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News from DTC Perspectives - CEOs Blast DTC

In these troubled times for pharmaceutical companies, some CEO’s are becoming publicly more critical of industry practices. One is Roche CEO, William Burns. At a Financial Times conference in London on 12/2, Reuters reported Mr. Burns said DTC was the “single worst decision for the industry.” He said this because he apparently believes DTC hurts the credibility of industry claims that it is spending more on R&D than promotion.

Mr. Burns believes that the days of marketing me-too drugs are over. He said "the marginally different and market it like hell model is over." I do not have access to his entire speech or context but I will comment on what I have seen in the Reuters report.

Mr. Burns is probably correct that DTC has contributed to industry image problems. There is no doubt that DTC has provided very visible fodder for political criticism. That being said, DTC has done a lot of good in opening up discussions on disease categories and previously undiagnosed conditions. Blaming DTC for the drug industry image problems, however, is just unfair. The drug industry had been criticized extensively pre-DTC for its pricing practices. The single worst decision of the drug companies was not DTC, but being slow to develop widely available price subsidy programs that would improve access at lower cost. For years the drug industry hoped the price issue could be avoided or deflected. DTC did not cause that head in the sand behavior.  Criticisms of drug industry patent extension practices, safety monitoring, clinical study disclosures, off label claims and cozy relationships with opinion leaders have nothing to do with DTC.

Mr. Burns says the me-too marketing machine days are over. He is probably right on this point. Consumers are being asked by payers to contribute more for these brands and therefore patients will demand justification from their physicians as to why they should use them. Mr. Burns should acknowledge, however, that me-toos create price competition and provide incentives for continual product improvements. Drug companies use me-toos to generate cash that allow for innovative new drugs.

Now let me comment on the reality of DTC spending. The real DTC spending is about 60% of reported spending because DTC is reported at retail pricing not what drug companies really pay media outlets. Therefore it is about $3, not $5 billion. That is about 1% of U.S. drug sales and about 10% of total marketing spending. DTC does not raise consumer prices because it is such a relatively low cost to drug companies. R&D spending is much higher than DTC spending. Mr. Burns should be commenting on the other elements of drug promotion which make up 90% of marketing spending. It is detailing, sampling, medical meetings, and physician ads that make up the bulk of brand budgets. These tactics are criticized by politicians at least as often as DTC because of the opaque nature of these activities compared to transparent TV and print ads.

I doubt Henry Waxman would be any less critical of Roche or the other drug companies even if DTC never existed. The core issues remain high prices and drug safety, and neither was caused by DTC. It is true that DTC may be contributing to the critics' anger, but it is a little much to use it as a main reason for drug industry image issues.