Few media events generate the high TV viewership as does the Academy Awards. While the numbers have been dropping over the years, last Sunday’s event drew 13.7 million viewers and provided a great platform for companies to advertise their products – including the biopharmaceutical industry. Heavyweights Pfizer, Novartis, and Lilly had ads, as did the smaller biopharma, Incyte. These ads weren’t cheap. Thirty second spots ran anywhere from $1.7 - $2.2 million. And while these ads provided great exposure, in the case of drug companies they also provided a target for criticism. At a time when drug prices are under intense scrutiny, people wondered whether the money spent on these ads couldn’t be put to better use.
This issue of spending on TV ads rather than investing in R&D was expressed in a response to my recent post: “What’s Really Driving Drug Costs”. This was apparently from a supporter of the biopharmaceutical industry.
“The massive expenditure on DTC ads for prescription drugs creates the impression – and perhaps it’s a reality – that Pharma is more focused on their sales and market share than R&D. I’d like to see Pharma channel their enormous DTC expenditures into meaningful R&D and/or cost reductions.”
That is not a unique opinion. But what are the facts? Let’s look first on R&D spend. Most drug companies invest 15 – 25% of their revenues into R&D – an extraordinary number. Specifically, in 2021, Roche invested $16.1 billion (22.5% of revenues), J&J invested $14.7 billion (16%), Pfizer $13.8 billion (17%), Merck $12.2 billion (25%) and BMS $11.3 billion (24%). In fact, just taking into account the top ten Pharma companies, a total of $107.2 billion was devoted to R&D last year. In contrast, the budget for the entire National Institutes of Health for 2022 is $45 billion. Furthermore, the Pharma R&D investment exceeds all other industries with respect to the percentage of top line revenues it pours into R&D. Comparison with big tech is revealing. Amazon spent $56.1 billion on R&D in 2021, but that was based on sales of $469.8 billion (11.9%). Google spent $31.6 billion on R&D with sales of $257.6 billion (12%) and Apple came in with $23.1 billion in R&D with $378.3 billion in revenue (6.1%). R&D is crucial to the success of the biopharma industry and these data show how seriously this is taken.
Compared to what it spends on R&D, Pharma’s spend on TV ads is pretty minor – a total of $3.9 billion in 2021. The leaders were Sanofi/Regeneron for Dupixent ($287.6 million); Novo Nordisk’s Rybelsus ($225.2 million); and AbbVie’s Humira ($176.5 million). One could argue that if you dropped the TV ads, you’d have another $3.9 billion to invest in R&D. But, it’s really not that simple. Companies obviously invest in R&D to drive sales. They have clear data that indicate that this sales strategy works. But, an extra billion in drug sales means that there is another $200 million to invest in R&D. Ironically, TV ads directly benefit R&D.
There are other benefits of these TV ads. They provide patients with information about new medicines and treatments for diseases that were previously untreatable. That was the case when new drugs emerged to treat fibromyalgia, an extremely painful condition. The ads heralding these drugs were welcomed by those who suffered from this condition. TV ads also encourage patients to open a dialogue with their doctors about medical conditions and illnesses – communication that might not have previously existed.
TV ads came under tremendous criticism during the reign of erectile dysfunction drugs, Viagra and Cialis. However, these drugs are no longer advertised on TV as their patents have expired and this appears to have dampened down criticism. Nevertheless, the perception remains that extraordinary amounts of money are spent on TV ads at the expense of R&D. The data show that this isn’t the case.
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March 30, 2022 at 07:00PM
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Pharma TV Ads And R&D Funding - Forbes
"TV" - Google News
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