Pharmaceuticals: The New Consumer Marketing Frontier

Len Tacconi

Executive Director

Consumer Marketing

Merck & Company

May 8, 2001

Pharmaceuticals: New Frontier for Consumer Marketing?

Frontier. 2a: Region that forms the margin of settled or developed territory. 2c: A new field that offers scope for exploitative or developmental activity

Why?

• Evolution Of Managed Care• Demographic Changes in US• Trend To Self Care• Success of Industry R&D• Competitive Pressures

• Regulatory Changes by FDA• PDUFA Funding • Industry Business Model• Limited Product Patent Life• Because It Works!!!

Agenda

• Evolution of consumer prescription drug promotion in the U.S.

• Impact of consumer on Rx buying process

• Overview of the emerging Consumer Self Care movement

• Merck Challenge & Singulair Case Study

• Words to the MIT Wise

Evolution of Consumer Promotion

In The Pharmaceutical Industry

• DTCA continues to be one of the largest and fastest growing categories in advertising…and will have exceeded the $2 Billion spending level in 2000.

DTCA Trends -- Annual Expenditure

$364

$864

$1,187

$1,309

$1,500

1995 1997 1998 19991996IMS Data

DTC Spending by Advertising Type

1999 Spending by Advertising Type

Source: Nielsen AdViewsSource: Nielsen AdViews

Product Claim82%

Unbranded14%

Corporate1% Reminder

3%

$1453MM

$48MM$26MM

$254MM

• 85% of Category spending is driven by Branded messaging split between Product Claim (82%) and Reminder activity (3%)

Top 10 Spending Industries

• Drugs & Remedies moved to #4 of top 10 spenders in 1999 from #5 in 1998, replacing Financial Services…it will be #3 after 2000 data.

Category Total 1999 ($B)

Automotive 15, 432.5

Retail 11,450.3

Media & Entertainment 4,492.9

Drugs & Remedies 4,240.3

Financial 4,135.9

Telecommunications 3,718.2

Restaurants 3,402.6

Public Transportation/Hotels & Resorts 3,086.5

Direct Response Companies 2,452.1

• Merck was the 30th leading consumer advertiser in the US for 1999 as measured by Ad Age; we’ll be in the top 25 for 2000

Source: CMR

• Merck was the first pharmaceutical company to use DTC advertising. Merck’s DTC has evolved with changing regulations and our growing understanding of how to communicate effectively with consumers.

Pneumovax®

Proscar® Fosamax®

Zocor®

Mevacor®

Crixivan®Timoptic XE®

‘81-’91 ‘92 ‘93 ‘94 ‘95 ‘96 ‘97 ‘98 ‘99

Propecia® Singulair®

DTC Advertising at Merck

Vioxx®

‘00

Merck’s Continued Partnership with DDMAC

MERCK

• Increased submissions due to expanding product line in 2000

• Utmost attention to regulatory issues and DDMAC’s comments and feedback• All consumer work is pre-cleared

DDMAC

• Issued a total of 78 regulatory letters to pharmaceutical companies in 2000

• 74 Notice of Violation• 4 Warning Letters

• Most letters driven by:• Lack of adequate fair balance• Unsubstantiated efficacy • Unsubstantiated safety• Unsubstantiated comparative

No regulatory letters to Merck in 2000!

Impact of Consumer Promotion On Buying Process

• Patient cannot prescribe

• 70% of patients don’t pay for product [above co-pay]

• All consumer promotion is pre-cleared by DDMAC

• Probably the most regulated form of consumer advertising for logical reasons

Today’s Healthcare Environment

• Aging Baby Boomers are more self-reliant than their parents– As many as 30-50% of patients are considered “communication-cravers”.

[Source: 2000 DVC ActiveCare Quantitative Research]

• A Self-Care movement in healthcare has resulted from this trend– 94% of patients will self-treat common illnesses

– 80% use OTC medicines

– 78% or 140MM Americans take vitamin and mineral supplements

– 45% or almost 84MM use herbal treatments; many without a physician’s advice despite very little clear scientific data on safety or efficacy and potentially harmful consequences

[Source: 2000-2001 Prevention Magazine Study in consultation with FDA]

• Managed Care has changed health care– 47% of Americans are worried that their health plan is more concerned about saving

money than providing the best care [Source: The Prevention Study]

– The physician sees 130 patients and works a 55-hour week. [Source: AMA Socioeconomic Statistics, 2000-2002]

• 169MM American adults are aware of DTC (91% of total)

• 54MM patients were motivated to see a doctor due to DTC (32% of DTC aware)

• 14MM (one in four) people asked about an advertised drug during an office visit: • 9.94MM were prescribed the product asked about (6% of DTC aware)• 1.40MM were prescribed a different drug• 2.66MM were not prescribed anything

[Source: 2000-2001 Prevention Magazine Study in consultation with FDA]

Creates awareness about diseases, the availability of diagnostic tests and treatment options

Examples: BMD testing program, cholesterol screening, HIV awareness health fairs, and the promotion of newer pain relief options

DTC Facts

Consumer

Public Health

Physician

Pharmaceutical Company

DTC

Overview of the emerging Consumer Self Care movement

• Brief Environmental Scan

• Key Drivers Of Change

• Emerging Challenges

14

Evidence of Consumer Interest in Health Care

54 million doctor discussions and 14 million prescriptions in 2000

Success of DTC

All Consumer media cover health care routinely (New York Times, tabloids, CNN)

Health care issues receive intense scrutiny by news organizations

Health Care Press Coverage

90% of Consumers trust their own judgment on health issues

85% like to know all options, decide for selves

76% think people should take primary responsibility for their own health

46% will self treat before seeing doctor

Growing Self-Care Movement

$27 billion on alternative medicine (1997)

Herbal supplements growing faster than ethical pharmaceuticals (4 years)

Alternative solutions often cost Consumer more

Growing Sales of Nutraceuticals

High volume

High level of sophistication

Health Care-Related Mail

Ease of access to information

30 million people use Web for health info (2000)

Over 15,000 Web health sites

Will be source of data for new medications

Health & MedicalInternet Usage

Every one of these factors is on a rising curve

15

Key Drivers

Increasing Role of Consumer in Medical Choice

Increasing Role of Consumer in Medical Choice

Demographics and Demographics and PsychographicsPsychographics

Demographics and Demographics and PsychographicsPsychographics

Baby Boomer generation approaching retirement

– More medically oriented phase of life

– Driving self- care movement

Baby Boomer generation approaching retirement

– More medically oriented phase of life

– Driving self- care movement

Political ClimatePolitical ClimatePolitical ClimatePolitical Climate

Politicians responding to outcry about MCOs denying choice

– Patient Bill of Rights

– Drug Coverage legislation

Politicians responding to outcry about MCOs denying choice

– Patient Bill of Rights

– Drug Coverage legislation

Easy Access to Easy Access to InformationInformation

Easy Access to Easy Access to InformationInformation

Internet creates wide availability and easy access to health and medical information

Interactive technologies on Internet platform

Internet creates wide availability and easy access to health and medical information

Interactive technologies on Internet platform

Patient Economics Patient Economics (Emerging)(Emerging)

Patient Economics Patient Economics (Emerging)(Emerging)

Corporate America shifting more of health care cost to employees

– E.g., Tiered copay

Corporate America shifting more of health care cost to employees

– E.g., Tiered copay

Institutional ChangesInstitutional ChangesInstitutional ChangesInstitutional Changes

Growth of Managed Care and rationing of treatment

– Lower satisfaction with quality of care

– Declining confidence in medical authority

Growth of Managed Care and rationing of treatment

– Lower satisfaction with quality of care

– Declining confidence in medical authority

DTCDTCDTCDTC

FDA regulatory change made product claim DTC more probable

Pharmaceutical DTC spending quadrupled from 1995-2000

FDA regulatory change made product claim DTC more probable

Pharmaceutical DTC spending quadrupled from 1995-2000

16

Patient EconomicsCorporate America is Shifting More Health Care Cost to Consumers

PhasePhasePhasePhase Implications for PatientsImplications for PatientsImplications for PatientsImplications for Patients

No third party payment for pharmaceuticalsSelf-Pay System

Full choice of health care options Third party payment (corporate benefit) contributed

to large increases in pharmaceutical volume

Old “Cost Plus” System

(pre 1980s)

Treatment rationing / limited choice

– Formularies / treatment guidelines Minimal, uniform patient co-pays

Rise of Managed Care

(1980s - 1990s)

Return to broader health care choice for consumer Patient bears significant share of medical expenses

(e.g., tiered co-pay)

Consumerist Era(2000 and beyond)

17

““Intrinsic Worth”Intrinsic Worth” ““Intrinsic Worth”Intrinsic Worth”

Selling to Consumers focuses on describing value of products according to their “intrinsic worth”

– Positioning statements and specific messages describe product characteristics and merit

Current Message

“Fair exchange” approach dominates Managed Care, with limited attention to “intrinsic worth” Consumer will be very motivated by both concerns; emergence of this first true hybrid customer will

generate debate about:– Consumer price sensitivity in environment of material co-pay– Appropriate messaging about price– Potential for direct financial interaction with Consumers– Role and importance of brand awareness and brand satisfaction

Positioning statements and specific messages continue

The increase of tiered co-pay will add the issue of “fair exchange” (price) to Consumer decision-making

““Intrinsic Worth” Intrinsic Worth” + +

““Fair Exchange”Fair Exchange”

““Intrinsic Worth” Intrinsic Worth” + +

““Fair Exchange”Fair Exchange”

Future Message

Changing Value Proposition for Consumer

18

Key Technology Tools (Existing and Emerging)

Supporting Supporting InfrastructurInfrastructur

ee

Supporting Supporting InfrastructurInfrastructur

ee

Technology ToolsReal Time Interactivity and Integrated Communications

Consumer database

– Permission-based and completely integrated with all channels of Consumer communication

Customization technologies (e.g., personal web pages)

Streaming video

– Allows the Consumer to double click on high quality video presentations on any subject and any length

Interactive Internet technologies

– Low speed access (e.g., email and email fulfillment)

– Broadband high speed access (e.g., integrated 2-way Internet and television)

Internet-based customer service (e.g., e-rep stations in call centers)

Physician automated Rx writing systems

Internet-based personal medical records

Merck Challenge & Singulair Case Study

Summary Of DTC Marketing Challenges

Demonstrate the viability of DTC

for the brand

Develop an effective DTC

campaign

Measure the success of the DTC

campaign

•Role of the consumer in the buying process

•Rationale for allocating resources to DTC Vs. traditional promotion to physicians

•Marketing objectives

•Branded Vs. unbranded

•Go/no go decision

•Key consumer insight from the buying process

•FDA supervised advertising standards

•Targeted messages

•Look and feel

•Media plan

•Targeting

•Messaging

•Media

•Marketing objectives

•Incremental prescribing

•Financial return

•Ideas for improvement

Singulair Case Study of DTC Decision-Making at

Merck

Symptoms of Asthma

Airwayinflammation

Symptoms Wheeze, cough, chest tightness Nighttime awakenings Recurrent attacks related to triggers

Asthma triggers: Allergens like pollen, mold and dust Irritants including smoke, perfumes, air

pollution and latex Physical conditions such as exercise,

weather changes, very cold air, medication and stress

Impact of Asthma

Afflicts 1 in 20 adults and 1 in 10 children Growing prevalence, especially in children Has a dramatic impact on society

1.9 million ER visits (in 1995) and 466,000 hospitalizations (in 1993) Third-ranking cause of hospitalization in children <15 years old 3 per 10,000 asthmatic patients die (1994)

and the life of the sufferer The most common chronic illness of childhood 3x more school absences in asthmatic children 23% of adults missed work in prior year due to asthma

Airwayinflammation

Managing Asthma

• Avoiding and controlling asthma triggers

• Medications to relieve symptoms and keep asthma under control– Quick-relief medications (rescue medications) act to quickly relieve

bronchoconstriction and other asthma symptoms

– Long-term controllers are used on a regular basis to keep asthma under control and reduce asthma symptoms before they occur

Product Overview

SINGULAIR is a leukotriene receptor antagonist– Leukotrienes are chemicals produced by cells which cause inflammation.

– SINGULAIR blocks leukotrienes and improves asthma symptoms.

SINGULAIR is indicated for the prophylaxis and chronic treatment of asthma in adults and children 2 years of age and older – SINGULAIR is always to be prescribed in addition to “as needed” rescue

medication

– SINGULAIR is not indicated for the treatment of asthma induced by exercise

Singulair Case Study of DTC Decision-Making at

Merck

Product Overview

Safety Profile– SINGULAIR is generally well tolerated.

– In clinical studies, side effects were usually mild and did not stop patients from taking SINGULAIR.

– The most common side effects included headache, flu, runny nose and ear infection.

Dosage and dosing– SINGULAIR is available in:

• 10 mg tablets for adults

• 5 mg cherry chewable tablets for children 6-14

• 4 mg cherry chewable tablets for children 2-5

– SINGULAIR is taken once-a-day in the evening.

Key Consumer Messages for Singulair

• Adult Patients– Help control your asthma with once-a-day Singulair®

– Singulair® is not a steroid

– Singulair® helps keep airways open, making breathing easier

– Safety similar to a sugar pill

– Cherry chewable tablet available for children 6-14

• Parents– Help control your child's asthma even when you can't be there

– Singulair® is not a steroid

– Singulair® helps keep airways open, making breathing easier

– Safety similar to a sugar pill

– Cherry chewable tablet for children 6-14

New DTC Campaign for Singulair

• Launch campaign was highly successful– Brand and ad awareness

– New patient starts

– Adherence among existing patients

– Physicians becoming aware of product from advertising

• Yet, we needed to develop a greater understanding of target’s mind set and the impact asthma has on their lives

• We incorporated research learning to refine ad messaging to strengthen the emotional benefits of using Singulair

Print Ad - Female Patient

Print Ad - Mothers

Active Merck ProgramsOsteoporosis

Unbranded ads to motivate women over age 60 to seek a Bone Mineral Density Test to assess whether they have osteoporosis

Male Pattern Hair LossUnbranded “help seeking” ads educate patients about product options that are not reimbursed

AsthmaBranded ads to inform patients about Singulair that helps kids as young as 2 to breathe easier.

OsteoarthritisBranded ads to inform patients about a breakthrough product that offers excellent tolerability with efficacy comparable to NSAIDs

CholesterolBranded ads to promotes the use of a cholesterol lowering medicine which is proven to reduce death and heart attacks among patients with elevated cholesterol and heart disease

HIVBranded ads that inform HIV positive patients and offers a life saving treatment option that just 4 years ago was unavailable

Chicken PoxUnbranded ads that inform parents about the risks and benefits of immunization to prevent this disease

Words to the MIT Wise

• Advice on company selection• Suggested interview techniques• One guy’s successful approach to Marketing Management

MERCK

Company Search Suggestions

• Marketing Driven Company

– Balanced Use of “4 Ps”

– Commitment to building brands

• Markets products that you can believe in

• Make a difference in the world if you can

• Make certain that integrity is ingrained in the company culture

• Follow your passion

During the Interview Process

• Probe for the company attributes just described

• Prepare as employee

• Provide company specific observations, examples, and solutions

• Primary sales drivers should be known

• Provide an understanding of the margin structure of the business

•Provide ideas that generate sales, and can maintain margins

As a Brand Manager

• Know thy customer and all segmentation differences– that includes every shred of information you can get your hands on

• Share your brand vision constantly– look at your competition in a “rear view” mirror

• Don’t be afraid to get your “hands dirty”– new parent analogy

• Learn how to implement tactics

• Leverage the many talents of those around you– agencies, marketing services, researchers, telemarketers

• Use metrics for everything; if they don’t exist create them