Marketing Spending Models - Innovation and Marketing in the Pharmaceutical Industry - page 552

Table 19.1 Top global advertising spenders in 2009 (US $ millions)
Rank 2009 Advertiser Country of origin Worldwide media spending

1 Procter & Gamble USA 8,679

2 Unilever UK/Netherlands 6,033

3 L'Oréal France 4,560

… …

14 Pfizer USA 1,827

16 GlaxoSmithkline UK 1,630

45 Merck & Co. USA 774

46 Bayer Germany 771

59 Novartis Switzerland 561

72 Bristol-Myers Squibb USA 440

76 Sanofi-Aventis France 427

78 Boehringer Ingelheim Germany 412

81 Eli Lilly & Co. USA 394

84 AstraZeneca UK 377

92 Abbott Laboratories USA 307

… …

Source : Advertising Age DataCenter's Global Marketers 2010 report

studies and medical education. The data from major European markets in Fischer
et al. ( 2011a , b ) show that these expenditures can be very substantial, as well.
If all marketing and sales-related expenditures are considered together the
marketing-sales ratio appears to be quite high. A nonrepresentative analysis of the
2011 annual reports of six global pharmaceutical companies (Novartis, Bayer,
Roche, Teva, Baxter, and Merck) reveals that marketing and sales expenditures cor-
respond, on average, to 23 % of their total revenues in 2010. It should be noted that
even Teva, the leading generics manufacturer, spent an impressive US $ 2.97 billion
on marketing and selling, which represents 18.4 % of its revenues.
In their study of a major cardiovascular category in the 1980s and 1990s, Bauer
and Fischer ( 2000 ) estimate that the average new drug receives US $ 414 millions
in terms of marketing investment, which is 1.8 times higher than the average R&D
investment at that time. Ca. US $ 330 millions are spent within the first 3 years
around product launch. Industry experts estimate that a drug requires ca. US $ 600
millions marketing support within the 3-year period around product launch today.
I shall later report on recent studies (Narayanan and Manchanda 2009 ; Osinga et al.
2010 ) that provide reasons for this high launch investment. To summarize, the mar-
keting investment into a new drug is substantial. Together with the high investments
into product development, it suggests that only a blockbuster drug offers the capac-
ity to deliver a positive product NPV. A blockbuster drug is a drug that generates
worldwide revenues of more than 1 billion US dollars per year. Empirical studies on
the profitability of drugs suggest that less than 30 % achieve a positive NPV over
their life cycle (Bauer and Fischer 2000 ; Grabowski and Vernon 1990 ).