Marketing Spending Models - Innovation and Marketing in the Pharmaceutical Industry - page 548

dollar spent in the USA are on drugs. US prescription drug sales reached a value of
US $ 300 billion in 2009. IMS Health predicts these expenditures to grow to US $
360-390 billion by 2014 (Lundy 2010 ).
From 1995 to 2002, the pharmaceutical industry was the leading industry in the
USA in terms of return on sales. Pharmaceutical firms still ranked third, realizing a
return on sales of 19.3 % in 2008 (Lundy 2010 ). Due to the long, complex, and
highly regulated development process, firms needed to invest ca. US $ 1,318 million
into a new drug in 2005 (EFPIA 2011 ). The market success of the new product, how-
ever, is uncertain. It depends on several factors, among them the entry order position
(e.g., Berndt et al. 1995 ), perceived drug effectiveness (Venkataraman and Stremersch
2007 ), etc. As a consequence, marketing becomes crucial in order to maximize rev-
enues over the life cycle of the new product. Since product development, distribu-
tion, and pricing are highly regulated across the world, pharmaceutical firms are not
as flexible as firms in other industries in using these elements of the marketing mix.
A special focus therefore is on communication activities, which spans visits by sales
representatives at physicians and pharmacists, advertisements in medical journals,
advertisements directed at consumers on TV, radio, and other channels, etc.
Marketing expenditures are high. Pharmaceutical firms spent US $ 10.9 billion
detailing and advertising in the USA in 2009 (see Fig. 19.1 ). Of these expenditures,
US $ 4.3 billion was directed at consumers (DTC expenditures) and US $ 6.6 billion
at physicians (IMS Health 2010 ). Given the high level and the importance of phar-
maceutical marketing expenditures, managers have a natural interest in understand-
ing and improving the effectiveness of their spending.

19.1.1 Recent Trends in Pharmaceutical Marketing

The practice of pharmaceutical marketing changes over time. The dominant
approach during the 1990s and early 2000 was to extend the sales force and inten-
sify detailing activities. As Fig. 19.1 demonstrates detailing expenditures are declin-
ing. This evolution reflects a recent trend that pharmaceutical firms turn away from
the sales force centric commercial model. Pharmaceutical communication has
become more complex today. It uses more channels and addresses more stakehold-
ers than just physicians, e.g., patients, payers, healthcare professionals and authori-
ties, pharmacists, practice nurses, and other medical support staff. The proliferation
of channels and potential receivers of pharmaceutical messages appears to be an
important trend.
Another trend is the systematic integration of product requirements, market
needs, and firm capabilities to develop and implement a holistic brand concept.
Pharmaceutical firms gradually understand that it needs more than an effective drug
that can be explained in classical media. A successful drug today requires a careful
brand positioning that is relevant to customers and differentiated from competitors.
For example, the pioneer drug Viagra identified women as suffering from men's
erectile dysfunction (ED) and repositioned ED as an issue of couples' quality of life.