There was good news and bad news printed in the Use of Medicines in the United States: Review of 2010 report. Just issued by the IMS Institute for Healthcare Informatics, the report notes that consumer spending on medication rose slightly in 2010. And the volume of medications consumed reflected a per capita decline. These trends have serious implications for the amount of advertising pharmaceutical companies will roll out this year.
Currently, yearly spending on medications totals $307.4 billion or $898 on a per capita level. About 3.99 billion prescriptions are filled annually – primarily at chain drugstores. Several new drugs came onto the market in 2010 and IMS research indicates that the typical new medication generates $62 million in annual revenue. This is a significant drop from the $114 million that a new medication earned in 2006. IMS analysts note that more drugs becoming available now are targeting orphan (smaller) markets or they are not significantly different than medications already on the market. As a result, lower revenues are earned and less money is spent on advertising. In addition, consumers feeling squeezed by the economy and the new frugality in the health care system are not increasing the numbers of medications they take.
At the same time, many well-known medications have reached the end of their patent protection period. Last year, consumer spending on brand drugs dropped while they purchased more generics. Specifically, the sales of branded drugs fell to $229 billion. This is not an unexpected shift. IMS data indicates that “on average, more than 80% of a brand’s prescription volume is replaced by generics within six months of patent loss.”
Some major drug companies reduced advertising outlays by as much as 4.1% — Pfizer, Merck and GlaxoSmithKline (GSK). While GSK increased DTC spending, the other big companies instead focused on medical journal promotions. But the outlook for 2011 isn’t exactly rosy. This year, Lipitor will lose patent protection. And for now, experts don’t foresee many new blockbuster drugs becoming available to replace the brands being lost to generic competitors. As a result, DTC spending by pharma companies may remain subdued for the next several years.[Sources: IMS Institute Reports U.S. Spending on Medicines Grew 2.3 Percent in 2010, to $307.4 Billion. IMSHealth.com. 19 Apr. 2011. Web. 5 May 2011; Iskowitz, Marc. As brand revenue shrinks, so does brand promotion. Mmm-online.com. 22 Apr. 2011. Web. May 2011]