Few media occasions generate the excessive TV viewership as does the Academy Awards. Whereas the numbers have been dropping through the years, final Sunday’s occasion drew 13.7 million viewers and supplied an ideal platform for corporations to promote their merchandise – together with the biopharmaceutical business. Heavyweights Pfizer, Novartis, and Lilly had advertisements, as did the smaller biopharma, Incyte. These advertisements weren’t low cost. Thirty second spots ran anywhere from $1.7 – $2.2 million. And whereas these advertisements supplied nice publicity, within the case of drug corporations additionally they supplied a goal for criticism. At a time when drug costs are underneath intense scrutiny, individuals questioned whether or not the cash spent on these advertisements couldn’t be put to higher use.
(Photograph by Andrew H. Walker/Getty Pictures)
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This difficulty of spending on TV advertisements moderately than investing in R&D was expressed in a response to my latest publish: “What’s Actually Driving Drug Prices”. This was apparently from a supporter of the biopharmaceutical business.
“The huge expenditure on DTC advertisements for pharmaceuticals creates the impression – and maybe it’s a actuality – that Pharma is extra centered on their gross sales and market share than R&D. I’d prefer to see Pharma channel their huge DTC expenditures into significant R&D and/or value reductions.”
That’s not a novel opinion. However what are the info? Let’s look first on R&D spend. Most drug corporations make investments 15 – 25% of their revenues into R&D – a rare quantity. Particularly, in 2021, Roche invested $16.1 billion (22.5% of revenues), J&J invested $14.7 billion (16%), Pfizer $13.8 billion (17%), Merck $12.2 billion (25%) and BMS $11.3 billion (24%). In truth, simply making an allowance for the highest ten Pharma corporations, a complete of $107.2 billion was devoted to R&D last year. In distinction, the price range for the complete Nationwide Institutes of Well being for 2022 is $45 billion. Moreover, the Pharma R&D funding exceeds all different industries with respect to the proportion of prime line revenues it pours into R&D. Comparability with huge tech is revealing. Amazon spent $56.1 billion on R&D in 2021, however that was primarily based on gross sales of $469.8 billion (11.9%). Google spent $31.6 billion on R&D with gross sales of $257.6 billion (12%) and Apple got here in with $23.1 billion in R&D with $378.3 billion in income (6.1%). R&D is essential to the success of the biopharma business and these information present how significantly that is taken.
In comparison with what it spends on R&D, Pharma’s spend on TV ads is pretty minor – a complete of $3.9 billion in 2021. The leaders have been Sanofi/Regeneron for Dupixent ($287.6 million); Novo Nordisk’s Rybelsus ($225.2 million); and AbbVie’s Humira ($176.5 million). One might argue that for those who dropped the TV advertisements, you’d have one other $3.9 billion to put money into R&D. However, it’s actually not that easy. Corporations clearly put money into R&D to drive gross sales. They’ve clear information that point out that this gross sales technique works. However, an additional billion in drug gross sales means that there’s one other $200 million to put money into R&D. Sarcastically, TV advertisements immediately profit R&D.
There are different advantages of those TV advertisements. They supply sufferers with details about new medicines and coverings for illnesses that have been beforehand untreatable. That was the case when new medication emerged to deal with fibromyalgia, a particularly painful situation. The advertisements heralding these medication have been welcomed by those that suffered from this situation. TV advertisements additionally encourage sufferers to open a dialogue with their docs about medical situations and diseases – communication which may not have beforehand existed.
TV advertisements got here underneath large criticism through the reign of erectile dysfunction medication, Viagra and Cialis. Nevertheless, these medication are now not marketed on TV as their patents have expired and this seems to have dampened down criticism. Nonetheless, the notion stays that extraordinary quantities of cash are spent on TV advertisements on the expense of R&D. The info present that this isn’t the case.
