Few media events generate as many television audiences as the Oscars. While numbers have dipped over the years, last Sunday’s event attracted 13.7 million viewers and provided an excellent platform for companies to advertise their products, including the biopharmaceutical industry. Heavyweights Pfizer, Novartis and Lilly had ads, as did small biopharma, Incyte. These advertisements were not cheap. thirty seconds the spots ran between $1.7 and $2.2 million. And while these ads provided great exposure, in the case of pharmaceutical companies, they also provided a target for criticism. At a time when drug prices are under intense scrutiny, people have wondered if the money spent on these ads couldn’t be put to better use.
This question of spending on TV ads rather than investing in R&D was voiced in a response to my recent article: “What’s Really Driving Drug Costs”. This apparently came from a supporter of the biopharmaceutical industry.
“The massive spending on DTC advertisements for prescription drugs gives the impression – and it may be a reality – that Pharma is more focused on its sales and market share than on R&D. I would like to see Pharma channel its huge DTC expenditures into meaningful R&D and/or cost reductions.
It is not a single opinion. But what are the facts? Let’s first look at R&D spending. Most pharmaceutical companies invest 15-25% of their revenues in R&D, an extraordinary figure. Specifically, in 2021, Roche invested $16.1 billion (22.5% of revenue), J&J invested $14.7 billion (16%), Pfizer $13.8 billion (17%), Merck $12.2 billion (25%) and BMS $11.3 billion (24%). In fact, just taking into account the top ten pharmaceutical companies, a total of $107.2 billion was spent on R&D last year. By contrast, the budget for the entire National Institutes of Health for 2022 is $45 billion. Additionally, pharmaceutical R&D investment tops all other industries in the percentage of front-line revenue it pours into R&D. The comparison with big tech is revealing. Amazon spent $56.1 billion on R&D in 2021, but that was based on sales of $469.8 billion (11.9%). Google spent $31.6 billion on R&D with sales of $257.6 billion (12%) and Apple came in with $23.1 billion on R&D with $378.3 billion in revenue (6, 1%). R&D is crucial to the success of the biopharmaceutical industry and this data shows how seriously it is taken.
Compared to what it spends on R&D, Pharma’s spending on TV ads is fairly minor – a total of $3.9 billion in 2021. The leaders were Sanofi/Regeneron for Dupixent ($287.6 million); Novo Nordisk’s Rybelsus ($225.2 million); and AbbVie’s Humira ($176.5 million). You could say that if you removed TV commercials, you would have an additional $3.9 billion to invest in R&D. But, it’s really not that simple. Companies obviously invest in R&D to boost sales. They have clear data that indicates this sales strategy is working. But an extra billion in drug sales means there’s another $200 million to invest in R&D. Ironically, TV ads directly benefit R&D.
These television commercials have other advantages. They provide patients with information about new drugs and treatments for diseases that were previously incurable. This was the case when new drugs appeared to treat fibromyalgia, an extremely painful disease. Advertisements advertising these drugs were well received by those who suffered from this condition. Television commercials also encourage patients to open a dialogue with their doctor about medical conditions and illnesses – communication that may not have existed before.
TV commercials have come under heavy criticism in the reign of erectile dysfunction drugs Viagra and Cialis. However, these drugs are no longer advertised on TV because their patents have expired, which seems to have dampened the criticism. Nevertheless, the perception remains that extraordinary sums are spent on television advertising at the expense of R&D. The data shows that this is not the case.