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Promotional expenditures in the pharmaceutical sector: some necessary corrections
Posted by MA_Gagnon on 19 Sep 2013 at 21:18 GMT
We read the article by Kornfield et al  with interest given our previous article on the same topic . In spite of some problems in terms of the methods they used, Kornfield et al convincingly depict important trends in promotional expenditures in the pharmaceutical sector using mostly IMS data. In justifying their methodology, Kornfield claims that they are using “a conventional commercial definition” that is similar to that used in previous research . While Kornfield et al’s methods may produce coherent results in a historical perspective, this does not mean that these results fully reflect the importance of promotional expenditures in the pharmaceutical sector. In our 2008 article, we used different sources and databases to explain three pitfalls for analysts when using the “conventional commercial definition” found behind IMS data on promotional expenditures. We explained that IMS’s data underestimates the absolute amount of promotional expenditures.
The first pitfall is that IMS data used by Kornfield grossly underestimated the cost of detailing. Another prescription tracking company, CAM (now called CEGEDIM) offers a more complete landscape regarding promotional expenditures. As we pointed out in our article, the difference in the amounts for detailing reported by IMS and CAM in 2004, $7.3 billion versus $20.4 billion, respectively, “can be explained by the fact that CAM offers a more complete data set since it includes in the average cost of a call (a sales representative’s visit to a physician) not only the “cost to field the rep” (salary and benefits of the representative and the transportation cost) but also the costs for the area and regional managers, the cost of the training, and the cost of detail aids such as brochures and advertising material. By contrast, in reporting the cost of detailing IMS only considers the ‘cost to field the rep.’”
A second pitfall is that IMS surveys drug companies for promotional expenditures while CAM surveys physicians. As mentioned in our article, “companies may not report some types of detailing, for example, the use of sales representatives for illegal off-label promotion, whereas doctors are not likely to distinguish between on- and off-label promotion and would report all encounters with sales representatives.” Surveying physicians instead of firms thus might better capture the amounts spent on off-label promotion.
A third pitfall was the incapacity of IMS to provide an estimate of the value of unmonitored promotion. In our article, we showed that based on a validation committee working in partnership with drug companies, CAM estimated the value of unmonitored promotion at around 30% the value of disclosed numbers, for a total of $14.4 billion. Note that unmonitored promotion does not necessarily mean unethical promotion. A third of this amount was considered by CAM to be “due to incomplete disclosure and omissions by surveyed physicians” and the rest was the “combination of promotion directed at categories of physicians that are not surveyed, unmonitored journals in which pharmaceutical promotion appears, and possibly unethical forms of promotion.” While CAM data partly captured the importance of unmonitored promotion, this is not the case with IMS data.
We also wanted to take this opportunity to emphasize two other points of Kornfield’s study. First, Kornfield seems to mischaracterize our findings by stating that we attributed part of R&D costs to marketing whereas we did no such thing. Phase IV clinical trials usually represent around 13% of R&D costs for drug companies . While it is estimated that 75% of phase IV clinical trials are conducted only for promotional purposes , only some rare firms, like AstraZeneca , declare some of their phase IV clinical trials to be promotional devices funded from the firm’s marketing budget. Our article used CAM data, which only included clinical trials officially declared as promotional devices by drug companies. We thus reported $300 million as the total amount for the category “e-promotion, mailing, clinical trials.” We made no attempts to estimate what should be the total amount reported as R&D costs that should be considered as promotion.
Second, Kornfield provides interesting figures in terms of promotion per drug. One problem, however, is that by choosing the leading prescription medicines according to dollar sales, the ratio of promotion spending to sales might be biased. It is generally understood that, in the life cycle of a drug, the bulk of promotional expenditures for drugs are for when they hit the market. At this time sales are very low and promotional expenditures are high. Sales will grow over time once the product becomes more widely known while typically promotional expenditures decrease as the product matures and the company preferentially focuses on newer products with more time left in their patent life. The last years of patent protection are normally the time when the drug is the most profitable in terms of sales, and least costly in terms of promotional expenditures. It would be interesting to compare Kornfield’s results with an analysis of total promotion for leading drugs as compared to total sales over the complete life cycle of the drug.
The Kornfield article is of great interest because it allows a better understanding of the trends in traditional drug marketing since 2001. However, the methodology they used significantly misrepresents the absolute amount spent both on promotional expenditures and on the percent of sales going into promotion. Based on our 2004 figures, we estimated that promotion accounted for 24.4% of sales whereas Kornfield’s estimate is 13.4%. Based on the pitfalls we identified, the 24.4% figure better represents the importance of drug marketing, but the pharmaceutical industry might seize on Kornfield’s figures to undermine the position of those critical of industry spending on promotion.
Marc-Andre Gagnon, PhD
Joel Lexchin, MD
1. Kornfield R, Donohue J, Berndt E, Caleb Alexander G (2013) Promotion of prescription drugs to consumers and providers, 2001-2010. PLoS One 8: e55504.
2. Gagnon M-A, Lexchin J (2008) The cost of pushing pills: a new estimate of pharmaceutical promotion expenditures in the United States. PLoS Medicine 5: e1.
3. Donohue J, Cevasco M, Rosenthal M (2007) A decade of direct-to-consumer advertising of prescription drugs. New England Journal of Medicine 357: 673-681.
4. La Puma J, Seltzer J (2002) Phase IV market steams ahead. CenterWatch 9: 1,9-13.
5. Epstein R (2006) Overdose: how excessive government regulation stifles pharmaceutical innovation. New York: Yale University Press.