Pharma's spending on product promotional activities in the United States has remained level over the past five years, even as companies continue with ambitious cost-cutting programs that have cut sales forces by more than 25%, according to the market research firm SDI.

Total U.S. 2010 promotion spend – excluding the fourth-quarter figures for direct-to-consumer advertising – was $19.2 billion, SDI said. The tally includes spending on journal ads, online promotion, as well as detailing to physicians, nurse practitioners and physician assistants (see chart below). Fourth quarter figures for DTC will become available in March and based on earlier trends, full year totals should essentially mirror 2009. The promotion spend figures exclude costs of administrative and support operations dedicated to commercial activities.

A Look At Promotional Spending

The steady-state trend appears almost counterintuitive, given the efforts in many companies to improve efficiencies because of economic challenges and a lack of new products. Pressure also comes from government crackdowns on overly aggressive marketing practices, which has resulted in several companies paying record fines. In addition, the Pharmaceutical Research and Manufacturers of America's updated its voluntary marketing code with some fanfare in late 2008 (Also see "PhRMA’s Revised Marketing Code: So Far, So What?" - Pink Sheet, 16 February, 2009.).

Why haven't the dollars gone out the door as quickly as sales reps? One reason may be industry's overall caution in cutting commercial spending, as well as its continued heavy reliance on detailing to support products – a facet of commercial operations that analysts and consultants emphasize remains very effective (Also see "Retooling The Sales Force Remains A Work In Progress" - Pink Sheet, 18 January, 2010.).

Timing may be another factor. Many of the sales force cuts occurred in late 2009 and early 2010 as a result of M&A activity in the industry, explained Kelly Sborlini, VP, Syndicated Analytics & Media Innovations at SDI.

In some areas as well, sales force size increased to support new product launches and line extensions, which helped to offset reductions in total rep counts, Sborlini added.

In 2009, for example, she noted that six of the top 10 products in detail spending were given a 10% boost on average in their detail budget and spending on the top 10 products, as a group, increased by 12% over the previous year.

SDI estimates that the top 40 companies now employ roughly 74,224 reps in the U.S. compared to 99,465 in 2006, when sales force employment was nearly at a peak.

There's also a slight shift to greater use of contract sales organizations, which are included and now make up about 4% to 5% of the total number of sales reps.

DTC accounted for 21% of total spending and meetings and events made up about 14%.

The only category to show a continuing increase is e-promotions, which received about $530 million in 2010, up from $520 million in 2009 and $330 million in 2006. But while that category – defined as online promotions to engage physicians – has generated a lot of industry attention and policy headlines, it remains a very small portion of overall spending.

SDI was founded in 1982 with an initial focus on disease surveillance. In January, it signed an deal to be acquired by IMS Health.

By Wendy Diller

Pharma's 2010 Promotional Budget: Fewer Reps But Same Dollars

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