The arms race of pharmaceutical advertising

Earlier this month, Derek Lowe’s In The Pipeline blog had some trenchant criticisms of a BMJ article (behind a paywall, alas) criticising the process of R&D in the pharmaceutical industry and questioning the supposedly huge costs of bringing a drug to market. I think Derek makes some excellent points, particularly the overlooked value of “me too” drugs, which often provide patients with a version of the product they can actually take, as opposed to a “first in class” drug that they can’t tolerate.

But I can’t agree with his rose-tinted view of pharma advertising. Maybe it’s because he works at the other end of the development process, doing the proper science? Anyway, Derek says:

So the company can bring in $60 dollars a year by doing no promotion, or it can bring in $70 a year after accounting for the expenses of marketing. The company will, of course, choose the latter. “But,” you’re saying, “what if all that marketing expense doesn’t raise sales from $60 up to $100 a year?” Ah, then you are doing it wrong. The whole point, the raison d’etre of the marketing department is to bring in more money than they are spending. Marketing deals with the profitable side of the business; their job is to maximize those profits. If they spend more than those extra profits, well, it’s time to fire them, isn’t it?

So marketing increases sales, which increases profits, nothing to see here folks, move on. Erm, no.

When launching a new drug, especially one in a brand-new indication, I agree that marketing works something like this: if nobody knows your product exists, obviously nobody will buy it. But most of the time, the marketing director is looking at a marketplace of at least a few competitors, and the name of the game is to increase or at least maintain market share until the product goes generic. Or more realistically, until the marketing director moves on to better pastures and his or her successor has to deal with the the mess they’ve left behind.

Most pharma marketing is therefore an arms race, in which all companies concerned are churning out brand identities, adverts, detail aids, leave pieces, websites, symposia, etc. They sponsor poor-quality research whose results can be used to sell product (poor-quality research is cheaper and its results are more predictable) and frankly throw money at any doctor who seems to have influence and is at least prepared to contemplate advocating their product. Let’s not even talk about the review articles.

How much money will they spend on this? As much as the marketing department can argue for, which is to say as much as the company thinks they can afford. Because they know very well that Pfizer or whoever has a big budget for marketing, and if they don’t spend just as much, sales will drop. What is the end result? In many cases, next to nothing. All the marketing essentially cancels out, and we are left with minimal changes in market share.

What puts the upper cap on this vast spend? As Derek says, sales of the drug. Everything is funded by drug sales. But the cost of the drug is not fixed; it derives from willingness to pay. It follows that this arms race will increase the price of the drug to its maximum possible level (and sometimes beyond, if purchasers can be fed false information or be persuaded to act irrationally) so that marketing can be in turn be maximised. Until the product goes generic, true competition drives the price back down, and marketing essentially packs up and moves on (although see this paper for an alternative outcome)

So cheer up, Derek. You may think that your end of the business is a “black hole of finance”, but at least pouring money into this hole results in periodic emissions of something useful. Marketing is a flight of stairs that turns into an escalator running in the wrong direction, achieving vastly less at much greater expense. Ultimately, it’s all paid for by you and me, whether in the form of taxes in the UK or higher insurance premiums in the US.

Does all this expenditure serve any socially useful purpose? Not much. You can argue that it represents a mechanism for getting more of the better drug into patients, but it’s a very inefficient one. Equally, you could argue that it allows patients to discover, eventually, which drug of a given class works better for them, but again it’s a very crude and expensive solution.

At this point someone will probably decide that because I am sceptical that market forces are getting us a good result here, I am therefore advocating a socialist/communist of central control, which is doomed to failure. This, my friends, is the fallacy of the excluded middle. The likely failure of the other extreme is not a reason to stick with what we have, even if I have no actual proposition for you at the moment. There are many ways to skin a rabbit.

Lastly, a commenter on Derek’s post said “If you haven’t read Atlas Shrugged yet, now you’re ready for it.” I fear this is a far worse criticism than anything I have to say, although not I hope justified. I’ll just quote John Rogers and leave it at that:

There are two novels that can change a bookish fourteen-year old’s life: The Lord of the Rings and Atlas Shrugged. One is a childish fantasy that often engenders a lifelong obsession with its unbelievable heroes, leading to an emotionally stunted, socially crippled adulthood, unable to deal with the real world. The other, of course, involves orcs.

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