly to them. Historically Big Pharma has been able to insulate itself from such price competition through a gatekeeper system and third-party payment. That system is eroding in the U.S. as consumers are required to pay a larger share of their prescription costs and DTC advertising elicits more decision making from them.
In April 1997, the industry opened a Pandora’s Box by obtaining legislation to permit DTC advertising. A decade of consumer promotions produced the unintended result of helping to erode the barriers to price competition. Whether such price competition is good or bad is another matter, but the industry must now prepare for its longer-term consequences.
Opinions expressed by contributors to PhillyInc are exclusively those of the contributors.
