Biomedical Engineering Reference
In-Depth Information
December 2009 Congressional Budget Offi ce Report (Campbell
2009
) indicates
that overall spending on detailing by US companies was about 12 billion dollars or
about 6.3 % of 2008 sales of about $189 billion in the USA. This contrasts with
previous research by Novartis cited by the Eularis consulting company (
www.
Eularis.com
)
that found the average detailing to sales percentage in 2006 was about
10 %, implying a signifi cant reduction in detailing emphasis by US companies
between 2006 and 2009. Further, according to
MM
&
M
's 2011 Pharma Report
(Iskowitz and Arnold
2011
) the average detailing spending to sales ratio of the top
six US pharma companies' in 2010 was less than 5 %. As illustrated below, our
detailing elasticity meta-analysis suggests this trend of detailing cutbacks in the
USA is consistent with the aging of product portfolios, i.e., increasing preponder-
ance of late stage pharmaceutical products with reduced detailing effectiveness.
Optimal detailing emphasis by PLC stage
(
early
vs.
late
)
and geographic region
(
US
vs.
Europe
). As already noted, Table
18.4
panel A displays our bias-corrected
estimates of mean detailing elasticity for Early and Late Stage patent-protected
pharmaceuticals in the USA and Europe. Continuing with the assumption of a mean
price elasticity of −1.39 over the entire patent-protected life of the drug, Table
18.4
panel B indicates the corresponding optimal detailing spending to sales percentages
in the four geographic region x PLC stage settings.
Interestingly, in the USA, the optimal detailing to sales ratio
for late stage prod-
ucts
is only
about 54
%
of the optimal ratio for early stage products
. The difference
is even starker in Europe where the optimal detailing to sales ratio for late stage
products is only about 38.5 % of that for early stage products. Thus, in both regions,
based on our meta-analysis fi nding of a lower mean detailing elasticity for late life
cycle stage products, we see that the detailing emphasis in the pharmaceutical pro-
motion mix should decrease as products mature. (For more insights into dynami-
cally optimal resource allocation strategies in the presence of time-varying
marketing effectiveness parameters see Fischer et al.
2011
; Raman et al.
2011
).
Next, comparing the US and European ratios with each other, we see that the
optimal detailing to sales ratio in Europe for early stage products is more than twice
the corresponding ratio in the US; while the optimal ratio in Europe for late stage
products is about 35 % higher than that in the USA. This implies that multinational
pharma companies should place a higher emphasis on detailing in promoting prod-
ucts in Europe than in the USA over their product life cycles, especially in the early
stage of the product's life. More specifi cally, if gross margins and current sales are
equal across both territories, deployment of more selling efforts in European than in
US markets would be desirable, e.g., Skiera and Albers (
1998
, p. 213). However, as
products age, a more drastic reduction in the emphasis on detailing is called for in
Europe than in the USA, although the emphasis level (detailing to sales ratio) should
remain higher than in the USA. As we have argued earlier, the ban on the use of
DTC advertising as well as tighter regulations and restrictions on pharma promotion
tactics in Europe are likely reasons underlying the differences in US and Europe
optimal detailing to sales ratios shown in Table
18.4
panel B.
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