How Drug Advertising Restrictions Could Benefit the Industry

Last Updated Nov 5, 2009 10:33 AM EST

The drug business spends $5 billion a year on advertising and yet studies continue to emerge suggesting that hundreds of millions of those dollars are wasted. Perhaps it's time to consider whether more restrictions on drug ads might, counterintutively, benefit the industry. BusinessWeek reports that a survey by research company Verilogue of 12,500 recorded conversations between doctors and patients in 2008 found only 23 requests for specific drugs. Worse, the survey also found stuff like this:
"I think it's, uh, Ambien that says you might go out to eat and not remember," said one patient in the study. "I thought, 'great, all I need.' " The campaign cost Sanofi (SNY) $151 million last year, and Ambien sales actually fell by 37%, to $806 million.
There has been a quiet drumbeat of recent reports suggesting the link between advertising and drug sales is weak at best. In the last couple of years, adspend on antidepressants and sleeping pills was drastically reduced, but due to stress caused by the recession prescriptions of both types of drugs went up.

And a Harvard study comparing consumer response between English and French-speaking Canada (where viewers are presumably unaffected by U.S. drug advertising) showed no difference across the launch of three drugs, Nasonex, Enbrel and Zelnorm. Most recently, an ad hoc poll on a New York Times blog found a solid majority of readers dislike direct-to-consumer (or DTC, in industry lingo) advertising.

The industry itself has mixed feelings about the practice. William Burns, Roche (RHHBY.PK)'s head of pharmaceuticals, once said of DTC:

Direct-to-consumer promotion was the single worst decision for the industry.
But AstraZeneca (AZN) CEO David Brennan said it's a matter of "when, not if," Europe adopts DTC advertising.

The drug industry is lobbying against proposals in Congress -- such as this bill by Sen. Al Franken -- to end the tax deduction for drug advertising. But why? If ads are an unproductive expense on your income statement that's only there because rival companies are doing the same thing (and you don't want to give away a marginal advantage), wouldn't it be better for the industry as a whole to allow such a tax to make DTC more unproductive still? It might save everyone some money.

Image: The Nasonex bee, which is to blame for the FDA's new proposed restrictions on drug ads.