What is driving up the cost of drugs?
The common answer is research and development?
But increasingly the companies are shifting their attention from research and development to gaining the largest market share, which includes massive expenditures on advertising.
The pervasive presence of pharmaceutical ads on air waves cannot be escaped and consumers are paying for every dollar of it. The cost of an ad can vary greatly, but on average a 30-second commercial broadcast nationally is from $350,000 to $500,000.
According to Forbes, during the Academy Awards “the biopharmaceutical industry” – heavyweights like “Pfizer, Novartis, and Lilly had ads, as did the smaller biopharma, Incyte, “ ran ads. “These ads weren’t cheap. Thirty second spots ran anywhere from $1.7 – $2.2 million.”
Forbes concedes that Pharma R&D investment exceeds all other industries, however, Pharma spent $3.9 billion in 2021 on television advertising. According to Statista, “In 2020, the pharmaceutical industry spent 4.58 billion U.S. dollars on advertising on national TV in the United States, unsurprisingly representing a big shift in spending compared to the 2019 pre-covid market.”
Fox News reported expenditures by Humira for one month in 2019 for one-minute ads was $38 million for six television spots: one for psoriasis, three for arthritis, two each for ulcerative colitis and Crohn’s. Ocrevus spent $17.6 million in on month promoting a multiple sclerosis drug at a cost to patients of $65,000 a year. Dovato spent $16.6 million in one month advertising an HIV medication. Ozempic spent $15 million on diabetes medication. Skyrizi spent $13.6 million in one month promoting a psoriasis treatment drug.
Who pays the cost of advertising?
The Congressional Budget Office reported in 2022, “The average net price of brand-name prescription drugs increased substantially over that period (2009-2018): from $149 to $353 in Medicare Part D and from $147 to $218 in Medicaid. Average prices for generic drugs in Medicare Part D and Medicaid fell over that period.”
Nationwide spending on prescription drugs increased from $30 billion in 1980 to $335 billion in 2018 (in 2018 dollars).
Spending on prescription drugs increased particularly rapidly after the mid-1990s with an increase in the number of drugs that attained “blockbuster” status by generating at least $1 billion in sales annually. Those blockbuster drugs generally treat conditions, such as high cholesterol or high blood pressure, that affect a large segment of the population.
Advertising directly to consumers rather than the clinicians who must prescribe a medication must be effective considering the yearly escalation in promotional advertising, which suggests clinicians succumb to pressure from patients.
Earlier this year Johns Hopkins Bloomberg School of Public Health “found that the share of promotional spending allocated to consumer advertising was on average 14.3 percentage points higher for drugs with low added benefit compared to drugs with high added benefit.”
“The findings suggest that shifting promotional dollars to direct-to-consumer advertising potentially reflects a strategy to drive patient demand for drugs that clinicians would be less likely to prescribe,” says Michael DiStefano, PhD, assistant scientist in the Bloomberg School’s Department of Health Policy and Management and lead author of the study.
The study found that the median promotional spending per drug in the study sample was $20.9 million in 2020. The median spending per drug on direct-to-consumer advertising was 13.5 percent of promotional budgets.
According to Johns Hopkins Bloomberg School of Public Health Manufacturers, “six of the best-selling drugs spent more than 90 percent of their promotional budget targeting consumers versus clinicians. These drugs include treatment options for motor neuropathy, various cancers, including breast cancers, multiple sclerosis, and HIV. Drugs treating metabolism and the digestive tract had a significantly lower share of total promotional spending on direct-to-consumer advertising.”