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 • Regulatory Changes by FDA

• Demographic Changes in US • PDUFA Funding
• Trend To Self Care • Industry Business Model
• Success of Industry R&D • Limited Product Patent Life
• Competitive Pressures • 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 Trends -- Annual Expenditure

• 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.

Total DTC 1995-1999 Spending (Branded/Unbranded)

$1,600 $1,500

$1,400 $1,309 Unbranded

$1,187 Branded
$1,200
Spending (MM)

$1,000
$864
$800

$600

$364
$400

$200

$0

1995 1996 1997 1998 1999

IMS Data
 DTC Spending by Advertising Type

• 85% of Category spending is driven by Branded messaging split between

Product Claim (82%) and Reminder activity (3%)

1999 Spending by Advertising Type

$26MM
$48MM Corporate $254MM
1% Reminder
Unbranded
3%
14%

$1453MM
Product Claim
82%
Source: Nielsen AdViews
 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
 DTC Advertising at Merck

• 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.

Proscar® Mevacor® Fosamax® Propecia® Singulair®

Zocor®
Pneumovax® Timoptic XE® Vioxx®
Crixivan®

‘81-’91 ‘92 ‘93 ‘94 ‘95 ‘96 ‘97 ‘98 ‘99 ‘00
 Merck’s Continued Partnership with DDMAC

MERCK DDMAC

• Increased submissions due to • Issued a total of 78 regulatory

expanding product line in 2000
• Utmost attention to regulatory
issues and DDMAC’s comments and
feedback
• All consumer work is pre-cleared
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]
 DTC Facts
Creates awareness about diseases, the
Public Health availability of diagnostic tests and
treatment options
DTC
Consumer Physician
Examples: BMD testing program,
cholesterol screening, HIV awareness health
Pharmaceutical
Company fairs, and the promotion of newer pain relief
options

• 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]
 Overview of the emerging
Consumer Self Care movement

• Brief Environmental Scan

• Key Drivers Of Change
• Emerging Challenges
 Evidence of Consumer Interest in Health Care
Growing Self-
Care Movement
 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
Health Care Press
Coverage
 All Consumer media cover
health care routinely (New
York Times, tabloids, CNN)
 Health care issues receive
intense scrutiny by news
organizations
Every one of these factors is on a rising curve
Health & Medical Growing Sales of
Internet Usage Nutraceuticals
 Ease of access to  $27 billion on alternative
information medicine (1997)
 30 million people use  Herbal supplements
Web for health info (2000) growing faster than
ethical pharmaceuticals (4
 Over 15,000 Web health
years)
sites
 Alternative solutions often
 Will be source of data for
cost Consumer more
new medications
Success of DTC
Health Care-
Related Mail
 54 million doctor
discussions and 14 million  High volume
prescriptions in 2000  High level of
sophistication
14

Institutional Changes
 Information
 Growth of Managed Care
and rationing of treatment
– Lower satisfaction
with quality of care
– Declining confidence
in medical authority
Demographics and
Psychographics
 Baby Boomer generation
approaching retirement
– More medically  Corporate America
oriented phase of life
– Driving self- care
movement
Key Drivers
Political Climate
Easy Access to
Politicians responding to
outcry about MCOs
denying choice  Internet creates wide
availability and easy
– Patient Bill of Rights
access to health and
– Drug Coverage medical information
legislation
 Interactive technologies
on Internet platform
Increasing Role
of Consumer in
Medical Choice
DTC
Patient Economics
 FDA regulatory change
(Emerging)
made product claim DTC
more probable
shifting more of health  Pharmaceutical DTC
care cost to employees spending quadrupled from
– E.g., Tiered copay 1995-2000
15
Patient Economics
Corporate America is Shifting More Health Care Cost to Consumers

Phase Implications for Patients

 Self-Pay System  No third party payment for pharmaceuticals

 Old “Cost Plus”  Full choice of health care options

System  Third party payment (corporate benefit) contributed
(pre 1980s) to large increases in pharmaceutical volume

 Rise of Managed  Treatment rationing / limited choice

Care – Formularies / treatment guidelines
(1980s - 1990s)
 Minimal, uniform patient co-pays

 Consumerist Era  Return to broader health care choice for consumer

(2000 and beyond)  Patient bears significant share of medical expenses
(e.g., tiered co-pay)
16
 Changing Value Proposition for Consumer
Current Message Future Message

“Intrinsic Worth”
“Intrinsic Worth” +
“Fair Exchange”

 Selling to Consumers focuses on  Positioning statements and

describing value of products
according to their “intrinsic worth”
– Positioning statements and
specific messages describe
product characteristics and
merit
specific messages continue
 The increase of tiered co-pay will
add the issue of “fair exchange”
(price) to Consumer decision-
making

 “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
17
 Technology Tools
Real Time Interactivity and Integrated Communications
Key Technology Tools (Existing and Emerging)

Supporting  Consumer database

Infrastructur
e – 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

18
 Merck Challenge
& Singulair Case Study
 Summary Of DTC Marketing Challenges

Demonstrate the Develop an Measure the

viability of DTC effective DTC success of the DTC
for the brand campaign campaign
•Role of the consumer in •Key consumer insight •Targeting
the buying process from the buying process
•Messaging
•Rationale for allocating •FDA supervised
resources to DTC Vs. advertising standards •Media
traditional promotion to
physicians •Marketing objectives
•Targeted messages •Incremental prescribing
•Look and feel
•Marketing objectives
•Media plan
•Branded Vs. unbranded •Financial return
•Go/no go decision •Ideas for improvement
 Singulair Case Study
of DTC Decision-Making at
Merck
 Symptoms of Asthma

Symptoms
 Wheeze, cough, chest tightness
Airway
inflammation  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
Airway
inflammation
 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
 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 Programs
Male Pattern Hair Loss
Unbranded “help seeking” ads
educate patients about product
options that are not reimbursed
Osteoarthritis
Branded ads to inform patients
about a breakthrough product that
offers excellent tolerability with
efficacy comparable to NSAIDs
Asthma
Branded ads to inform patients
about Singulair that helps kids as
young as 2 to breathe easier.
Chicken Pox
Unbranded ads that inform parents about the risks and
benefits of immunization to prevent this disease
Osteoporosis
Unbranded ads to motivate women
over age 60 to seek a Bone Mineral
Density Test to assess whether they
have osteoporosis
Cholesterol
Branded 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
HIV
Branded ads that inform HIV
positive patients and offers a life
saving treatment option that just 4
years ago was unavailable
 Words to the MIT Wise
• Advice on company selection
• Suggested interview techniques
• One guy’s successful approach to Marketing Management
 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

MERCK
 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