Healthcare Marketers Trend Report 2014

A Medical Marketing & Media (MM&M) and Ogilvy CommonHealth Public Relations Study

Presented by:Kate CroninGlobal Managing Director Ogilvy CommonHealth PR

Emerging Markets

Patent Cliff

Sunshine Act

Regulations

Rising Clinical Development Costs

Sagging Economy

Consolidation

Affordable Care Act

Evaporating Pipelines

The End of Big Pharma

The BIG Shift – 2013

There’s no question that the healthcare sector is in transition. For the past few years, we’ve seen a well-documented “perfect storm” of converging pressures – patent cliff, increasing regulatory scrutiny, pipeline issues, healthcare reform, the economic recession, consolidation — all of which have pounded the industry with maximum force. And drug manufacturers are bearing the brunt. In 2013, Ogilvy CommonHealth Public Relations conducted an inaugural study among U.S. healthcare executives to define the changing paradigm of the healthcare industry and its related services. The study results provided important insights into what has driven change in the industry over the last few years, as well as challenges and opportunities in the years to come – including coverage on such topics as the regulatory environment, the Affordable Care Act, Big Data, pipelines, digital media, integration, consolidation and more.

Medical Marketing & Media Magazine June 2014 Feature

3

Small Healthcare Companies(Revenue <$500M)

Medium-to-Large Healthcare Companies

(Revenue $500M+)

Annual Revenue**

57%43%

26% 74%Non C-SuiteC-Suite

Title

This past June, we released the findings of the follow-up report, showcasing new insights on the challenges, opportunities and perspectives of an industry in transformation. The study was fielded among 202 U.S. healthcare company executives – director level and above from Pharma, Biotech, Devices, and Diagnostics manufacturers. The sample for the study was generated from the Pharmaceutical Marketers Directory (PMD) and included a cross-section of small (revenue <$500M) and medium-to-large (revenue $500M+) healthcare companies. Beyond tracking changes over the last year, this year’s study took a closer look at the impact of the Affordable Care Act (ACA), increased pressures to demonstrate value, and the trends and draft guidance on digital and social media.

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The Turning Tides – 2014

FDA Guidelines

Medical-Legal Review

Pressure from Payers

Baby Boomer Health Burden

Innovation

Impact of ACA

Value Proposition

ROI

Big Data

Restrictions on Sales Reps

Not Patient-Centric

We found that while many healthcare marketers feel the industry is headed in the right direction overall, concerns have intensified around the ability to showcase effectiveness in an ever-changing business environment, with an increasing focus on integration and digital engagement. Some pressing concerns raised in 2013 such as the overall impact of ACA, were not as strong in 2014. The study highlights healthcare marketer perspectives on engaging, communicating and marketing in this evolving landscape. I’d like to highlight what, we believe, are some of the key outcomes in 2014.

Industry Outlook

6

57%Agree

The industry overall is heading in the right direction

Overall, industry executives believe that the healthcare industry as a whole is heading in the right direction, though some sectors are faring better than others.

7

88%Agree

The industry needs to evolve its business model to remain viable

But there’s no doubt among marketers that the industry needs to evolve its business model, and get better at demonstrating value and reconsider marketing opportunities to remain viable in the future. Most respondents (63%) believe that the healthcare industry is not doing enough to demonstrate the value proposition of new drugs, including cost, health benefit, and market need. This was more pronounced among mid-size to large-scale pharma companies as three-quartered said the industry is lagging behind.

In playing it safe, the industry is not fulfilling its innovation potential

65%Agree

Innovation remains a challenge area for the healthcare industry. Many believe that the industry is being too cautious, and that is hampering its ability to be innovative. FDA regulations and guidelines also are preventing healthcare companies from innovating (73%), as well as the historical organizational structure of the healthcare industry remains a major roadblock to innovation (63%). In addition, there are increasing concerns (80%) that restrictions on sales representative communication with healthcare providers will impact prescribing knowledge and patient outcomes in the future. But on the positive side, more than half believe that the shift of retail pharmacies to healthcare providers is opening new avenues for pharmaceutical marketing.

Compared to last year, concerns around the FDA and ACA were less pronounced in 2014, with MLR more prominent

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Q: The industry has been, and will continue to be, subject to a number of trends, forces, events and pressures. Please score each of the following according to their degree of challenge to your organization currently. (Excludes “other”) (Top 2 box on a 5-point scale)

Top 5 industry challenges 2013 vs. 2014

Clinical development/time-to-market64%

Pressure from payers/managed care73%

FDA regulations/guidelines76%

The Affordable Care Act60%

The economy in general63%

2013

Clinical development/time-to-market66%

FDA regulations/guidelines66%

Pressure from payers/managed care74%

The economy in general54%

MLR/internal medical/legal approval55%

2014

1st

2nd

3rd

4th

5th

In terms of driving concerns in the industry, FDA regulation and guidance continues to be a leading challenge, though not as pronounced as last year. More interesting, is that while ACA was among the top 5 industry concerns in 2013, fears about how the changes might impact the overall industry do not seem to have materialized. When we probed deeper, we discovered that many marketers (41%) believe that while the Affordable Care Act has had the most positive impact on patients, it is having a substantially more negative impact on healthcare professionals (57%).

Constituent Engagement

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8%

15%

21%

32%

43%

45%

46%

50%

51%

52%

55%

74%

0% 20% 40% 60% 80% 100%

Outdoors

Radio

TV

Mobile/tablet apps

Direct marketing/direct mail

Print ads

Digital ads

Advocacy education programs

Public relations (earned media)

Research/data/analytics

Social media

Websites (brand.com, disease.com)

Total Respondents

Digital channels, research and PR will lead consumer-focused marketing initiatives in 2014

Q: And which do you plan to use for the current fiscal year (2014)? (Excludes “other”)

Marketing channels planned for consumers in 2014

Compared to last year, marketers see greater opportunity in customer behavioral change and social media

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Q: Now please score each of the following according to their potential opportunity to your organization in the future. (Excludes “other”) (Top 2 box on a 5-point scale)

Top 5 industry opportunities 2013 vs. 2014

Clinical development/time-to-market50%

Pipelines58%

Emerging markets58%

Customer behavioral change 48%

Mobile/tablets49%

2013

Emerging markets58%

Customer behavioral change 59%

Pipelines60%

Social media 54%

Clinical development/time-to-market57%

2014

1st

2nd

3rd

4th

5th

When engaging with their key stakeholders, industry executives are seeing greater value in customer behavioral changes and in social media than they did last year.

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While many healthcare companies claim to be patient-centric, few operate in this way

78%Agree

But many marketers question the authenticity of the industry being patient-centric and do not believe it has planned for the coming generational health burden. 69% also believe the healthcare industry is not prepared for the significant health burden of the baby boomer generation.

While a large portion of 2013 spend was dedicated to meetings and sales support, projected increases in 2014 were focused on digital channels

18%

18%

18%

19%

21%

22%

26%

28%

30%

33%

34%

36%

64%

68%

69%

70%

68%

53%

65%

59%

63%

62%

61%

54%

18%

14%

13%

11%

11%

25%

9%

13%

7%

5%

5%

10%

0% 20% 40% 60% 80% 100%

Sales materials

Paid traditional advertising (print, TV, radio)

Sales representatives

Public relations (earned media)

Advocacy relations

Professional meetings/conferences

Direct marketing

Content/materials development

Paid digital advertising

Social media

Search engine optimization/marketing

Websites/micro-sites

Increase

Stay the Same

Decrease

Q: And how do you anticipate your marketing budget changing, if at all, for this current fiscal year (2014)–increase, stay the same or decrease for each channel? (Excludes “other”)

Marketing budget expectations for 2014

Ranked on Increase.*Indicates that the audience is significantly higher than its corresponding audience.

Sm21%

Md/Lg38%*

Increase

Sm11%

Md/Lg23%*

Increase

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15

86%Agree

Digital media has forever changed the way the healthcare industry needs to communicate and engage with its constituents

Most marketers agree that digital media has changed the way in which the industry needs to operate, and indeed, marketers are increasing their spend in digital.

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72% AgreeThe industry significantly lags behind

patients in engaging digitally on health information

42% AgreeHealthcare companies are ready to embrace social media engagement

But few believe the industry has kept pace with the digital revolution. While many believe digital media has forever changed the way the healthcare industry needs to communicate and engage with its constituents, most also believe that the industry is severely lagging behind their constituents and are not quite ready to embrace social media engagement. The promise of electronic health records (EHRs) in evolving patient care also has fallen short of expectations (70% agree).

In 2014, marketing dollars increased for patients/consumers as well as physicians, with the greatest decreases noted for advocacy audiences

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Q: For each of the following audiences, did your marketing budget increase, stay the same, or decrease for the current fiscal year (2014) compared to the last fiscal year (2013)? (Excludes “other”)

17%

22%

24%

35%

40%

42%

65%

61%

56%

53%

43%

43%

18%

17%

20%

12%

17%

15%

0% 20% 40% 60% 80% 100%

Pharmacists

Nurse practitioners/physician assistants

NGOs/advocacy groups

Payers/managed care

Physicians/specialists

Patients/consumers

Increase

Stay the Same

Decrease

Marketing budgets shifts from 2013 to 2014

Ranked on Increase.

In 2014, marketing dollars increased for patients/consumers as well as physicians, with the greatest decreases noted for advocacy audiences. Compared to last year, many marketers increased their branded communications budgets, while unbranded budgets remained flat. And in 2014, digital channels, research and PR will lead consumer-focused marketing initiatives. Regardless of marketing spend, physicians are seen as the most important audience to healthcare companies, followed by payers and patients. When targeting HCPs in 2014, the primary marketing channels will focus on meetings, websites, as well as sales materials and representatives.

Regardless of marketing spend, physicians are seen as the most important audience to healthcare companies, followed by payers and patients

18

5%

6%

15%

19%

38%

39%

79%

0% 20% 40% 60% 80% 100%

NGOs/advocacy groups

Pharmacists

Shareholders/investors

Nurse practitioners/physician assistants

Patients/consumers

Payers/managed care

Physicians/specialists

Total Respondents

Q: Regardless of your actual marketing spend, please rank the following audiences according to how important you think they are to your organization and your brands.

Important audiences for marketing (ranked 1st-2nd)

A focus on professional meetings and sales remained the cornerstone of healthcare marketing spend in 2013

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4%

4%

4%

5%

5%

8%

8%

9%

10%

12%

14%

16%

0% 20% 40% 60%

Search engine optimization/marketing

Social media

Paid digital advertising

Advocacy relations

Public relations (earned media)

Direct marketing

Paid traditional advertising (print, TV, radio)

Websites/micro-sites

Content/materials development

Sales materials

Sales representatives

Professional meetings/conferences

Total Respondents

Q: Overall, what percent of your marketing budget did you spend on the following marketing channels during the last fiscal year (2013)? (Excludes “other”)

Percent of marketing channel spend in 2013

Performance Optimization

21

The pressure to demonstrate ROI is a substantial hurdle to implementing marketing initiatives

75%Agree

Total 2013: $12.9M

Total 2014: $13.5M

57%22%

21%

Increase

Stay the same

Decrease

Year-over-Year

https://www.youtube.com/watch?v=vmoVsbaFrHc Pharma budgets averaged 19.4mm and devices were at 4.2mm – and their budgets remained flat. BIOTECH budgets shot up 28% to 14.7mm Small companies reported an increase in mean total budget to 2.6mm Small companies and non-pharma fared better than medium and big pharma companies (could be patent cliff issues)

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Marketing spend increases are of note, but come with greater scrutiny

Annual Marketing Spend (mean)**

Total 2013: $12.9M

Total 2014: $13.5M

**Marketing budget only provided by 138 of 202 respondents.

Q: To what extent do you agree or disagree with each of the following statements? (Agree represents strongly/somewhat agree–Top 2 box of 5 pt. scale) / What was the size of your total annual marketing budget for the last fiscal year (2013)? / And what is the size of your total annual marketing budget for the current fiscal year (2014)? / Year-over-year change (increase, decrease, stay the same) calculated

Medium-to-Large Companies

(Revenue $500M+):

$22.2M

Pharmaceutical: $19.4M

Biotech: $14.7M

Devices: $4.2M

Diagnostics: $747K

57%22%

21%

Increase

Stay the same

Decrease

Year-over-Year Organization Type (2014) Organization Size (2014)

The pressure to demonstrate ROI is a substantial hurdle to implementing marketing initiatives

75%Agree

Small Companies

(Revenue <$500M):

$2.9M

23

Compared to last year, many marketers increased their branded communications budgets, while unbranded budgets remained flat

Q: For each of the following, did your marketing budget increase, stay the same, or decrease for the current fiscal year (2014) compared to the last fiscal year (2013)? / How many brands does your marketing budget cover?

BRANDED COMMUNICATIONS UNBRANDED COMMUNICATIONS

Marketing budget shifts from 2013 to 2014

51%36%

13% Increase

Stay the same

Decrease

33%

47%

20% Increase

Stay the same

Decrease

Average number of brands covered under marketing budget (2014)

3.6Mean

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90%Agree

Much like trends in the utilization of CROs, healthcare companies will continue to look for ways to optimize resources and profitability

Nearly all marketers report that healthcare companies are looking for ways to optimize resources, expecting greater collaboration and integration from agencies. Healthcare companies are looking for greater consultation and collaboration across the marketing service spectrum from its agencies. And 81% feel that marketing service companies must integrate their offerings and become more dynamic to serve the changing needs of the healthcare industry. This is a significant jump from 69% in 2013.

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57%Agree

65% among mid- to

large-scale companies

Expect their company to consolidate its marketing services (Advertising, Public Relations, Media, etc.) under fewer agencies in the future

45% among small-

cap companies

Much like last year, the majority of marketers expect their companies to consolidate their marketing services, with larger healthcare companies significantly more likely to note this.

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36%

61%

49%

63%

19%

35%

78%

59%

71%

46%

56%

26%

0%

20%

40%

60%

80%

100%

My company’s preferred partner lists

Recommendations fromothers

Inviting existing partnersto pitch for new work

Industry relationships My company’s procurement services

Consulting reference sources (such as The

PMD and MM&M’s The Agency Issue)

Small Healthcare Companies

Medium-to-Large Healthcare Companies

Identifying Agency Partners

Many marketers leverage existing relationships when searching for agency partners, underscoring the importance of maintaining service satisfaction. Future partner search strategies vary by firm size, with small companies more often leveraging industry relationships, while medium-to-large companies lean more on partner lists and procurement.

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Industry Outlook

Integration of marketing services will continue to increase

Continuation of trend toward digital marketing and away from traditional

Increasing collaboration across companies in the healthcare industry

Emphasis on value will continue to increase

More than 8 in 10 marketers agree that market service companies must integrate their offerings and become more dynamic to serve the changing healthcare needs of the hc industry – an increase from 69 percent last year.

Healthcare Trend Report Can Be Accessed at:

http://www.ogilvypr.com/en/turning-tides

THANK YOU

Kate.Cronin@ogilvy.com

212-880-5360