Counselor Commentary: Pharma Marketing Dollars Up For Grabs

Big Opportunities Abound In Pharma For Promo Product Sellers

Andy CohenEarlier this week, pharmaceutical giant GlaxoSmithKline announced that it will no longer pay doctors for speeches or promotions of any kind. Further, the company said it will be changing its sales rep compensation structure so that representatives are no longer compensated for the amount of prescriptions written by the doctors that they call on. These are transformative moves in the marketing world – ones that have been in the works in the pharmaceutical industry, but are now actually taking shape.

Surely, other companies will follow Glaxo’s lead because, well, they’ll have to. Ever since the Pharmaceutical Research and Manufacturers Association (PhRMA) changed its members’ marketing guidelines in 2008, the pharma sector has been evolving. Sales reps can no longer simply buddy up to doctors – with payments in hand, by the way – and expect that those doctors will write prescriptions to their companies’ drugs without thought of what’s best for patients. And, as Glaxo’s move points out, companies can no longer slip cash to doctors for low-stress speaking engagements and appearances that come with an unstated quid pro quo – you take this and agree to promote our products over those of our competitors.

Glaxo’s move is ultimately a response to the Physician Payment Sunshine Act, which was passed as a provision within the 2010 Affordable Care Act. Pharmaceutical companies will now have to publicly report any payments they make to doctors that total more than $100. This includes gifts of any kind, as well as compensation for marketing, promotions, or speaking engagements. Glaxo’s payments of these kind, which beginning in 2016 will become nil, totaled $15.4 million per quarter in 2009, $13.2 million per quarter in 2010, $6 million per quarter in 2011, and $2.5 million per quarter in 2012. “Many people have wondered, what difference will it make?” said Susan Chimonas, a research scholar at the Center on Medicine as a Profession at Columbia University, about the Sunshine Act. “Will it clean up practices, or just allow the status quo to continue so long as there is transparency? Glaxo’s move is giving us an early answer and reason for optimism. The Sunshine law is working.”

The question, then, is where will all of these marketing dollars go? Glaxo and other pharmaceutical companies still need to promote their products, and the direct-to-consumer route is where they’re headed. This is the big opportunity for promotional products sellers. While pharma companies are decreasing (and in some cases eliminating) payments to doctors, they’re increasing their efforts at convincing consumers to request their products from doctors. That’s where live event marketing and new product launch promotions (two of the calling cards for promotional products) will become paramount for these companies.

We’ve already seen the pharmaceutical industry begin to spend again on promotional products. After PhRMA passed its new marketing guidelines, the pharmaceutical sector fell from accounting for nearly 5% of distributor annual revenues to representing just more than 1% of overall distributor revenues in 2009. That huge drop, noted in Counselor’s State of the Industry survey, has begun to rebound and the sector accounted for 2.5% of ad specialty revenues last year. With Glaxo’s move – and the shifting of marketing budgets happening in the industry overall – it’s clear that the pharma market will continue to rise as an opportune target for promo products companies.