Pharmaceutical advertising – maybe I’ve misplaced the blame

Every once in a while a girlfriend and I get on a cost-of-prescription-drugs tangent during our morning conversations. “It all went south when drug companies could advertise on television,” is my usual argument.

This outline from the Congressional Budget Office suggests that might be right, but it might also be wrong.

Recognizing that both consumers and physicians take part in the decision to purchase a drug, pharmaceutical manufacturers spent at least $20.5 billion on promotional activities aimed at those groups in 2008. For a practice called detailing, which involves sales representatives meeting with physicians, nurse practitioners, and physicians’ assistants, pharmaceutical companies spent $12 billion, accounting for more than half of that promotional spending. Companies spent another $3.4 billion sponsoring professional meetings and events and about $0.4 billion placing advertisements in professional journals. Pharmaceutical manufacturers spent the rest of their promotional budgets, $4.7 billion in 2008, on DTC advertising. To place those figures in context, in 2008, promotional expenditures equaled 10.8 percent of the U.S. sales reported by the Pharmaceutical Research and Manufacturers of America, in line with most years since the early 1990s, during which time that share has remained between 10 percent and 12 percent.

Though pharmaceutical manufacturers use DTC advertising for only a small set of drugs, they spend heavily on DTC advertising for those drugs. Among the drugs in CBO’s dataset, the 10 with the highest DTC expenditures in 2008 accounted for 30 percent of expenditures for DTC advertising industry-wide. That concentration is nearly twice what was observed for detailing, where the drugs with the highest expenditures totaled 16 percent of the industry’s detailing expenditures. Drugs promoted using DTC advertising are, on average, newer to the market than drugs promoted through detailing, but the difference in the average expenditures for DTC advertising and detailing seems largely a result of the distribution of the two types of spending.

So advertising costs about 11% of sales, and TV advertising is about 1/4 of that. However, if they’re advertising on TV, they are also pushing the drug harder during “detailing.” Many times it’s because that drug is newer to the market.

All I know is that prescription drugs can be ridiculously expensive. I hope you took time to listen to Someone Else’s Money. There was a great example in that broadcast of two drugs doing the same thing but having a huge difference in cost.

My best argument is to stay away as far as possible from the usually prescribed goods. Nope, no Viagra for me. I’ll also put up a hard fight if statins are ever prescribed. I know a few people who are taking prescriptions to counteract the side effect of other prescriptions that probably wouldn’t be necessary if they’d manage the recommendation to change their diet and increase their exercise. Unfortunately, the way the system is now set up, I get to help pay for that.

Health care is a mess; prescription drug costs are a mess. I’m glad Congress is taking a look, but please – do more than look. Figure this thing out. Soon.


  1. The Lorax says:

    I remember my grandpa was put on tons of medication after he had kidney disease, he had to take enough to fill his entire hand full of pills every morning.

    Then he got a new doctor who told him the drugs were all to counteract the one before it. The doctor cancelled all my grandfather’s prescriptions and halved the original prescription and suddenly things got a whole lot better, and cheaper.

    Part of the problem is that doctors are influenced by the “products” they peddle, so it’s not just advertising, but bonuses and freebies.

  2. BrkfldDad says:

    It’s definitely not all advertising, although that’s part of the problem. The wh0le pharma world is a tricky situation. Only about 20% of the drugs that get developed ever break even on the market, so you have to have your blockbusters (Lipitor, Nexium, Viagra, etc…) make huge profits if you are to stay afloat. And, you have to have many of them in the pipeline to survive (like a Pfizer). Look at Purdue Pharma, when Oxycontin went generic (and boy they fought losing the patent), they had zilch in the pipeline and overnight became over 50% smaller than the days before. That’s the reason you see all these combined drugs (like Caduet) that try and extend the life of a brand by disguising/combining two about to expire blockbusters into a newly patented drug and then getting the doctors to switch their patients to that.

    Add in the physicians buying into the pharma company sales process and you create a artificial need for a single drug.

    Plus, and I don’t know how much this adds, pharma is a lot like liquor distribution is for taverns. They have to buy from a liquor distributor. Pharmacies are the same, they have to buy through distribution (Cardinal, McKesson, Amerisource Bergen are the big 3). If they could go direct to the manufacturer (say Wal-Mart pharmacies buy direct from Pfizer), it would drive prices down.

  3. Well aren’t you a wealth of information bdad. Professional specialty?

  4. BrkfldDad says:

    Damn, I bet myself you’d ask if I was a doctor! I’ve sold into the market on and off, but my ‘wealth’ of knowledge came from two areas:

    1) My sister-in-law is a lifer Pfizer sales rep.
    2) A good friend told me to read this book – A lot of what’s in there has been resolved in the past few years within the distribution channel, but boy if you want a good and scary read about your meds, I recommend it. Couldn’t put it down.