shutterstock_1038105319-690124-editedHensley Evans co-wrote this blog post with Sharon Suchotliff. 

This time of year, many brands are deep into the annual brand planning cycle. By now, many of us have already read about the reported decline in DTC spend over the last two years: DTC investment declined 4.7% between 2016 and 2017, the first decline since 2011. Yet despite the overall decline, TV’s share of DTC spending continues to climb, accounting for more than 70% of DTC investment in 2017, and reaching an all-time high of $4.3 billion.* More than anything else, these shifts in DTC signal that direct-to-consumer spending is headed into a state of flux, with continued change and volatility expected in the coming years.

There are three key drivers behind this emerging shift in DTC:

1. Big spenders exiting DTC: The industry lost some of its biggest DTC spenders between 2016 and 2017 due to the loss of exclusivity. These include Viagra, Cialis, Nasonex, Tamiflu, Axiron and Crestor. These brands have all been in the top 20 of DTC investors over the past five years. Together, they accounted for close to $500 million in DTC investment over the past two years, according to Kantar.

In general, we see brands incrementally increase spending post-launch until about two to three years before LOE, when investment in DTC promotion begins to decrease. Historically, brands will cease DTC promotion or maintain very minimal investment in promotion once a brand loses exclusivity. Several big brands, such as Humira, Victoza, Eliquis, Chantix and Lyrica, are set to lose exclusivity by 2022. In 2017, these brands spent a combined total of more than $1.2 billion in DTC and accounted for approximately half of the investment for the top 10 DTC spenders, according to Kantar. We can expect a significant impact on overall DTC spending as these brands lose exclusivity.

2. The continued rise of specialty brands: Despite the overall decline in DTC spending, we’re seeing the continued growth of TV investment, which is largely driven by specialty brands. For these brands, including Humira, Consentyx and Xeljanz, investment in TV makes sense despite a relatively small patient population since the value of a single patient can rise into six figures. Kantar data shows that specialty brands now account for six of the top 10 DTC spenders, and beginning in 2016, oncology brands have joined biologics as some of DTC’s biggest investors.

Opdivo was the first oncology brand to join the top 10 in 2016, followed by Keytruda in 2017, and we see signs of competition heating up. Just this year, we saw new entrants in metastatic breast cancer, Verzenio and Ibrance, support their launches with TV campaigns. Ibrance received approval in 2016 for metastatic breast cancer and launched TV ads the following year, and we saw Verzenio quickly follow its launch in 2017 with a TV campaign earlier this year. While Verzenio and Ibrance are currently not in the top 10 DTC spenders, according to Kantar, we can expect spending for these brands to continue to climb. (Ibrance is currently No. 13 in terms of top 20 DTC spenders.)

Other categories to watch include HIV and neurology. HIV saw its first TV advertisement by Triumeq in 2017. As competition continues to increase and new pre-exposure prophylaxis treatments enter the market, we can expect others to test the waters in TV, particularly as additional targeted opportunities emerge in online video, and over-the-top and connected TV advertising. With upcoming approvals in migraine, Parkinson’s and Alzheimer’s over the next few years, we can expect brands in these categories to explore various DTC opportunities.

3. Shifts in consumer behavior and marketing channel mix: Brands with younger targets are the first to invest more heavily in digital. While brands in oncology have allocated an average of 3% of their media budget to digital, brands in HIV have dedicated 20% of their DTC budgets to digital advertising, according to Kantar.

ZS’s recent interviews with media agencies revealed that between 20% and 80% of pharma’s digital advertising budget is currently allocated to programmatic digital advertising. Programmatic advertising offers many advantages to direct placement by targeting specific target profiles based on characteristics of potential patients for the brand. However, it’s more difficult to track and report on industry spending in programmatic advertising. This is due to the prevalent methodologies of tracking digital placement that deploy profile-based bots to crawl the web several times each day to try and identify where placements are taking place. Such systems are reliant on the number of sites crawled, the number of times per day the web is crawled, and the sophistication of the profile definition. In our estimation, there are placements across the digital web (including mobile and social) that are missed by the bots, which is presenting an artificially low picture of pharma’s total spend in digital. It’s possible that digital spending is underrepresented in overall DTC estimates.

Additionally, the changing nature of TV and how we watch is creating a shift in marketing dollars. Among all age groups except 65-plus, traditional TV viewing is declining. Many are opting for on-demand services on multiple devices and over-the-top streaming options such as Roku and Apple TV. According to Nielsen, 2016 marked the first time that streaming TV was in 50% of U.S. TV households. The growth in cord cutters—those who cancel cable television subscriptions in favor of an internet-based or wireless service—will drive pharma’s digital investment in online video, further blurring the line between channels.

We can expect the future of advertising placement to emphasize target and screen size over specific channels (digital, TV, print) as media continue to converge and the focus continues to shift to patient and consumer behavior. Addressable TV—the ability for an advertiser to deliver a TV ad to a specific, defined segment or individual based on first-, second- or third-party data—is emerging as an opportunity for pharma to connect with targeted audiences based on behavior or demographics. Some early adopters in pharma are experimenting with the technology, although concerns about privacy and affiliation with programming have hindered the growth of addressable TV placement use by pharma. According to eMarketer, addressable TV is continuing to grow slowly as a percentage of overall TV ad spending.

Point-of-care is also growing as a channel. Although the industry suffered a setback with the Outcome Health issues regarding both impact measurement and placements, point-of-care spending continues to be a stable part of DTC campaigns. As networks grow to include more physicians’ practices and digital platforms become more prominent in the office, brands will increase their investment. 

It’s clear that pharma marketers have entered a transition phase when it comes to DTC spending, and forward-looking brands will need to consider new strategies to be successful. In my next post, I’ll share what these trends mean for pharma companies looking to get the most from their direct-to-consumer marketing efforts.

*Data sources include Nielsen, Kantar, IMS Health, Market Measures Interactive, Datamonitor, The Routledge Handbook of Health Communication, Ad Age and STAT News.


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Topics: Specialty Drugs, Point of Care, digital marketing, DTC, consumer behavior, pharma marketing, pharma brands, direct-to-consumer ads, direct-to-consumer marketing, brand planning, marketing mix, TV advertising