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ISBN 1-84544-855-3
ISSN 0736-3761
Volume 22 Number 7 2005
Journal of
Consumer Marketing Pharmaceutical marketing Guest Editor: Ross Mullner
www.emeraldinsight.com
Journal of Consumer Marketing Volume 22, Number 7, 2005 ISSN 0736-3761
Pharmaceutical marketing Guest Editor Ross Mullner
Contents 404
Global marketing of lifesaving drugs: an analogical model Oswald A. Mascarenhas, Ram Kesavan and Michael Bernacchi
412
Does DTC mean “direct to court”? Donna J. Cunningham and Rajesh Iyer
421
Pharmaceutical marketing on the internet: marketing techniques and customer profile Caˇlin Guraˇu
429
Direct-to-consumer advertising and young consumers: building brand value Erin E. Baca, Juan Holguin Jr and Andreas W. Stratemeyer
Direct-to-consumer advertising of prescription drugs: help or hindrance to the public’s health? Greg Finlayson and Ross Mullner
432
Understanding the dynamics of the pharmaceutical market using a social marketing framework David Holdford
Herbal product claims: boundaries of marketing and science Stephanie Y. Crawford and Catherine Leventis
437
Executive summary
442
Book reviews
447
Computer currency Edited by Dennis A. Pitta
449
Internet currency Edited by Dennis A. Pitta
451
Note from the publisher
362
Access this journal online
363
Editorial
364
Introduction
365
Misplaced marketing For the drugs we need Herbert Jack Rotfeld
369
379
388
397
Direct-to-consumer prescription drug advertising: a study of consumer attitudes and behavioral intentions Tanuja Singh and Donnavieve Smith
Direct-to-consumer prescription drug advertising: concerns and evidence on consumers’ benefit Jaeun Shin and Sangho Moon
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Holdford describes the “affordable drugs movement” and presents a social marketing framework to place major developments within a meaningful theoretical context. The author also provides referenced descriptions and examples of forces causing change within the pharmaceutical market. He also classifies forces into six conditions influencing successful social movements. Shin and Moon provide an overview of the economic and clinical impacts of direct-to-consumer advertising on both the consumer and physician. Their findings recognizes direct-toconsumer advertising as a positive force for public health and at the same time identifies its potential negative effects on the economic and clinical aspects of the health care markets. Mascarenhas, Kesavan and Bernacchi apply the concept of “analogical reasoning” (paying attention to select features of (marketing) information, discerning patterns in it, and applying said patterns to present market challenges) to the current situation in the pharmaceutical industry. The authors posit that challenging pharmaceutical companies to explore new innovations in reengineering and redesigning their products and services so that developing nations that need them the most can afford them is of the utmost importance. Cunningham and Iyer have examined the current controversy in the direct-to-consumer advertising arena, and have created an intricate “road map” of recommendations of how to prevent this concept from coming to mean, “direct-tocourt” for the pharmaceutical industry. Ca˘lin Gura˘u investigates the perceived advantages and risks associated with online pharmaceutical transactions. From this research, the author proposes specific segmentation of consumers into four main categories. Finlayson and Mullner review the issues regarding the direct-to-consumer advertising that have been identified in the literature from the perspective of consumers, consumer groups, physicians, the medical profession and the pharmaceutical industry. Crawford and Leventis explore the boundaries in marketing and science with respect to labeled claims of herbal products and other dietary supplements. They report that the need for consumer choice, meaningful information and free-market access to dietary supplements must be balanced with the demands for truth-in-advertising and consumer protection from unreliable claims and adverse health events. Included in this issue, you will also find our other sections of interest to you the reader – “Misplaced marketing”, “Book reviews” and “Computer currency”. Richard C. Leventhal
Editorial Today, pharmaceutical companies are increasing their marketing budgets to advertise directly to the consumer. This spiraling effort has begun to attract the attention of both consumer advocacy groups, as well as the federal government (in the USA), in terms of taking a closer look at the effects of such advertising efforts. In July of 2005, the US Senate Majority leader asked pharmaceutical marketers to voluntarily stop their direct-to-consumer advertising during a drug’s first two years on the market. The ability for a pharmaceutical company to affect both the physician (who can prescribe a specific drug) and a consumer (who can request that they receive a prescription for a certain drug) has virtually affected the traditional model of marketing communications, which has been used for many years. In addition, products that are not regulated by the United States Food And Drug Administration (FDA) are also gaining popularity, in terms of being advertised directly to the consumer. There is no doubt that pharmaceutical companies have discovered that appealing directly to the consumer, and bypassing the “traditional” doctor-patient relationship, has become a very effective tool. The pharmaceutical companies have been able to create a heightened awareness among consumers, as it concerns the introduction of new drugs, and have observed how consumers have the ability to literally create strong market demand a for these new prescription drugs. It will be interesting to observe how this new model of marketing communications will play out. Singh and Smith have tried to determine whether direct-toconsumer drug advertising influences consumers’ behavioral intentions. They indicate that while consumers generally have favorable perceptions of prescription drug advertising, their behavioral intentions are influenced by a heightened awareness of specific branded drugs. Consumer motivation to request drugs may be impacted by several factors. Baca, Holguin and Stratemeyer have shown that demographics influence attitudes and interest in direct-toconsumer advertising, and those younger consumers’ interest, and propensity to seek additional information for themselves and family members, increases as a result of this type of advertising.
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public-sector expenditures for prescription drugs. For example, the price of prescription drugs has dramatically risen in the last several years, and the price of drugs is rising at a faster rate than the general rate of inflation for health care. They also argue the pricing policies of the pharmaceutical companies are inappropriate and socially irresponsible. For example, prescription drugs are sold at much lower prices in Canada and Mexico than they are in the USA. And millions of US citizens are forced to purchase their drugs from these countries to lower their medical costs. The pharmaceutical companies have also been accused of keeping the prices of their HIV/AIDS drugs artificially high, forcing many developing countries experiencing the devastating AIDS pandemic to either go without the drugs or to produce their own HIV drugs at a fraction of the cost. In sharp contrast, those who favor these marketing efforts argue that the pharmaceutical companies are conducting huge, privately funded, highly visible and effective public health education campaigns. They argue these marketing efforts raise the general public’s awareness of important medical conditions, motivates the public to take action, and helps them to better and more effectively communicate with physicians and other health professionals. They also argue many people who seek care because of their marketing efforts are frequently diagnosed with medical conditions different from those that were advertised. And many of these conditions such as diabetes, hypertension, and heart disease are discovered earlier when they can be more effectively treated. Lastly, they argue that the pharmaceutical companies are responding to the public’s concerns by adopting a voluntary code of conduct that will ensure better dialogue between patients and physicians. The purpose of this special issue is to address some of the complex and controversial issues posed by pharmaceutical marketing. Specifically, articles in this issue will address the impact of direct-to-consumer advertising of drugs, the marketing of drugs over the internet, pharmaceutical companies’ marketing policies, and the marketing of herbal products, which are not regulated by the United States Food and Drug Administration (FDA). Hopefully, this issue will provide many new insights into the benefits and pitfalls of pharmaceutical marketing. Ross Mullner
Introduction About the Guest Editor Dr Ross Mullner is Associate Professor in the Division of Health Policy and Administration at the School of Public Health, University of Illinois at Chicago. He is also Adjunct Associate Professor in the Department of Pharmacy Administration at the University of Illinois’ College of Pharmacy. His research interests include health care marketing, health services research, and the history and future of medicine and public health. Dr Mullner has written six books and over 100 journal articles on various aspects of health care. He has served on the editorial boards of several journals including Health Services Research, and Inquiry. He is currently the Associate Editor of the Journal of Medical Systems. Dr Mullner received his doctoral degree and two masters degrees from the University of Illinois.
Pharmaceutical marketing In 2004, pharmaceutical companies in the USA spent more than $10 billion on marketing activities. Of the total, $7 billion was spent on one-on-one marketing to physicians by company sales representatives, and more than $3 billion dollars was spent on marketing to the general public through television and newspaper direct-to-consumer advertising. Many politicians, public policy makers, and the general public are beginning to seriously question the need for these large marketing expenditures. Physicians are beginning to restrict the number of drug company sales representatives they see, and the general public seems to be saturated from the many drug advertisements they are exposed to each day. Some are beginning to feel the nation’s pharmaceutical companies are becoming more concerned with marketing than scientific research. Those who oppose these marketing efforts argue that pharmaceutical companies aggressively market only the latest and most expensive drugs, even though other older drugs may be more effective, safer, and much less costly. They argue these marketing efforts greatly increase both the private- and
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Misplaced marketing
For the drugs we need Herbert Jack Rotfeld Auburn University, Auburn, Alabama, USA Abstract Purpose – To delineate confusions and uncertainties of the issues surrounding those criticisms. Critics assert that all marketing of medical products is abusive, while actual impacts are disputed. Design/methodology/approach – Pulling from past commentaries on pharmaceutical marketing and current criticisms of the practice, to indicate areas of confusion. Findings – The ills of pharmaceutical marketing are not as great as critics presume, but the practices are not as positive as the companies might wish to assert. With uncertainty on the actual impact of specific practices, the companies are engaging in a certain degree of warfare via ever-increasing budgets of sometimes-questionable value. Practical implications – Puts criticisms of pharmaceutical marketing in context. Originality/value – Perspectives for understanding pharmaceutical marketing. Keywords Pharmaceuticals industry, Drugs, Brand names Paper type Viewpoint
Regardless of the consumer protection problem described in our term papers, the students in our 1975 graduate marketing and society course mentioned “consumer information” as a major part of the solution. Misprescribed pharmaceuticals, deceptive loan terms, fraudulent car repairs and many other consumer problems would be solved, we often said, if the businesses were required to provide consumers with more detailed and accurate information. Our instructor, Mary Gardiner Jones, had recently completed her service as a member of the Federal Trade Commission, and while she generally agreed with us, I will always remember her lament after one too many presentations on this theme: “I don’t want to be required to be my own expert pharmacist, mechanic, accountant or doctor.” She was a lawyer by education and that, she said, was difficult enough. Over five decades ago, the US Government changed the relationships among doctors, patients, and pharmacists. Initially, prescriptions were a doctor’s recommendation of a potentially useful drug, but patients did not need the doctor’s permission to make a purchase and pharmacists could also make recommendations. The 1951 Durham-Humphrey Amendment defined the kinds of drugs that cannot be safely used without medical supervision and restricted their sale to prescription by a licensed practitioner. In theory, with
all the new drugs just starting to come out at that time, patients would be forced to have the rational and informed expertise of a doctor involved in their drug-purchasing decisions.
Advertising information or influence The doctors are the experts, or so we like to believe. And with the medical doctors as the decision makers, for many years the pharmaceutical industry exclusively focused their brandname promotional practices on physicians. Even with the more recent advent of direct-to-consumer (DTC) advertising, the companies’ sales representatives still have regular and expensive contacts with physicians, spending large sums of money per year promoting brand name drugs by giving doctors various gifts, travel subsidies, and free meals in addition to the arguably more educational, though potentially biased, sponsored teachings and symposia. The total annual advertising and other promotional spending by US pharmaceutical companies has grown into the billions of dollars, or as some industry critics like to say, well over a thousand dollars per physician per year. And to the critics, that huge sum alone is the basis for asserting a huge and improper influence on prescribing decisions. Some rare doctors refuse any gifts from the drug companies of any kind in an effort to remain free of the taint of being “bought.” Skeptical patients given a brand name prescription look for coffee mugs with that same name around the front office as potential proof that the brand’s company salesperson had recently paid the doctor a visit and generated the direction to buy an expensive product. It is hard to tell just what influence specific promotional efforts might have on the doctors who honestly assert they have patients’ interests as their prime concern. No one wants to believe that a patient will be prescribed new anti-depressant
The Emerald Research Register for this journal is available at www.emeraldinsight.com/researchregister The current issue and full text archive of this journal is available at www.emeraldinsight.com/0736-3761.htm
Journal of Consumer Marketing 22/7 (2005) 365– 368 q Emerald Group Publishing Limited [ISSN 0736-3761] [DOI 10.1108/07363760510631093]
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For the drugs we need
Journal of Consumer Marketing
Herbert Jack Rotfeld
Volume 22 · Number 7 · 2005 · 365 –368
or antihistamine just because the doctor has a pen with that name written on it. To some extent, it is possible that even the drug companies question the sales value of the plethora of special gifts and advertising specialty products with a brand name printed on the side. At the same time, however, the drug manufacturers must feel the competitive pressure to provide the same sales “support” as is done at the competing companies. In a competitive industry, there must be a degree of advertising dollar combat, with the different companies trying to maintain a financial share of advertising voice. It still must be admitted that like any other consumerpurchased product from cars to house paint, the physician decision-maker’s primary source of product information is provided by the manufacturers. Some critics of the pharmaceutical industry assert that the companies abuse this information power and intentionally desire to mislead medical people. Regardless of whether there is intentional malfeasance, one study found that a significant number of statements from the sale representatives contradicted information readily available to them, and that the physicians generally failed to recognize the inaccuracies (Ziegler et al., 1995). While our personal doctors might claim that they derive their information only from research articles, there exists persistent evidence that they may be misled about a brand’s value apart from the scientific data on the matter (e.g. Avorn et al., 1982). Even the medical practitioners do not always know or understand all the information they have available. Research repeatedly finds that once a company starts selling a drug to assist a certain condition, the number of people diagnosed with the problem increases by several times the original rate. Patients must at least wonder about the medical decision when their new prescription is pre-printed on the doctor’s note pad (Wazana, 2000).
payment for coverage of brands than for generic products. In theory, when a doctor recommends a brand name, the patient must decide if the specific brand is worth the higher cost. In practice, the patient is forced to pay for a unique treatment that is still under patent protection. The possible solution that some would like to see at some future time is a designation as all pharmaceutical brand names as unnecessary, or, at least, not serving the needs of doctors or their patients. In those nations that require dispensing of generic forms of prescriptions whenever they are available, this is the de facto outcome. At a more basic level, there is some question as to whether the medical system is served by brand names for any prescription drug product whose patent has expired. Some people retain an unrealistic faith in the power of brand name drugs, but the Food and Drug Association (FDA) repeatedly assures the public that any functional benefit is virtually nonexistent. Generic drug manufacturers are subjected to the same standards as their brand name counterparts. But despite these repeated assurances from the government agency charged with regulating the efficacy and purity of prescription drugs, some patients and even doctors retain faith in the brand names. Logically, the FDA could ban the use of all brand names for pharmaceutical drugs. When a new drug first comes on the market, the pharmaceutical company has a patent. No one else can make it without their permission and they can charge whatever mark-up is deemed necessary, or rather, whatever the market will tolerate. They do not need a brand name to do this. And once the patent expires, they have competition from what are now identical products. The new products’ brand name might have had an initial value to make it easier for consumers to recall the name in direct-to-consumer television commercials, but once the product becomes generic, maybe the former brand name could become generic, too. Of course, no company would ever tolerate such a change in regulations, especially since brand names have a carryover value after the initial patent expiration. Higher dose or time release variations of the product can give new extended life to a brand name, as can new approvals of the original drug in combination with other products. There are also a growing number of prescription brand names that find extended life as the product gains new approval for OTC sales. Without prescribing laws or insurance payments encouraging generic substitutions, potential brand loyalty acquires new strength with consumer purchases.
Questions of brand value When new pharmaceutical products are first introduced, the primary marketing goal is to generate awareness of a previously-unavailable potential treatment for medical problems. Yet the longer-term desire would be to generate a degree of brand awareness and even brand loyalty among doctors and their patients that extends beyond the time of patent protection to when generic substitutes are available. Such brand loyalty exists for many categories of products, including non-prescription over-the-counter (OTC) drugs B i.e. many consumers pay a premium price for Aleve or Sudafed instead of the chemically identical generic naproxen sodium or pseudophedrine hydrochloride B So it is logical for a pharmaceutical manufacturer to desire such loyalty to their brand names after the patent expires. Yet even where such loyalty might have a potential to exist, it is discouraged by state laws that encourage pharmacists to substitute the cheaper generic products for prescriptions. In addition, insurance companies have taken brand names, any brand names, as a surrogate indicator of medical profligate spending, and in the process, they also make it more costly for people to use any and all newly developed drugs. Even if is a new product without an available generic version, many frustrated patients discover that their medical coverage either refuses to pay for brand name drugs or requires a higher co-
Over-informed consumers New Zealand and the USA might be on the leading edge of what could be an international trend as consumers are expected to play a bigger role in their drug decisions as the two nations allow direct to consumers (DTC) advertising for various prescription drugs. Reportedly the physicians in the two countries are skeptical to outright opposed to the practice, and despite similar survey responses from UK physicians, there is pressure to start allowing the practice in UK and the greater European Community (Reast et al., 2004). The a priori presumed benefits and potential problems have been debated ad infinitum in the news media (for a 366
For the drugs we need
Journal of Consumer Marketing
Herbert Jack Rotfeld
Volume 22 · Number 7 · 2005 · 365 –368
summary, see Auton, 2004), yet one detailed large-scale consumer study on actual impacts concluded that:
A sizable percentage of patients would probably respond negatively if their physician refused to prescribe the DTC drug the consumer thinks will solve the problem (Bell et al., 1999). Physicians must feel the pressure (Spurgeon, 2000), and a possibly misplaced marketing orientation insists that the customers needs be satisfied. It would be unrealistic to think that many doctors would not give the requested drug, even when the advertised brand might not be the physicians’ first choice for treatment, or even when the patient might be better off not taking any drug at all.
The reality of DTC’s effect on consumer behavior and doctor-patient relationship [in the USA] is more benign than its detractors fear and less specifically influential on product sales than many pharmaceutical brand managers would hope (White et al., 2004, p. 65).
In theory, consumers are well informed by the new conduit of information. While the main “promotional” pages of the advertising have many appeals to consumer emotions (Main et al., 2004), the print versions are filled with the same page of print-heavy data on indications, contraindications and precautions found in medical journal advertisements, and the television voiceovers and superimposed print disclaimers themselves provide enough warnings of side effects to make the audience members nauseous. This additional regulatoryrequired information is the same materials required in the advertising to the expert audience of physicians; if the front makes a emotional sales appeal, the extra two data pages provide all the information needed for an informed rational decision. While there would exist serious doubts that the typical consumer, or any non-expert layperson, would read the data. A secondary effect of requiring the technical prescribing data in all DTC advertising is that there are fewer such messages. When a prescription drug changes to OTC status, the data pages are no longer required. With the advertising purchases now able to be a single page instead of three, an extensive study of magazine advertising in one product category found a near-immediate tripling of the number of advertisements for the brand when the former DTC prescription product became OTC (Avery et al., 2005). Such an effect of limiting pharmaceutical advertising could be an unspoken regulatory intent of the data requirements, though there does not exist any proof that rule-writers at the FDA considered this as a goal. But it is clearly an effect. Yet you have to wonder about just what impact all this DTC advertising must have or what the companies hope to accomplish. The products are often brands under exclusive patent rights, so the company is trying to establish strong and broad demand while they still have an exclusive product. And since the ads often make emotional appeals, people are encouraged to rush to doctors for what could be minor nonmedical concerns. Not every case of depression, sleep loss, or lowered sex drive should be treated by expensive drugs. Even highly educated medical students tend to spot each new disease studied in their own bodies, and freshman psychology students tend to suddenly find all sorts of neurotic difficulties in themselves or their friends, so these DTC ads can readily play on consumers’ uncertainty about their own health. Food and Drug Administrations officials repeatedly insist that, at least in their view, the medical practitioners are still gatekeepers on the drug purchases. Unfortunately, with the increasingly competitive environment of patient services and medical care, many doctors concentrate on patient satisfaction, satisfying the medical customer’s short-term perceived needs even when the therapeutic solution is not so simple. A patient comes to the office wanting a cure or something that looks like a cure, and even without DTC advertising the physicians can make prescriptions that are, at best, useless.
Meanwhile at the advertising spending war Columnists in the advertising trade magazines have questioned the value of DTC advertising. While it might generate some consumer knowledge or inquiries of a newly introduced product, there does not seem to be any long-term effects on brand demand by consumers. In the wake of a scandal over the hidden dangers of a heavily promoted branded pain reliever, the introduction of a different new product included a promise by the company to refrain from any consumer-oriented advertising for one year. It is hard to believe that a company would so quickly give up a promotional tool if it felt it was important for long-term consumer awareness and prescription sales, so it is possible that the company also questioned the actual value of expenditures on consumer advertising. The new scandaltied criticisms of DTC advertising gave the company an easy way out of expensive spending on a practice of questionable value. But then, there are so many variables in prescription decisions, every decision on promotional spending is filled with uncertainty, and valid questions exist of each specific practice’s pragmatic utility. In a highly competitive business, with a short shelf-life on a prescription brand name, each pharmaceutical manufacturer is encouraged to maintain a loud and strong spending voice. Advertising and promotional spending almost becomes an arms race of sorts, with spending on marketing increasing as fast as successes in research and development on new products. In turn, the expensive marketing becomes are added target for blame in the high costs of drugs.
References Auton, F. (2004), “The advertising of pharmaceuticals direct to consumers: a critical review of the literature and debate”, International Journal of Advertising, Vol. 23 No. 1, pp. 5-52. Avery, R., Kenkel, D., Lillard, D. and Mathios, A. (2005), “Regulating advertisements: the case of smoking cessation products”, unpublished presentation to the 2005 American Council on Consumer Interests National Conference, Columbus, OH, April 6-9. Avorn, J., Chen, M. and Hartley, R. (1982), “Scientific versus commercial sources of influence on the prescribing behavior of physicians”, The American Journal of Medicine, Vol. 73, July, pp. 4-8. Bell, R.A., Wilkes, M.S. and Kravitz, R.L. (1999), “Advertisement-induced prescription drug requests: patients’ anticipated reactions to a physician who refuses”, The Journal of Family Practice, Vol. 48, June, pp. 446-52. 367
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Journal of Consumer Marketing
Herbert Jack Rotfeld
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Main, K.J., Argo, J.J. and Huhmann, B.A. (2004), “Pharmaceutical advertising in the USA: information or influence?”, International Journal of Advertising, Vol. 23 No. 1, pp. 119-42. Reast, J.D., Palihawadana, D. and Spickett-Jones, G. (2004), “UK Physicians’ attitudes towards direct-to-consumer advertising of prescription drugs: an extension and review”, International Journal of Advertising, Vol. 23 No. 2, pp. 229-51. Spurgeon, D. (2000), “Doctors feel the pressure from direct to consumer advertising”, The Western Journal of Medicine, Vol. 172, January, p. 60.
Wazana, A. (2000), “Physicians and the pharmaceutical industry: is a gift ever just a gift?”, Journal of the American Medical Association, Vol. 283, 12 January, pp. 373-80. White, H.J., Draves, L.P., Soong, R. and Moore, C. (2004), “‘Ask your doctor!’ Measuring the effect of direct-toconsumer communications in the world’s largest healthcare market”, International Journal of Advertising, Vol. 23 No. 1, pp. 53-68. Ziegler, M.G., Lew, P. and Singer, B.C. (1995), “The accuracy of drug information from pharmaceutical sales representatives”, Journal of the American Medical Association, Vol. 273 26 April, pp. 1296-8.
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Direct-to-consumer prescription drug advertising: a study of consumer attitudes and behavioral intentions Tanuja Singh and Donnavieve Smith Department of Marketing, Northern Illinois University, DeKalb, Illinois, USA Abstract Purpose – To determine whether direct-to-consumer prescription drug advertising influences consumers’ behavioral intentions. Design/methodology/approach – Gathered data from 288 respondents using a pencil and paper mail survey. Respondents were asked about their knowledge and behavior regarding prescription drugs. Findings – Indicated that while consumers generally have favorable perceptions of prescription drug advertising, their behavioral intentions are nevertheless influenced by a heightened awareness of specific branded drugs. Consumers feel empowered by the information provided in direct-toconsumer advertising and they are concerned about governmental attempts to regulate prescription drug advertising. Research limitations/implications – Data was collected from a relatively homogenous sample with respect to ethnicity. Future research efforts could include respondents from diverse ethnic backgrounds and could incorporate questions regarding respondents’ actual behaviors with respect to branded prescription drug medications. Practical implications – Useful information for researchers, public policy makers and prescription drug manufacturers. Results suggest that consumer motivation to request branded drugs may be impacted by factors related to the quality of advertisements, trust in their physician, and personal competence. Consumer interest in advertised drugs may also depend on the strength of the relationship that they have with their physician. Originality/value – This research fills an identified gap in the literature. While researchers have examined consumers’ general perceptions of direct-toconsumer prescription drug advertising, little research has been done on the link between consumer perceptions and behavioral intentions. Keywords Advertising, Promotional methods, Consumer behaviour, Pharmaceutical products, Medical prescriptions Paper type Research paper
promotions in 2001, of which $2.5 billion went to mass media advertising. Prescription drug advertising, often referred to as direct-to-consumer (DTC) advertising, has increased at an annual rate of 13-20 percent since 1997. Thus far, there have been mixed findings regarding the overall financial impact of DTC advertising on the pharmaceutical industry. While there is some evidence that suggests a direct and positive correlation between mass media advertising and drug manufacturers’ earnings (Findlay, 2002; Anderson, 2003), the relationship between adverting expenditures and the success of specific brands is not clear. Clearly, drug manufacturers place a great deal of faith in DTC ads and the impact that they can have on consumers’ decision to adopt advertised brands, but the exact nature of that impact remains controversial. While a recent study reports that for every 10 percent increase in DTC advertising, there is a 1 percent increase in drug sales (Kaiser Family Foundation, 2003), there is also evidence that DTC advertising often serves to increase the size of a market for a specific class of drugs, but not necessarily the market share for a particular brand (Krisanits, 2003). Researchers have examined DTC advertising from various viewpoints. Some have focused on the governmental rulings that have paved the way for DTC advertising (Dukes et al., 2001) and the case law that deals with drug manufacturers’ responsibility to warn consumers about the side effects of prescription medication. Other researchers have recently addressed the efficacy of DTC advertising as an educational tool. While some claim that there is “little rationale for directto-consumer advertising of prescription drugs” (Lexchin and
An executive summary for managers and executive readers can be found at the end of this issue.
Introduction “Depression elicits Prozac, high cholesterol has made Lipitor a familiar name and hay fever sufferers are all familiar with Claritin”(Schroff, 2003). A once mysterious industry has now opened its doors to American consumers and prescription drug advertising has become a billion dollar business. From the multimillion-dollar Super Bowl ads to the repetitive spots that are shown during primetime sitcoms, advertising for branded prescription drugs abounds. Overall, the advent of prescription drug advertising has added an entirely new dimension to the role of consumers in the decision making process for prescription medications and consumers are now more informed than ever before (Smith, 1998). In order to increase brand awareness for prescription medication, drug manufacturers spent $15.7 billion on The Emerald Research Register for this journal is available at www.emeraldinsight.com/researchregister The current issue and full text archive of this journal is available at www.emeraldinsight.com/0736-3761.htm
Journal of Consumer Marketing 22/7 (2005) 369– 378 q Emerald Group Publishing Limited [ISSN 0736-3761] [DOI 10.1108/07363760510631101]
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Direct-to-consumer prescription drug advertising
Journal of Consumer Marketing
Tanuja Singh and Donnavieve Smith
Volume 22 · Number 7 · 2005 · 369 –378
Mintzes, 2002, p. 194), others suggest that DTC advertising benefits not only health-care organizations, but also physicians as well as patients (Calfee, 2002). Researchers (Wilkes et al., 2000) have also examined consumers’ attitudes towards DTC advertising and the actions that consumers have taken in response to DTC ads. However, research has not investigated how consumers’ self perceptions or perceptions of their relationship with their primary physician might impact their decision-making for DTC advertised drugs. Further, while all of these studies have established that DTC advertising is a topic worthy of further investigation, there has not been any research done on the individual and relational variables that might influence the behavioral intentions of consumers during their medical decision making processes. Furthermore, researchers have not investigated whether these behavioral intentions might be detrimental to the doctor-patient relationship. The debate between industry advocates and public policy advocates is often rancorous in so far as DTC advertising is concerned. Industry advocates obviously argue that there are numerous merits to DTC advertising. They contend that it is primarily an educational tool for the consumer. Conversely, public policy advocates point to the inherent dangers of such advertising and suggest that the effects of too little knowledge may in fact be harmful to the consumer. This study was designed to provide some insights into consumers’ thinking and decision making processes as they respond to DTC advertising in the current marketplace. In particular, the study attempted to answer the following questions: . How do consumers view DTC advertising in general? . Does DTC advertising cause consumers to engage in specific behaviors or behavioral intentions (e.g., asking a primary care provider for more information about a drug that they have been exposed to or asking a physician to prescribe a particular advertised drug)? . Does DTC advertising empower consumers and if so, what are the outcomes of this perceived empowerment?
and for the first time, manufacturers were allowed to provide the name of the drug and the conditions that were associated with its use. At the same time, the FDA relaxed the guidelines concerning the information regarding the inclusion of product risk information. With the relaxed guidelines, drug manufacturers would only be required to mention the most critical information – basically those risks that would be common for the general population. In addition, drug manufacturers were also required to open up the lines of communication with their consumers. Consequently, drug manufacturers started providing consumers with information on request via toll-free numbers, the Internet, print advertising and similar means (Wilkes et al., 2000). By 1999, the final guidance on DTC advertising was issued and DTC ads had gone mainstream with drug manufacturers using a broad spectrum of promotional devices for prescription drugs including the back of ATM receipts, bank statements, and airline luggage labels (Reast et al., 2004). The debate over DTC advertising While the pharmaceutical industry was once enveloped in a shroud of mystery, consumers now have more information at their disposal than ever before. On the surface it appears that consumers might appreciate the opportunity to become more involved in their medical care and it also seems apparent that drug manufacturers should benefit from the provision of information in the form of DTC ads. However, there have been growing concerns about the necessity of DTC ads and their true benefits. “Proponents and opponents of direct-toconsumer advertising have established their rhetoric and have staked out their positions” (Dukes et al., 2001, p. 2). While many arguments have been advanced regarding the legitimacy of DTC advertising, the central question revolves around whether or not DTC advertising is truly beneficial to consumers and if so, how? Drug industry advocates point to the “educational” value of advertising directly to consumers and assert that consumers are now able to manage their health issues more effectively because of the information they garner from DTC ads. Supporters also point to the criticality of time, noting that there has traditionally been a time lag in the communication between pharmaceutical companies and doctors/patients; that doctors would often hear about medical advances and new medicines well after the information was needed. Supporters assert that DTC advertising bridges this information gap by informing consumers and physicians about new and promising advances in the medical field to treat particular conditions (Calfee, 2002). Opponents of DTC advertising disagree with these assertions and charge that FDA’s decision to allow DTC advertising of prescription drugs has created or will create numerous problems (Elliott, 2002). Some lament the changing doctor-patient relationship, while others decry the viewing of patients as consumers (Reast et al., 2004). These detractors argue that DTC ads might create a false sense of empowerment for the average consumer who does not have the ability or background to effectively evaluate the claims associated with the advertised drug (Wilkes et al., 2000). For these consumers, the complexity of information presented in DTC advertisements may prove to be too difficult to
Background History of direct-to-consumer advertising Despite its origins in the sixteenth century, direct marketing of pharmaceutical products to consumers is a relatively recent phenomenon (Dukes et al., 2001). Prior to the 1980s, prescription drug manufacturers primarily marketed branded drugs to physicians in an effort to avoid disrupting the intricate, and often delicate, relationship that existed between doctors and patients (Dukes et al., 2001; Ausness, 2002). Between 1983 and 1985 the FDA requested a voluntary moratorium on DTC advertising noting that there was a lack of previous court rulings on the issue. Around 1985 the ban was lifted and the courts reached a compromise by declaring that DTC ads were to be subjected to the same regulations that had previously guided pharmaceutical drug advertising to physicians. Consumers were to be protected through “full disclosure” and drug manufacturers would be required to provide a “brief summary” of the product in the form of package insert. As a result of industry pressure, and after considerable debate and deliberation, the FDA relaxed its rules in 1997 370
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understand and interpret. Opponents also contend that DTC advertising might result in self-diagnosis of “assumed” medical conditions by the consumers, leading to unnecessary and perhaps even dangerous uses of prescription drugs (Chandra and Holt, 1999). Opponents are also skeptical about the incremental value of information provided about new drugs. Citing data from numerous studies, Lexchin and Mintzes (2002, p. 194) note that a very small percentage of new medications are truly breakthrough advances that provide “substantial improvements over existing therapies”. In fact, they claim that drug companies are motivated more by profits than they are by informing consumers about better or safer drugs that offer significant advances over existing treatments. It has also been suggested that the drive to increase profits could eventually become a detriment to drug manufacturers. Opponents believe that DTC advertising has little educational merit and that most prescription drug advertising only serves to meet the financial motives of drug manufacturers. Some feel that DTC advertising might eventually increase the costs of prescription medication as consumers “demand” branded drugs to treat their medical conditions and abandon the less expensive, generic versions of the drugs that might be equally effective. Overall, DTC advertising offers several fruitful avenues for continuing research. From a consumer context, it is important that researchers empirically assess the impact of DTC advertising on consumer decision making regarding medical treatment. This exploration should focus on consumers’ acquisition of product knowledge, the formation of consumer attitudes towards individual brands and/or classes of prescription medication and the behavioral outcome after exposure to DTC ads. For example, it would be instructive to evaluate whether DTC advertising has changed the manner in which consumers acquire, view and utilize medical information. If consumers have become more attentive to their own medical needs and have taken steps to discuss their medical questions with a medical practitioner, then DTC ads would foster positive behavior change. However, if consumers resort to “self-diagnosis” after exposure to DTC ads, have pressured their physicians to provide unnecessary prescriptions, or have resisted competent medical advice, then DTC ads would be contributing to negative and potentially dangerous behavior changes.
choice in decision making; in fact, in some cases consumers’ intentions and final brand choice may not necessarily be related at all (Biehal et al., 1992). Research also suggests that the relationship between consumer attitudes and behavioral intentions might be more complex than originally believed (Biehal et al., 1992; Burton and Lichtenstein, 1988). As such, consumers may develop a preference for a particular brand or product even when they do not have very favorable attitudes towards the advertisements for these products particularly in situations where consumers perceive greater risk levels (Biehal et al., 1992). Various studies point to consumers’ lack of faith in drug manufacturers and their perceptions regarding prescription drugs as belonging to a risk-laden product category. A recent survey indicated 57 percent of Americans do not trust corporate executives to give them honest information, with an overwhelming number of respondents expressing negative views about drug manufacturers in particular (Schroff, 2003). Additionally, a Harris poll reported that the number of respondents who felt that drug manufacturers do a good job of serving consumers dropped by 20 percent between 1997 to 2002. These statistics suggest that consumers may not be as receptive to DTC advertising as drug manufacturers would like and as consumer advocates fear. Therefore, it seems that while consumers may have negative perceptions of DTC advertising and/or drug manufacturers, they are still willing to inquire about and request specific branded drugs that they have come to know about as a result of DTC advertising. Overall, one could argue that DTC advertising has created at least some value for the consumer (Shankland, 2003). Proponents of DTC advertising suggest that as patients become increasingly more involved in decisions that relate to their medical conditions, DTC advertising enables them to be not just better informed about their medical options, but it also provides a level of control over their medical choices (Eagle and Kitchen, 2002). Supporters of DTC advertising also claim that while the rise in DTC advertising might create some discomfort for the physician, it empowers the patient as it seeks to change the previously paternalistic approach that governed the doctor-patient relationship. Drug manufacturers of course invest a great amount of time and effort into DTC advertising by spending millions of dollars on commercials and other promotional tools that purport to reach a large current and potential consumer population. These changes in the DTC promotional environment have at least partially contributed to millions of people actually inquiring about particular drugs by name and 25 percent of these requests resulting in the physician prescribing the requested brand (Shankland, 2003). Our research explores the relationship between consumers’ views of DTC advertising and the resulting behavior or behavioral intention. We suggest that consumers may have a paradoxical relationship with DTC advertising in that the factors that facilitate consumer attitudes toward DTC advertising may differ from the factors that facilitate consumers’ behavioral intentions (e.g. propensity to ask their medical provider about a drug or a disease) or actual behaviors (e.g. actually seeking information from their physician about a particular drug), interest and/or adoption of DTC advertised drugs. Whether a patient would ask his or her physician about a specific prescription drug is likely to be
Theoretical foundations Attitude-behavior research Generally, advertisers have assumed that consumers’ attitudes towards a brand directly affect the choice of that particular brand. While it is not possible to review the vast domain of attitude research in this paper, the earlier foundational theories in attitude research would lead one to assume that consumers’ behavioral intentions could be reflective of their attitudes towards advertising, as well as attitudes towards a certain branded product. In other words, it could be argued that if consumers have positive attitudes towards DTC advertising, they are more likely to adopt the specific advertised brand and vice-versa (Ajzen and Fishbein, 1977). More recent research has shown that attitude towards an ad or a brand may not always be indicative of a consumer’s final 371
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function of several variables including such things as whether the consumer perceives him/herself to be competent to evaluate the claims, the quality of DTC advertising and the value of the information contained in the ad. Therefore, we suggest the following hypothesis: H1. Consumers’ willingness to consult his/her physician about an advertised prescription medication will be a function of the perceived information value in the DTC ad, the quality of the DTC ad, and a consumer’s perceived competence.
physician’s judgment and could seek alternative sources of information. Accordingly, we advance the following hypothesis: H2. Consumers’ willingness to trust their physician’s judgment regarding an advertised drug will be a function of whom they view as the primary source of medical information, their personal perceived personal competence, and value of information contained in DTC ads.
While DTC advertising has become commonplace, the terminology used in majority of the ads can be difficult for the average consumer to comprehend. Studies have found that 97 percent of prescription drug literature is too difficult for the average adult to digest (Smith, 1998). As a result, consumers are turning to others in their personal environments to assess the credibility of information that they receive via DTC ads; consumers are asking their friends, families, and/or their co-workers about specific branded drugs (Smith, 1998). Most important, consumers are turning to their physicians to confirm or dispel specific claims made via DTC advertising (Alleyne, 2002; Wilkes et al., 2000). Research also suggests that doctors themselves have varied perspectives on the value of DTC advertising (Coney, 2002). While medical opinion in the USA was initially quite favorable towards DTC advertising, recent data seems to suggest growing skepticism and negative attitudes towards such advertising (Reast et al., 2004). Similarly, other researchers have found that of the physicians surveyed in a study, only 15 percent had a positive view of DTC ads, 33 percent were neutral, and 52 percent disapproved of the practice (Yuan and Duckwitz, 2002). As consumers become better informed regarding various drugs that are available to treat specific illnesses, their decision to insist on a specific brand will most often be a function of the type of relationship that they have with their primary physician. Generally, most physicians would be more likely to prescribe a brand name prescription medication that had been requested by a patient, when the patient had either failed to respond to or tolerate another form of treatment (Yuan and Duckwitz, 2002). Moreover, it has been suggested that doctors will prescribe a DTC advertised drug because it is indeed the best treatment available for that specific condition (Shankland, 2003) irrespective of patients’ requests fostered by DTC advertisements. Conversely, doctors offer many reasons why they might refuse patients’ requests such as potential drug interaction and the availability of better treatment alternatives. If the patient-physician relationship is good, one would expect that there is a lot of informational exchange taking place in the physicians’ offices between the consumer and the medical service provider. At the crux of these conversations lies the patient’s trust in his/her physician’s ability to create the most effective treatment plan. Therefore, if a patient views his/her physician as the primary source of medical information, there will be a higher level of trust in the relationship. On the other hand, if consumers feel that they are competent and knowledgeable about their medical needs, they might discount their physician’s advice. Finally, if consumers believe that the information in the DTC ad is valuable to them, they would tend to rely less on their
Consumer empowerment/freedom of choice Advocates of DTC advertising contend that the advent of DTC advertising has given consumers an opportunity that they have never had before. They claim that consumers can take an active role in the treatment of their medical conditions via the knowledge they acquire from DTC advertising. Industry advocates claim that consumers now have increased choice in their medical decisions, which obviously is beneficial. Research dealing with empowerment can provide the backdrop against which the issue of increased choice can be evaluated. Some researchers believe that increased choice and information availability provide consumers with increased level of control in their decision making environment. Consequently, it is assumed that a sense of empowerment will always be viewed by consumers as a benefit since increased control allows consumer to get a better match between their needs and market offerings (Kreps, 1979). Based on this argument, it could be said that a sense of empowerment about their medical decisions would be viewed positively by consumers and welcomed. However, other researchers question the generalization that consumers always view increased choice as a benefit (Wathieu et al., 2002, p. 298). Instead, these researchers believe that “providing consumers with more control may be a mixed blessing, potentially leading to a less compelling choice or a less satisfactory outcome”. In fact, some studies have found that when consumers are provided with fewer alternatives, they often feel more satisfied with the decision they make (Iyengar and Leppar, 2000). This view would compel one to argue that DTC advertising may not always contribute to the consumer’s sense of empowerment. Wathieu et al. (2002) contend that it is not merely the size of the choice set that matters in a decision environment, but it also depends on whether or not consumers have the ability to specify and adjust the choice context. Clearly medical decisions are considerably more demanding, risky and complex than many average everyday, ordinary decisions consumers make. Therefore, consumer empowerment may not be as simple as having more choice but rather would be determined by a kind of trade-off between the benefits and costs associated with the ensuing empowerment. Thus, we propose the following hypothesis: H3. Consumers’ perceived empowerment as a result of DTC advertising is a function of perceived benefits and perceived costs of DTC advertising. Some of these ideas are rooted in the “theory of choice” (Steiner, 1970) used by social scientists to explain the “perception” of freedom of choice, and may have some bearing on consumers’ perceptions of DTC advertising. The 372
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theory of choice argues that there are two aspects to choice – decision control and outcome control. It can be argued that the DTC prescription drug advertising might give consumers the perception of freedom of choice and decision control as they feel that their medical decisions reflect their own judgments and personal preferences rather than those of their physician. This sense of empowerment or freedom of choice could prompt consumers to oppose any regulatory actions that might limit their access to prescription medication information. If consumers perceive that they have been “liberated” by the advent of DTC advertising, any attempt that threatens to limit communication between information providers (i.e. drug manufacturers) and consumers could be viewed as a threat to consumers’ freedom of choice. This leads us to the following hypothesis: H4. The higher the degree of felt empowerment and the more the perceived benefits, the more negative the attitude toward governmental regulation of DTC ads.
Table I Sample demographics Percentage
Methodology Survey design and sample description A paper and pencil survey was developed after a review of the extant literature in the area. A pilot test suggested minor modifications in the wording of some statements to improve communicability. The revised survey was further tested for face and content validity by scholars working in the area of survey design. Overall, the survey contained thirty-five statements anchored from strongly disagree to strongly agree, eight questions addressing consumer knowledge and behavior regarding prescription drugs and seven standard demographic questions, resulting in a total of 50 questions. A mailing list of adult respondents (aged 21 or above) residing in a large mid-western region of the USA was leased from a commercial list provider. The survey was mailed to 2,500 randomly selected addresses from this list. It included a standard statement regarding the confidentiality of consumer data and an offer to participate in a drawing for $100. A total of 288 usable responses were received in the allowed time-frame. After taking into account the 64 surveys which were returned undelivered, the response rate is approximately 12 percent. The sample consisted of approximately 58 percent of women and 42 percent men. The subject pool was quite diverse in terms of income, education, and age but relatively homogenous in terms of its ethnic background with the majority of the respondents being Caucasian (approximately 89 percent). About 90 percent of the respondents considered themselves to be “healthy” and 94 percent reported having health insurance which covered prescription drugs at least to some extent. Table I describes the demographic information for the sample.
Age Under 21-30 31-40 41-50 51-60 Over 69
13.2 19.4 22.6 17.7 27.1
Gender Female Male
58 42
Education Less than high school Finished high school Two-year college Some four year college Completed four-year college or university Completed Master’s degree or equivalent PhD or other advanced degree
3.1 17.4 14.2 16.7 28.8 15.6 4.2
Income No answer Less than $20,000 $20,001-$40,000 $40,001-$60,000 $60,001-$80,000 $80,001-$100,000 $100,001-$130,000 $130,001-$150,000 More than $150,000
6.6 5.6 20.8 18.8 16.7 13.2 11.8 3.1 3.5
Marital status Married Single Living together Other
68.4 22.3 2.8 6.6
Political affiliation Democrats Republican Independent None Other
29.5 33.0 14.2 18.0 7.30
completely safe drugs (there is no such requirement) and about 13 percent believed that companies can only advertise safe drugs. Only about 58 percent of the respondents correctly noted that the statement, “companies cannot advertise those prescription drugs which might have serious side effects,” is false. About 40 percent of the respondents had asked their physician about a particular drug after seeing an ad and about 15 percent reported being motivated to inquire about a condition they believed that they might have, after watching a DTC ad. A total of 17 percent had requested a particular brand of drug after seeing an ad; in about 58 percent of these instances, the physician prescribed the requested brand. There was a near unanimous agreement among respondents that DTC prescription drug advertising has increased significantly in recent years. A majority of
Consumer beliefs and opinions about DTC advertising Approximately 66 percent of the respondents reported that they pay some attention to prescription drug ads. Interestingly, 63 percent of the respondents did not know whether DTC prescription drug ads require government approval (they do not) and 14 percent erroneously believed that some government agency approves these ads. Almost 37 percent did not know if companies can only advertise 373
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respondents (more than 73 percent) viewed DTC advertising as “nothing more than savvy marketing” (mean value ¼ 3:97) and there was a statistically significant difference between men and women (mean values 4.13 versus 3.84; t ¼ 2:429, two-tailed significance ¼ 0:017) in terms of how they responded to this statement. Respondents with advanced degrees were much more skeptical of DTC advertising relative to others in the group. For example, the mean agreement level with the statement about DTC advertising being nothing more than savvy marketing was 4.33 for respondents having a Ph.D. or an equivalent degree, which was significantly higher than those with a Master’s degree (mean value ¼ 3:76; t-value ¼ 1.989; two-tailed significance ¼ 0:050). However, there were no systematic differences among respondents as a function of political ideology, age, or income in so far as this statement was concerned. In general, consumers did not believe that they had become more knowledgeable about their medical needs as a results of DTC advertising (mean value ¼ 2:44) but, agreed somewhat that DTC advertising empowers people (mean value ¼ 3:22) by giving them more say in their own medical decisions. Interestingly, people aged 40 years or less felt significantly more empowered than those over 40. For example, the mean value for the statement that DTC advertising empowers people was 3.41 for people aged 31-40 years whereas it was 3.03 for people older than 60 (p , 0:05, t ¼ 2:072) About 65 percent of the consumers believed that the average consumer does not have the competence to evaluate claims made in a prescription drug ad and 58 percent indicated that they did not trust DTC ads. Interestingly, more than 80 percent disagreed that consumers are better informed as a result of DTC advertising. However, only about 46 percent of the respondents agreed that they were personally opposed to DTC prescription drug advertising and only 42 percent supported the idea of banning DTC advertising of prescription drugs. At the same time, Democrats, more than Republicans, agreed that they would personally support stricter regulations on DTC advertising (mean values ¼ 3:54 versus 3.21; t ¼ 2:146, two-tailed significance ¼ 0:033). There were no other systematically significant differences as a function of gender, income, and education. Government’s role in approving and controlling DTC ads was supported by only 31 percent of the respondents but, an equal number of respondents were indifferent to the idea. About 37 percent of the respondents supported the idea that DTC advertising should be controlled by the government.
significant indicating a relatively clean factor structure. The first factor, which contained 12 items, extracted the highest amount of variance (23 percent) and the last factor, which contained two items, extracted the least amount of variance (4.7 percent). Factor scores were used as independent variables in subsequent regression analyses to test hypotheses H1 and H2. For H1, the dependent variable was the mean of the item that asked whether DTC advertising would prompt the respondents to inquire about a branded drug that they saw advertised to treat a medical condition that respondents believed they had. This dependent variable (DV1) was labeled DOCADVICE and the mean value for this item is 3.54 on a five-point Likert-type scale ranging from strongly disagree (1) to strongly agree (5), indicating a general agreement with this statement. The first regression with the dependent variable DOCADVICE resulted in three independent variables being significant predictors of DV1. These comprised of information value (factor 1), perceived quality of DTC ads (factor 2) and perceived consumer competence (factor 3). Tables II and III present the results of the regression analysis. As shown, the F-value for the model is 44.799 with a p-value of , 0.005 and an adjusted R2 of 0.313. Thus, views about the information value of DTC advertising, quality concerns regarding these ads and respondents’ views of their own perceived competence were significantly related to their behavioral intentions regarding seeking information from their physician about a particular drug that they saw advertised. Therefore, hypothesis, H1 is supported. As shown in Tables II and III, information value is positively related to the propensity to ask one’s physician about a branded drug, along with the quality of information contained in the ad and how competent the consumer feels to evaluate the claims contained in the ad. Quality of information contained in the ad and consumer competence are negatively correlated with the criterion variable suggesting that the more competent the consumer feels about being able to evaluate the claims and the higher the perceived quality of information contained in the DTC ad, the less likely he/she is to inquire about particular prescription drugs and seek advice from his/her physician. It is pertinent to note the relative Table II Seeking advice from the physician (dependent variable: DOCADVICE) Standardized Beta t-value p-value
Independent variable Information value Perceived quality of DTC ads Perceived Personal Competence
Factor analysis and hypotheses testing A principal components analysis with a varimax rotation resulted in a six-factor solution (Eigenvalues above 1.00) with 62 percent of variance explained. A variance extracted of 60 percent or more is considered satisfactory in the social sciences, particularly in exploratory research (Hair et al., 1998). The six factors generally reflected the following dimensions of consumer attitudes towards DTC advertising: information value of DTC ads, perceived quality of DTC ads, consumer competence, views about information complexity of DTC ads, views about the primary source of medical information, and beliefs about the outcome of DTC advertising. Most factor loadings were above 0.50 and
0.532 2 0.151 2 0.121
10.897 0.000 23.086 0.002 22.474 0.014
Note: Adjusted R 2 ¼ 0.313
Table III Model Regression Residual Total
Sums of squares df Mean square 90.325 191.544 281.869
Note: Adjusted R 2 ¼ 0.313
374
3 285 288
30.108 0.672
F
Significance
44.799
0.000
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importance of the first independent variable – information value, as evidenced by the high standardized beta in the equation. It is the most significant predictor of consumers’ behavioral intentions. The other two, perceived quality of DTC ads and perceived competence, while important, explain lower incremental amounts of variance in the equation. For hypothesis H2, the dependent variable is the mean of the item that asked the respondents whether they would respect their physician’s judgment if he/she turned down their request to prescribe an advertised drug that the respondent had requested. This dependent variable (DV2) was labeled MEDDEC. The mean values for this dependent variables is 3.90 on a five-point Likert-scale ranging from strongly disagree (1) to strongly agree (5), indicating a general agreement with this statement. The second regression with the dependent variable MEDDEC resulted in two variables being significant predictors of DV2. These comprised of respondents’ views about the primary source of medical information (factor 5) and information value of DTC advertising (factor 1). Tables IV and V show the results of the regression analysis. As shown, the F-value for the model is 41.548 with a p-value of , 0.005 and an adjusted R2 of 0.220. Thus, consumers’ willingness to respect their physician’s judgment about a medical condition was significantly related to whether his/her physician was the primary source of medical information and information value of DTC advertising. In this model, the higher standardized beta is associated with respondents’ primary source of medical information. Information value is negatively correlated with the dependent variable whereas views about the primary source of medical information are positively correlated. In essence, the higher the perceived information value of an ad, the less the willingness of the consumer to go along with the physician’s judgment. On the other hand, if the physician is the primary source of medical information, this translates into a higher level of trust in his/ her judgment. Thus, hypothesis H2 is supported. To tests hypotheses H3 and H4, multi-item measures were used: perceived cost and perceived benefits of DTC
advertising were measured using three items each (Cronbach’s alpha ¼ 0:7028 and 0.6662 respectively). The two dependent variables were: perceived empowerment which was labeled EMPOWER (DV3) and attitude towards governmental regulation of DTC ads, which was labeled REGULATE (DV4). Mean value for DV1 on a scale ranging from strongly disagree (1) to strongly agree (5) is 3.22 suggesting that the respondents agree that DTC advertising empowers people. Mean value for DV4 is 3.16 on the same strongly disagree (1) to strongly agree (5) scale suggesting that in general, there is some support for governmental regulation of DTC advertising. Tables VI and VII present the results of the regression analysis with the dependent variable “Empower”. The model is significant with an F-value of 68.838, p , 0:005 and an adjusted R2 of 0.320. The model suggests that empowerment is positively related to the perceived benefits of DTC advertising and negatively related to the perceived costs of such advertising. In essence, mere information and information availability do not empower the consumer. Instead it appears that consumers make a trade-off between the perceived benefits of DTC advertising versus the costs they believe are associated with such advertising. As such, H3 is supported. Finally, Tables VIII and IX present the results of the regression analysis with the dependent variable “Regulate”. As shown, the model is significant with an F-value of 16.659, p , 0:005, and an adjusted R2 of 0.098. Both empowerment and perceived benefits are negatively related to consumers’ willingness to support government regulation of DTC advertising. Thus, the more empowered the consumers feel the less amenable they are to support regulatory interference in their medical information seeking environment. However, despite the statistical significance of these results, one must interpret these results with caution due to the low adjusted R2. In effect, while H4 appears to have been supported, these results should be validated using another study to ensure the strength of the relationships in the equation.
Table IV Impact on medical decision (dependent variable: MEDDEC)
Table VI Perception of empowerment (dependent variable: EMPOWER)
Standardized Beta
Independent variable Views about primary source of medical information Information value
t-value
p-value
0.434 2 0.192
8.338 23.685
0.000 0.002
Perceived benefits of DTC advertising Perceived costs of DTC advertising
Note: Adjusted R 2 ¼ 0.220
Note: Adjusted R 2=0.320
Table V
Table VII
Model Regression Residual Total
Sums of squares df Mean square 22.974 158.143 204.090
2 286 288
Standardized Beta t-value p-value
Independent variable
30.108 0.672
F
Significance
41.548
0.000
Model Regression Residual Total
Note: Adjusted R 2 ¼ 0.220
Sums of squares df Mean square 98.548 204.718 303.266
Note: Adjusted R 2 ¼ 0.320
375
0.445 20.193
2 286 288
49.274 0.716
7.793 0.000 23.374 0.001
F
Significance
68.838
0.000
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Volume 22 · Number 7 · 2005 · 369 –378
Table VIII Feelings about government regulation (dependent variable: REGULATE)
extra steps needed to ensure that consumers make the connection between their drug and alleviation of specific medical conditions. Behavioral intentions are positively influenced by DTC advertising in that consumers are asking their physicians about DTC advertised drugs and are more likely to ask about a specific brand, however, our findings also suggest that consumers’ willingness to take action is dependent on a number of variables. Consumer action after exposure to DTC ads is not only a function of the effectiveness of DTC ads, but also a function of their perceptions of their own personal competence, the value of information in the ads, and the overall quality of DTC advertisements. While some researchers and practitioners have noted that consumers might shop around until they find a doctor that is willing to issue a prescription for a specific brand, our findings suggest that this “shopping around” will stem more from the level of trust that consumer places in his/her doctor and the relationship that exists between the consumer and his/her physician. However, our research also suggests that the quality of the DTC ads may have some bearing on consumer’s willingness to seek a DTC advertised drug from another physician. In other words, if consumers do not have a strong relationship with their primary care physicians but find the information in a DTC ad to be useful and informative, they may be more likely to seek the brand from an another physician. This reasoning highlights the way in which the physicianpatient relationship has evolved with the onset of DTC advertising. Where consumers once felt entrapped in their relationships with their physicians, the acquisition of information regarding branded drugs has given consumers more power than ever before. Interestingly enough, our findings suggest that mere empowerment may not be enough to ensure consumer satisfaction with DTC advertising, nor might it be enough to facilitate consumer acceptance of and/ or trust in drug manufacturers. While drug manufacturers have assumed that merely providing consumers with more information would ensure consumer trust and acceptance, researchers have found that increased choice alternatives do not necessarily lead to increased satisfaction (Wathieu et al., 2002). In order for consumers to truly be satisfied with DTC advertisements, they must become more knowledgeable about the products and their efficacy. “Patients face a daunting task. True empowerment demands the truth . . . ” (Friedwald, 2000). As it stands, there seems to be a gap between consumer awareness and the “real” truth about DTC advertised brands. While consumers/patients do have more information available to them because of DTC advertising, they may not necessarily be able to effectively evaluate the costs and benefits of the given options. As such, our findings highlight the need for increased focus and attention on the manner and context in which branded drugs are advertised. On the surface it seems that advertising broad-based benefit would be attractive to consumers; however, there is no guarantee that consumers are able to differentiate these benefits from those offered by competing drug manufacturers or other nutritional supplements (Wealleans, 2003). Typically DTC advertisements show “a stream of indistinguishable communication in which execution cliche´s abound-walking
Standardized Beta t-value p-value
Independent variable Perceived benefits of DTC advertising Level of perceived empowerment
23.186 0.002 22.293 0.023
20.213 20.153
Note: Adjusted R 2 ¼ 0.098
Table IX Model Regression Residual Total
Sums of squares df Mean square 24.828 213.15 237.943
2 286 288
12.414 0.745
F
Significance
16.659
0.000
Discussion and implications Overall, the advent of DTC advertising presents a wealth of interesting dichotomies and valuable insights regarding consumer perceptions. Our findings reveal that although consumers are motivated to ask their primary care physicians about drugs promoted through DTC advertising, they are not particularly knowledgeable about DTC advertisements. In particular, our findings show that consumers are not particularly knowledgeable about prescription drugs or the laws that govern DTC advertising, even though they claim that DTC advertising has increased their overall awareness of prescription drugs. It could very well be that while consumers have become more aware of the brands mentioned in DTC ads, they are not necessarily more educated about the benefits and risks associated with advertised brands. Specifically, consumers know that DTC drug ads abound; however, consumers may not fully understand the message in DTC ads, nor do they trust in drug manufacturers to provide them with accurate information. This disparity may exist because consumers are not comfortable with the format in which drugs are advertised, they do not feel competent to evaluate the claims made in such advertising, and they are not aware of the various avenues to get more information. As consumers become savvier and as drug manufacturers seek to establish profitability for their specific brands, researchers and practitioners will need to examine the types of ads that most impact the development of favorable attitudes towards DTC advertised drugs. Currently, many of the ads for DTC drugs feature consumers who are active and thriving in their day-to-day lives with little mention of the drug’s connection to the alleviation of specific symptoms related to the individual’s given condition. Perhaps, consumers are in need of more information regarding the drug’s specific impact on the condition and their long term benefits and effects. Currently, many of the ads are ambiguous and it seems that drug manufacturers have left it to the physicians to fill in the blanks regarding the actual benefits of their respective products. However, as we move into an era of consumer empowerment, we should expect that consumers will be demanding more of the drug manufacturers and their brands. These changing demands could mean that drug manufacturers may have to take the 376
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the dog, playing with grandchildren, painting, cooking, etc.” (Wealleans, 2003, p. 98). Our findings suggest that it may not be enough to merely mention a brand name and to show that the consumer is able to engage in an “active” lifestyle despite his/her medical condition. Further, as noted by practitioners, the traditional consumer goods product marketing model may not be the best option for the marketing of DTC branded drugs. Marketers must thoroughly understand the psychology of the consumer and his/her beliefs about a particular drug category before formulating an ad campaign (Schroff, 2003). While consumer goods manufacturers have relied on brand associations to build brand loyalty, drug manufacturers must create a distinct format for the successful advertisement of branded drugs. With consumer goods, it may be enough to merely get consumers to be familiar with a particular brand name; however, with branded prescription drugs there are many other factors to consider such as the patient’s disease history, their physician’s medical training, possible generic substitutions and the amount of co-pay that the patient may have to contribute (Shankland, 2003). As such, consumers may need to receive information about branded drugs that reaches beyond the scope of hearing the brand name repeated time and time again, and drug manufacturers must determine the best method to convey this information. Thus, drug manufacturers must address whether would be advantageous for them to modify the way in which DTC advertising is created and disseminated. At the present time, drug manufacturers have been successful in terms of getting more information to the public and opening up lines of communication with their consumers. Next, drug companies must determine what type of relationship they want to have with consumers. DTC advertising has been successful in making the consumer aware of various medical conditions and increasing the recognition of branded drugs (Alleyne, 2002; Krisanits, 2003; Smith, 1998; Wilkes et al., 2000). With the flattening out of DTC advertising spending (Shankland, 2003), it seems that DTC advertising is at a major crossroads and drug manufactures will have to make some critical decisions regarding the future of prescription drug advertising to consumers.
DTC advertising for this population may be of tremendous value in assessing whether it can bridge the knowledge gap that has existed for decades. The National Medical Association, the nation’s oldest and largest AfricanAmerican medical association, recently released findings from a survey of 900 black physicians in which they found resounding support for DTC advertisements, particularly for African-American patients (Alleyne, 2002). These physicians noted that DTC advertisements encourage dialogue between doctors and patients and it increases the likelihood of doctor’s visits, both of which have been fairly difficult issues for African-American patients. Similarly evaluating perceptual differences regarding the value and efficacy of DTC advertising among other sub-cultures (e.g. HispanicAmericans, Asian-Americans, etc.) might also be useful to assess whether cultural variables play a role in medical decision making, and whether DTC prescription drug advertising might be used to encourage information seeking among these sub-groups.
References Alleyne, S. (2002), “Commercial medicine”, Black Enterprise, Vol. 33 No. 1, pp. 107-8. Ajzen, I. and Fishbein, M. (1977), “Attitude behavior relations: a theoretical analysis and review of empirical research”, Psychological Bulletin, pp. 888-918. Anderson, P.J. (2003), “Study measures DTC impact”, Pharmaceutical Executive, Vol. 23 No. 8, p. 18. Ausness, R.C. (2002), “Will more aggressive marketing practices lead to greater tort liability for prescription drug manufacturers?”, Wake Forest Law Review, Vol. 37 No. 1, pp. 97-139. Biehal, G., Stephens, D. and Curlo, E. (1992), “Attitude toward the ad and brand choice”, Journal of Advertising, Vol. 21 No. 3, pp. 19-36. Burton, S. and Lichtenstein, D.R. (1988), “The effect of ad claims and ad context on attitude toward the advertisement”, Journal of Advertising, Vol. 17 No. 1, pp. 3-11. Calfee, J.E. (2002), “Public policy issues in direct-toconsumer advertising of prescription drugs”, Journal of Public Policy and Marketing, Vol. 21, Fall, pp. 174-93. Chandra, A. and Holt, G.A. (1999), “Pharmaceutical advertisements: how they deceive patients”, Journal of Business Ethics, Vol. 18, pp. 359-66. Coney, S. (2002), “Direct-to-consumer advertising of prescription pharmaceuticals: a consumer perspective from New Zealand”, Journal of Public Policy and Marketing, Vol. 21 No. 2, pp. 213-23. Dukes, D.E., Rogers, J. and Paine, E.A. (2001), “What you should know about direct to consumer advertising of prescription drugs”, Defense Counsel Journal, Vol. 58 No. 1, pp. 36-49. Eagle, L. and Kitchen, P. (2002), “Direct consumer promotion of prescription drugs: a review of the literature and the New Zealand experience”, International Journal of Medical Marketing, Vol. 2 No. 4, pp. 293-310. Elliott, S. (2002), “Pharmaceutical makers and ad agencies fight to preserve campaigns for prescription drugs”, The New York Times, July 12, p. 2.
Future research This research addressed attitude and behavioral change issues from the consumer’s perspective. To have a better understanding of how DTC advertising affects the physician-patient dyad, it would be useful to evaluate what physicians feel about the efficacy of such advertising for their patients. Since DTC advertising is here to stay, it might also be useful to get the physicians’ perspectives on what type of information should be incorporated into DTC advertising by the drug companies so that the consumers can use it more effectively and benefit from the information provided in the ad. Another rich avenue would be to address the impact of ethnicity and/or other individual differences on consumers’ response to DTC advertising. For example, it is well known that African-Americans lag behind their Caucasian counterparts in terms of access to quality healthcare and knowledge about medical issues; evaluating the efficacy of 377
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Findlay, S. (2002), “Do ads really drive pharmaceutical sales?”, Marketing Health Services, available at: web.lexisnexis.com/universe (accessed October 17, 2003). Friedwald, V. Jr (2000), “The internet’s influence on the doctor-patient relationship”, Health Management Technology, Vol. 21 No. 11, p. 80. Hair, J.E., Anderson, R., Tatham, R. and Black, W. (1998), Multivariate Data Analysis, Prentice Hall, Englewood Cliffs, NJ. Iyengar, S.S. and Leppar, M.L. (2000), “Personality processes and individual differences when choice is demotivating: can one desire too much of a good thing?”, Journal of Personality and Social Psychology, Vol. 79 No. 6, pp. 995-1006. Kaiser Family Foundation (2003), “Impact of direct-toconsumer advertising on prescription drug spending,” available at: www.kff.org/ rxdrugs/6084-index.cfm (accessed November 29, 2003). Kreps, D.M. (1979), “A representation theorem for preference for flexibility”, Econometrica, Vol. 47, pp. 565-77. Krisanits, T. (2003), “DTC grows drug class, not brand share”, Medical Marketing and Media, Vol. 38 No. 12, p. 26. Lexchin, J. and Mintzes, B. (2002), “Direct-to-consumer advertising of prescription drugs: the evidence says no”, Journal of Public Policy and Marketing, Vol. 21, Fall, pp. 194-201. Reast, J.D., Palihawadana, D. and Spickett-Jones, G. (2004), “UK Physicians’ attitudes towards direct-to-consumer
prescription drugs: an extension and review”, International Journal of Advertising, Vol. 23, pp. 229-51. Schroff, K. (2003), “Why pharma branding doesn’t work”, Pharmaceutical Executive, Vol. 23 No. 10, pp. 50-8. Shankland, S. (2003), “To DTC or not to DTC? Direct to consumer advertising can seem like a prescription for futility”, Marketing Health Services, Winter, Winter, p. 44. Smith, D. (1998), “We hold the keys and we know it”, Pharmaceutical Executive DTC Times Supplement, May, pp. 8-9. Steiner, I.D. (1970), “Perceived freedom”, in Berkowitz, L. (Ed.), Advances in Experimental Social Psychology, Academic Press, New York, NY, pp. 187-248. Wathieu, L., Brenner, L., Carmon, Z., Chattopadhyay, A., Wertenbroch, K., Droleet, A., Gourville, J., Muthukrishnan, A.V., Novemsky, N., Ratner, R.K. and Wu, G. (2002), “Consumer control and empowerment”, Marketing Letters, Vol. 13 No. 3, pp. 297-305. Wealleans, S. (2003), “DTC could use a fresh injection of strategy”, Medical Marketing and Media, Vol. 38 No. 12, p. 98. Wilkes, M., Bell, R.A. and Kravitz, R.L. (2000), “Direct to consumer prescription drug advertising: trends, impact, and implications”, Health Affairs, Vol. 19 No. 2, pp. 110-28. Yuan, Y. and Duckwitz, N. (2002), “Doctors and DTC”, Pharmaceutical Executive, Vol. 22 No. 9, pp. 114-24.
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Direct-to-consumer advertising and young consumers: building brand value Erin E. Baca, Juan Holguin Jr and Andreas W. Stratemeyer Department of Marketing and Management, College of Business Administration, The University of Texas at El Paso, El Paso, Texas, USA Abstract Purpose – Direct-to-consumer advertising (DTCA) is a pervasive element in society today. Consumers have responded accordingly by becoming more knowledgeable, developing specific perceptions and attitudes toward DTCA. The purpose of this article is to examine direct-to-consumer prescription drug advertising issues among younger adults as both consumers and caregivers to determine whether companies are, or should be, taking advantage of building brand value through DTCA. Design/methodology/approach – A sample of 225 young adults answered questionnaires to measure the effects of DTCA. The questionnaire was based on a study by the National Consumers League and only the items that were most central to the current study were utilized and/or modified to measure the following key variables: age; current health status; prescription drug use; attitudes toward DTCA; interest in DTCA; DTCA recall; and inclination to seek additional information. Findings – The findings show that demographics influence attitudes and interest in DTCA, as well as younger consumers’ interest and propensity to seek additional information for themselves and family members. Details of the statistical analysis of the study are given. Originality/value – The implications of the findings for pharmaceutical marketers, health care advisors, and academic researchers are discussed in the paper. Keywords Advertising, Brand identity, Young adults, Pharmaceuticals industry, Prescription medicines Paper type Research paper
(FDA) identified the benefits of direct-to-consumer advertising (DTCA) as, creating increased levels of awareness, involvement, compliance, reach, and clientpatient interaction (Food and Drug Administration, 2004). As a result, medical patients are recognized as an evolving market segment in terms of influence. Further noted by Mintzes et al. (2002, p. 279) “Patient requests for medicines are a powerful driver of prescribing decisions”. To capture this fast growing and profitable market, directto-consumer advertising (DTCA) has flourished with expenditures in the billions for some of the largest pharmaceutical firms. Promotional activities for pharmaceutical products is approaching that of the largest Fortune 500 firms’ products with Advertising Age (2004) listing promotion expenditures for Pfizer at $2.57 billion, GlaxoSmithKline at $1.55 billion, and Merck at $1.16 billion. These expenditures rank Pfizer, GlaxoSmithKline, and Merck as the 4th, 12th, and 19th largest Fortune 500 advertisers respectively in the USA for 2002. With such large investments in promotional activities by pharmaceutical firms, consumers appear to be responding to DTCA. Extant literature has suggested that consumers in general have positive attitudes toward advertising and feel that DTCA is a valuable source of information regarding various products and services (for examples, see Perri and Nelson, 1987; Perri and Dickson, 1988; Everett, 1991; Williams and Hensel, 1995; Shavitt et al., 1998; Paul et al., 2002). However, because prescription drug DTCA is relatively new, having only been legal since 1985 and only used extensively after 1997 when the FDA relaxed the standards for DTCA (Macias and Lewis, 2003), questions remain regarding the effectiveness of the advertisements for this segment of the industry. Thus, what is not known is how effectively these advertising campaigns achieve the goals of the firm in
An executive summary for managers and executive readers can be found at the end of this issue. While advertising expenditures continue to grow every year in the USA, marketers, executives, policy makers, academics, and the general public continue to debate its merit (Macias and Lewis, 2003). Although personal selling, sales promotion, publicity, and public relations are important elements of promotional activities within the marketing mix, advertising is likely the most visible and noticeable component (Coulter et al., 2001). This is clearly exemplified in the pharmaceutical industry where expenditures on promotions have grown from $2.64 billion in 2002 to $3.2 billion in 2003 (Slaughter, 2004). There is little doubt that the average American has seen an increasing number of advertisements from pharmaceutical firms (Findlay, 2001). For example, for heavily advertised brands, increases in consumer awareness levels have ranged from 40 to 75 percent over previous years for drugs such as Viagra, Allegra, Lipitor, and Zoloft (Slaughter, 2004). Additionally, Parker and Pettijohn (2003) suggest that information regarding DTCA for pharmaceutical products will continue to grow as the baby-boomer generation continues to age. In 2003, the Food and Drug Administration The Emerald Research Register for this journal is available at www.emeraldinsight.com/researchregister The current issue and full text archive of this journal is available at www.emeraldinsight.com/0736-3761.htm
Journal of Consumer Marketing 22/7 (2005) 379– 387 q Emerald Group Publishing Limited [ISSN 0736-3761] [DOI 10.1108/07363760510631110]
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reaching consumers as well as which advertising theories are most appropriate for measuring the effectiveness of DTCA. Therefore, given that researchers have only recently examined the effectiveness and the related impact of DTCA by pharmaceutical firms and that empirical research on this subject is still emerging (Menon et al., 2004), this research is exploratory in nature. Although skepticism remains regarding whether DTCA truly educates the consumer and thus begins to establish brand loyalty or whether DTCA merely contributes to rising drug costs, “drug companies are discovering what packagedgoods companies and other consumer markets have known for years: Nothing is more powerful than building consumer brand loyalty,” (Marx, 1996, p. 56). To build brand loyalty, companies have to focus on building value for their brand (Moore et al., 2002). According to Rutledge:
of media and promotional activities. It is reasonable to conclude that pharmaceutical firms believe that increased levels of media and sales promotion spending is directly related to establishing and maintaining strong brand equity (Herremans et al., 2000). Additionally, DTCA is being placed within a multitude of media so that the actual audience ranges from young adults to senior consumers with much of this advertising placed in primetime television and national magazines that appeal to a broad-based audience. Thus, exploring the likelihood of specific demographic groups, or younger consumers, and responses to DTCA is an important research topic (Pinto et al., 1998). The majority of the literature on DTCA has focused on consumer attitudes, propensity to seek information, and comprehension of DTCA among older adults (Maddox, 1999; Menon et al., 2004). Overall, the literature suggests that consumers have an awareness of and carry a positive attitude toward DTCA (Perri and Nelson, 1987; Everett, 1991; Williams and Hensel, 1995); thus far, however, the vast majority of research efforts focused primarily on consumers age 35 and older. Studies have focused on older consumers because it is assumed they are the primary users of prescription drug medications (Williams and Hensel, 1995; NCL, 2003). However, the National Consumers League (2003) conducted a study regarding the effectiveness and attitude toward DTCA of prescription drugs, and in general, their findings reveal that attitudes toward DTCA were positive across a broad range of age groups. Variances in findings across these studies were found among different age groups with regard to interest level and DTCA. Overall, the NCL (2003) study did not investigate specifics regarding younger consumers and DTCA. Thus, it is suggested that factors such as interest level varies based on the age of the consumer. The phenomenon of younger people paying attention to DTCA may seem somewhat perplexing. Burak and Damico (1999) found 35.9 percent of 18-24 year olds were familiar with the prescription allergy medication Allegra. Although intuitive, older consumers typically need more medication and are therefore more likely to be interested in DTCA; however, many prescription drugs such as allergy medications are targeted to a broad age group. Coupled with the aging of the population, a trend involving the growing numbers of caregivers, typically younger consumers, has been a topic of discussion. Caregiving refers to individuals who undertake everything from the primary caregiving role itself to support for older relatives (Dellmann-Jenkins et al., 2000). The activities surrounding caregivers involve assistance with searching for information to help with illnesses which includes reviewing DTCA. A study by Prevention Magazine (2004) found that caregivers are more likely than other consumers to pay attention and respond to DTCA. Of the population of caregivers sampled in this study, 29 percent were in the 18-34 age group, which was the largest proportion in relation to the other age categories (Slaughter, 2004). The categories identified for caregivers (specifically, whom they are responsible for) include everything from children to grandparents. Another study found that of the individuals under the age of 40, one-quarter to one-third of this population is identified as caregivers of someone in their family (Dellmann-Jenkins et al., 2000). Additionally, the same study found that younger consumers (one in four) obtain
The brand is your customer’s belief in what you stand for as a company. The brand is what allows you to charge a little more or merit a larger market share than the companies selling no-name products. That “little bit more” translates into future incremental cash flow. The present value of this stream of future-incremental-cash-flow is brand equity. Building brand equity is the only way I know to create long-term value for shareholders (Rutledge, 1998, p. 154).
The result of building or increasing product brand value translates into increased sales and increased value for the company. For example, after Merck invested approximately $145 million into the advertisement of Vioxx, a product for arthritis and joint pain, sales increased more than 300 percent to over $1.5 billion (Bittar, 2001). Interbrand’s 2004 report, a well-respected private brand consulting firm in the UK, identified Coca-Cola as the world’s most valuable brand, possessing a brand value of $67.4 billion (BBC News, 2004); this figure represents about 68 percent of the total market value of the firm, supporting the idea that brand names add value to firms. Kirmani (1990) suggests that consumers use their impressions of advertising costs as an indication of brand quality. While the effects of DTCA have been investigated, unanswered questions remain, such as; Who is responding to DTCA? What is motivating the consumer to request a specific drug? And finally, what are consumer attitudes toward DTCA? Questions such as these are important given the enormous costs that firms, specifically pharmaceutical firms, invest in bringing products to market and the subsequent costs of promotional activities. While various efforts have been made to understand the effects of direct-to-consumer prescription drug advertising in terms of consumers’ interest, attitudes, and propensity to seek additional information (Hoek et al., 2004), the majority of the research has focused on older consumers or current users of prescription drugs. This study adds to the extant literature by empirically determining what effects, if any, DTCA has on younger adults as consumers and caregivers in terms of interest and attitudes as well as propensity to seek additional information. Specifically, we seek to extend past research by examining this demographic relationship to determine whether pharmaceutical companies are taking advantage of building brand value through DTCA.
Background Direct-to-consumer advertising research Drug companies recognize the value of DTCA, allocating a total of $2.5 billion to media campaigns during the year 2000 including television, print, radio, billboards, and other forms 380
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information from DTCA for someone else to whom they are giving care. The overarching theme is that younger consumers are becoming increasingly more aware and knowledgeable about DTCA. It seems younger consumers (as responsible caregivers) want to provide information to assist in making an informed decision. Given that prescription drug manufacturers are spending in excess of one billion dollars per year in marketing their products directly to consumers, it appears logical to assume that a variety of individuals (both target audience members and caregivers) are going to be exposed to, recall more, and have a higher level of interest in prescription drug advertising. Advertising of pharmaceutical drugs is influential in encouraging consumers to seek additional information for these products (Williams and Hensel, 1995; Hoek et al., 2004). As awareness and interest expands for DTCA, the consumer base is also expanding from users of prescription drugs to those caring for someone with health conditions requiring a prescription drug. Thus, higher recall and interest in DTCA and an increased motivation by consumers to obtain more information may cause pharmaceutical companies to re-think the concept of building brand value.
purchase request or some other positive behavioral response (Cobb-Walgren et al., 1995; Miller and Berry, 1998). The awareness and attitudes toward DTCA among older adults are particularly important to pharmaceutical companies because older adults tend to be heavy users of advertised drugs (Perri and Nelson, 1987; Williams and Hensel, 1995). However, younger consumers may be equally important to pharmaceutical companies because they often become caregivers of older adults and as this segment ages, they may also become users of pharmaceutical drugs. Furthermore, pharmaceutical companies should look at younger consumers as caregivers and future consumers for their brand as firms may be able to move those they care for along the path to purchase by encouraging younger consumers to seek additional information for others or themselves (Williams and Hensel, 1995). The path to purchase was first proposed by Lavidge and Steiner (1961) as a seven-step process, labeled the “Hierarchy of effects model” and suggested that the buying process is not a single event, but rather composed of a series of steps that a consumer goes through that ultimately leads to a purchase.
Brand value and direct-to-consumer advertising Marketing experts generally agree that there is a strong link between advertising and building value for a brand (CobbWalgren et al., 1995). Miller and Berry (1998, p. 82) note, “established brands are stronger and more robust than many suspected.” Brand value goes beyond brand awareness to include favorable attitudes toward the brand (Moore et al., 2002). Building brand equity is related to the degree of brand recognition, the strength of consumers’ mental and emotional associations, as well as perceived brand quality (Aaker, 1996). When brands are positioned correctly, consumers feel strong ties toward them (Cobb-Walgren et al., 1995). Pharmaceutical advertisers have a unique opportunity to position their brands through promoting desirable and positive benefits of their products. By expanding the target audience, firms can help develop strong consumer beliefs about product benefits and brand value through pharmaceutical drug advertising and integrate the branding strategy throughout the organization (Dunn and Davis, 2003); this approach may be critical to achieving overall success with the brand. Although pharmaceutical companies are utilizing a combination of promotional activities to add value to their brands, the majority of their brand value is being built through advertising (Kirmani, 1990; Cobb-Walgren et al., 1995; Miller and Berry, 1998; Herremans et al., 2000; Coulter et al., 2001). Because consumers cannot purchase certain medications without a prescription, pharmaceutical companies who utilize DTCA are trying to encourage some other behavioral response such as seeking additional information (Williams and Hensel, 1995). Eliciting positive attitudes and increased interest in DTCA is an important goal for pharmaceutical companies in order to move consumers closer to actual purchase by encouraging them to seek additional information about their product(s). The attempt to position a brand name in the consumer’s evoked set allows companies to build familiarity with the brand (Cobb-Walgren et al., 1995); establishing familiarity with the brand name and conveying favorable images for the brand can be translated into acceptance and preference for the brand (Bogart and Lehman, 1973). In turn, this awareness should result in
Hierarchy of effects model The framework proposed by Lavidge and Steiner (1961), as well as the numerous variants proposed over the last 40 years, can be traced back to Lewis (1898), and the AIDA model consisting of four separate attributes: (1) attention; (2) interest; (3) desire; and (4) action. In this model, researchers noted that advertising can be an important factor in creating awareness for a product or service (Moore et al., 2002; Parker and Pettijohn, 2003). This is particularly important for pharmaceutical companies because consumers have limited outlets in which to gather information about various healthcare options (Roth, 2003). The framework is a suitable model to help gain an understanding of the effects of DTCA (Vakratsas and Ambler, 1999; Menon et al., 2004), and for this study, the impact on different segments of the market. Therefore, it could be suggested that without awareness, other marketing objectives are not likely to be achieved (Roth, 2003). Lavidge and Steiner (1961) suggest that different advertisements or campaigns can be focused at different steps in the seven-step buyer process. For example, the authors posit that firms, when bringing a new product to market, should focus their advertising primarily during the first steps of the process. The primary goal of the advertiser in this scenario should be to make potential customers aware of the new product and inform them of the product’s benefits and features. However, because consumers are not the final authority in regards to the purchase of prescription drugs, it is difficult to assess the actual path to purchase (Menon et al., 2004). Therefore, this study will not examine the final conditions and determinants that lead consumers to purchase a pharmaceutical drug. Rather, this study will investigate whether consumers, specifically young consumers, pay attention to DTCA by reviewing their attitudes, interest, and recall of pharmaceutical advertising. 381
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Research hypotheses While age may impact the degree to which consumers have favorable attitudes and interest in DTCA, two other variables are suggested to impact attitudes and interest, including health status and prescription drug use as well as an additional variable, concern for family member’s condition, is expected to impact interest in DTCA (see Figure 1). To accomplish the stated objectives of this study, several research hypotheses are proposed. First, research has shown that older consumers are more likely to be users of prescription drugs and are more likely to have favorable attitudes toward DTCA (Williams and Hensel, 1995; Menon et al., 2004). Research has indicated that overall consumers feel DTCA is a useful source of information (Perri and Nelson, 1987; Everett, 1991; Williams and Hensel, 1995; Roth, 2003). What is currently unknown is the attitudes of younger consumers toward DTCA. It is unclear whether consumers who do not currently suffer from any acute medical conditions will or will not pay particular attention to DTCA. Younger consumers are less likely to have these sorts of chronic medical conditions. Thus, it can be expected that younger consumers’ attitudes may vary from older consumers’ attitudes toward DTCA. Since consumers thus far have been found to hold favorable attitudes toward DTCA, it is expected: H1. Older consumers will have more positive attitudes toward DTCA than younger consumers.
Previous studies have hypothesized expected relationships between health status and attitudes toward DTCA (Williams and Hensel, 1995), as well as health status and interest in DTCA among older consumers (NCL, 2003). These findings suggest that there is a propensity for those in poor health to have more favorable attitudes toward, and be more interested in, DTCA. Based on these results, there is no reason to expect that younger consumers would not respond similarly. Thus the following hypotheses are proposed: H3. Health status will directly affect the interest in and attitudes toward DTCA among younger consumers. H3a. Younger consumers in average or poor health will be more likely than younger consumers in good health to have an interest in DTCA. H3b. Younger consumers in average or poor health will be more likely than younger consumers in good health to have favorable attitudes toward DTCA. There has been little empirical research on the relationship between ad recall and interest in DTCA. In a study conducted by the NCL (2003), a positive relationship was indicated between ad recall and interest in DTCA among older consumers (i.e. over 35 years of age). Based on their findings and the belief that younger consumers are similar to older consumers regarding their interest in DTCA, the following hypothesis is proposed: H4. There is a positive relationship between interest in DTCA and recall among younger consumers.
Because of the multitude of media outlets chosen for DTCA, it is difficult to ascertain whether older consumers would have more interest in DTCA than younger consumers. Younger consumers have been found to display interest in DTCA (NCL, 2003). Pollay and Mittal (1993) and Shavitt et al. (1998) suggest that consumers use advertising for information about brands and product availability, and further posit that younger consumers think of advertising as an informational source for products in general more than older audiences do. Generation Y consumers have been found to be just as likely as Generation X, Baby Boomers, and Matures to recall pharmaceutical advertisements (Slaughter, 2004). Therefore, it can be expected that younger consumers would be just as likely as older consumers to have an interest in DTCA, which leads to the following hypothesis: H2. Younger consumers are as likely as older consumers to express interest in DTCA.
It is also reasonable to assume that those younger consumers currently taking prescription drugs would have positive attitudes toward and interest in DTCA. Although Williams and Hensel (1995) did not find a significant relationship between older consumers’ current drug use and their attitudes toward DTCA, the NCL (2003) study found a positive relationship between prescription drug use among older consumers with regard to attitude and interest in DTCA. As previously noted, there is an expectation that younger consumers and older consumers respond similarly to DTCA, thus the following hypotheses are proposed: H5a. There is a positive relationship between prescription drug use and attitude toward DTCA among younger consumers. H5b. There is a positive relationship between prescription drug use and interest in DTCA among younger consumers. Because DTCA has been identified as an important source of information overall for consumers (Perri and Nelson, 1987; Everett, 1991; Williams and Hensel, 1995; Roth, 2003), it is expected that a positive relationship exists between attitudes toward DTCA and an inclination to seek additional information among younger consumers. Additionally, Williams and Hensel (1995) found that those consumers with more favorable attitudes toward DTCA were more inclined to seek additional information from a pharmacist and/or a friend. This leads to the following hypothesis: H6. There is a positive relationship between attitudes toward DTCA and inclination to seek additional information among younger consumers.
Figure 1
Similarly, because pharmaceutical companies are trying to move consumers closer to an actual purchase by encouraging them to seek additional information, the AIDA model suggests that favorable attitudes and increased interest in 382
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The choices in the current study included: . good health; . average health; and . poor health.
DTCA are related to consumers’ inclination to seek additional information (Parker and Pettijohn, 2003). Perri and Nelson (1987) point out that a majority of consumers would likely ask their doctor about a product that they had seen advertised, and consumers with an interest in advertising will use this information to help guide their decision making (Shavitt et al., 1998; Handlin et al., 2003). As noted earlier, the NCL (2003) found that younger consumers display an interest in DTCA. Therefore, the following hypothesis is proposed: H7. There is a positive relationship between interest in DTCA and inclination to seek additional information among younger consumers.
The original NCL (2003) instrument may have been biased toward older consumers as the choices appeared skewed toward a negative assessment rather than a positive assessment of current health status. The modified version for this study reflected a more realistic assessment of health assessment by a younger population. Prescription drug use, ad recall, and interest were measured with questions taken from the survey obtained through the NCL (2003). Respondents were asked to report their use of prescription medication for pain over the previous year. Specifically, the question asked, “In the past year, have you used a prescription medicine for pain?” Choices included: Yes, currently use; Yes, have used in the past year; and, No, have not used in the past year. The questions for ad recall and interest were, respectively, “In the past 12 months, have you seen or heard any advertising for medications that you can only get with a prescription?” and “Were any of these prescription drug advertisements for a condition that was of particular interest to you?” Respondents were simply asked to respond to each question: Yes; or No. Additionally, to measure degree of information search, respondents were asked: “Thinking about a prescription drug advertisement you saw or heard that interested you, what did you do after seeing or hearing that advertisement? Did you seek more information?” Respondents simply answered: Yes; or No. Attitudes toward DTCA of prescription medications was measured using ten items developed by the NCL (2003) in order to assess the multiple facets of attitude toward DTCA. Overall, the scale contained both positive and negative statements regarding DTC pharmaceutical advertising. The scale consisted of ten, five-point Likert-type statements anchored by strongly disagree and strongly agree. Only one item, the second question, was modified for better understanding, with “provide information” replacing “destigmatize.” It was deemed that the rest of the questions appeared clear and straightforward so additional modifications were not necessary. All items for this scale are shown below: (1) Advertisements describe the side effects and/or risks of medications so that you understand them. (2) Advertisements provide information about the conditions that may have gone untreated due to patient embarrassment. (3) Advertisements help you when you want to talk to your doctor about a condition that you think you might have. (4) Advertisements encourage people to ask for drugs they do not need or cannot take. (5) Advertisements just help pharmaceutical companies sell their drugs. (6) Advertisements are largely responsible for the increased cost of prescription drugs. (7) Advertisements for medicines should only be in medical magazines for doctors. (8) Advertisements remind people to take their medicines or refill their prescriptions. (9) Advertisements are confusing. (10) Advertisements make you feel good about the medicines you are already taking.
Finally, it is expected that younger consumers may express more interest in DTCA when a family member has an unresolved health condition. Little research has addressed the relationship between younger consumers’ caregiving activities in terms of interest in DTCA. These caregiving activities may be heightened when younger consumers become concerned about a family member who suffers from a condition illustrated in a DTCA. Younger consumers have been found to exhibit a more active caregiving role with the emergence of a trend among young adult children and grandchildren serving as caregivers to elderly relatives (Dellmann-Jenkins et al., 2000). Thus, the following hypothesis is proposed: H8. There is a positive relationship between concern for a family member and interest in DTCA among younger consumers.
Methodology Research instrument and subjects The questionnaire was obtained from the National Consumers League (NCL, 2003) and only the items that were most central to this study were utilized and/or modified to measure the following key variables: age; current health status; prescription drug use; attitudes toward DTCA; interest in DTCA; DTCA recall; and inclination to seek additional information. Questionnaires were administered to 225 undergraduate students enrolled in a major university in the southwest USA. The mean as well as the median age for the undergraduate population is 25. Students were given the questionnaires during their classes but were not forewarned of the study in order to ensure there were no biases toward the topic. Responses from 20 participants were deemed unusable, resulting in a total of 205 usable questionnaires. Measurement Participants were asked to provide information on their current health status through a slightly modified version of an item developed for the NCL (2003) study. The item consisted of six categories and was modified from “Would you consider yourself . . . ” to the following question: “Overall, how would you rate your current heath?” Choices in the NCL (2003) study included: . generally healthy; . in good health, but have some chronic conditions; . not in very good health; . in poor health; and . do not know.
Items 4, 5, 6, 7 and 9 are reverse coded. 383
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The NCL (2003) study did not report reliability for the attitude scale. Therefore, the ten-item attitude scale was subjected to an exploratory R-type factor analysis to test convergent validity. The data is appropriate for factor analysis with an overall measure of sampling adequacy (MSA) of 0.841 (Hair et al., 1998). Factors were extracted using principal components estimation with a varimax rotation, which revealed three factors. Factor loadings ranged from 0.463 to 0.844. According to Hair et al. (1998), factor loadings of 0.40 or greater are considered important. The percentage of variance explained by the three-factor solution was 53.1 percent. Factor one included items 4, 5, 6, 7, and 9, which are negative statements related to attitudes toward DTCA in general and exhibited factor loadings of 0.463, 0.605, 0.722, 0.749, and 0.564 respectively. Factor two included items 1, 2, and 3, which include positive statements related to attitudes toward information regarding DTCA and exhibited factor loadings of 0.844, 0.822, and 0.516 respectively. Factor three included items 8 and 10, which include positive statements, related to attitudes toward DTCA prescription medicines specifically and produced factor loadings of 0.735 and 0.771 respectively. Reliability levels were assessed among the three factors, with a ¼ 0:62 for factor one, a ¼ 0:66 for factor two, and a ¼ 0:64 for factor three. A commonly used threshold for acceptable reliability is a coefficient alpha of 0.70, although this is not an absolute standard and may decrease to 0.60 in exploratory research (Hair et al., 1998). All items were retained for further analysis. The scale as a whole showed an adequate level of reliability, a ¼ 0:68. In summary, the tenitem, three dimensional attitude scale developed by NCL (2003) showed sufficient internal consistency across all dimensions and proved to be reliable measure of attitudes toward DTCA for the present study. For the attitude scale, the dependent measure was calculated by averaging overall across the scale to assess each variable. The final part of the instrument contained demographic measures of age, education, and income. Based on the median age of 25 years, the sample was split into two categories based on their responses. The first category represented younger consumers (25 years or younger) while the second category represented older consumers (26 years or older).
effects, follow-up univariate ANOVAs and Tukey-HSD paired comparisons were performed on each interest and attitude measure (Hair et al., 1998). Health status was significantly related to attitude and interest (H3a and H3b) across the three categories of health status (p , 0:05). Therefore, H3, H3a, and H3b were all supported. MANOVA and ANOVA results are summarized in Table I. Pairwise comparisons of each dependent variable on health status is displayed in Table II. These results further revealed that the differences between the groups were as hypothesized. Those in poor health had higher interest levels (with a lower mean indicating higher interest levels). Although significant overall (p , 0:05), the mean score for good health was higher that the mean score for average health in relation to attitude toward DTCA. In terms of attitudes, it seems those in good and average health have similar views toward DTCA, with those in average health with slightly less positive attitudes than those in good health. H4 predicted a positive relationship between interest in DTCA and recall. A one-way ANOVA was utilized to test the significance of the variables. Interest in DTCA was significantly related to recall (p , 0:001). Younger consumers who indicated interest in DTCA were able to recall more pharmaceutical ads (F-value ¼ 42.274, p , 0:000). Given these results, H4 was supported. The hypothesized positive relationships were examined between attitude toward DTCA and prescription drug use (H5a); and interest in DTCA and prescription drug use (H5b) among younger consumers. ANOVAs were utilized to test both hypotheses and the relationship between attitude and prescription drug use was marginally significant, p , 0:10 (Fvalue ¼ 3.551, p , 0:061), and the relationship between interest and prescription drug use and was not supported (F-value ¼ 0.012, p , 0:912). Further, the results of these tests revealed that prescription drug use has a marginally significant positive effect on younger consumer’s attitudes. Prescription drug use does not, however, relate significantly with interest in DTCA. Therefore, H5a was partially supported and H5b was not supported. To test H6 and H7, which predict that there is a positive relationship between attitudes toward and interest in DTCA and inclination to seek additional information, univariate ANOVAs were utilized. H6 was not statistically significant, (Fvalue ¼ 0.920, p , 0:538). However, H7 was statistically significant, (F-value ¼ 7.521, p , 0:007), with interest in DTCA being a significant predictor of younger consumers propensity to seek additional information regarding pharmaceutical drugs. Therefore, H6 was not supported and H7 was supported. The hypothesized positive relationship was examined between concern for family member and interest in DTCA (H8). Univariate ANOVA was utilized to test the hypothesis and the relationship between concern for family member and interest in DTCA among younger consumers was statistically significant, p , 0:0001 (F-value ¼ 21.978, p , 0:000). As expected, younger consumers who are concerned about a family member is a significant predictor of interest in DTCA.
Results H1 predicts that there is a positive relationship between age and attitudes toward DTCA and was supported (p , 0:05) as the ANOVA shows, attitude toward DTCA was significantly related to age (F-value ¼ 5.520, p , 0:020). Mean differences were examined to test if the relationship was in the expected direction. As expected, younger consumers (25 or less) hold less positive attitudes toward pharmaceutical advertising with a mean score of 3.0236 than older consumers, with a mean score of 3.1688. H2 examined the relationship between younger consumers and interest in DTCA. A correlation revealed no significant relationship (r ¼ 20:024, p ¼ 0:733) between younger consumers and interest in DTCA. Based on these results H2 was not supported. H3 was tested in a one-way MANOVA with health status used as the independent variable. The analysis shows that the set of dependent variables (interest and attitudes) was significantly related to health status (Wilk’s l4;392 ¼ 0:918, p , 0:05). Given the positive MANOVA findings for the main
Discussion This study examines the relationship between DTCA and young consumers’ attitudes, interest and inclination to seek out additional information regarding pharmaceutical drugs. Overall, the results of this study confirm and extend previous 384
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Table I Health status and attitudes toward DTCA Independent variable
Dependent variable
Health status
Interest Attitudes
Wilk’s Lambda
MANOVA Results F df
0.918
4.306
(4, 392)
P <
F
ANOVA Results df
P <
5.210 3.427
(2, 197) (2, 197)
0.006 * 0.034 *
0002
Note: * Significant at the 0.05 level
Table II Pairwise comparisons between health status and DTCA outcomes Dependent variable
Health status
Meana
Attitude toward DTCA
Good Health Average health Average health Poor health Poor health Good health Good health Average health Average health Poor health Poor health Good health
3.041
Interest in DTCA
Mean difference
Std. error
Sig.
20.138
0.064
0.033 *
0.379
0.198
0.057 * *
20.241
0.195
0.218
0.169
0.090
0.062
0.603
0.278
0.031 *
20.772
0.273
0.005 *
3.179 2.800 1.722 1.603 1.000
Notes: a Lower score indicates higher interest and attitudes toward DTCA; * Significant at the 0.05 level; * * Significant at the 0.10 level
research by developing and empirically testing these relationships and the findings support the role of age in the relationship between attitudes and interest in DTCA. Attitudes of younger consumers toward DTCA were related to age, health status, and prescription drug use. Moreover, younger consumers’ attitudes toward DTCA were not related to recall of DTCA or inclination to seek additional information. This research also demonstrated that younger consumers were just as likely to have an interest in DTCA. However, this interest was not related to inclination to seek out additional information which implies that younger consumers are paying attention, moving through the initial stages of the AIDA model, but have not progressed to the desired stage of the model. These results are of importance because both attitude and interest can serve as important indicators of the attractiveness of DTCA advertisements for younger consumers. These results indicate that younger consumers are aware of pharmaceutical products and are taking a participative role in DTCA. Additionally, relationships were established between health status, ad recall, and prescription drug use among younger consumers with regard to interest in DTCA. Our study of younger consumers was partially consistent with the research of Williams and Hensel (1995) which found DTCA to elicit positive attitudes among older consumers. Thus, this study supports previous findings and suggests a generally positive attitude toward DTCA existing across different age groups. While the relationship between younger consumers and older consumers with regard to attitude toward DTCA was not as strong as previous findings, younger consumer attitudes are still an important component of DTCA as both future consumers and caregivers. This is
particularly clear as our study found a significant relationship with younger consumers’ attitudes toward DTCA. Research done by Williams and Hensel (1995) found that a negative relationship existed between health status and attitudes toward DTCA, and our results in examining the same relationship revealed the same relationship among young consumers. Thus, as health status decreases, attitudes and interest in DTCA increases. Williams and Hensel (1995) further suggested that the theory of selective attention explains this relationship. Consumers, in general, pay attention to advertising which is meaningful and relevant in different situations. Since younger consumers overall are exhibiting positive attitudes toward advertising, this finding would imply that further research is warranted to examine the precise relationship between perceived health status of younger consumers and attitudes toward DTCA.
Managerial implications In general, pharmaceutical marketers, health care advisors, and academic researchers should note the strongest relationships within this study concerned interest in DTCA. This implies that DTCA is influential in attracting attention from not only older consumers, but also younger, and more importantly, future consumers. This finding is important not only because younger consumers are undertaking care-giving roles, but also as the younger population group begins to age, they become a stronger customer base for the wide range of pharmaceutical products. With increases in purchasing power over time, these consumers will already posses a heightened awareness of various products and brand names associated with pharmaceuticals. Similarly, as products move through their patent cycle to become over-the-counter (OTC – e.g. 385
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Conclusion
Claritin, Claritin-D) or generic drugs, younger consumers will be more familiar with the brand names of these medications. As such, it is important for pharmaceutical marketers to educate and provide access to information to build brand value with younger consumers. Researchers and managers should recognize that the attitude formation process clearly begins with younger consumers who are not necessarily current users of prescription drugs but will be in the future and as caregivers may have influence over current users. In contrast, interest in DTCA and relationships between ad recall, health status, and prescription drug use were all significantly related. The relationship between ad recall and interest in DTCA is also positive for younger consumers such that the greater the ad recall, the greater the interest in the advertised product. This finding is interesting and merits further exploration of this relationship by pharmaceutical marketers since this confirms earlier results found with older consumers, but younger consumers have not been identified as primary users of pharmaceutical drugs. This provides a unique opportunity because younger consumers are taking an interest in DTCA, and pharmaceutical marketers can channel their efforts toward building their brand by creating an awareness of pharmaceutical drugs in new market segments. Firms that take advantage of building their brand should likely benefit in a couple of different ways. First, firms should be able to reach this audience and establish a market for products that are currently unknown to this segment but could be appropriate at a future date. Second, establishing the brand name is an important means to reach consumers who care for and attend to older family members. With consumers entering their senior years, it is reasonable to assume that while the current market consists of these consumers, a secondary target would be the care-givers. Information and branding learned through DTCA would be valuable in establishing the firm’s brand with this secondary target audience for top of mind awareness. Through communication and influence, caregivers can be more informed with the daily decisions that face the older population.
This research has added an important component to extant literature concerning attitudes, recall, and an intention to seek additional information regarding DTCA from target market segments and younger consumers. Despite certain limitations, our results also add to understanding the multidimensional nature of DTCA. A significant amount of DTCA targets older adult consumers because they tend to be heavy consumers of prescription medications (Everett, 1991; Williams and Hensel, 1995; Menon et al., 2004). However, DTCA is found across a multitude of media outlets geared toward a broad audience base. Therefore, examining younger population segments are important for understanding how potential consumers are moved along the “path to purchase” in an effort to build value for the brand. In particular, investigating younger consumers further establishes the impact of DTCA on both caregivers and potential users instead of limiting the audience to current users of pharmaceutical drugs (Shufeldt et al., 1998). Younger consumers are just as likely as older consumers to receive drug information through mass media. Furthermore, the emphasis of building brand value among younger consumers with regard to DTCA should be further extended to ensure young consumers attitudes and interest in DTCA is positive.
References Aaker, D.A. (1996), Building Strong Brands, The Free Press, New York, NY. Advertising Age (2004), “Fact Pack 2004 edition”, Advertising Age, available at: www.adage.com/news.cms?newsId ¼ 39766 (accessed September 2004). BBC News (2004), “Coca-Cola is world’s top brand”, BBC News, available at: news.bbc.co.uk/2/hi/business/ 3919947.stm (accessed September 2004). Bittar, C. (2001), “Prescription drugs”, Brandweek, Vol. 42 No. 7, p. SR22. Bogart, L. and Lehman, C. (1973), “What makes a brand name familiar?”, Journal of Marketing Research, Vol. 10, February, pp. 17-22. Burak, L.J. and Damico, A. (1999), “Effects of direct-toconsumer advertising of pharmaceutical products on college students”, Health Marketing Quarterly, Vol. 17 No. 2, pp. 19-29. Cobb-Walgren, C.J., Ruble, C.A. and Donthu, N. (1995), “Brand equity, brand preference, and purchase intent”, Journal of Advertising, Vol. 24 No. 3, pp. 25-40. Coulter, R.A., Zaltman, G. and Coulter, K.S. (2001), “Interpreting consumer perceptions of advertising: an application of the Zaltman metaphor elicitation technique”, Journal of Advertising, Vol. 30 No. 4, pp. 1-21. Dellmann-Jenkins, M., Blankemeyer, M. and Pinkard, O. (2000), “Young adult children and grandchildren in primary caregiver roles to older relatives and their service needs”, Family Relations, Vol. 49 No. 2, pp. 177-87. Dunn, M. and Davis, S. (2003), “Building brands from the inside”, Marketing Management, May/June, pp. 32-7. Everett, S.E. (1991), “Lay audience response to prescription drug advertising”, Journal of Advertising Research, Vol. 31 No. 2, pp. 43-9. Findlay, S. (2001), “Prescription drugs and mass media advertising, 2000”, National Institute for Health Care Management (NIHCM) Foundation, November, pp. 1-17.
Limitations and directions for future research Despite some potentially important implications of this study, there are some limitations. While the sample for the study consisted of a convenience sample, this approach provided a relatively good basis for comparison among younger consumers. Future studies should assess generalizability of the results to younger consumers across a larger geographical area. Furthermore, despite efforts to insure reliability, it should also be noted that the measures for attitudes toward DTCA utilized in this study were those developed by the NCL (2003) study. The measures obtained through the NCL (2003) study, particularly the assessment of attitudes toward DTCA, only provided acceptable reliabilities and would need improvement in the measures for DTCA. Although the NCL study included a large population group, the strength of various items within the dimensions associated with attitude were not clear and merit attention before utilizing the measures in subsequent studies. Therefore, pharmaceutical marketers and researchers should coordinate their efforts and take a careful look at the measurement and formation of attitudes by consumers toward DTCA. 386
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Food and Drug Administration (2004), “Direct-to-consumer advertising of prescription drugs: physician survey preliminary results”, available at: www.fda.gov/cder/ddmac/ globalsummit2003/sld001.htm (accessed September 2004). Hair, J.F., Anderson, R.E., Tatham, R.L. and Black, W.C. (1998), Multivariate Data Analysis, Prentice Hall, Upper Saddle River, NJ. Handlin, A., Mosca, J.B., Forgione, D.A. and Pitta, D. (2003), “DTC pharmaceutical advertising: the debate’s not over”, Journal of Consumer Marketing, Vol. 20 No. 3, pp. 227-37. Herremans, I.M., Ryans, J.K. Jr and Aggarwal, R. (2000), “Linking advertising and brand value”, Business Horizons, May-June, pp. 19-26. Hoek, J., Gendall, P. and Calfee, J. (2004), “Direct-toconsumer advertising of prescription medicines in the United States and New Zealand: an analysis of regulatory approaches and consumer responses”, International Journal of Advertising, Vol. 23 No. 2, pp. 197-227. Kirmani, A. (1990), “The effect of perceived advertising costs on brand perceptions”, Journal of Consumer Research, Vol. 17 No. 2, pp. 160-71. Lavidge, R.J. and Steiner, G.A. (1961), “A model for predictive measurements of advertising effectiveness”, Journal of Marketing, Vol. 25 No. 6, pp. 59-62. Macias, W. and Lewis, L.S. (2003), “A content analysis of direct-to-consumer (DTC) prescription drug web sites”, Journal of Advertising, Vol. 32 No. 4, pp. 43-56. Maddox, L.M. (1999), “The use of pharmaceutical web sites for prescription drug information and product requests”, Journal of Product & Brand Management, Vol. 8 No. 6, pp. 488-96. Marx, W. (1996), “Shrinking the drug pipeline”, American Management Association-Management Review, April, pp. 56-9. Menon, A.M., Deshpande, A.D., Zinkhan, G.M. and Perri, M. III (2004), “A model assessing the effectiveness of direct-to-consumer advertising: integration of concepts and measures from marketing and healthcare”, International Journal of Advertising, Vol. 23 No. 1, pp. 91-117. Miller, S. and Berry, L. (1998), “Brand salience versus brand image: two theories of advertising effectiveness”, Journal of Advertising Research, Vol. 38 No. 5, pp. 77-82. Mintzes, B., Barer, M.L., Kravitz, R.L., Kazanjian, A., Bassett, K., Lexchin, J., Evans, R.G., Pan, R. and Marion, S.A. (2002), “Influence of direct to consumer pharmaceutical advertising and patients’ requests on prescribing decisions: two site cross sectional survey”, British Medical Journal, Vol. 324 No. 7332, pp. 278-9. Moore, E.S., Wilkie, W.L. and Lutz, R.J. (2002), “Passing the torch: intergenerational influences as a source of brand equity”, Journal of Marketing, Vol. 66 No. 2, pp. 17-37. National Consumers League (NCL) (2003), “Survey: directto-consumer advertising of prescription drugs”, NCL, available at: www.nclnet.org/dtcsurvey.htm (accessed March 2003). Parker, R.S. and Pettijohn, C.E. (2003), “Ethical considerations in the use of direct-to-consumer
advertising and pharmaceutical promotions: the impact on pharmaceutical sales and physicians”, Journal of Business Ethics, Vol. 48 No. 3, pp. 279-90. Paul, D.P., Handlin, A. and Stanton, A.D. (2002), “Primary care physicians’ attitudes toward direct-to-consumer advertising of prescription drugs: still crazy after all these years”, Journal of Consumer Marketing, Vol. 19 No. 7, pp. 564-74. Perri, M. and Dickson, W.M. (1988), “Consumer reaction to a direct-to-consumer prescription drug advertising campaign”, Journal of Health Care Marketing, Vol. 8 No. 2, pp. 66-9. Perri, M. and Nelson, A. Jr (1987), “An exploratory analysis of consumer recognition of direct-to-consumer advertising of prescription medications”, Journal of Health Care Marketing, Vol. 7 No. 1, pp. 9-17. Pinto, M.B., Pinto, J.K. and Barber, J.C. (1998), “The impact of pharmaceutical direct advertising: opportunities and obstructions”, Health Marketing Quarterly, Vol. 15 No. 4, pp. 89-101. Pollay, R.W. and Mittal, B. (1993), “Here’s the beef: factors, determinants, and segments in consumer criticism of advertising”, Journal of Marketing, Vol. 57 No. 3, pp. 99-114. Roth, M.S. (2003), “Media and message effects on DTC prescription drug print advertising awareness”, Journal of Advertising Research, Vol. 43 No. 2, pp. 180-93. Rutledge, J. (1998), “How to protect brand value”, Forbes, Vol. 162 No. 12, p. 154. Shavitt, S., Lowrey, P. and Haefner, J. (1998), “Public attitudes toward advertising: more favorable than you might think”, Journal of Advertising Research, Vol. 38 No. 4, pp. 7-22. Shufeldt, L., Oates, B. and Vaught, B. (1998), “Is lifestyle an important factor in the purchase of OTC drugs by the elderly?”, Journal of Consumer Marketing, Vol. 15 No. 2, pp. 111-24. Slaughter, E. (2004), “Consumer reaction to DTC advertising of prescription medicines”, Prevention Magazine, pp. 1-76 (7th Annual Survey, 2003-2004). Vakratsas, D. and Ambler, T. (1999), “How advertising works: what do we really know?”, Journal of Marketing, Vol. 63 No. 1, pp. 26-43. Williams, J.R. and Hensel, P.J. (1995), “Direct-to-consumer advertising of prescription drugs”, Journal of Health Care Marketing, Vol. 15 No. 1, pp. 35-41.
Further reading Curtis, L.G. (2002), “Coming to terms with direct-toconsumer advertising”, Journal of the American Academy of Physician Assistants, Vol. 1, pp. 6-9. Prescription Access Litigation (2002), “Claritin”, available at: www.prescriptionaccesslitigation.org/claritin.htm (accessed September 2004). Strong, E.K. (1925), The Psychology of Selling, McGraw-Hill, New York, NY.
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Understanding the dynamics of the pharmaceutical market using a social marketing framework David Holdford Virginia Commonwealth University School of Pharmacy, Richmond, Virginia, USA Abstract Purpose – The objectives of this paper are to describe the “affordable drugs movement” and present a social marketing framework to place major developments within a meaningful theoretical context. Design/methodology/approach – Specific examples are used to illustrate the framework and its utility in understanding the complexities of the pharmaceutical market. Methods to research the dynamics of the market are also presented. Findings – Provides referenced descriptions and examples of forces causing change within the pharmaceutical market. Classifies forces into six conditions influencing successful social movements: structural conduciveness, structural strains, growth of generalized beliefs, precipitating events, mobilization for action, and utilization of social control by opponents. Suggests social research methodologies to study the conditions in greater depth. Research limitations/implications – This is a descriptive framework that has not been validated for its use in the pharmaceutical market. Practical implications – Offers a useful framework for academics, managers, students, and individuals to classify and study developments in the pharmaceutical industry. Originality/value – This paper provides an overview of major forces within the pharmaceutical market and offers direction for those who wish to explore it in greater detail. Keywords Pharmaceuticals industry, Social marketing, Economics Paper type General review
planning, and AIDs prevention. It can also be used to study and influence major social movements such as consumerism, conservatism, and many other ism’s (Fox and Kotler, 1980). Social movements are defined as relatively persistent, organized efforts by large numbers of people to effect social change. The study of social movements attempts to understand their success or failure with the intention of predicting their consequences and influencing their course. Social movements studied in health care include the movements toward self-care, (Schiller and Levin, 1983) health care reform (Hoffman, 2003), and insurance reform (Atim, 1999). It has been suggested that social movements would benefit from marketing thinking and planning (Kotler, 1971). It has also been proposed that a social movement framework can help in understanding the dynamics of the pharmaceutical market (Wells and Banaszak-Holl, 2000). There is currently an organized movement by individuals and groups to change how the pharmaceutical marketplace provides safe, effective, and affordable medicine. This movement is not new. It has been around since the beginning of the modern pharmaceutical industry, periodically intensifying and diminishing throughout the years. Revitalized in recent years, movement supporters assert that the current pharmaceutical system is broken and major changes are necessary (Angell, 2004; Avorn, 2004; Goozner, 2004) They allege that the pharmaceutical industry makes excessive profits by taking advantage of perverse incentives in a market where consumers rely on third parties (i.e. physicians) to choose drugs for them and prescription drug insurance coverage (often provided by employers or the government) to shield consumers from the full cost of paying for those drugs. The distorted economics of the market therefore permits the industry to succeed by marketing new,
An executive summary for managers and executive readers can be found at the end of this issue. The pharmaceutical marketplace is facing major pressures from a broad range of dynamic and powerful forces. Major healthcare legislation such as the Medicare Prescription Drug, Improvement Act of 2003, widespread criticisms of pharmaceutical industry marketing, increasing consumer involvement in health care, calls to improve FDA oversight of the pharmaceutical industry, and demands for more affordable drugs are forcing society to re-examine the way that pharmaceuticals are developed, distributed, and financed within the USA. To understand the impact and potential consequences of these forces, it is helpful to place them within some meaningful theoretical context. “Social marketing” has been presented as a framework for analyzing social change (Kotler, 1971). Social marketing is a process for influencing social ideas and behaviors based on the premise that social causes can be marketed like any product. Founded on the fields of sociology, psychology, and marketing, it best known for its utility in promoting socially desirable behaviors such as recycling, seat belt use, family The Emerald Research Register for this journal is available at www.emeraldinsight.com/researchregister The current issue and full text archive of this journal is available at www.emeraldinsight.com/0736-3761.htm
Journal of Consumer Marketing 22/7 (2005) 388– 396 q Emerald Group Publishing Limited [ISSN 0736-3761] [DOI 10.1108/07363760510631129]
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expensive drugs that are often no better than cheaper alternatives currently on the market. Those high priced drugs are supported by tax incentives and Federal investment in research and development. Furthermore, promotional efforts by drug companies encourage inappropriate prescribing by physicians, incorrect drug use and unreasonable expectations by patients, and wasteful expenditures on drugs and other health care. Drug price comparisons between what Americans and citizens of other developed countries are presented as further proof of problems with the market. In defending themselves, the pharmaceutical industry counters that money spent on drugs brings tremendous value to Americans. They contend that drug costs are a small, affordable portion of the health care dollar. Drugs are cost effective, because they reduce and prevent hospitalizations, doctor’s office visits, nursing home stays, and emergency room visits. Furthermore, they assert that billions of dollars in revenues received by the industry are reinvested into research and development of new therapies that will save millions of lives and prevent untold suffering. They insist that if change is needed, it should strengthen the patent system on new medications, ensure the freedom to inform and educate the public and health care professionals, and reduce government regulation. Any remedies proposed by opponents that restrict financial incentives to innovate, reduce educational and promotional efforts, or add to regulatory costs will only result in negative, unintended consequences. Opposition to the pharmaceutical industry occurs for several philosophical and practical reasons. One is the belief that it is unethical for any industry to profit from the suffering of others and that the market should not be used to distribute health care. Another is concern about the overuse of drugs to solve the ills of individuals and society. There is also the real concern that drug expenditures are becoming unaffordable. This paper will focus on the struggle to control the costs of prescription drugs. Specifically, it will deal with the effort of individuals and groups to improve the way we pay for and finance drug development and manufacturing, distribution, prescribing, and medication use. Labeled the “affordable drugs movement,” it will be studied using a social marketing framework. Opposition to the movement will be considered to come primarily from members of Pharmaceutical Research and Manufacturers of America (PhRMA), a trade association that represents all major pharmaceutical manufacturers. This paper does not contend that PhRMA is against affordable drugs – just that PhRMA is opposed to many of the movement’s proposed strategies for achieving affordability. In fact, PhRMA resists most efforts to challenge the status quo when it comes to promoting affordable drug initiatives (Murray, 2004). This paper will be organized in the following way. First, it will describe how social movements develop and sustain themselves using illustrations from the pharmaceutical market. Then it will list social marketing strategies employed by the industry to interrupt or divert change efforts of the affordable drugs movement. Finally, a discussion will present ways that the affordable drugs movement framework can help understand and research the changing pharmaceutical market.
Factors associated with social movement success The sociology literature identifies six factors associated with successful social movements (Table I) (McAdam et al., 1988) These factors are the conditions and stresses affecting society, public perceptions that reform is needed and agencies to support it, the presence of precipitating events to trigger change, and the techniques used by opposing parties to support or hinder change. Structural conduciveness The first factor, structural conduciveness, describes the broad social conditions necessary for collective behavior (McAdam et al., 1988). Structural conduciveness refers to the degree to which an environment encourages conflicts between groups. The aging US population is an example. It is a broad social condition increasing the need for drugs. As the population ages, demand for pharmaceuticals to treat chronic diseases increases. A related social condition leading to conflict is the public’s demand for the newest, high priced drugs. Fueled by profit expectations of shareholders and the increasing complexity of drug development and research, prices for some drugs, such as the cancer drug Erbitux, can cost $10,000 per month or more (Nishad, 2004). Consequently, drug spending has been increasing at double digit percentage rates up to $179.2 billion in 2003 (Smith et al., 2005). The global marketplace is another cause of conflict because it permits consumers to compare the cost paid for drugs in the USA with the relatively low prices paid by the rest of the world. Discord is further fanned when rising drug expenditures exacerbate governmental deficits, since state and Federal governments are some of the largest purchasers of prescription drugs. The Federal debt limit will soon exceed eight trillion dollars, without considering the demands for Social Security and Medicare reforms or spending for the military (Wall Street Journal, 2004). Even the Medicare Prescription Drug, Improvement Act of 2003 has exacerbated Federal budgetary concerns about drug affordability with program cost estimates rising from an original $400 billion to $720 billion over ten years (Lueck, 2005). All of these structural issues increase conflicts between providers, payers, politicians, employers, consumers, and patients and enhance the demand for change. Structural strains A related factor stimulating social movements is the existence of structural strains which are defined by sociologists as stresses existing within a social system that lead to discontent (McAdam et al., 1988). These strains are caused by events or situations within society that lead to the perception of a problem. Two major structural strains causing discontent with drug affordability are the increased requirements in patient costsharing by health plans and the impending retirement of baby boomers. Increased patient cost-sharing causes dissatisfaction because it forces patients to share the pain of high drug costs. In the past, employer-paid private drug insurance plans covered most or all of employee drug costs as a way of attracting and keeping employees in a competitive job market. Now, rising drug costs have forced employers to pass some of those costs on to employees through increased prescription drug co-payments and coinsurance. Some employers are even dropping drug insurance altogether. Consequently, more 389
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Table I Conditions influencing successful social movements Condition
Description
Examples
Structural conduciveness
Broad social conditions necessary for collective behavior and conflicting interests Stresses existing within a social system that lead to open discontent Growing and spreading perception that current conditions are unacceptable Events that trigger the desire for action Marshaling of resources to change the status quo Use of social influence techniques to control individuals or groups
Increasing drug expenditures, Federal budget deficits
Structural strains Growth of generalized beliefs Precipitating events Mobilization for action Utilization of social control by opponents to movement
Increased cost-sharing, retirement of baby boomers Polling data, content and direction of media coverage Thalidomide disaster, recession Proposals for legislation, protests Public relations, co-opting opponents
people are feeling the pinch of rising drug costs. This strain is exacerbated by the fact that baby boomers are now facing retirement. Baby boomers are a large and activist cohort of current and potential prescription drug users who are expected to demand drugs not just to treat illnesses but improve lifestyle. There is also concern that many boomers have not saved enough to adequately fund their retirement. Increased cost sharing and the aging of baby boomers will cause significant strains on the US health care system.
Today, industry opponents have had some success monopolizing the media to portray it in a negative light through the publication of studies, polls, anecdotal reports, articles, and books. Several books critical of the pharmaceutical industry have been published (Abramson, 2004; Angell, 2004; Avorn, 2004; Goozner, 2004; Jerome Kassirer, 2004). Public media have also given extensive coverage to politicians, consumer groups, academics, policy analysts and others with grievances against the industry.
Growth of generalized beliefs The conduciveness of structural conditions in society and its resulting stresses can help shape public opinion that current conditions are undesirable. When public opinion coalesces into common generalized beliefs of social events and stresses, it can lead to a call for change. Public opinion is influenced by many sources – mass media, personal experience, and wordof-mouth discussions between individuals. Movements that control public generalized beliefs and public discourse can dictate the direction and perceived viability of change. Lanzarfeld and Merton argue three conditions are necessary to control social discussion: monopolization (i.e. control of mass media), canalization (i.e. presence of general attitudes supporting change), and supplementation (i.e. word-of-mouth discussions that supplement messages in the media and help spread general attitudes) (Lazarfeld and Merton, 1949). When these three conditions favor one side over another, public dialogue can degenerate into propaganda promoting a favored viewpoint.
Canalization Public acceptance of propaganda by either side of the affordable drugs debate is facilitated by the public’s prevailing attitudes (i.e. canalization) (Lazarfeld and Merton, 1949). Polling data indicate little support for drug companies. Opinion surveys rank public perceptions of drug companies down with cigarette companies (Time, 2004) Polls consistently and strongly indicate that the public believes drug prices are too high with as many as 87 per cent thinking drug prices to be “unreasonably high” or “somewhat high” (Harris Interactive, 2004a). A total of 60 per cent of Americans express support for drug price controls (Harris Interactive, 2004a), 81 percent believe that drug prices are a greater burden in the USA compared to Canada (Harris Interactive, 2004b), and 84 per cent support drug importation from Canada (Harris Interactive, 2004c). The one positive finding for PhRMA is that most Americans feel that drug costs are not a difficult problem at the moment with 75 percent indicating that they have little difficulty paying for drugs (Harris Interactive, 2004d).
Monopolization Social movements that monopolize traditional media (e.g. newspapers, television) and non-traditional media (e.g. internet) can present their viewpoint in a way that effectively obstructs any counter-arguments of opposing viewpoints. Monopolization is very difficult to do in a free society with freedom of speech and the press. Nevertheless, it does sometimes happen. In 1993, when President Clinton attempted to implement a major reform of the health care system, media coverage turned so negative against the pharmaceutical industry that major legislation to overhaul the pharmaceutical market almost passed (Ostrowski, 1994). If the proposed plan had been simpler and less confusing, public discourse would have led to major changes in the pharmaceutical market. Instead, squabbles among supporters of change let PhRMA and other powerful interest groups effectively challenge the legislation (Hoffman, 2003).
Supplementation Supplementation of media coverage and public opinion through word-of-mouth (WOM) sets the final condition for developing a generalized belief that change is needed (Lazarfeld and Merton, 1949) WOM consists of noncommercial discussions of products and ideas between friends, peers, acquaintances, and family members. They are considered more credible than commercial forms of communication but more difficult to control due their spontaneity and randomness. WOM discussions about drug prices may occur between individuals, friends, and family members who experience hardships in paying for drugs. Even individuals with full prescription drug coverage may complain about the high price of drugs if their uninsured parents are forced to pay a large portion of their discretionary income for prescription drugs. Despite the difficulty influencing WOM, 390
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social movements try to facilitate discussions through grassroots organizing of protests and other forms of activism.
(knowledge of how and where a person might go to act) and “mechanism” (the existence of an agency that enables the person to act) (Weibe, 1951). Direction provides an outlet for movement supporters to act on their beliefs. Mechanism provides a way to gather like-minded individuals and coordinate their actions. AARP is a mechanism used by seniors to contribute money, participate in protests, write letters to legislators, and organize voter drives. Without the AARP, many seniors would need to find other ways to remain engaged in the seniors’ movement. A major impediment to the affordable drugs movement is that there are not many outlets for opponents to express their dissatisfaction. Individuals who want to push for affordable drugs have few organizations that promote affordable drugs. Indeed, the lack of grass roots activities has been cited as a reason for some of the past failures of health care social movements (Hoffman, 2003).
Precipitating events Social movements can be paralyzed even when a dissatisfied public demands change if there exist significant barriers to action (Kotler, 1972). Movements often need some precipitating factor or event that sparks action. Precipitating events may be spontaneous or provoked by agencies such as the American Association of Retired Persons (AARP). Over the years, most major drug legislation has occurred because some precipitating event turned public sentiment against drug companies. The Federal Food and Drugs Act of 1906, Food, Drug, and Cosmetic Act of 1938, Durham Humphrey Amendment of 1951, and the Kefauver Harris Amendments of 1962 all occurred because events turned public opinion against the prevailing practices of the pharmaceutical industry. Precipitating events can be a single, major episode or a series of smaller incidents that incrementally ratchet up the pressure for change. Single events such as the thalidomide tragedy have initiated most major legislation governing the pharmaceutical industry. Thalidomide was a sedative and anti-nauseant drug used by pregnant women in Europe in the early 1960s. At the time, the Food and Drug Administration (FDA) resisted putting the drug on the US market. When reports started to appear in Europe of thousands of infants with grotesque birth defects born to pregnant mothers who had been taking the drug, support blossomed for the previously languishing KefauverHarris Amendments to the Federal Food, Drug, and Cosmetic Act. This legislation required pharmaceutical companies to prove that their drugs were effective prior to marketing. Without the precipitating thalidomide tragedy, the legislation likely would not have passed. In contrast, the Medicare Prescription Drug, Improvement Act of 2003 resulted from a series of precipitating events. Organizations such as the AARP provoked politicians to act with a series of media events (e.g. busloads of seniors crossing the border to buy Canadian drugs) and drug price studies illustrating the high cost of prescription drugs for seniors. State and local governments demanded relief on drug costs from the Federal government. The re-election strategy adopted by President George W. Bush and Republican congressional victories also contributed to the passing of a drug bill that was pushed through Congress by a small voting margin. Current events have weakened the credibility and public confidence in the industry and increased the pressure for reform. Some pharmaceutical companies have run into trouble with their marketing practices (Angell, 2004; Lenzer, 2004). Warner Lambert plead guilty to illegal and fraudulent promotion of unapproved uses for the drug Neurontin and paid fines of more than $430 million (FDA Consumer, 2004). Links between the widely used and marketed COX-2 arthritis drugs with heart attacks and strokes have lead to calls for changes in FDA oversight. Concerns over cholesterol lowering agents, attention deficit therapies, antidepressants, and other drugs have the further undermined confidence in the pharmaceutical industry.
Social control techniques The progress of social movements depends, in large part, on the reaction of those opposing them. Opponents who effectively exert social control techniques can deflect negative public opinion and undercut the arguments of social movements. Social control techniques are defined as social strategies used to influence individuals or groups (McAdam et al., 1988). Social control borrows heavily from social marketing. Several strategies used by the pharmaceutical industry are described below. Manage the public’s image Drug companies are aware that they have image problems (Ostrowski, 1993, 1994). They have responded with public relations campaigns that attempt to present a consistent and coherent message (Tsao, 2004). The message is that drug companies need money to innovate, high profits to pay for the risk of research, marketing to educate people about complex therapies, me-too drugs to meet the individual needs of patients, and less regulation to reduce the costs of making drugs. In addition, industry emphasizes how they provide free and low cost drugs to needy patients and save lives. A good public image helps when implementing some of the other social control techniques. Influence the evaluation process Social movements operate on the premise that objective assessments of a situation lead to the conclusion that change is needed. Opponents to movements attempt to influence this evaluation process so their viewpoints are represented. In health care, evaluations of drug affordability are conducted on multiple levels and by many players. Public policy relating to prescription drugs is made at the international (e.g. World Health Organization, World Trade Organization), national (e.g. FDA, FTC), state (e.g. board of pharmacy), and local levels (e.g. public health department). The pharmaceutical industry attempts to influence discussion at all levels in their lobbying and advocacy. To illustrate, pharmaceutical companies spent $93 million in 2000 lobbying Congress, the White House, and other federal agencies. (USA Today, 2004) State and local lobbying totals are substantial too but harder to come by given the differences in state and local reporting requirements. At the health system and hospital levels, pharmaceutical companies heavily lobby medical directors, pharmacy directors, formulary committee
Mobilization for action Public opinion will only translate into social movement when conditions mobilize action. Action requires “direction” 391
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members, and individual physicians to present their perspectives in decision-making forums.
Drug companies spend a large portion of their marketing budget on KOLs. For the average physician, drug companies spend an estimated $8,000 to $13,000 every year in promotional expenses (Wazana, 2000). For opinion leaders, the amount is significantly more. Opinion leaders are wooed with dinners, trips, and consultant contracts. Influential physicians in some key practice settings annually receive hundreds of thousand of dollars worth of drug samples (Wolf et al., 1998). Physicians who are willing to write editorials supporting industry interests receive monetary compensation (Brennan, 1994). Drug company support of KOLs influences information provided in continuing medical education (Relman, 2001) and medical publications (Lexchin et al., 2003). The effectiveness of the pharmaceutical industry in using social control techniques is illustrated by the fact that few changes opposed by industry have occurred over the years despite widespread negative public opinions about drug companies (Time, 2004). In effect, the pharmaceutical industry has been able to use social control to “divide and disarm opposition in the community” (Dukes, 2002).
Influence the agenda A related tactic is to influence the agenda of decision makers in a way that benefits drug companies. Industry often argues that opponents focus on the wrong issues. They counter that affordability is not a question of high drug prices, drug company profits, nor marketing clout. Instead, the real issues are the needs to permit the marketplace to decide what drugs will succeed or fail, reduce legislation that prevents innovations from getting to patients, and reward the risks of investors with profits. Indeed, marketers would likely argue against the label “affordability movement” used in this paper in favor of an industry friendlier tag such as the “drug regulation burden movement”. Build coalitions and alliances Opponents of social movements frequently build coalitions and alliances to give them allies to lobby for their cause and influence public opinion (Joanna, 2002; Sibyl, 2000). Pharmaceutical companies often develop coalitions with consumer and disease advocacy groups to work together toward common goals and associate themselves with good causes (Herxheimer, 2003). Relationships with disease advocacy and public health groups are especially important given these groups’ own potent lobbying efforts – $12 million for Federal politicians and officials in 2000 (Landers and Sehgal, 2004). Industry often contributes to the lobbying efforts of advocacy groups by funding those with similar goals. Some advocacy groups are accused of being so closely attached to industry that they are little more than frontgroups used to conduct stealth-lobbying campaigns (Moynihan, 2003). Although they profess their independence, advocacy groups openly work with industry to influence legislation (Joanna, 2002).
Proposed changes The fundamental structural issues affecting drug expenditures (e.g. aging population, government budget deficits) will continue to pressure the status quo (Moran, 2000). There is also a belief that the current structure of the health care system is a major part of the problem (Newhouse, 2004; Nichols et al., 2004). Therefore, some change is likely to occur although the exact form is still undetermined. Proposed changes associated with improving drug affordability fall into three types: regulating industry, increasing competition, or making better purchases with our drug dollars. Regulating industry Most regulatory solutions for making drugs more affordable focus on having the Government control the price of drugs (Maynard and Bloor, 2003) The Government can accomplish this directly by restricting the prices charged by companies or indirectly by restricting the amount of drug revenue that can go to profits. Direct price controls in European countries work by having some governmental agency establish a price ceiling for which a drug can be sold or reimbursed through an insurance program. Prices are typically set based on charges for comparable drugs in other markets within or outside of the country. Prices are controlled through the establishment of a national drug formulary that permits the government to negotiate drug prices and influence prescribing (Huskamp et al., 2003) An indirect mechanism of price control used in the UK attempts to regulate pharmaceutical company profits. Profit controls are problematic because they do not halt drug price increases and encourage inefficiency in drug development (Maynard and Bloor, 2003). There is significant resistance to price controls by the pharmaceutical industry and public policy experts (Calfee, 2001). One reason is that experience in other countries indicates price controls alone do not stop drug price increases (Menon, 2001). All industrial countries face rising drug expenditures despite a broad range of price controls. Another reason for opposition is that it is not clear what unintended consequences price controls may have on innovation and long term health care costs (Maynard and Bloor, 2003). If price
Co-opting opponents Co-opting occurs when one converts an opponent into a supporter. Co-opting can be accomplished in a variety of ways. One is to place a supporter in an opposition group. This might be done by encouraging a supporter to serve on a regulatory agency that is blocking a pharmaceutical industry initiative. Another strategy might be to co-opt potential opponents with consulting fees or other financial incentives. In fact, financial relationships between clinical researchers and drug companies are a serious concern among many (Bodenheimer, 2000a). Co-opting can also occur when opponents find areas of common interest and work together. This occurred when pharmaceutical companies found that AIDS activist groups, vocal critics of drug pricing policies, could be used to pressure politicians to support funding for expensive AIDS treatments. Cultivate opinion leaders Cultivating key opinion leaders (KOLs) is a major strategy used by pharmaceutical companies to influence public and private discussions about drugs (Angell, 2004; Avorn, 2004; Jackson, 2001). Industry develops relationships with KOLs in medicine, academia, public policy, and government to spread key talking points about the value presented by drugs. KOLs are physicians and other individuals whose opinions have greater influence due to their position, expertise, and/or connections (Holdford, 2004). 392
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controls choke off the pharmaceutical innovations coming onto the market, any savings might come at a high cost. Price controls also invite meddling by politicians who may try to pick up political points by interfering with their implementation and administration (Frank, 2003; Newhouse, 2004). Finally, price controls fly in the face of free market advocates who argue for private markets to regulate health care costs and encourage pharmaceutical innovation (Bush, 2004).
The problem is that the health care market chooses and pays for many drugs that are unnecessary, overpriced, and inappropriate. Drugs could be made more affordable if payers, prescribers, and patients made better choices.
Increasing competition Despite the resistance to governmental price controls, there are growing feelings that reliance on the market alone is not the solution (Nichols et al., 2004). Under the current patent system for drugs, abusive pricing practices by industry can occur unless patented medications are made to compete against generic and therapeutic alternatives (Newhouse, 2004). Consequently, efforts have been made to increase market competition by enhancing drug choices. One proposed strategy is to weaken patent laws to allow cheaper generic drugs to more quickly enter the market. The problem with this strategy is that it reduces incentives to develop therapeutic innovations (Eisenberg, 2001). An alternative solution is to permit substitution of lower priced, therapeutically similar drugs for more expensive ones. Patents would still be in place but low priced substitutes could be switched for higher priced drugs, regardless of whether they differ chemically, if they achieve the same medical outcomes. The argued advantage of this therapeutic substitution is that it permits competition between therapeutic equals (i.e. me-too drugs) but still gives a competitive advantage in the market for drugs that achieve unique therapeutic benefits. Importation of low priced drugs from Canada and other countries has also been suggested as a way of increasing price competition. In fact, the new Medicare Drug Legislation permits importation, if the Food and Drug Administration (FDA) demonstrates that it can be done safely (something the FDA has been unwilling to do). Nevertheless, some states encourage their citizens to shop for Canadian drugs. Minnesota, Illinois, New Hampshire, Wisconsin and other states direct citizens to purchase at state-approved Canada Internet pharmacy web sites. It is believed that some form of legalized drug importation is inevitable, if no major unforeseen roadblock occurs (i.e. deaths due to counterfeit drugs) (Jill, 2004). The benefits of doing so, however, are expected to be modest (1 percent decrease in total drug expenditures) (Congressional Budget Office, 2004).
Improve prescribing Physicians are responsible for most health care utilization choices, so the health care system should facilitate costeffective prescribing. Managed health care had argued that drug costs can be controlled through the use of drug formulary systems that restrict physician prescribing and insurance coverage to a limited list of essential, cost-effective drugs (i.e. formulary). Formularies are enforced with the use of management tools such as drug utilization review, restricted provider networks, therapeutic and generic substitution, provider benchmarking, and patient costsharing. To get on the formulary, drug companies are forced to offer their drugs at lower prices or be excluded from insurance coverage. However, evidence of the effectiveness of managed care is still limited (Bodenheimer, 2000b; Carroll, 2002; Schulman et al., 1996). Despite the spread of managed care coverage, plans still see double digit increases in drug expenditures. One reason is that many of the tools in the formulary toolbox are rarely utilized (Carroll, 2002). Reasons include public opposition to restrictions on drug therapies, lack of integration between health care providers, and patient demand for the newest pharmaceuticals. In addition, managed care can be profitable under the current ineffective cost control system because most excess drug costs can be passed on to payers (Moran, 2000). Even the Federal Government, the largest single purchaser of prescription drugs, is unwilling to utilize some tools to control drug costs. Critics of the Medicare Prescription Drug Program complain that the Federal government is expressly prohibited from negotiating lower drug prices with manufacturers. Instead, negotiations on drug prices will be made by the individual drug plan providers (e.g. pharmacy benefit managers) to avoid governmental price controls. Rightly or wrongly, this restriction takes away one of Federal Government’s most potent cost management tools. State and Federal governmental politics have also hamstrung the ability of pharmacy benefit managers and other non-governmental purchasers to control drug costs with numerous rules, regulations, and laws that reduce their ability to restrict payment on drugs (e.g. birth control), restrict provider networks (e.g. any willing provider laws), and integrate services (e.g. antitrust laws).
Make better purchases Demands to regulate drug companies are based on the assumption that industry is the problem for high drug expenditures, while calls to increase competition assume that the market needs to be fixed. However, the problems of drug affordability could be resolved simply if better purchases are made at the payer, physician, or patient levels. If more discipline and rationality were encouraged in the process of drug selection and reimbursement, greater value could be achieved with health care dollars spent. Current mechanisms for purchasing drugs encourage industry to increase marketing, charge higher prices for new drugs, and promote utilization (Newhouse, 2004). None of these things are bad if they increase the development and use of necessary drugs.
Involve patients in their drug choices The difficulty in implementing cost control strategies has lead managed care providers to share the risk of pharmaceutical costs with patients through consumer-driven health care. Consumer-driven healthcare is a broad term for strategies designed to empower patients to choose their own health care and share the risks of their costs. Elements of consumerdriven plans include choice of different healthcare options, medical savings and flexible spending accounts, and costsharing through co-payments, coinsurance, deductibles, and reimbursement caps. The goal is to make patients take greater responsibility for their drug and health care decisions. Although cynics might describe consumer-driven healthcare as just another way of saying “consumers pay more for 393
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healthcare” (Kleinke, 2004), it is a cost control strategy that is becoming increasingly important.
reporting and publications can also be conducted to examine issues and trends identified as important by the media. Case studies can explore the direct and indirect significance of major events in the pharmaceutical market. Case studies can describe and explain unique or interesting events such as the implementation of the Medicare Prescription Drug, Improvement Act of 2003. For instance, it is not clear at the moment whether the Act will increase or decrease pressure for change. Although it was meant to solve the problem of affordable drugs for seniors, many details and consequences of the Act are unclear. If seniors judge it favorably, and it slows the rise of inappropriate drug expenditures, pressure on the pharmaceutical market will be relieved. If things go badly, however, renewed calls for price controls and other dramatic solutions will intensify. Content analysis of the media can be used to explore resources mobilized by governmental, political, consumer, business, and professional agencies. It has been used to understand how agencies in the consumer movement mobilized resources to promote their agenda (Smith and Bloom, 1989). In a similar manner, content analysis can be used to examine issues advanced by the movement, the types of groups and individuals promoting change, and the form and direction of the change advanced over time. Finally, researchers can study the changing social control strategies used by industry to resist change. The evolving effectiveness of techniques can be instructive. For example, there is growing resistance to the acceptance of drug company money by individuals and groups. One group called “No Free Lunch” advocates the elimination of pharmaceutical promotion from medical education, practice, and research (No Free Lunch, 2005) If physicians, educators, and researchers widely adopt the solutions proposed by No Free Lunch, the influence of drug companies in resisting change will be diminished.
Focus on value in making drug choices The current environment of medical research and evidencebased medicine results in the conclusion that “more medicine is better” (Kleinke, 2004). This means that even if the most effective drug is chosen for every patient who needs it, pharmaceuticals expenditures will continue to spin out of control unless cost is also factored into the choice. Some argue that payments for drugs should be structured around consideration of value rather than price (Kleinke, 2004; Chernew et al., 2004). That means that payers need to be able to refuse to cover drugs that are not cost-effective (where the cost exceeds the benefit received) (Newhouse, 2004). If patients want to pay for any extra marginal benefit associated with an uncovered drug, they should be expected to pay for all or part of the cost of drugs depending on their impact on health outcomes (Fendrick et al., 2001; Morgan et al., 2004). Methodological and practical issues still exist with the assessment of drug cost effectiveness. For instance, few headto-head comparisons of competing drugs occur in clinical trials making direct cost effectiveness comparisons difficult. Another issue is that cost-effectiveness analysis requires transparency in data, analytical methods, and conclusions along with transparent rules before it can be widely applied in the design of pharmacy benefits (Kleinke, 2004). The problem with transparency is that it opens up methods to immediate criticism by opponents that can be exploited by savvy pharmaceutical marketers. KOLs can be solicited to attack the methods or results in order to water-down the pharmacoeconomic decision-making process.
Managerial implications Issues relating to the affordability of drugs are complex and multifaceted. The descriptive framework presented in this paper can be used as a tool to place developments in the pharmaceutical marketplace into a meaningful context. Conditions listed in Table I describe variables that can be studied to understand the swirl of conflicting information about pharmaceuticals. The two conditions of structural conduciveness and structural are useful but stable characteristics of the broad market environment. Therefore, their value lies in providing groundwork for understanding the other four, more dynamic conditions of the framework. The remaining four conditions from Table I can be studied to monitor major trends and events that impact the pharmaceutical market. Social research methodologies can permit researchers to understand the growth, direction, and character of generalized beliefs by the public about drug affordability. Public opinions about drug affordability are being monitored through polls conducted by media such as the Wall Street Journal, but most are static cross-sectional studies that do not provide much depth about public feelings. More extensive, longitudinal studies of public opinions would provide greater understanding of changes in attitudes over time. Opinion leaders can also be interviewed about their feelings on major issues such as that demonstrated in the community tracking study. This study conducts periodic interviews of households, physicians, and health system leaders in 60 communities and recently found greater support for government intervention in health care (Nichols et al., 2004). Content analyses of media
Conclusion The only certainty in the pharmaceutical market is that change will occur. It will either happen when public demands for change overpower the ability of the pharmaceutical industry to resist it or when industry decides that change is in its best interests. In other words, industry can be proactive in their support of change, or they can wait and let others decide. The economics of the pharmaceutical market are unlikely to spontaneously improve it, so systematic research should be conducted to understand its dynamics. The paper presents a framework for doing so.
References Abramson, J. (2004), Overdosed America: The Broken Promise of American Medicine, 1st ed., HarperCollins, Philadelphia, PA. Angell, M. (2004), The Truth About the Drug Companies: How They Decieve Us and What to Do About It, 1st ed., Random House, New York, NY. Atim, C. (1999), “Social movements and health insurance: a critical evaluation of voluntary, non-profit insurance schemes with case studies from Ghana and Cameroon, Social”, Science & Medicine, Vol. 48 No. 7, pp. 881-96. Avorn, J. (2004), Powerful Medicines: The Benefits, Risks, and Costs of Prescription Drugs, 1st ed., Knopf, New York, NY. 394
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Bodenheimer, T. (2000a), “Uneasy alliance – clinical investigators and the pharmaceutical industry”, The New England Journal of Medicine, Vol. 342 No. 20, pp. 1539-44. Bodenheimer, T. (2000b), “Disease management in the American market”, BMJ, Vol. 320 No. 7234, pp. 563-6. Brennan, T.A. (1994), “Buying editorials”, The New England Journal of Medicine, Vol. 331 No. 10, pp. 673-5. Bush, G. (2004), “President Bush discusses quality, affordable health care: remarks by the President on access to health care”, available at: www.whitehouse.gov/news/ releases//01/20040128-2.html 1-28-2004e.2-3-0005e Calfee, J.E. (2001), “Pharmaceutical price controls and patient welfare”, Annals of Internal Medicine, Vol. 134 No. 11, pp. 1060-4. Carroll, N.V. (2002), “How effectively do managed care organizations influence prescribing and dispensing decisions?”, American Journal of Managed Care, Vol. 8 No. 12, pp. 1041-54. Chernew, M.E., Jacobson, P.D., Hofer, T.P., Aaronson, K.D. and Fendrick, A.M. (2004), “Barriers to constraining health care cost growth”, Health Affairs, Vol. 23 No. 6, pp. 122-8. Congressional Budget Office (2004), Would Prescription Drug Importation Reduce US Drug Spending?, Congressional Budget Office, Great Falls, VA. Dukes, M.N.G. (2002), “Accountability of the pharmaceutical industry”, The Lancet, Vol. 360, November 23, pp. 1682-4. Eisenberg, R.S. (2001), “The shifting functional balance of patents and drug regulation”, Health Affairs, Vol. 20 No. 5, pp. 119-35. FDA Consumer (2004), “Drug maker to pay $430 million in fines, civil damages”, FDA Consumer, Vol. 38 No. 4, pp. 36-7. Fendrick, A.M., Smith, D.G., Chernew, M.E. and Shah, S.N. (2001), “A benefit-based copay for prescription drugs: patient contribution based on total benefits, not drug acquisition cost”, American Journal of Managed Care, Vol. 7 No. 9, pp. 861-7. Fox, K. and Kotler, P. (1980), “The marketing of social causes: the first 10 years”, Journal of Marketing, Vol. 44 No. 4, p. 24. Frank, R.G. (2003), “Perspective: government commitment and regulation of prescription drugs”, Health Affairs, Vol. 22 No. 3, pp. 46-8. Goozner, M. (2004), The $800 Million Pill: The Truth behind the Cost of New Drugs, 1st ed., University of California Press, Berkeley, CA. Harris Interactive (2004a), “Most people think health care costs are ‘unreasonably high’ and favor price controls, according to Harris poll”, Harris Interactive, Rochester, NY. Harris Interactive (2004b), “Almost all Americans believe that the financial burden of drug costs for chronically ill patients is greater in US than in Canada”, Harris Interactive, Rochester, NY. Harris Interactive (2004c), “Importation of prescription drugs could be a big issue in presidential election but only if Kerry can exploit it”, Harris Interactive, Rochester, NY. Harris Interactive (2004d), “Health care costs not a difficult problem for most Americans”, Harris Interactive, Rochester, NY.
Herxheimer, A. (2003), “Relationships between the pharmaceutical industry and patients’ organizations”, British Medical Journal, Vol. 326 No. 31, pp. 1208-10. Hoffman, B. (2003), “Health care reform and social movements in the United States”, American Journal of Public Health, Vol. 93 No. 1, pp. 75-85. Holdford, D. (2004), “Using buzz marketing to promote ideas, services, and products”, Journal of the American Pharmacists Association, Vol. 44 No. 3, pp. 387-95. Huskamp, H.A., Epstein, A.M. and Blumenthal, D. (2003), “The impact of a national prescription drug formulary on prices, market share, and spending: lessons for Medicare?”, Health Affairs, Vol. 22 No. 3, pp. 149-58. Jackson, T. (2001), “Marketing: are you being duped?”, BMJ, Vol. 322 No. 7297, p. 1312. Jill, W. (2004), “Rx imports inevitable”, Pharmaceutical Executive, Vol. 24 No. 6, p. 38. Joanna, B. (2002), “Partnerships and perspectives”, Pharmaceutical Executive, Vol. 22 No. 1, p. 68. Kassirer, J. (2004), On the Take: How Medicine’s Complicity with Big Business Can Endanger Your Health, Oxford University Press, New York, NY. Kleinke, J.D. (2004), “Access versus excess: value-based cost sharing for prescription drugs”, Health Affairs, Vol. 23 No. 1, pp. 34-47. Kotler, P. (1971), “Social marketing: an approach to planned social change”, Journal of Marketing, Vol. 35 No. 000003, p. 3. Kotler, P. (1972), “What consumerism means for marketers”, Harvard Business Review, Vol. 50 No. 3, p. 48. Landers, S.H. and Sehgal, A.R. (2004), “Health care lobbying in the United States”, The American Journal of Medicine, Vol. 116 No. 7, pp. 474-7. Lazarfeld, P.F. and Merton, R.K. (1949), “Mass communication, popular taste, and organized social action”, in Schramm, W. (Ed.), Mass Communications, University of Illinois Press, Urbana, IL. Lenzer, J. (2004), “Scandals have eroded US public’s confidence in drug industry”, BMJ, Vol. 329 No. 7460, p. 247. Lexchin, J., Bero, L.A., Djulbegovic, B. and Clark, O. (2003), “Pharmaceutical industry sponsorship and research outcome and quality: systematic review”, BMJ, Vol. 326 No. 7400, pp. 1167-70. Lueck, S. (2005), “Drug-benefit cost put at $720 billion for first 10 years”, Wall Street Journal, Nos 2-9, p. D5. McAdam, D., McCarthy, J.D. and Zald, M.N. (1988), “Social movements”, in Smelser, N. (Ed.), Handbook of Sociology, Sage Publications, Newbury Park, CA, pp. 695-737. Maynard, A. and Bloor, K. (2003), “Dilemmas in regulation of the market for pharmaceuticals”, Health Affairs, Vol. 22 No. 3, pp. 31-41. Menon, D. (2001), “Pharmaceutical cost control in Canada: does it work?”, Health Affairs, Vol. 20 No. 3, pp. 92-103. Moran, D.W. (2000), “Prescription drugs and managed care: can ‘free-market detente’ hold?”, Health Affairs, Vol. 19 No. 2, pp. 63-77. Morgan, S., Bassett, K. and Mintzes, B. (2004), “Outcomesbased drug coverage in British Columbia”, Health Affairs, Vol. 23 No. 3, pp. 269-76. 395
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Moynihan, R. (2003), “US seniors group attacks pharmaceutical industry ‘fronts’”, British Medical Journal, Vol. 326 No. 15, p. 351. Murray, A. (2004), “Trade group’s fight against drug review is self-defeating”, Wall Street Journal online, November 30, p. A4. Newhouse, J.P. (2004), “How much should Medicare pay for drugs?”, Health Affairs, Vol. 23 No. 1, pp. 89-102. Nichols, L.M., Ginsburg, P.B., Berenson, R.A., Christianson, J. and Hurley, R.E. (2004), “Are market forces strong enough to deliver efficient health care systems? Confidence is waning”, Health Affairs, Vol. 23 No. 2, pp. 8-21. Nishad, H.M. (2004), “Erbitux’s high price raises difficult questions; ImClone cancer treatment put at $161,000 average; is the extra time worth it?”, Wall Street Journal, Nos 7-22-2004, p. D. No Free Lunch (2005), “Just say no to drug reps”, available at: www.nofreelunch.org (accessed February 25, 2005). Ostrowski, H. (1993), “Pharmaceutical giants tell their story”, The Public Relations Journal, Vol. 49 No. 10, p. 20. Ostrowski, H. (1994), “Pharmaceutical makers step up educational efforts to win support”, Public Relations Review, Vol. 50 No. 3, p. 26. Relman, A.S. (2001), “Separating continuing medical education from pharmaceutical marketing”, JAMA: Journal of the American Medical Association, Vol. 285 No. 15, pp. 2009-12. Schiller, P.L. and Levin, J.S. (1983), “Is self-care a social movement?”, Social Science & Medicine, Vol. 17 No. 18, pp. 1343-52. Schulman, K.A., Rubenstein, L.E., Abernethy, D.R., Seils, D.M. and Sulmasy, D.P. (1996), “The effect of
pharmaceutical benefits managers: is it being evaluated?”, Annals of Internal Medicine, Vol. 124 No. 10, pp. 906-13. Sibyl, S. (2000), “Big pharma benefits by helping others”, Pharmaceutical Executive, Vol. 20 No. 11, p. 110. Smith, C., Cowan, C., Sensenig, A. and Catlin, A. and the Health Accounts Team (2005), “Health spending growth slows in 2003”, Health Affairs, Vol. 24 No. 1, pp. 185-94. Smith, D.B. and Bloom, P.N. (1989), “Using content analysis to understand the consumer movement”, The Journal of Consumer Affairs, Vol. 23 No. 2, p. 301. Time (2004), “Pharma charm”, Time, Vol. 164 No. 3, p. 85. Tsao, A. (2004), “In defense of the drug makers”, Business Week Online, Nos 10-15-2004. USA Today (2004), “Pharmaceutical firms top the list (health care lobbies)”, USA Today Issue, Vol. 2713 No. 133, pp. 4-5. Wall Street Journal (2004), “Investor’s calendar”, Wall Street Journal, Vol. 1, pp. 11-21. Wazana, A. (2000), “Physicians and the pharmaceutical industry. Is a gift ever just a gift?”, Journal of American Medical Association, Vol. 283 No. 3, pp. 373-80. Weibe, G.D. (1951), “Merchandising commodities and citizenship on television”, Public Opinion Quarterly, Vol. 15, winter, pp. 679-91. Wells, R. and Banaszak-Holl, J. (2000), “A critical review of recent US market level health care strategy literature”, Social Science & Medicine, Vol. 51 No. 5, pp. 639-56. Wolf, B.L., Westfall, J.M., McCabe, J. and Nicholas, R.A. (1998), “Drug samples: benefit or bait?”, JAMA: The Journal of the American Medical Association, Vol. 279 No. 21, pp. 1698-9.
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Understanding the dynamics of the pharmaceutical market using a social marketing framework David Holdford Virginia Commonwealth University School of Pharmacy, Richmond, Virginia, USA Abstract Purpose – The objectives of this paper are to describe the “affordable drugs movement” and present a social marketing framework to place major developments within a meaningful theoretical context. Design/methodology/approach – Specific examples are used to illustrate the framework and its utility in understanding the complexities of the pharmaceutical market. Methods to research the dynamics of the market are also presented. Findings – Provides referenced descriptions and examples of forces causing change within the pharmaceutical market. Classifies forces into six conditions influencing successful social movements: structural conduciveness, structural strains, growth of generalized beliefs, precipitating events, mobilization for action, and utilization of social control by opponents. Suggests social research methodologies to study the conditions in greater depth. Research limitations/implications – This is a descriptive framework that has not been validated for its use in the pharmaceutical market. Practical implications – Offers a useful framework for academics, managers, students, and individuals to classify and study developments in the pharmaceutical industry. Originality/value – This paper provides an overview of major forces within the pharmaceutical market and offers direction for those who wish to explore it in greater detail. Keywords Pharmaceuticals industry, Social marketing, Economics Paper type General review
planning, and AIDs prevention. It can also be used to study and influence major social movements such as consumerism, conservatism, and many other ism’s (Fox and Kotler, 1980). Social movements are defined as relatively persistent, organized efforts by large numbers of people to effect social change. The study of social movements attempts to understand their success or failure with the intention of predicting their consequences and influencing their course. Social movements studied in health care include the movements toward self-care, (Schiller and Levin, 1983) health care reform (Hoffman, 2003), and insurance reform (Atim, 1999). It has been suggested that social movements would benefit from marketing thinking and planning (Kotler, 1971). It has also been proposed that a social movement framework can help in understanding the dynamics of the pharmaceutical market (Wells and Banaszak-Holl, 2000). There is currently an organized movement by individuals and groups to change how the pharmaceutical marketplace provides safe, effective, and affordable medicine. This movement is not new. It has been around since the beginning of the modern pharmaceutical industry, periodically intensifying and diminishing throughout the years. Revitalized in recent years, movement supporters assert that the current pharmaceutical system is broken and major changes are necessary (Angell, 2004; Avorn, 2004; Goozner, 2004) They allege that the pharmaceutical industry makes excessive profits by taking advantage of perverse incentives in a market where consumers rely on third parties (i.e. physicians) to choose drugs for them and prescription drug insurance coverage (often provided by employers or the government) to shield consumers from the full cost of paying for those drugs. The distorted economics of the market therefore permits the industry to succeed by marketing new,
An executive summary for managers and executive readers can be found at the end of this issue. The pharmaceutical marketplace is facing major pressures from a broad range of dynamic and powerful forces. Major healthcare legislation such as the Medicare Prescription Drug, Improvement Act of 2003, widespread criticisms of pharmaceutical industry marketing, increasing consumer involvement in health care, calls to improve FDA oversight of the pharmaceutical industry, and demands for more affordable drugs are forcing society to re-examine the way that pharmaceuticals are developed, distributed, and financed within the USA. To understand the impact and potential consequences of these forces, it is helpful to place them within some meaningful theoretical context. “Social marketing” has been presented as a framework for analyzing social change (Kotler, 1971). Social marketing is a process for influencing social ideas and behaviors based on the premise that social causes can be marketed like any product. Founded on the fields of sociology, psychology, and marketing, it best known for its utility in promoting socially desirable behaviors such as recycling, seat belt use, family The Emerald Research Register for this journal is available at www.emeraldinsight.com/researchregister The current issue and full text archive of this journal is available at www.emeraldinsight.com/0736-3761.htm
Journal of Consumer Marketing 22/7 (2005) 388– 396 q Emerald Group Publishing Limited [ISSN 0736-3761] [DOI 10.1108/07363760510631129]
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expensive drugs that are often no better than cheaper alternatives currently on the market. Those high priced drugs are supported by tax incentives and Federal investment in research and development. Furthermore, promotional efforts by drug companies encourage inappropriate prescribing by physicians, incorrect drug use and unreasonable expectations by patients, and wasteful expenditures on drugs and other health care. Drug price comparisons between what Americans and citizens of other developed countries are presented as further proof of problems with the market. In defending themselves, the pharmaceutical industry counters that money spent on drugs brings tremendous value to Americans. They contend that drug costs are a small, affordable portion of the health care dollar. Drugs are cost effective, because they reduce and prevent hospitalizations, doctor’s office visits, nursing home stays, and emergency room visits. Furthermore, they assert that billions of dollars in revenues received by the industry are reinvested into research and development of new therapies that will save millions of lives and prevent untold suffering. They insist that if change is needed, it should strengthen the patent system on new medications, ensure the freedom to inform and educate the public and health care professionals, and reduce government regulation. Any remedies proposed by opponents that restrict financial incentives to innovate, reduce educational and promotional efforts, or add to regulatory costs will only result in negative, unintended consequences. Opposition to the pharmaceutical industry occurs for several philosophical and practical reasons. One is the belief that it is unethical for any industry to profit from the suffering of others and that the market should not be used to distribute health care. Another is concern about the overuse of drugs to solve the ills of individuals and society. There is also the real concern that drug expenditures are becoming unaffordable. This paper will focus on the struggle to control the costs of prescription drugs. Specifically, it will deal with the effort of individuals and groups to improve the way we pay for and finance drug development and manufacturing, distribution, prescribing, and medication use. Labeled the “affordable drugs movement,” it will be studied using a social marketing framework. Opposition to the movement will be considered to come primarily from members of Pharmaceutical Research and Manufacturers of America (PhRMA), a trade association that represents all major pharmaceutical manufacturers. This paper does not contend that PhRMA is against affordable drugs – just that PhRMA is opposed to many of the movement’s proposed strategies for achieving affordability. In fact, PhRMA resists most efforts to challenge the status quo when it comes to promoting affordable drug initiatives (Murray, 2004). This paper will be organized in the following way. First, it will describe how social movements develop and sustain themselves using illustrations from the pharmaceutical market. Then it will list social marketing strategies employed by the industry to interrupt or divert change efforts of the affordable drugs movement. Finally, a discussion will present ways that the affordable drugs movement framework can help understand and research the changing pharmaceutical market.
Factors associated with social movement success The sociology literature identifies six factors associated with successful social movements (Table I) (McAdam et al., 1988) These factors are the conditions and stresses affecting society, public perceptions that reform is needed and agencies to support it, the presence of precipitating events to trigger change, and the techniques used by opposing parties to support or hinder change. Structural conduciveness The first factor, structural conduciveness, describes the broad social conditions necessary for collective behavior (McAdam et al., 1988). Structural conduciveness refers to the degree to which an environment encourages conflicts between groups. The aging US population is an example. It is a broad social condition increasing the need for drugs. As the population ages, demand for pharmaceuticals to treat chronic diseases increases. A related social condition leading to conflict is the public’s demand for the newest, high priced drugs. Fueled by profit expectations of shareholders and the increasing complexity of drug development and research, prices for some drugs, such as the cancer drug Erbitux, can cost $10,000 per month or more (Nishad, 2004). Consequently, drug spending has been increasing at double digit percentage rates up to $179.2 billion in 2003 (Smith et al., 2005). The global marketplace is another cause of conflict because it permits consumers to compare the cost paid for drugs in the USA with the relatively low prices paid by the rest of the world. Discord is further fanned when rising drug expenditures exacerbate governmental deficits, since state and Federal governments are some of the largest purchasers of prescription drugs. The Federal debt limit will soon exceed eight trillion dollars, without considering the demands for Social Security and Medicare reforms or spending for the military (Wall Street Journal, 2004). Even the Medicare Prescription Drug, Improvement Act of 2003 has exacerbated Federal budgetary concerns about drug affordability with program cost estimates rising from an original $400 billion to $720 billion over ten years (Lueck, 2005). All of these structural issues increase conflicts between providers, payers, politicians, employers, consumers, and patients and enhance the demand for change. Structural strains A related factor stimulating social movements is the existence of structural strains which are defined by sociologists as stresses existing within a social system that lead to discontent (McAdam et al., 1988). These strains are caused by events or situations within society that lead to the perception of a problem. Two major structural strains causing discontent with drug affordability are the increased requirements in patient costsharing by health plans and the impending retirement of baby boomers. Increased patient cost-sharing causes dissatisfaction because it forces patients to share the pain of high drug costs. In the past, employer-paid private drug insurance plans covered most or all of employee drug costs as a way of attracting and keeping employees in a competitive job market. Now, rising drug costs have forced employers to pass some of those costs on to employees through increased prescription drug co-payments and coinsurance. Some employers are even dropping drug insurance altogether. Consequently, more 389
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Table I Conditions influencing successful social movements Condition
Description
Examples
Structural conduciveness
Broad social conditions necessary for collective behavior and conflicting interests Stresses existing within a social system that lead to open discontent Growing and spreading perception that current conditions are unacceptable Events that trigger the desire for action Marshaling of resources to change the status quo Use of social influence techniques to control individuals or groups
Increasing drug expenditures, Federal budget deficits
Structural strains Growth of generalized beliefs Precipitating events Mobilization for action Utilization of social control by opponents to movement
Increased cost-sharing, retirement of baby boomers Polling data, content and direction of media coverage Thalidomide disaster, recession Proposals for legislation, protests Public relations, co-opting opponents
people are feeling the pinch of rising drug costs. This strain is exacerbated by the fact that baby boomers are now facing retirement. Baby boomers are a large and activist cohort of current and potential prescription drug users who are expected to demand drugs not just to treat illnesses but improve lifestyle. There is also concern that many boomers have not saved enough to adequately fund their retirement. Increased cost sharing and the aging of baby boomers will cause significant strains on the US health care system.
Today, industry opponents have had some success monopolizing the media to portray it in a negative light through the publication of studies, polls, anecdotal reports, articles, and books. Several books critical of the pharmaceutical industry have been published (Abramson, 2004; Angell, 2004; Avorn, 2004; Goozner, 2004; Jerome Kassirer, 2004). Public media have also given extensive coverage to politicians, consumer groups, academics, policy analysts and others with grievances against the industry.
Growth of generalized beliefs The conduciveness of structural conditions in society and its resulting stresses can help shape public opinion that current conditions are undesirable. When public opinion coalesces into common generalized beliefs of social events and stresses, it can lead to a call for change. Public opinion is influenced by many sources – mass media, personal experience, and wordof-mouth discussions between individuals. Movements that control public generalized beliefs and public discourse can dictate the direction and perceived viability of change. Lanzarfeld and Merton argue three conditions are necessary to control social discussion: monopolization (i.e. control of mass media), canalization (i.e. presence of general attitudes supporting change), and supplementation (i.e. word-of-mouth discussions that supplement messages in the media and help spread general attitudes) (Lazarfeld and Merton, 1949). When these three conditions favor one side over another, public dialogue can degenerate into propaganda promoting a favored viewpoint.
Canalization Public acceptance of propaganda by either side of the affordable drugs debate is facilitated by the public’s prevailing attitudes (i.e. canalization) (Lazarfeld and Merton, 1949). Polling data indicate little support for drug companies. Opinion surveys rank public perceptions of drug companies down with cigarette companies (Time, 2004) Polls consistently and strongly indicate that the public believes drug prices are too high with as many as 87 per cent thinking drug prices to be “unreasonably high” or “somewhat high” (Harris Interactive, 2004a). A total of 60 per cent of Americans express support for drug price controls (Harris Interactive, 2004a), 81 percent believe that drug prices are a greater burden in the USA compared to Canada (Harris Interactive, 2004b), and 84 per cent support drug importation from Canada (Harris Interactive, 2004c). The one positive finding for PhRMA is that most Americans feel that drug costs are not a difficult problem at the moment with 75 percent indicating that they have little difficulty paying for drugs (Harris Interactive, 2004d).
Monopolization Social movements that monopolize traditional media (e.g. newspapers, television) and non-traditional media (e.g. internet) can present their viewpoint in a way that effectively obstructs any counter-arguments of opposing viewpoints. Monopolization is very difficult to do in a free society with freedom of speech and the press. Nevertheless, it does sometimes happen. In 1993, when President Clinton attempted to implement a major reform of the health care system, media coverage turned so negative against the pharmaceutical industry that major legislation to overhaul the pharmaceutical market almost passed (Ostrowski, 1994). If the proposed plan had been simpler and less confusing, public discourse would have led to major changes in the pharmaceutical market. Instead, squabbles among supporters of change let PhRMA and other powerful interest groups effectively challenge the legislation (Hoffman, 2003).
Supplementation Supplementation of media coverage and public opinion through word-of-mouth (WOM) sets the final condition for developing a generalized belief that change is needed (Lazarfeld and Merton, 1949) WOM consists of noncommercial discussions of products and ideas between friends, peers, acquaintances, and family members. They are considered more credible than commercial forms of communication but more difficult to control due their spontaneity and randomness. WOM discussions about drug prices may occur between individuals, friends, and family members who experience hardships in paying for drugs. Even individuals with full prescription drug coverage may complain about the high price of drugs if their uninsured parents are forced to pay a large portion of their discretionary income for prescription drugs. Despite the difficulty influencing WOM, 390
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social movements try to facilitate discussions through grassroots organizing of protests and other forms of activism.
(knowledge of how and where a person might go to act) and “mechanism” (the existence of an agency that enables the person to act) (Weibe, 1951). Direction provides an outlet for movement supporters to act on their beliefs. Mechanism provides a way to gather like-minded individuals and coordinate their actions. AARP is a mechanism used by seniors to contribute money, participate in protests, write letters to legislators, and organize voter drives. Without the AARP, many seniors would need to find other ways to remain engaged in the seniors’ movement. A major impediment to the affordable drugs movement is that there are not many outlets for opponents to express their dissatisfaction. Individuals who want to push for affordable drugs have few organizations that promote affordable drugs. Indeed, the lack of grass roots activities has been cited as a reason for some of the past failures of health care social movements (Hoffman, 2003).
Precipitating events Social movements can be paralyzed even when a dissatisfied public demands change if there exist significant barriers to action (Kotler, 1972). Movements often need some precipitating factor or event that sparks action. Precipitating events may be spontaneous or provoked by agencies such as the American Association of Retired Persons (AARP). Over the years, most major drug legislation has occurred because some precipitating event turned public sentiment against drug companies. The Federal Food and Drugs Act of 1906, Food, Drug, and Cosmetic Act of 1938, Durham Humphrey Amendment of 1951, and the Kefauver Harris Amendments of 1962 all occurred because events turned public opinion against the prevailing practices of the pharmaceutical industry. Precipitating events can be a single, major episode or a series of smaller incidents that incrementally ratchet up the pressure for change. Single events such as the thalidomide tragedy have initiated most major legislation governing the pharmaceutical industry. Thalidomide was a sedative and anti-nauseant drug used by pregnant women in Europe in the early 1960s. At the time, the Food and Drug Administration (FDA) resisted putting the drug on the US market. When reports started to appear in Europe of thousands of infants with grotesque birth defects born to pregnant mothers who had been taking the drug, support blossomed for the previously languishing KefauverHarris Amendments to the Federal Food, Drug, and Cosmetic Act. This legislation required pharmaceutical companies to prove that their drugs were effective prior to marketing. Without the precipitating thalidomide tragedy, the legislation likely would not have passed. In contrast, the Medicare Prescription Drug, Improvement Act of 2003 resulted from a series of precipitating events. Organizations such as the AARP provoked politicians to act with a series of media events (e.g. busloads of seniors crossing the border to buy Canadian drugs) and drug price studies illustrating the high cost of prescription drugs for seniors. State and local governments demanded relief on drug costs from the Federal government. The re-election strategy adopted by President George W. Bush and Republican congressional victories also contributed to the passing of a drug bill that was pushed through Congress by a small voting margin. Current events have weakened the credibility and public confidence in the industry and increased the pressure for reform. Some pharmaceutical companies have run into trouble with their marketing practices (Angell, 2004; Lenzer, 2004). Warner Lambert plead guilty to illegal and fraudulent promotion of unapproved uses for the drug Neurontin and paid fines of more than $430 million (FDA Consumer, 2004). Links between the widely used and marketed COX-2 arthritis drugs with heart attacks and strokes have lead to calls for changes in FDA oversight. Concerns over cholesterol lowering agents, attention deficit therapies, antidepressants, and other drugs have the further undermined confidence in the pharmaceutical industry.
Social control techniques The progress of social movements depends, in large part, on the reaction of those opposing them. Opponents who effectively exert social control techniques can deflect negative public opinion and undercut the arguments of social movements. Social control techniques are defined as social strategies used to influence individuals or groups (McAdam et al., 1988). Social control borrows heavily from social marketing. Several strategies used by the pharmaceutical industry are described below. Manage the public’s image Drug companies are aware that they have image problems (Ostrowski, 1993, 1994). They have responded with public relations campaigns that attempt to present a consistent and coherent message (Tsao, 2004). The message is that drug companies need money to innovate, high profits to pay for the risk of research, marketing to educate people about complex therapies, me-too drugs to meet the individual needs of patients, and less regulation to reduce the costs of making drugs. In addition, industry emphasizes how they provide free and low cost drugs to needy patients and save lives. A good public image helps when implementing some of the other social control techniques. Influence the evaluation process Social movements operate on the premise that objective assessments of a situation lead to the conclusion that change is needed. Opponents to movements attempt to influence this evaluation process so their viewpoints are represented. In health care, evaluations of drug affordability are conducted on multiple levels and by many players. Public policy relating to prescription drugs is made at the international (e.g. World Health Organization, World Trade Organization), national (e.g. FDA, FTC), state (e.g. board of pharmacy), and local levels (e.g. public health department). The pharmaceutical industry attempts to influence discussion at all levels in their lobbying and advocacy. To illustrate, pharmaceutical companies spent $93 million in 2000 lobbying Congress, the White House, and other federal agencies. (USA Today, 2004) State and local lobbying totals are substantial too but harder to come by given the differences in state and local reporting requirements. At the health system and hospital levels, pharmaceutical companies heavily lobby medical directors, pharmacy directors, formulary committee
Mobilization for action Public opinion will only translate into social movement when conditions mobilize action. Action requires “direction” 391
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members, and individual physicians to present their perspectives in decision-making forums.
Drug companies spend a large portion of their marketing budget on KOLs. For the average physician, drug companies spend an estimated $8,000 to $13,000 every year in promotional expenses (Wazana, 2000). For opinion leaders, the amount is significantly more. Opinion leaders are wooed with dinners, trips, and consultant contracts. Influential physicians in some key practice settings annually receive hundreds of thousand of dollars worth of drug samples (Wolf et al., 1998). Physicians who are willing to write editorials supporting industry interests receive monetary compensation (Brennan, 1994). Drug company support of KOLs influences information provided in continuing medical education (Relman, 2001) and medical publications (Lexchin et al., 2003). The effectiveness of the pharmaceutical industry in using social control techniques is illustrated by the fact that few changes opposed by industry have occurred over the years despite widespread negative public opinions about drug companies (Time, 2004). In effect, the pharmaceutical industry has been able to use social control to “divide and disarm opposition in the community” (Dukes, 2002).
Influence the agenda A related tactic is to influence the agenda of decision makers in a way that benefits drug companies. Industry often argues that opponents focus on the wrong issues. They counter that affordability is not a question of high drug prices, drug company profits, nor marketing clout. Instead, the real issues are the needs to permit the marketplace to decide what drugs will succeed or fail, reduce legislation that prevents innovations from getting to patients, and reward the risks of investors with profits. Indeed, marketers would likely argue against the label “affordability movement” used in this paper in favor of an industry friendlier tag such as the “drug regulation burden movement”. Build coalitions and alliances Opponents of social movements frequently build coalitions and alliances to give them allies to lobby for their cause and influence public opinion (Joanna, 2002; Sibyl, 2000). Pharmaceutical companies often develop coalitions with consumer and disease advocacy groups to work together toward common goals and associate themselves with good causes (Herxheimer, 2003). Relationships with disease advocacy and public health groups are especially important given these groups’ own potent lobbying efforts – $12 million for Federal politicians and officials in 2000 (Landers and Sehgal, 2004). Industry often contributes to the lobbying efforts of advocacy groups by funding those with similar goals. Some advocacy groups are accused of being so closely attached to industry that they are little more than frontgroups used to conduct stealth-lobbying campaigns (Moynihan, 2003). Although they profess their independence, advocacy groups openly work with industry to influence legislation (Joanna, 2002).
Proposed changes The fundamental structural issues affecting drug expenditures (e.g. aging population, government budget deficits) will continue to pressure the status quo (Moran, 2000). There is also a belief that the current structure of the health care system is a major part of the problem (Newhouse, 2004; Nichols et al., 2004). Therefore, some change is likely to occur although the exact form is still undetermined. Proposed changes associated with improving drug affordability fall into three types: regulating industry, increasing competition, or making better purchases with our drug dollars. Regulating industry Most regulatory solutions for making drugs more affordable focus on having the Government control the price of drugs (Maynard and Bloor, 2003) The Government can accomplish this directly by restricting the prices charged by companies or indirectly by restricting the amount of drug revenue that can go to profits. Direct price controls in European countries work by having some governmental agency establish a price ceiling for which a drug can be sold or reimbursed through an insurance program. Prices are typically set based on charges for comparable drugs in other markets within or outside of the country. Prices are controlled through the establishment of a national drug formulary that permits the government to negotiate drug prices and influence prescribing (Huskamp et al., 2003) An indirect mechanism of price control used in the UK attempts to regulate pharmaceutical company profits. Profit controls are problematic because they do not halt drug price increases and encourage inefficiency in drug development (Maynard and Bloor, 2003). There is significant resistance to price controls by the pharmaceutical industry and public policy experts (Calfee, 2001). One reason is that experience in other countries indicates price controls alone do not stop drug price increases (Menon, 2001). All industrial countries face rising drug expenditures despite a broad range of price controls. Another reason for opposition is that it is not clear what unintended consequences price controls may have on innovation and long term health care costs (Maynard and Bloor, 2003). If price
Co-opting opponents Co-opting occurs when one converts an opponent into a supporter. Co-opting can be accomplished in a variety of ways. One is to place a supporter in an opposition group. This might be done by encouraging a supporter to serve on a regulatory agency that is blocking a pharmaceutical industry initiative. Another strategy might be to co-opt potential opponents with consulting fees or other financial incentives. In fact, financial relationships between clinical researchers and drug companies are a serious concern among many (Bodenheimer, 2000a). Co-opting can also occur when opponents find areas of common interest and work together. This occurred when pharmaceutical companies found that AIDS activist groups, vocal critics of drug pricing policies, could be used to pressure politicians to support funding for expensive AIDS treatments. Cultivate opinion leaders Cultivating key opinion leaders (KOLs) is a major strategy used by pharmaceutical companies to influence public and private discussions about drugs (Angell, 2004; Avorn, 2004; Jackson, 2001). Industry develops relationships with KOLs in medicine, academia, public policy, and government to spread key talking points about the value presented by drugs. KOLs are physicians and other individuals whose opinions have greater influence due to their position, expertise, and/or connections (Holdford, 2004). 392
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controls choke off the pharmaceutical innovations coming onto the market, any savings might come at a high cost. Price controls also invite meddling by politicians who may try to pick up political points by interfering with their implementation and administration (Frank, 2003; Newhouse, 2004). Finally, price controls fly in the face of free market advocates who argue for private markets to regulate health care costs and encourage pharmaceutical innovation (Bush, 2004).
The problem is that the health care market chooses and pays for many drugs that are unnecessary, overpriced, and inappropriate. Drugs could be made more affordable if payers, prescribers, and patients made better choices.
Increasing competition Despite the resistance to governmental price controls, there are growing feelings that reliance on the market alone is not the solution (Nichols et al., 2004). Under the current patent system for drugs, abusive pricing practices by industry can occur unless patented medications are made to compete against generic and therapeutic alternatives (Newhouse, 2004). Consequently, efforts have been made to increase market competition by enhancing drug choices. One proposed strategy is to weaken patent laws to allow cheaper generic drugs to more quickly enter the market. The problem with this strategy is that it reduces incentives to develop therapeutic innovations (Eisenberg, 2001). An alternative solution is to permit substitution of lower priced, therapeutically similar drugs for more expensive ones. Patents would still be in place but low priced substitutes could be switched for higher priced drugs, regardless of whether they differ chemically, if they achieve the same medical outcomes. The argued advantage of this therapeutic substitution is that it permits competition between therapeutic equals (i.e. me-too drugs) but still gives a competitive advantage in the market for drugs that achieve unique therapeutic benefits. Importation of low priced drugs from Canada and other countries has also been suggested as a way of increasing price competition. In fact, the new Medicare Drug Legislation permits importation, if the Food and Drug Administration (FDA) demonstrates that it can be done safely (something the FDA has been unwilling to do). Nevertheless, some states encourage their citizens to shop for Canadian drugs. Minnesota, Illinois, New Hampshire, Wisconsin and other states direct citizens to purchase at state-approved Canada Internet pharmacy web sites. It is believed that some form of legalized drug importation is inevitable, if no major unforeseen roadblock occurs (i.e. deaths due to counterfeit drugs) (Jill, 2004). The benefits of doing so, however, are expected to be modest (1 percent decrease in total drug expenditures) (Congressional Budget Office, 2004).
Improve prescribing Physicians are responsible for most health care utilization choices, so the health care system should facilitate costeffective prescribing. Managed health care had argued that drug costs can be controlled through the use of drug formulary systems that restrict physician prescribing and insurance coverage to a limited list of essential, cost-effective drugs (i.e. formulary). Formularies are enforced with the use of management tools such as drug utilization review, restricted provider networks, therapeutic and generic substitution, provider benchmarking, and patient costsharing. To get on the formulary, drug companies are forced to offer their drugs at lower prices or be excluded from insurance coverage. However, evidence of the effectiveness of managed care is still limited (Bodenheimer, 2000b; Carroll, 2002; Schulman et al., 1996). Despite the spread of managed care coverage, plans still see double digit increases in drug expenditures. One reason is that many of the tools in the formulary toolbox are rarely utilized (Carroll, 2002). Reasons include public opposition to restrictions on drug therapies, lack of integration between health care providers, and patient demand for the newest pharmaceuticals. In addition, managed care can be profitable under the current ineffective cost control system because most excess drug costs can be passed on to payers (Moran, 2000). Even the Federal Government, the largest single purchaser of prescription drugs, is unwilling to utilize some tools to control drug costs. Critics of the Medicare Prescription Drug Program complain that the Federal government is expressly prohibited from negotiating lower drug prices with manufacturers. Instead, negotiations on drug prices will be made by the individual drug plan providers (e.g. pharmacy benefit managers) to avoid governmental price controls. Rightly or wrongly, this restriction takes away one of Federal Government’s most potent cost management tools. State and Federal governmental politics have also hamstrung the ability of pharmacy benefit managers and other non-governmental purchasers to control drug costs with numerous rules, regulations, and laws that reduce their ability to restrict payment on drugs (e.g. birth control), restrict provider networks (e.g. any willing provider laws), and integrate services (e.g. antitrust laws).
Make better purchases Demands to regulate drug companies are based on the assumption that industry is the problem for high drug expenditures, while calls to increase competition assume that the market needs to be fixed. However, the problems of drug affordability could be resolved simply if better purchases are made at the payer, physician, or patient levels. If more discipline and rationality were encouraged in the process of drug selection and reimbursement, greater value could be achieved with health care dollars spent. Current mechanisms for purchasing drugs encourage industry to increase marketing, charge higher prices for new drugs, and promote utilization (Newhouse, 2004). None of these things are bad if they increase the development and use of necessary drugs.
Involve patients in their drug choices The difficulty in implementing cost control strategies has lead managed care providers to share the risk of pharmaceutical costs with patients through consumer-driven health care. Consumer-driven healthcare is a broad term for strategies designed to empower patients to choose their own health care and share the risks of their costs. Elements of consumerdriven plans include choice of different healthcare options, medical savings and flexible spending accounts, and costsharing through co-payments, coinsurance, deductibles, and reimbursement caps. The goal is to make patients take greater responsibility for their drug and health care decisions. Although cynics might describe consumer-driven healthcare as just another way of saying “consumers pay more for 393
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healthcare” (Kleinke, 2004), it is a cost control strategy that is becoming increasingly important.
reporting and publications can also be conducted to examine issues and trends identified as important by the media. Case studies can explore the direct and indirect significance of major events in the pharmaceutical market. Case studies can describe and explain unique or interesting events such as the implementation of the Medicare Prescription Drug, Improvement Act of 2003. For instance, it is not clear at the moment whether the Act will increase or decrease pressure for change. Although it was meant to solve the problem of affordable drugs for seniors, many details and consequences of the Act are unclear. If seniors judge it favorably, and it slows the rise of inappropriate drug expenditures, pressure on the pharmaceutical market will be relieved. If things go badly, however, renewed calls for price controls and other dramatic solutions will intensify. Content analysis of the media can be used to explore resources mobilized by governmental, political, consumer, business, and professional agencies. It has been used to understand how agencies in the consumer movement mobilized resources to promote their agenda (Smith and Bloom, 1989). In a similar manner, content analysis can be used to examine issues advanced by the movement, the types of groups and individuals promoting change, and the form and direction of the change advanced over time. Finally, researchers can study the changing social control strategies used by industry to resist change. The evolving effectiveness of techniques can be instructive. For example, there is growing resistance to the acceptance of drug company money by individuals and groups. One group called “No Free Lunch” advocates the elimination of pharmaceutical promotion from medical education, practice, and research (No Free Lunch, 2005) If physicians, educators, and researchers widely adopt the solutions proposed by No Free Lunch, the influence of drug companies in resisting change will be diminished.
Focus on value in making drug choices The current environment of medical research and evidencebased medicine results in the conclusion that “more medicine is better” (Kleinke, 2004). This means that even if the most effective drug is chosen for every patient who needs it, pharmaceuticals expenditures will continue to spin out of control unless cost is also factored into the choice. Some argue that payments for drugs should be structured around consideration of value rather than price (Kleinke, 2004; Chernew et al., 2004). That means that payers need to be able to refuse to cover drugs that are not cost-effective (where the cost exceeds the benefit received) (Newhouse, 2004). If patients want to pay for any extra marginal benefit associated with an uncovered drug, they should be expected to pay for all or part of the cost of drugs depending on their impact on health outcomes (Fendrick et al., 2001; Morgan et al., 2004). Methodological and practical issues still exist with the assessment of drug cost effectiveness. For instance, few headto-head comparisons of competing drugs occur in clinical trials making direct cost effectiveness comparisons difficult. Another issue is that cost-effectiveness analysis requires transparency in data, analytical methods, and conclusions along with transparent rules before it can be widely applied in the design of pharmacy benefits (Kleinke, 2004). The problem with transparency is that it opens up methods to immediate criticism by opponents that can be exploited by savvy pharmaceutical marketers. KOLs can be solicited to attack the methods or results in order to water-down the pharmacoeconomic decision-making process.
Managerial implications Issues relating to the affordability of drugs are complex and multifaceted. The descriptive framework presented in this paper can be used as a tool to place developments in the pharmaceutical marketplace into a meaningful context. Conditions listed in Table I describe variables that can be studied to understand the swirl of conflicting information about pharmaceuticals. The two conditions of structural conduciveness and structural are useful but stable characteristics of the broad market environment. Therefore, their value lies in providing groundwork for understanding the other four, more dynamic conditions of the framework. The remaining four conditions from Table I can be studied to monitor major trends and events that impact the pharmaceutical market. Social research methodologies can permit researchers to understand the growth, direction, and character of generalized beliefs by the public about drug affordability. Public opinions about drug affordability are being monitored through polls conducted by media such as the Wall Street Journal, but most are static cross-sectional studies that do not provide much depth about public feelings. More extensive, longitudinal studies of public opinions would provide greater understanding of changes in attitudes over time. Opinion leaders can also be interviewed about their feelings on major issues such as that demonstrated in the community tracking study. This study conducts periodic interviews of households, physicians, and health system leaders in 60 communities and recently found greater support for government intervention in health care (Nichols et al., 2004). Content analyses of media
Conclusion The only certainty in the pharmaceutical market is that change will occur. It will either happen when public demands for change overpower the ability of the pharmaceutical industry to resist it or when industry decides that change is in its best interests. In other words, industry can be proactive in their support of change, or they can wait and let others decide. The economics of the pharmaceutical market are unlikely to spontaneously improve it, so systematic research should be conducted to understand its dynamics. The paper presents a framework for doing so.
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Moynihan, R. (2003), “US seniors group attacks pharmaceutical industry ‘fronts’”, British Medical Journal, Vol. 326 No. 15, p. 351. Murray, A. (2004), “Trade group’s fight against drug review is self-defeating”, Wall Street Journal online, November 30, p. A4. Newhouse, J.P. (2004), “How much should Medicare pay for drugs?”, Health Affairs, Vol. 23 No. 1, pp. 89-102. Nichols, L.M., Ginsburg, P.B., Berenson, R.A., Christianson, J. and Hurley, R.E. (2004), “Are market forces strong enough to deliver efficient health care systems? Confidence is waning”, Health Affairs, Vol. 23 No. 2, pp. 8-21. Nishad, H.M. (2004), “Erbitux’s high price raises difficult questions; ImClone cancer treatment put at $161,000 average; is the extra time worth it?”, Wall Street Journal, Nos 7-22-2004, p. D. No Free Lunch (2005), “Just say no to drug reps”, available at: www.nofreelunch.org (accessed February 25, 2005). Ostrowski, H. (1993), “Pharmaceutical giants tell their story”, The Public Relations Journal, Vol. 49 No. 10, p. 20. Ostrowski, H. (1994), “Pharmaceutical makers step up educational efforts to win support”, Public Relations Review, Vol. 50 No. 3, p. 26. Relman, A.S. (2001), “Separating continuing medical education from pharmaceutical marketing”, JAMA: Journal of the American Medical Association, Vol. 285 No. 15, pp. 2009-12. Schiller, P.L. and Levin, J.S. (1983), “Is self-care a social movement?”, Social Science & Medicine, Vol. 17 No. 18, pp. 1343-52. Schulman, K.A., Rubenstein, L.E., Abernethy, D.R., Seils, D.M. and Sulmasy, D.P. (1996), “The effect of
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Direct-to-consumer prescription drug advertising: concerns and evidence on consumers’ benefit Jaeun Shin KDI School of Public Policy and Management, Seoul, South Korea, and
Sangho Moon SungKyunKwan University, Seoul, South Korea Abstract Purpose – The purpose of this study is to provide an overview of the economic and clinical impacts of direct-to-consumer (DTC) advertising on consumers and physicians. Design/methodology/approach – Controversy around the benefits and concerns associated with DTC advertising are summarized. The sources are sorted based on their position toward DTC promotions: defending or opposing. Two recent works by Woloshin et al. and by Weisseman et al. are discussed in depth to provide the empirical evidence for the impacts of DTC promotions. Findings – Notwithstanding many concerns against DTC advertising, evidence-based papers report that both consumers and physicians are potentially benefited from it. Consumers rate the health-related information contained in DTC advertising as important. Physicians do not feel that they are pressured to prescribe inappropriate medications driven by DTC advertising. Physicians perceive improved communication and education among DTCAinfluenced patients. However, consumers tend to overestimate drug effectiveness when the ads vaguely convey the benefit information and subsequently, seek unnecessary treatments. DTC advertising needs to be required to demonstrate the benefit information using actual data. This will help consumers avoid overuse of drugs. Originality/value – This paper recognizes DTC advertising as a positive force for the public health and at the same time identifies its potential negative effects on the economic and clinical aspects of the health care markets. This can offer practical help policymakers develop the effective regulations on DTC advertisings to reinforce the beneficial outcome while attenuating the potential harms that might take place. Keywords Medical prescriptions, Advertising, Drugs, Consumers Paper type Literature review
Following a public hearing and debate in 1997, the FDA issued a proposal for new guidelines on DTC advertising. This proposal was designed to entitle prescription drug manufacturers to give both the drug’s name and the condition without disclosing all of the product’s risks. The FDA guidelines clarified and relaxed the quantity of “balanced” information that was required in each broadcast advertisement. Yet, advertisers were required to mention important risks and to provide a statement explaining that additional information is available from other sources, such as toll-free telephone numbers and print advertising. The FDA thereby ensured that persons with varying levels of education and technological knowledge would have access to additional, detailed information. DTC advertising is defined as “any promotional effort by a pharmaceutical company to present prescription drug information to the general public in the lay media”[1] (Conti et al., 1999). Among drug companies’ general promotions, direct-to-consumer advertising (DTCA) of prescription drugs is particularly interesting, because it affects patients, doctors, and health care organizations in profound but not always predictable ways. For example, Wilkes et al. (2000) report in a recent survey that more than one-third of respondents reported asking their doctors for information about a drug they had seen or heard advertised, and nearly one-quarter asked for the drug itself. Of these, three-quarters reported that their doctors provided the
An executive summary for managers and executive readers can be found at the end of this issue.
1. Introduction As one of the fastest-growing components in the US health care market, prescription drugs command much attention. Spending on prescription drugs exceeded $150 billion in 2001, which is almost twice $79 billion spent in 1997 (National Institute for Health Care Management, 2002). In 2001, the industry spent more than $19.1 billion in promotional activities. The spending for direct-to-consumer (DTC) drug advertising increased from $1.1 billion in 1997 to about $2.7 billion in 2001, which is as dramatic as the increase in drug companies’ spending on research and development (R&D), from $19 billion to $30.3 billion (US General Accounting Office, 2002). The Emerald Research Register for this journal is available at www.emeraldinsight.com/researchregister The current issue and full text archive of this journal is available at www.emeraldinsight.com/0736-3761.htm
Journal of Consumer Marketing 22/7 (2005) 397– 403 q Emerald Group Publishing Limited [ISSN 0736-3761] [DOI 10.1108/07363760510631138]
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requested prescription (American Pharmaceutical Association, 1997). Since 1997 not only have the number of drugs advertised increased, but so have the drug companies’ advertising budgets directed at consumers. The advertisements have also become far more sophisticated. The consumer is no longer simply provided with information about a pharmaceutical product. Advertisers enlist well-known celebrities to endorse their products (T’Hoen, 1998; Wilkes et al., 2000). Drug companies’ promotional spending leads to exposure, getting messages about prescription drugs to physicians and patients. Physician-oriented marketing consists of detailing (in-person visits by drug company representatives), advertising in journals, and continuing medical education events. Patient-oriented marketing has focused on advertising in various media, including print, broadcast, and online. The position of pharmaceutical companies behind the rocketing increase in the DTCA spending is plain: “We believe that any health information for consumers is beneficial” (Kelly, 2004). However, there have been concerns that this belief can be true only when certain conditions are embedded: the information must be accurate and lead to more and better physician-patient encounters.
believed less effective than expected (Batchlor and Laouri, 2003). Critics counter that promotion has fueled the rise in drug spending, chiefly in the form of inappropriate prescribing caused by ad-induced patient demand or incomplete information influencing physicians’ decisions, or both. As a recent medical journal stated, “The education of patients – or physicians – is too important to be left to the pharmaceutical industry” (Wolfe, 2002). Whether this is a valid conclusion or misguided assertion is one of the main questions around the controversy on DTC advertising. How policymakers should react to this controversy is another issue to be responded at once. This paper provides an overview of recent evidence, both endorsing and defying, for the controversial issue. Using the recent literature to date, we review the economic and clinical impacts of DTC advertising on the consumer, the medical professionals, and the health care system. The leading concerns raised against DTC advertising are that it leads doctors to write unnecessary prescriptions under pressure from patients and that it increases the cost of prescription drugs. Because some critics believe that DTC advertising leads to overuse of costly drugs, it is not surprising that it has come under increasing scrutiny (Bonifazi, 2002; Weissman et al., 2004). Another concern is that if the information on drugs is inaccurate and misguided, the active involvement of patients in the medical decisions which is motivated by DCTAs is likely to end up with serious clinical mistreatment and eventually harm the quality of public health. Recommended solutions to these problems reach from an outright ban on DTC advertising, to removing business expense tax deductions, and to strengthening the FDA’s oversight capacity (Jeffords, 2004). A critic on the role of FDA on regulating DTC advertising is that FDA enforcement against false and misleading advertisements have dropped sharply in recent years, raising concerns over consumer safety (Waxman, 2004).
2. Concerns Of concern is the question about whether the consumers’ exposure to the drug advertising fills a needed educational gap, or it merely promotes inappropriate and unnecessary use. Pharmaceutical manufacturers and other proponents of DTC advertising claim that it is informative and educational: it teaches consumers and physicians about health conditions, new medicines and treatment options. It contributes to increased disease awareness, greater detection and patients’ compliance with medical care. Eventually, it improves the quality of overall public health (Rosenthal et al., 2002; Fintor, 2002). They argue that the FDA’s existing regulatory regime is sufficient to protect the public health and that the government should not mandate unnecessary restraints on commercial free speech. Indeed, there are studies to advocate drug promotion and advertising showing its usefulness as a means of educating the patient, its contributions to the doctorpatient relationship and the beneficial quality outcomes associated with new and, in some cases, high priority diagnosis (Jeffords, 2004). Opponents of drug promotion are concerned about that information conveyed is inaccurate or unbalanced and promotes the inappropriate and unnecessary use of drugs. DTC advertisements may lead to inappropriate patient demands on providers and to overuse of prescription drugs against the doctors’ judgment. In some instances, it may encourage the use of more expensive brand-name medicines by consumers even with cheaper and equally effective alternatives available. Payers are also concerned about the promotion of nonessential or lifestyle drugs, such as drugs to treat nail fungus and sexual dysfunction, which drive up their pharmaceutical spending without providing significant health benefits. According to World Health Organization, even among the drugs most heavily advertised directly to consumers, many are
2.1. Economic aspect: overuse of resources Impact on consumers From a public health point of view, the question we must address is whether it is the best way to spend nearly $3 billion on health communications to the American public. Avorn (2003) states this question in a practical context: even if more patients with high cholesterol or depression seek treatment because of DTCAs for Lipitor or Proza, how many more could be treated if they were instead prescribed the equally effective generic drugs in the same classes, lovastatin or fluoxetine? The publication of the Anti-hypertensive and Lip-lowering Treatment to Prevent Heart Attack Trial (ALLHAT) showed that the older thiazide drugs are both better and cheaper than many newer drugs in the management of hypertension. Then, it raises skepticism on the net public health benefit of costly advertisements and the promotion-driven use of these expensive products. When there is no fervent promotions for generic drugs, DTC advertising for prescription drugs conveys the information that mislead viewers to lean more on the drugs whose prices embed the advertising costs even when they are aware of the availability of cheaper and equally-effective 398
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alternatives. Further, the frequent and repeated watching of DTCAs may enhance consumers’ dependency on drugs. Consumers are likely to demand specific drugs more than necessary and demand it immediately (Bell et al., 1999). Of course, there is counter evidence by Dubois, Alexander, Wade, Mosso, Markson, Lu, Nag and Berger (2002) that growth in a specific drug use, which corresponded to a time period of much pharmaceutical promotion, was associated not with inappropriate use or overuse, but rather with the identification of additional patients in need of that drug. This contends that promotion is not accompanied by excessive use.
of DTC advertising may interest consumers in their health conditions in a regular basis. The alert consumers can take actions to prevent or detect the outburst of a health problem in its early stage before it exacerbates. This entire conceptual and behavioral response of consumers to DTC advertisings can contribute to the improved quality of public health. Well acknowledged of the medical information through DTC promotions, consumers begin to involve in the decisions on the medical treatment. By interacting with the physicians vigorously, the patients’ compliance with physicians order is expected to be enhanced. Subsequently, health outcomes of any medical treatment on patients can be upgraded. However, as Wilkes et al. (2000) argued, there is evidence to suggest that clinical quality of care is harmed by DTC advertising.
Impact on manufacturers Given the economic incentives, pharmaceutical companies may provide a more than optimal amount of advertising from a societal perspective (Carlton and Perloff, 2000; Dubois, 2003). Annual spending on DTC advertising rose gradually in the 1990s and then tripled between 1996 and 2000, when it reached $2.5 billion (Rosenthal et al., 2002). Although DTC spending had been increasing prior to 1997, the FDA guidelines issued in 1997 seem to correspond with the rapid increases in DTC spending that were observed thereafter. In 2000, drug companies spend more than a billion dollars on marketing directly to consumers, up from $55 million in 1991 and represent five times larger amount compared to the spending in 1994 (Wilkes et al., 2000). The driving force for this rise has forced pharmaceutical manufacturers to stimulate consumer demand (Tully, 1993; Hollon, 1999).
Impact on consumers From the DTC advertisement, patients and physicians receive the repeated and consistent education on a drug’s characteristics and its potential role. This is deemed to reduce the variation in therapy, that is, patients with a specific symptom are uniformly prescribed more expensive brandname drugs they are exposed through the ads. Although reduced variability of treatment is often translated to quality improvement, there are challenges that greater uniformity in use of medications may not necessarily appropriate (Dubois, Batchlor and Wade, 2002; Dubois, 2003). Even when we assume that the uniformity in practice render the improved quality of care, whether it is attributable at least in part to the educational role of drug promotion to physicians is neither proved nor refuted (Batchlor and Laouri, 2003). In addition, receiving prescription drugs advertised in broadcast rather than possibly equally effective generic drugs may not be medically correct. Many new drugs are found to offer few advantages over pre-existent drugs. For worse, whose safety profiles are shown to be less well understood (Kessler and Pine, 1990). It is because DTC ads tend to emphasize the positive features of a drug and downplay the negative or unknown aspects. Side effects are typically discussed last or buried in the narrative. Only 35 percent of advertisements invited the viewer to learn more about the drug by obtaining information from the company (Wilkes et al., 2000). Even when the information in DTC advertisements is balanced and accurate, it is still possible that consumers are confused and construct erroneous perceptions of a drug’s effectiveness and safety. Because most of consumers do not have the clinical and pharmacologic background to properly understand and evaluate DTC advertisements, the miscomprehension of drug advertisements is not a surprising phenomenon (Cohen, 1988; Morris et al., 1986). Ultimately, the argument that DTC promotions are educational for the public about medical conditions and their treatments hinges on the quality of drug information available to consumers through advertising.
Impact on insurers People who benefit from the pharmaceuticals often do not pay for them directly. In recent years people with insurance have paid relatively little out of pocket for their medicines. A large proportion of the cost has been borne by their insurers and by purchasers (employers) in the form of insurance premiums. The fact that the consumers who view the advertising and are influenced to consume the drugs do not generally pay for them contributes to the controversy surrounding advertising prescription drugs to consumers. According to the report by American Pharmaceutical Association, of all prescription filled in 1997, 79 percent are paid for at least in part by some type of private or public insurance. Even given the push from managed care and other payers to increase the use of generic drugs, most prescriptions written are still for brand-name medicines. From the economic perspective, the impacts of DTCAs on consumers are threefold: first, the amount of DCT promotions may be socially excessive due to pharmaceutical manufacturers’ desire for high sale and large market share. High and rising spending for advertisements may result in high price of the prescription drugs (price effect). Second, the amount of consumption of prescription drugs may be far above necessary, which is advertising-induced (quantity effect). Lastly, as more drugs are prescribed, the insurance companies are doomed to increase the associated premiums charged on consumers (insurance effect).
Impact on medical professionals With the explosion of DTC drug advertising, physicians begin to experience the change in their relationship with patients. The American College of Physicians feels that DTCA “is not a proper practice” and “undermines the patient-physician relationship” (American College of Physicians-American
2.2. Clinical aspect: inappropriate use of drugs DTC advertising unfolds to consumers what kind of drugs is available in the market and what extent those drugs work. Typically, this sort of information has been monopolized by medical professionals and pharmacists. Continuous viewing 399
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Society of Internal Medicine, 1998). However, Weissman’s et al. (2004) surveys of physicians show a mixed picture. Some physicians appreciate DTCA for increasing patients’ awareness, encouraging patients to seek medical advice for conditions that might otherwise go untreated, and improving doctor-patient communication (Allison-Ottey et al., 2002). Negative views are more frequently reported including concerns that when patients misperceive a drug’s effectiveness, physicians’ time is wasted in correcting the biased view on a drug’s pros an cons. DTC advertisements may challenge physicians’ professional authority in the medical decision as the better-informed consumers intend to pressure their physicians to prescribe drugs either inappropriate in effectiveness or excessive in quantity and to order advertised drugs, perhaps against physicians judgment (Avorn et al., 1988; Petroshius et al., 1995; Lipsky and Taylor, 1997). This active patient involvement encouraged by DTC promotions is a main reason for physicians’ reluctance to embrace the popular drug promotions.
outcomes with and without the drug. In addition, one-word summary to describe the direction of effect was included in the benefit box. For each drug, the efficacy data came from the published article of the randomized trial cited in the FDA drug approval document, which matched the indication and outcome in the advertisement. For this study a total of 203 in-person interviews were conducted with consumers selected from the greater Boston area. Experiments are performed in two ways. Before-after comparisons include the procedure that after people are trained to familiarize with the three elements of interest (the ad, the brief summary, and the drug benefit box), each participant is shown the standard version of the drug advertisements. They are then asked to indicate how they thought effective the drug was using a standardized five-point scale. Participants are then given the benefit box version of the ad and are again asked to rate the drug effectiveness. In the randomized comparison, respondents are asked a few general questions about the benefit box itself such as whether they think the information is important, should be required, and is easy to understand to evaluate consumers’ perceptions on the benefit information. Then they are randomized into two groups. The intervention group is shown only the benefit box version of an ad. The control group sees only the standard version of the ad. Their findings are summarized as: . Most participants in the experiment rate the health information provided by DTC advertising as “very important” or “important”. . Almost all participants find the information in DTC promotions easy to understand. . Most people can understand the data and are influenced by the drug advertising. . Most people interviewed want benefit data in drug advertising. . Perceptions of drug effectiveness drop after respondents saw the benefit box (in before-after compassion). . Perceptions of drug effectiveness are much lower for drug advertising that incorporates the benefit box than for advertising that does not (in randomized comparison).
3. Evidence As the DTC advertising gets widespread and the associated spending proliferates, there is an enlightened discussion to know whether pharmaceutical promotion educates or misleads. The recent debate is focused on whether the potential benefit of educating physicians and consumers outweigh the potential clinic and economic harm of overuse (Kravitz, 2000). Although advocates of DTC advertising argued that there are no objective data showing that DTC advertising results in an inappropriate use of drugs (Ziegler et al., 1995), this argument was not particularly persuasive for opponents since there has been little reinforcing data for the positive impacts of DTC advertisings. Recently, a growing body of research shows that DTC advertising is having some beneficial effect. Those studies claim that consumer-direct advertising raises awareness of diseases, treatment, and specific drugs – and that patients who are exposed to this information are more likely to request specific drugs. In particular, the papers by Weissman et al. (2004) and Woloshin et al. (2004) make indispensable contributions to understanding how DTC drug advertising is perceived by the two most important participants in this policy debate: the physicians and the patients.
The main weakness is pointed out that the findings are based on an experiment over convenience samples. Nonetheless, the study has important qualitative message only extraordinarily powerful counter evidence could defeat. Consumers collect useful information on drugs from DTC advertisings. They have no particular difficulty in understanding the ads. Their perceptions and presumably consumption decisions on drugs are influenced by the ads. In general, the participants are very optimistic about the effectiveness of each drug with the standard form of drug advertising. However, the perceptions of effectiveness drop after seeing the benefit box of actual data. That illustrates the necessity of the drug benefit boxes on its ad to prevent possible illusion among viewers on how well and safely the drug works.
3.1. Consumers’ perception of the DTC advertising effects Woloshin et al. (2004) research question comes from recognizing that DTC advertising offers limited information on the efficacy of the drug. The US Food and Drug Administration (FDA) requires the advertisements to include information about potential harms. In contrast, information on drug benefit is not specifically regulated, and most advertisements assert that drugs do work using vague, qualitative terms rather than presenting actual data (Bell et al., 2000). Lacking from much of the debate surrounding DTCA was empirical evidence of its impact on patients’ health and health care. Woloshin et al. (2004) describe consumers’ evaluation of a “prescription drug benefit box”. The benefit box is a table presenting the proportion of people experiencing various
3.2. Physicians’ perception of the DTC advertising effects Weissman et al. (2004) use a national survey of physicians who reported on recent patient visits during which they discussed advertised drugs. Their goal was to describe physicians’ perceptions of actual health care experiences and 400
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their attitudes toward DTC advertising, and to predict the resulting outcomes as it affects medical practice. The sample was randomly selected from a national list of physicians[2] provided by National Marketing Service. The questionnaire was designed to give physicians equal opportunities to express positive or negative views about DTC advertising. Physicians are asked to report their perception on whether the drug promotion might be beneficial, inconsequential, or harmful. The largest portion of the survey was designed to gather data on the health care events surrounding the most recent visits in which patients initiated discussions about prescription drugs they had seen advertised on any means of multimedia, so called “DTCA visits.” The findings are as follows: . The majority of physicians could not feel that DTC advertising has pressured them to prescribe inappropriate medications. . Patients reported that they benefited from their interactions with physicians related to DTCA, including diagnosis of new conditions and delivery of other health care services that are widely perceived as beneficial. . DTCA discussions occurred in a small proportion of all physician visits (31 percent), but more than half of physicians had participated in at least one DTCA visit in the past week. . Physicians perceived improved communication and education but also thought that DTCA led patients seek unnecessary treatments. . Physicians prescribed the advertised drugs in 39 percent of DTCA visits but also recommended lifestyle changes and suggested other treatments. . Referring to visits when the DTCA drug was prescribed, 46 percent of physicians said that it was the most effective drug, and 48 percent said that others were equally effective.
alternatives are available for the broader population of people with these conditions and there is no consensus on its use. Promotion of Cox-2 inhibitors might provide patients with added clinical benefit, but perhaps at a higher cost. Papers by Woloshin et al. (2004) and by Weissman et al. (2004) provide some validation for the views of both sides of the DTC advertising debate with more emphasis on the supporting evidence that DTC drug advertising appears to be a generally positive force for health. Yet, these studies are critiqued to be limited to draw definitive conclusions about key issues involving inappropriate use of expensive medications and their substitution for cheaper medications that are just as effective. Avorn (2003) claims that the data presented in these two studies do not justify the conclusions that the effects of pharmaceutical promotion are beneficial. Further he argues that some of the data they present suggest a different conclusion. Since the factors initiating a visit to the doctor, the topics discussed between physicians and patients, and the subsequent events are all complex interactions so that it is not straightforward to interpret the results as supporting evidence for the consumers benefit from DTC advertising. Though it is appealing to think that DTCA may alert patients to diagnoses that have been undetected or under-treated by their physicians, it is criticized that among consumers of directto-consumer advertising, those heavily influenced by such DTC advertising were no more likely to have laboratory studies ordered or lifestyle changes recommended. Economic inefficiency of pharmaceutical promoting is severely criticized (Avorn, 2003). Since the impact of promotion is neither uniformly efficient nor inefficient from a societal perspective, it would be hard to implement a rule that would selectively limit “relatively inefficient” promotional efforts. Proposals for stricter regulation may have to consider their potential impact on the desirable outcomes that accrue from pharmaceutical promotion. Beyond the regulatory scope, the federal government, as a major purchaser of pharmaceuticals, may enforce drug makers to disclose information about safety and comparable effectiveness in their DTC advertising as part of any purchasing agreement (Jeffords, 2004). From a market perspective, another approach is to regulate the content of DTC advertising to improve their educational content. The systematic provision of drug benefit data would educate consumers and promote informed decision making by providing easy access to scientific data on drug benefit whenever a drug advertisement appears.
The study confirms that consumers get educational benefit from the drug advertising. The information they gather from the ads enables them to have more productive encounters with physicians. Though DTC advertising induces unnecessary “DTCA visits” and pressures on physicians to prescribe the advertised drugs, these impacts are relatively mild. Physicians are likely to maintain their professional authority over patients in the decisions on the proper medical treatments and prescription of drugs.
4. Discussion and policy implications DTC drug advertising has been controversial since its inception, with proponents and opponents debating the educational value of ads and their impact on the physicianpatient relationship. For areas where it is known that a particular treatment option works well but it is underused, any means to educate and promote is probably beneficial. DTC advertising operates as a beneficial market-expanding mechanism, spreading awareness of newly drug therapies. Perhaps the concern about promotion relates to utilization of prescription drugs in the absence of consensus or strong evidence for proper use. Most troubling is the potential for advertising to stimulate inappropriate demand for drugs. For instance, most would agree that Cox-2 inhibitors greatly help some patients with arthritis and pain. However, less costly
5. Conclusion We review the literature examining one of the most controversial issues in an ever more competitive health care market, the goods and bads of the DTC advertising. By and large, drug promotion is a mixed bag. In some cases it promotes educational benefit for consumers and appropriate use of drugs, but in others, it encourages inappropriate use. When drug promotion is aligned with evidence-based medicine, it may have a positive effect. Recently a growing body of research supports the view that the information presented in DTC advertising informs patients’ decision 401
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making and leads to more productive physician/patient encounters by reducing the information gap between the two. Obviously, public debate should focus on making information about both the benefit and potential side effects clear and comprehensible so that consumers can get maximum value possible from DTC advertising.
Dubois, R.W., Batchlor, E. and Wade, S. (2002), “Geographic variation in the use of medications: is uniformity good news or bad?”, Health Affairs, Vol. 21 No. 1, pp. 240-50. Dubois, R.W., Alexander, C.M., Wade, S., Mosso, A., Markson, L., Lu, J.D., Nag, S. and Berger, M.L. (2002), “Growth in use of lipid lowering therapies: are we targeting the right patients?”, American Journal of Managed Care, Vol. 8 No. 10, pp. 82-7. Fintor, L. (2002), “Direct-to-consumer marketing: how has it faired?”, Journal of the National Cancer Institute, Vol. 94 No. 5, pp. 329-31. Hollon, M.F. (1999), “Direct-to-consumer marketing of prescription drugs: creating consumer demand”, Journal of American Medical Association, Vol. 281 No. 4, pp. 382-4. Jeffords, J.M. (2004), “Direct-to-consumer drug advertising: you get what you pay for”, Health Affairs, pp. W4-253, Web Exclusive. Kelly, P. (2004), “DTC advertising’s benefits far outweigh its imperfections”, Health Affairs, pp. W4-246 (web exclusive). Kessler, D.A. and Pine, W.L. (1990), “The Federal Regulation of prescription drug advertising and promotion”, Journal of the American Medical Association, Vol. 264 No. 18, pp. 2409-15. Kravitz, R.L. (2000), “Direct-to-consumer advertising of prescription drugs”, Western Journal of Medicine, Vol. 173 No. 4, pp. 221-2. Lipsky, M.S. and Taylor, C.A. (1997), “The opinions and experiences of family physicians regarding direct-toconsumer advertising”, Journal of Family Practice, Vol. 45 No. 6, pp. 495-9. Morris, L.A., Brinberg, D., Klimberg, R., Rivera, C. and Millstein, L.G. (1986), “Miscomprehension rates of prescription drug advertisements”, Journal of Current Issues and Research in Advertising, Vol. 9 Nos 1-2, pp. 93-117. National Institute for Health Care Management (2002), “Prescription drug expenditure in 2001: another year of escalating costs”, National Institute for Health Care Management, available at: www.nihcm.org/ spending2001.pdf/ (accessed January 6, 2003). Petroshius, S.M., Titus, P.A. and Hatch, K.J. (1995), “Physician attitudes toward pharmaceutical drug advertising”, Journal of Advertising Research, Vol. 35 No. 6, pp. 41-51. Rosenthal, M.B., Berndt, E.R., Donohue, J.M., Frank, R.G. and Epstein, A.M. (2002), “Promotion of prescription drugs to consumers”, New England Journal of Medicine, Vol. 346 No. 7, pp. 498-505. T’Hoen, E. (1998), “Direct-to-consumer advertising: for better profits or for better health?”, American Journal of Health-System Pharmacy, Vol. 55, pp. 594-7. Tully, S. (1993), “The plots to keep drug prices high”, Fortune, December 27, pp. 120-3. US General Accounting Office (2002), Prescription Drugs: FDA Oversight of Direct-to-Consumer Advertising Has Limitations, Pub. No. GAO-03-177, US General Accounting Office, Washington DC. Waxman, H.A. (2004), “Ensuring that consumers receive appropriate information from drug ads: what is the FDA’s role?”, Health Affairs, pp. W4-256 (web exclusive). Weissman, J.S., Blumenthal, D., Silk, A.J., Newman, M., Zapert, K., Leitman, R. and Feibelmann, S. (2004),
Notes 1 Increasingly, the drug advertisements offer additional information to consumers through the internet. A total of 14 percent of advertisements provided a web site. 2 The list of physicians includes both American Medical Association (AMA) members and non-members and is updated in a weekly basis
References Allison-Ottey, S.D., Ruffin, K. and Allison, K.B. (2002), “‘To do no harm’: survey of NMA physicians regarding perceptions on DTC advertisements”, Journal of the National Medical Association, Vol. 94 No. 4, pp. 194-202. American College of Physicians-American Society of Internal Medicine (1998), Direct-To-Consumer Advertising for Prescription Drugs 9, American College of PhysiciansAmerican Society of Internal Medicine, Philadelphia, PA. American Pharmaceutical Association (1997), Navigating the Medication Marketplace: How Consumers Choose, American Pharmaceutical Association, Washington, DC. Avorn, J. (2003), “Advertising and prescription drugs: promotion, education, and the public health”, Health Affairs, pp. W3-104, Web Exclusive. Avorn, J., Chen, M. and Hartley, R. (1988), “Scientific versus commercial sources of influence on the prescribing behavior of physicians”, American Journal of Medicine, Vol. 73 No. 1, pp. 4-8. Batchlor, E. and Laouri, M. (2003), “Pharmaceutical promotion, advertising, and consumers”, Health Affairs, pp. W3-109, Web Exclusive. Bell, R., Kravitz, R. and Wilkes, M. (1999), “Direct-toconsumer prescription drug advertising and the public”, Journal of General Internal Medicine, Vol. 14 No. 11, pp. 651-7. Bell, R., Wilkes, M. and Kravitz, R. (2000), “The educational value of consumer-targeted prescription drug print advertising”, Journal of Family Practice, Vol. 49 No. 12, pp. 1092-8. Bonifazi, W.L. (2002), “Hard sell: drug makers are spending billions on direct-to-consumer ads, but just how effective are the products?”, Wall Street Journal, March 25. Carlton, D.W. and Perloff, J.M. (2000), “Advertising and disclosure”, Modern Industrial Organization, 3rd ed., Addison Wesley Longman, Reading, MA. Cohen, E.P. (1988), “Direct-to-the-public advertisement of prescription drugs”, New England Journal of Medicine, Vol. 318 No. 6, p. 373. Conti, R., Dorosh, E., Epstein, A.M., Frank, R.G., Huskamp, H.A. and Rosenthal, M.B. (1999), “Prescription drug policy issues in California”, report prepared for the California Health Care Foundation, April. Dubois, R.W. (2003), “Pharmaceutical promotion: don’t throw the baby out with the bathwater”, Health Affairs, pp. W3-96, Web Exclusive. 402
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“Physicians report on patient encounters involving directto-consumer advertising”, Health Affairs, pp. W4-219 (web exclusive). Wilkes, M.S., Bell, R.A. and Kravitz, R.L. (2000), “Directto-consumer prescription drug advertising: trends, impact, and implications”, Health Affairs, Vol. 19 No. 2, pp. 110-28. Wolfe, S.M. (2002), “Direct-to-consumer advertising – education or emotion promotion?”, New England Journal of Medicine, Vol. 346 No. 7, pp. 524-6. Woloshin, S., Schwartz, L.M. and Welch, H.G. (2004), “The value of benefit data in direct-to-consumer drug ads”, Health Affairs, pp. W4-234 (web exclusive).
Ziegler, M.G., Lew, P. and Singer, B.D. (1995), “The accuracy of drug information from pharmaceutical sales representatives”, Journal of the American Medical Association, Vol. 273 No. 5, pp. 651-7.
Further reading Calfee, J.E. (2003), “What do we know about direct-toconsumer advertising of prescription drugs?”, Health Affairs, pp. W3-116 (web exclusive). Lewis, C. (2003), “The impact of direct-to-consumer advertising”, U.S. Food and Drug Administration, FDA Consumer Magazine, March-April.
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Global marketing of lifesaving drugs: an analogical model Oswald A. Mascarenhas, Ram Kesavan and Michael Bernacchi College of Business Administration, University of Detroit Mercy, Detroit, Michigan, USA Abstract Purpose – In light of the desire to bring about an increase in the global distribution of lifesaving drugs at affordable prices, the purpose of this paper is to focus on the global marketing of lifesaving drugs related to the current pandemic of HIV/AIDS. Design/methodology/approach – An analogical model is used to challenge companies to reengineer their products and their strategies to meet the twin objectives of profitability and humanitarianism. Following analogical reasoning, it is argued that an innovative reengineering and redesigning of lifesaving drugs can meet the great needs of developing countries with affordable prices. Findings – The paper proposes an analogical model that treats the marketing of drugs in general and of lifesaving drugs in particular, to the developing countries as a “target problem.” This problem can be resolved by seeking analog “candidate solutions” from other “source industries” that have faced similar problems. Practical implications – In recent decades the pharmaceutical industry and its free market model of marketing drugs have come under sharp criticism both domestically and globally. Their pricing and distribution of lifesaving drugs to developing countries have been severely criticized. This paper helps pharmaceutical firms to meet the need for lifesaving drugs in developing countries. Originality/value – Analogical reasoning as applied to marketing is new. The paper submits that this solution will be more effective in combating the HIV/AIDS pandemic than any current solutions. The paper discusses the strategic marketing implications of the analogical model. Keywords Medical products, International marketing, Developing countries, Acquired immune deficiency syndrome, HIV Paper type Case study
Gavetti and Rivkin (2005), we suggest an alternative “analogical” model that is independent of the aforementioned models or ethical ideologies. The analogical model solves a “target problem” by seeking and evaluating “candidate solutions” from a “source industry” that bears close resemblance to the target industry. Though one could apply the analog model for the purpose of gaining access to any lifesaving drug by those who need them most, our application in this paper is related to the lifesaving drugs for HIV/AIDS. Our thrust is to shape the right conditions so that the poorest of the poor will be able to immediately access the essential medication that they desperately need at affordable prices. We divide this paper into four parts: (1) a description of the “target problem” of the HIV/AIDS pandemic; (2) an exploration of the “source industries and problems” that might offer; (3) a feasible set of “candidate solutions” to the pandemic; and (4) an evaluation of the “target problem solution.”
An executive summary for managers and executive readers can be found at the end of this issue. In the domain of pharmaceutical marketing, the marketing of lifesaving drugs has recently received explosive and critical attention. The pricing and distribution of HIV/AIDS drugs in particular has attracted an even more passionate media blitz and political opposition. Several constituencies from both the developed and the developing countries have accused the pharmaceuticals of price gouging, overextended brand name patent protection, blocking the production of cheaper generic drugs, and for failing to prevent the millions of preventable deaths in the poorest nations who have died and will die from the HIV virus (Kennedy et al., 2004; Kremer, 2002; Rosen et al., 2003). Several conventional solutions have been proposed to solve this problem such as free market-driven pricing (Calfee and Bate, 2004), differential pricing (Danzon, 1997; Danzon and Towse, 2003), socially responsible pricing (Vachani and Smith, 2004), compulsory licensing (Ashcroft, 2001) and pricing using the stakeholder model as a guide (Kennedy et al., 2004). Each of these solutions, however, is ideological, very general and fraught with a bevy of other problems. Based on
We submit that the analogical model that seeks a bilateral case-by-case solution to this pandemic is well within the domain, capabilities and long-term corporate interest of pharmaceutical producers and distributors. Essentially, the analogical approach is a bilateral, market-by-market, drug brand by drug-brand, or even corporation-by-customer (patient) approach. It has been noted that multilateral, general and ideological models have failed to solve the problem of obtaining lifesaving drugs to those who need them most paying prices that they can afford (e.g. Ashcroft, 2001; Garrett and Rosenstein, 2005). Even appeals to pharmaceutical company’s moral responsibilities, ethical
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Journal of Consumer Marketing 22/7 (2005) 404– 411 q Emerald Group Publishing Limited [ISSN 0736-3761] [DOI 10.1108/07363760510631147]
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corporate citizenship and the application of the distributive justice principles to mandate the prevention of preventable deaths have led to an impasse. These models do not generate any effective remedy to the teeming millions of lives at risk today, we need to look at alternative models such as the analogical model to provide useful and doable solutions to the global HIV/AIDS pandemic.
was identified as the cause of the deadly AIDS disease. Although the latency period between HIV infection and fullblown AIDS can last for many years, untreated HIV eventually kills all its victims. HIV is extremely difficult to control or to eradicate after infection has occurred. No one has developed a cure or vaccine for HIV. Several companies have developed drugs that inhibit the ability of the HIV virus to either replicate or enter host cells. The best that can be done at present is to temporarily suppress the virus in the HIV patient, thus delaying the progression of the infection. The drugs that suppress HIV are called anti-retrovirals. Burroughs Welcome introduced AZT known also as Retrovir in 1987, the first drug that suppresses HIV. AIDS now kills more people worldwide than any other infectious disease. Already, more than 22 million men, women and children have died from AIDS since 1981, including three million deaths in 2003 (UNAIDS, 2004). Nearly all of the 42 million currently infected AIDS victims will die from AIDS-related complications within the next two decades (International AIDS Vaccine Initiative, 2005). More than half of these HIV/AIDS victims are women and children. An estimated five million people were newly infected with HIV in 2003. More than 95 percent of all new HIV/AIDS infections are in developing countries where medical and economic resources are very scarce. By 2010, unless the pandemic is drastically controlled, we may register more than 100 million HIV-infected people outside of Africa (Tenet, 2003). Even though the pandemic is predominant in the developing nations, AIDS is now everybody’s business (Rosen et al., 2003). The national, international and global healthsecurity dimensions of the HIV virus are increasingly clear. An effective solution to the HIV/AIDS pandemic, therefore, is in the long interest of all, including USA and the rest of the developed world. We propose the analogical model as an action-oriented, negotiating, holistic and compassionate approach to such tragic human problems. Specifically, we submit that the HIV/ AIDS pandemic needs a case-by-case approach that translates to a patient-by-patient, market-by-market, country-bycountry strategy. Reducing it to a price that “transfers” to all or to an ideological issue oversimplifies the problem.
The analogical model Recently, Gavetti and Rivkin (2005) have emphasized the use of cases or analogies in framing and implementing business strategies. Analogical reasoning (AR) makes efficient use of information, but does not pretend to detail every marketing issue of the problem at hand. AR pays attention to select features of the information, sees patterns in it, and applies the patterns to the present market challenges. For example, the supermarket, a retail format pioneered during the 1930s in the USA, has served as an analogical source to many subsequent strategies. Charlie Merrill relied heavily on his experience as a supermarket executive when he developed the financial supermarket for the Merrill Lynch Co. Later, Charles Lazarus employed the supermarket model when he conceived and designed the Toys R Us in the 1950s. Then, Thomas Stemberg, modeled Staples on the “mini supermarket” Toys R Us. In each of these three instances AR was applied. AR gives novel problems the opportunity of being solved because precedent is used from a similar but different problem set. In short, a previous solution may be transferred to solve a present problem. The value of application of precedent is fully recognized in analogical reasoning. For instance, had Charles Lazarus analyzed all of the interdependent configurations of choices in toy retailing – from marketing to operations, from human resource management to logistics – it is unlikely that he would have discovered a strategy as coherent and effective as the one Toys R Us he eventually adopted. In other words, AR encourages one to think completely “outside of the box”. The analogy of a supermarket gave Toys R Us an effective framework, an integrated bundle of choices that included exhaustive selection, relatively low prices, rapid replenishment of stock, deep investment in information technology and selfservice with shopping carts (Gavetti and Rivkin, 2005). We apply AR as follows: Given a target problem (i.e. the rapid and effective distribution of lifesaving HIV/AIDS drugs to the developing countries whose poor populations need them the most at affordable prices), AR looks for similarity mapping using source industries with their source problem (e.g. other comparable industries that tackled similar problems) that offer candidate solutions (product redesigning and reengineering, wider distribution, close collaboration with locals) to the target problem. Figure 1 outlines the analogical model.
The source industries and problems Thus, the “target problem” is how to rapidly produce and effectively distribute lifesaving HIV/AIDS medication in the developing countries that need them most. The “source industries” are all those industries and corporations that have effectively and profitably resolved the problem of producing and marketing products and services critically needed by the developing nations at affordable prices. In general, the development of most brand name pharmaceuticals takes place in developed countries (e.g. USA, Canada, Western Europe and Japan) and targets health problems that are prevalent in those countries. For instance, there is no effective drug treatment for a number of tropical diseases ravaging the developing countries. The developed countries consume 85 percent of the pharmaceuticals even though they represent less than 15 percent of the world’s population. The need for pharmaceuticals is just as great in the developing world, even though the resources and
The target problem: the AIDS pandemic The HIV/AIDS crisis may well be the worst pandemic since the fourteenth century AD Black Plague. The first case of AIDS (acquired immune deficiency syndrome) was identified in June 1981 at the US Center for Disease Control (CDC) as a rare illness among homosexuals (Gottlieb, 2001). In 1983, the retrovirus dubbed HIV (human immunodeficiency virus) 405
Global marketing of lifesaving drugs
Journal of Consumer Marketing
Oswald A. Mascarenhas, Ram Kesavan and Michael Bernacchi
Volume 22 · Number 7 · 2005 · 404 –411
Figure 1 The analogical model applied to the pharmaceuticals
Serving the poor of the world that are the most affected by HIV/AIDS, moreover, can be a great uncontested business opportunity (Kim and Mauborgne, 2004; Prahalad, 2004). The developing world offers multinational firms an opportunity to find new sources of value and to be profitable at the same time. There is an invisible undiscovered, ignored and/or untapped market waiting at the bottom of the economic pyramid – a market of five billion people who live on less than $2 a day, nevertheless, their annual market exceeds $3.6 trillion. The poor can be profitable (Prahalad and Hammond, 2002). Selling to these poor is a uniquely powerful way of achieving breakthroughs in the production and marketing of products and services (Prahalad, 2004). The markets at the bottom of the economic pyramid can be a sandbox for innovation, a powerful force to rethink costs, scale of operations and use of capital (Prahalad and Hammond, 2002). In the context of HIV/AIDS pandemic, furthermore, the poor desperately need the lifesaving drugs, and may even be able to afford them as long as they are marketed to them in innovative ways (Prahalad, 2004; Prahalad and Hammond, 2002). Let us explore how the “source industries” addressed similar problems in relation to the developing countries.
infrastructure necessary to create, purchase and deliver pharmaceuticals are largely absent. Thus, the developing world is characterized by very strong medical need and very weak economic ability. The markets of the developing nations are underserved in relation to high-tech and quality products. The conventional reasoning is that these markets though large have a very low buying power and therefore, cannot afford lifesaving products and services. In relation to lifesaving drugs, such reasoning implies that “they who cannot pay, die”. New thinking has proved that this conventional reasoning is flawed (e.g. Handy, 2002; Letelier et al., 2003; Prahalad, 2004; Prahalad and Hammond, 2002). The poor are human beings, and as far as lifesaving drugs are concerned, society owes them the access to lifesaving drugs by unsigned social contracts, un-contracted joint responsibility and global distributive justice rather than by patent laws. Not all diseases are self-inflicted, and most of the victims of HIV/AIDS are children of HIV/AIDS infected parents. Coming to the aid of these victims is humanitarianism (Nierle, 2003), a response to the call of respecting human dignity and the right to life of all the peoples of the world. 406
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Oswald A. Mascarenhas, Ram Kesavan and Michael Bernacchi
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Candidate solution types
delivering the exact amount of cement in a timely fashion to each of its big and small customers (McGrath and MacMillan, 2005). Cemex soon started selling homes or parts of them to its customers throughout the world. Cemex created the Patrimonio Hoy program a la carte Grameen Bank. This club signs do-it-yourself homebuilders into a system for building homes one room at a time. Patrimonio customers join into groups of three who take joint responsibility for making weekly payments. Their payments entitle them to quality building materials for a full new room, which are delivered, in general, about the middle of the payments program. The Patrimonio Hoy also counsels customers on designing their rooms, warehousing privileges, rights to delivery, and other rights with preferred local dealers. By summer 2003, the Cemex Patrimonio Club had 39,000 families as members, and over 100,000 had successfully passed through the Hoy. This was a remarkable achievement, given the fact that the largest subsidized Mexican government plan had captured only 4,000 families. The rate of complete payment after the building materials were received, moreover, was 99.6 percent (Letelier et al., 2003). Finally, in India, China, the Philippines, and in other developing countries, single-serve packs of shampoo, detergents, tea, aspirin, matches, pickles, and ketchup are common. Almost 60 percent of the value of all shampoo sold in India is in single-serve packets, sold for a penny a piece. This market was a very profitable business for global corporations such as Unilever and P&G and for local firms as well. Profiting on penny sachets of shampoo or detergents is just a start. The markets at the bottom of the economic pyramid challenge managers to reengineer design, production, quality and marketing.
When Aravind Eye Care in India proposed to offer affordable cataract surgery to the poor of southern India, it knew that its customers could never afford the usual procedure cost of $3,000 prevalent in the developed world. The company, therefore, reengineered the procedure and innovated a process with high quality that decreased the cost from $3,000 to $30 per procedure. Aravind Eye Care is now the globe’s largest eye-care facility. It performs more than 200,000 surgeries a year. The quality of care Aravind delivers is as good as any in the developed world. Debt-free and highly profitable, Aravind Eye Care records an annual return on equity of more than 75 percent. The poor can, indeed, be profitable (Prahalad, 2004). Casas Bahia, a Brazilian retailer, built a highly profitable $2.5-billion-a-year chain of 300 stores primarily in the nation’s shantytowns. This retailer has developed skills to assess the creditworthiness of the poor even though their incomes are uneven and often unreported. The company offers credit at a low cost that enables its consumers to buy, for instance, their favorite kitchen appliance or television. The poor also hunger for credit, good products and technology. Obsolete products and technologies cannot satisfy the bottom of the economic pyramid anymore than it can its top. In the 1890s, the Singer Company showed that the sewing machine could be a great productive asset in poor countries. Knowing that the poor of the world could not afford its then price of $100 and more, Singer devised a credit system for the developing countries whereby it charged customers $5 a month. The ordinary poor women put the machine to good productive and income-earning use, paid off their loans within 20 months, and even applied for second Singer machines. The Singer Company was a roaring success in the developing countries. Similar is the story of Mohammad Yunus, the founder of the Grameen Bank. The philosophy of Grameen was and is that individual customers are not just consumers of credit or mere laborers but “entrepreneurs”. Since 1983, and after five years of successful pilot programs in Bangladesh, the Bank has been extending credit to groups of the poorest of the poor. Grameen does not make home loans to the poor but rather it makes loans to their factories where they exercise their entrepreneurial skills in handicrafts. Grameen has been replicating credit programs in Indonesia, Africa, Latin America, and now throughout South Asia. Grameen achieves repayment rates of 98 percent and more, much higher than what most banks receive on collateralized loans in the developed world. When mainstream markets of the developed world get saturated and competitive strategies focused on differentiation indicate diminishing returns, marketers are best positioned to penetrate sizable emerging markets of the developing countries (Kim and Mauborgne, 2004; Letelier et al., 2003). Cemex, a Mexican company and currently the world’s third largest cement company, used core methods and competencies to sell its premium-priced cement to an increasing number of low-income, do-it-yourself homebuilders who join “patrimony-building” (Patrimonio Hoy) clubs. Like other traditional cement companies, it did not merely sell cement by cubic yards; instead, it changed its business unit to perfect deliveries. The company started
The target solutions In the past, the brand name pharmaceuticals of the developed world have adopted several strategies to market lifesaving drugs to the poor nations but with no significant long-run effects. Some of these strategies include the following. Discount pricing Discount pricing has been a common solution in distributing lifesaving drugs to developing countries. For instance, on intense and increasing pressure from protestors (e.g. the ACT UP coalition), including policy makers from the USA and Europe, Burroughs Welcome (now GlaxoSmithKline or GSK) pared the price by 20 percent in 1987 and again by 30 percent in 1989. Pressure for discounting HIV/AIDS related drugs was sparked in the wake of Fuzeon that was introduced early 2003 by Timeris and Roche at $23,000 price per patient per annum, twice the price of any previous AIDS therapy. With accelerated pressure from international government agencies and especially, from sub-Saharan African countries, GSK, Timeris and Roche and other leading HIV/AIDS drug manufacturers have offered heavily discounted drug prices to developing nations. In the year 2000, manufacturers began talking to various UN agencies about offering AIDS treatments to African nations at “affordable” prices. But price discounts may not be an effective solution for the HIV/AIDS pandemic. For instance, Bristol-Myers Squibb (BMS) reduced the price of two widely used AIDS drugs, ddI 407
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Oswald A. Mascarenhas, Ram Kesavan and Michael Bernacchi
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Analogical candidate solution: innovative production and distribution strategies
and d4T, to $500 or so in Senegal. Senegal has over 80,000 HIV/AIDS patients. Besides drugs, patients need drug therapy, hospitalization and rehabilitation, testing and counseling, prevention and palliative care, which together with the needed drugs could cost well over $2,000 per patient. The median income in Senegal is around $550 per year that makes discount pricing ineffective. Arguably, the case is similar in almost all developing countries where HIV/AIDS is a serious problem. Discount pricing, moreover, could be bound by problems of time and quantity limitations and will most often depend on the capricious goodwill of the pharmaceuticals.
The analogy between source industries and the target industry and between candidate solutions and the target solutions must be real and well considered within a concrete framework (see Figure 1). Both the source and the target industries must: . relate to critically needed products and services such as eye care (Aravind Eye Care), credit for rural entrepreneurship (the Grameen Bank), cement for individual home construction (Cemex), and HIV/AIDS drugs (pharmaceuticals); . relate to developing countries such as India, Bangladesh, Mexico, and Brazil; and . relate to the distribution, prices and logistics that make sense to vulnerable and disadvantaged customers.
Donation of drugs From 1987, Merck has donated its drug Mectizan (ivermectin) to anyone afflicted with river blindness, as long as the drug is needed. Most drugs go to Africa, the Latin American countries and Yemen. In 2002, Merck donated the 250 millionth dose. Pfizer agreed to provide fluconazole to South Africans affected by cryptococcal meningitis. Boehringer-Ingelheim for a limited period of time donated Nevirapene, a drug proven to drastically reduce the motherchild transmission of HIV. To the extent that these donations are voluntary and not coerced, they indicate an assumption of moral urgency and moral responsibility by corporations. But the problem with these handouts is that they offer ad hoc solution, often fraught with dependency conditions, time and quantity based limitations and the contingencies of corporate goodwill. They also spell paternalism and a continuing dependence of developing countries on the generosity of pharmaceuticals for their healthcare planning. For these and other reasons, this donation-solution may not be sustainable or desirable over time, especially when millions of immediately preventable deaths are at stake.
The basic differences in the above examples are that the source industries are the companies related to life enhancing products and services (e.g. eye care, credit, home building, rural entrepreneurship) while the target industry is focused on life saving products and services such as HIV/AIDS drug and therapy. Far from weakening, this difference even reinforces analogical reasoning and urges its quick application for preventing millions of preventable deaths due to HIV/AIDS in the developing countries. That is, if the source industries radically innovated production and distribution for lifeenhancing products services, the target industry should do this all the more for life-saving situations. We now suggest various strategies to this effect. Reengineering the product/service bundle are requirements All the previously mentioned source industry companies must have and did reengineer and redesign their products so that they become relevant and affordable to the market conditions of the developing nations. Rather than just entering, penetrating and exploiting an existing market, the source industry companies must have and did construct the markets from a bottoms-up perspective of developing the credit potential and worthiness of indigent customers by collaborating with local distribution logistics and by delivering a full product/service from the beginning to the end. The target (pharmaceutical lifesaving HIV/AIDS drug) industry must therefore, respond in its most efficient and effective manner. In all of the above examples, the source industry companies were successful in expanding revenues and profits. The pharmaceutical industry will enjoy similar outcomes as long as it can reengineer and redesign the drugtherapy bundle from its start (prevention, testing, and detection) to its end (therapy, control, and rehab). This is possible. For instance, in February 2001, the Indian pharmaceutical company Cipla offered to make generic AIDS medicines available to the governments of developing nations for $600 per patient per year. The same year, Cipla further reengineered its product to decrease that price to $350 to the Nobel Prize-winning healthcare aid agency, Me´decins Sans Frontie`res.
Differential pricing Drug manufacturers engage in differential pricing or price discrimination for patented drugs. That is, they charge higher prices in markets with greater willingness to pay and lower prices in countries with lower buying power (Danzon and Towse, 2003). Higher prices in developed countries often subsidize lower prices (just above marginal costs) in the developing countries. The drug price differential between developed and developing countries may be as much as tenfold. This tenfold price differential has created many problems such as parallel importing. The latter implies parallel pricing and parallel trade, that is, it could well reverse the shipment of drugs from low price markets to high-price markets by unauthorized dealers, thus depressing domestic prices in the USA and Western Europe. South Africa’s 1997 Medicines Act sought to legalize parallel imports and compulsory licensing as part of a campaign to combat AIDS. If markets cannot be separated (as with globalized markets), massive parallel trade can undermine and soon neutralize differential pricing and its benefits. For these and other reasons, we do not support discount and differential pricing nor the donation of drugs as long-run effective solutions to the HIV/AIDS pandemic. We have recourse to the candidate solution suggested by analogical reasoning.
Volunteer licensing Innovative production of drugs in the developing countries can be spurred by voluntary licensing, especially, by brand name pharmaceuticals of the developed world. When patents 408
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Oswald A. Mascarenhas, Ram Kesavan and Michael Bernacchi
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Managerial implications
expire, competing manufacturers are generally permitted (by the 1984 Hatch-Waxman Act) to introduce generic versions of the drugs that quickly drive down the prices of brand name drugs. The 1984 Hatch-Waxman Act does not apply to “biologicals” (drugs that are derived from biological processes) as opposed to those synthesized from simple chemical compounds. Some HIV drugs (e.g. Emtriva) are biologicals. Volunteer licensing should ensure quality generic production in the developing countries with provisions to block parallel trading. In 2001, Cipla, an Indian pharmaceutical company, offered 5 percent royalties to brand-name companies of the West in exchange for licensing agreements to sell generic versions of their medicines in developing nations (Slater, 2003). The prospect of generic competition, however, prompted significant price discounts by such brand-name innovator companies as Bristol-Myers Squibb, GlaxoSmithKline (GSK), Merck, and Pfizer. GSK has allowed South African firms to produce and market its AIDS drugs (Zimmerman, 2001). GSK is the market leader in the USA with 40 percent market share of AIDS related drugs. It also owns 66 percent of all patents for AIDS in 53 African countries. Thus, volunteer licensing, especially by GSK to African countries, can be very effective. It can also stimulate the reengineering and redesigning of the entire lifesaving product/service so that millions of preventable deaths could be rapidly prevented.
Companies like Costco, Sam’s Club, Wal-Mart and other wholesaler institutions encourage consumers to stockpile based on bargain prices and convenience. Selling to poor countries mandates the opposite perspective (Prahalad, 2004). Successful companies that retailed to match the specific needs and capabilities of the poor like Aravind Eye Care, Casas Bahia, Cemex, Grameen Bank, P&G, and Unilever challenge the pharmaceuticals to do the same. The secret here is a strong analogical reasoning being applied creatively, without letting the conventional wisdom determine the process or the outcomes. Pharmaceuticals should be able to recover R&D costs We understand that in the high-technology driven organizations of HIV/AIDS drug manufacturers, it is critical that funds are available to attract, develop and retain the best scientists and to foster a R&D team research that would expedite the new drug development process. In the past, high prices and high profitability of major pharmaceutical firms have enabled this continuous funding. Drug prices typically have been well above the marginal costs of manufacturing and distribution so that profits can quickly recover developmental costs and continue to motivate investments in new and ongoing research (Calfee and Bate, 2004). Studies also indicate that R&D investment averages 12 percent of sales in the pharmaceutical industry and about 21 percent of sales in big R&D pharmaceutical firms (Danzon, 1997). If we factor in the opportunity costs of the funds expended during the long gestation period (average 15 years) that culminates in commercialized drugs, R&D cost estimates could rise to 30 percent of annual sales revenues (Danzon, 1997). During 1993-2002, R&D spending by the top pharmaceutical companies tripled to more than $30 billion annually (Challener, 2003). The target solutions that we suggest must keep the problem of rapid R&D costs recovery in perspective. Serving the poor, indeed, can be profitable (Prahalad, 2004) and help pharmaceuticals to recover R&D costs and more. The analogical model we suggest challenges pharmaceuticals to explore new innovations in reengineering and redesigning their products and services so that the developing nations that need them the most can afford them. In this connection, source industries and their great corporations such as Aravind Eyecare, Casas Bahia, Cemex, Grameen, Singer, P&G and Unilever provide outstanding insights. These corporations did not compromise their products or their quality. Instead, they either reengineered their products to enable mass generic production, or they reinvented their distribution (e.g. redefining business unit, redesigning financing or credit-enabling) systems whereby the poorest of the poor could afford it at the time they needed it. Analogically, the brand name pharmaceuticals need to do this in the context of all lifesaving drugs, and HIV/AIDS drugs in particular.
Cooperation in prevention Drug therapy is not keeping pace with the raging growth of the HIV/AIDS pandemic. For instance, the UN’s goal of treating three million HIV patients by 2005 will not match the eight million new HIV infections that will have occurred by 2005 (Nakashima and Brown, 2004). Unless the average annual increment of five million HIV infections falls sharply, treatment programs will not match the number of people in need (Gayle and Lange, 2004). Prevention, hence, is better than cure and HIV/AIDS remains a preventable condition even in poor nations. For instance, the remarkable decline of HIV infection rates in Senegal, Botswana and South Africa is strongly correlated with fundamental behavior modifications in sexual practices. Several African nations are working on prevention strategies. Uganda has obtained a striking reduction in the incidence of HIV from 21 percent in 1991 to 10 percent in 1998 to 6 percent in 2001 (Low-Beer, 2004). While pharmaceuticals enable generic production of lifesaving drugs, developing countries affected by HIV/AIDS must simultaneously and actively engage their people in prevention modalities that control the spread of the disease. Finally, on obtaining lifesaving medication HIV victims must be educated and encouraged to meticulously follow the entire drugtherapy treatment regimen for an effective control of the disease. The pharmaceuticals that volunteer licensing and accelerate generic production should exert pressure on local governments and on affected people and their families to do their part in preventing the disease by appropriate behavior modifications, and, if affected by the disease, to commit themselves to the full drug regimen and therapy that can avoid premature deaths.
Respect brand name patents We also support brand name patent protection. In general, pharmaceuticals are characterized by high technology, lengthy drug development cycles, large capital investments and high financial risks. Only about 30 percent of all new drugs are 409
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Oswald A. Mascarenhas, Ram Kesavan and Michael Bernacchi
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profitable and generate enough revenues to cover their development costs (Grabowski et al., 2002). Some HIV drugs are difficult and expensive to manufacture. During the 1990s, on average, each new compound cost close to $800 million and these costs have increased each year by more than 7 percent (DiMasi et al., 2003). In the USA, new drug patents extend for 20 years from the filing date. Long clinical trials and the FDA approval process itself totals to 8-15 years of real patent shelf life. Patent protection is essential to the drug industry. But while protecting their patents, brand name pharmaceuticals can also engage in reengineering and redesigning the lifesaving drugs so that they become rapidly and effectively available to the increasing millions of HIV/ AIDS victims in the developing nations. Generic drug manufacturers from the developing countries have copied leading brand names, almost defying the patent protection laws of the developed world. Compulsory licensing as a solution (Ashcroft, 2001) can lead to such defiance, and hence, we do not advocate it. Brazil passed a new patent protection law in 1996 that requires brand name companies to produce patented drugs locally within three years from their introduction in the developed world or face compulsory licensing by Brazilian state-run factories. Brazil enforced this law to leverage price reductions. Apparently it worked, as the incidence of HIV has been reduced by 80 percent since 1996, though this “success” implied an open defiance of the universal patent law. We do not advocate such patent infringement. If price discounting, patent infringement in the developing nations and patent threats in the developed world continue, then the high-tech HIV/AIDS drug industry may not be able to recover R&D costs on the one hand, and allocate resources for future R&D on the other. This would be a loss-loss situation. Furthermore, this may seriously discourage if not paralyze HIV/AIDS research and new drug development in the developed world, thus creating a problem worse than the solution to the pandemic. This is where a caseby-case analogical approach becomes an imperative and effective solution. Analogies are context-dependent. Depending on the context, scholars or strategists may differently establish the analogy between a “target problem”, the “source industry” and the “candidate solution” and thus arrive at different solutions to the target problem. Proper evaluation and validation of the analogy and the candidate solution are needed before decision and implementation. Analogical thinking is independent of ideologies or ethical systems. It does not engage them but may derive support from them. The analogical model can help discussants communicate with one another without unnecessarily getting trapped in the ideological differences and details that underlie, for instance, the stakeholder and capitalist models. It is for these reasons that we invoke the analogical model as a solution-approach to the HIV/AIDS pandemic. AR can be a source of remarkable insight. Business schools typically teach strategy using case studies that provide an abundance of analogies from which students can draw problem-solutions. The best strategy according to consultants is to draw lessons from one industry and apply them to another. AR, however, needs careful causal reasoning. Dangers arise when strategists draw an analogy based on superficial similarity rather than the real causal traits between the target problem and the source problem. We need
breakthrough thinking in the distribution of lifesaving drugs, and AR provides a wonderful opportunity for it. In producing and marketing lifesaving drugs, manufacturers and distributors need to redefine their unit of business analysis (McGrath and MacMillan, 2005). It cannot only be a drug regimen for HIV/AIDS priced at affordable levels to the developing markets. It should be a total patient experience of education, medication, therapy, hospitalization and rehabilitation. The pharmaceuticals need to “immerse” themselves in this holistic experience of ministering fragile patients and patient families whose lives reflect unspoken resignations. This is what Me´decins Sans Frontie`res (MSF) did, and the pharmaceuticals could take this lead. The credo of MSF is humanitarian medicine, one person at a time. MSF puts the individual at the center of its attention and deals with the total patient in a very humanitarian way (Nierle, 2003). MSF is a grand humanistic application of the case-by-case, patient-by-patient analogical approach to the distribution of lifesaving drugs and therapy. Strong humanitarian values can empower pharmaceuticals to reengineer and redesign products and services so as to reach the needy.
Concluding remarks The pharmaceuticals that sell higher priced drugs to the saturated markets of the developed world can expand the market for their products and services by targeting lowincome customers of the developing countries. The developing markets, however, need to be carefully constructed and not simply entered. The analogical model challenges pharmaceutical companies to reengineer their products, the production process and the marketing strategies such that the same product is distributed to a much larger market of the developing countries at prices they can afford, using the twin guideposts of profitability and humanitarianism. To be profitable, firms cannot simply compromise the products they sell to rich countries or to simply give them away. Instead, they must thoroughly reengineer products to reflect the very different economics of the very different developing countries. In this manner greater number will be served with a “greater good” outcome but it will be on a basis of sound business not charity.
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Letelier, M.F., Flores, F. and Spinosa, C. (2003), “Developing productive customers in emerging markets”, by Edward C. Green, California Management Review, Vol. 45 No. 4. Low-Beer, D. (2004), “Review of rethinking AIDS prevention”, Lancet, Vol. 364, July 3, pp. 19-20. McGrath, R.G. and MacMillan, I.C. (2005), “Market busting: strategies for exceptional business growth”, Harvard Business Review, March, pp. 80-91. Nakashima, E. and Brown, D. (2004), “AIDS meeting focuses on prevention: Bangkok conference ends amid debate on progress and funding of methods”, Washington Post, 17 July, p. A13. Nierle, T. (2003), “Humanitarian medicine: one person at a time” available at: www.doctorswithoutborders.org/ publications/ar/i2003/ humanitarianmedicine.shtml Prahalad, C.K. (2004), “Why selling to the poor makes for good business sense”, Fortune, Vol. 150 No. 10, pp. 70-2. Prahalad, C.K. and Hammond, A. (2002), “Serving the world’s poor, profitably”, Harvard Business Review, Vol. 80 No. 9, pp. 48-9. Rosen, S., Vincent, J.R., MacLeod, W., Fox, M. and Thea, D.M. (2003), “AIDS is your business”, Harvard Business Review, February, pp. 81-7. Slater, J. (2003), “India’s drug makers emerge as important industry rivals”, The Wall Street Journal, November 13, p. A3. Tenet, G. (2003), “The worldwide threat in 2003: evolving dangers in a complex world”, available at: www.odci.gov/ cia/pubaffairs/speeches/dci (accessed November 11, 2003). UNAIDS (2004), 2004 Report on the Global AIDS Epidemic, UNAIDS, Geneva. Vachani, S. and Smith, C.N. (2004), “Socially responsible pricing: lessons from the pricing of AIDS drugs in developing countries”, California Management Review, Vol. 47 No. 1, pp. 117-45. Zimmerman, R. (2001), “Glaxo to allow South African firm to produce and market its AIDS drugs”, The Wall Street Journal, October 8.
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Does DTC mean “direct to court”? Donna J. Cunningham and Rajesh Iyer Department of Management, Harley Langdale Jr College of Business Administration, Valdosta State University, Valdosta, Georgia, USA Abstract Purpose – The purpose of this paper is to investigate the changing legal landscape associated with the growth of advertising of prescription drugs directly to the consumer, and makes recommendations designed to assist advertisers in avoiding legal liability based on those advertisements. Design/methodology/approach – This study investigates the phenomenal growth of DTC advertising since 1997, when a profound change in the FDA regulations took effect. These changes permitted advertisers significantly more flexibility in providing information about the advertised drug directly to the consumer. Since then, however, DTC advertising has repeatedly come under attack. A review of the literature, changing law, and other factors, reveals the primary criticisms of DTC advertising, and its tendency to expose pharmaceutical advertisers to legal liability. Findings – The paper recounts the development of the law concerning pharmaceutical advertising, and particularly, the application of the Learned Intermediary Rule. Previously, this Rule operated to shield pharmaceutical companies for liability by passing liability on to the physician who wrote the prescription for the drug. Now, that law is changing, with resulting liability for pharmaceutical advertisers. Practical implications – The study recounts the primary criticisms of DTC advertising, and provides a number of steps that can be taken to help avoid legal liability for pharmaceutical companies that engage in DTC advertising. Originality/value – The study looks at DTC advertising from both a marketing and a legal perspective, and combines those disciplines to draw conclusions helpful to DTC advertisers. Keywords Advertising, Medical prescriptions, Laws and legislation Paper type Viewpoint
and then explain the current state of the law and regulations governing a pharmaceutical company’s advertising of prescription drugs. We conclude the paper by offering recommendations which we hope will provide direction toward a harmonious co-existence between DTC and the laws and regulations governing it, and toward a marketing paradigm which recognizes its customers as “patients” first, and “consumers” second.
An executive summary for managers and executive readers can be found at the end of this issue.
Introduction Direct-to-consumer (DTC) advertising is the subject of intense debate. Proponents argue that it can educate consumers about new treatments, increase treatment for under-diagnosed conditions, and help patients make betterinformed health care decisions. Opponents contend that it could interfere with the physician-patient relationship, raise health care costs, and increase consumption of new, more costly products over older, cheaper, and safer alternatives. Opponents also argue that DTC ads oversimplify complex issues and may confuse consumers who lack specialized medical knowledge (Kaphingst and DeJong, 2004). This article investigates the changing legal landscape associated with the growth of DTC advertising of prescription drugs, and offers some suggestions for ways in which pharmaceutical companies can avoid liability arising from their DTC advertisements. We limit our discussion to prescription drugs, and do not address the sale of over-thecounter drugs. In the next sections, we discuss the success of DTC, and the views of proponents and opponents of DTC,
The success of direct-to-consumer advertising For decades, prescription drug makers promoted their products exclusively to health-care professionals, who were expected to interpret drug information for their patients. But about 15 years ago, partly because of the increase in the number of patients making their own health-care decisions, some manufacturers began to produce ads targeted to consumers. Since then, DTC advertising has become a popular promotional tool (Mehta and Purvis, 2003). The phenomenal growth of DTC advertising is a result of a change in Food and Drug Administration (FDA) regulations in 1997, which have made it easier for pharmaceutical companies to advertise prescription drugs, especially on television. These regulations include permitting advertisers more flexibility in providing information about the advertised drug. For example, the guidelines allowed advertisers to include both the name of the drug and the health condition it treats, along with a statement of major risks and side effects, and a reference to a source of further information such as a toll-free number or web site without requiring a complete
The Emerald Research Register for this journal is available at www.emeraldinsight.com/researchregister The current issue and full text archive of this journal is available at www.emeraldinsight.com/0736-3761.htm
Journal of Consumer Marketing 22/7 (2005) 412– 420 q Emerald Group Publishing Limited [ISSN 0736-3761] [DOI 10.1108/07363760510631156]
This research was partially funded through a summer research grant from the Rae and Lillian Steele Foundation at the Langdale College of Business Administration, Valdosta State University.
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statement of side effects and contraindications (Brumback, 1999). This made television broadcast ads possible (Mehta and Purvis, 2003). Consumer awareness of direct-to-consumer (DTC) advertising has climbed from 75 percent in 2002, to an alltime high 81 percent in 2003, according to data from healthcare and pharmaceutical marketing research firm Market Measures/Cozint. In all, this widespread awareness extends to print and broadcast DTC ads across all 25 disease states tracked by the firm’s annual DTC Monitor. Based on input from more than 6,000 consumers, the study found that sufferers are not only recalling DTC ads for their conditions, but are also increasingly acting on the ads (Gatti, 2003). In particular, doctor contact rates – the percent of consumers who call or visit their physicians as a result of seeing a DTC ad – have risen for the second consecutive year to 23 percent. Moreover, among those patients contacting their doctors, 47 percent specifically request the brand they see advertised (up from 41 percent), while 74 percent of physicians actually comply with these requests (up from 71 percent). Furthermore, 58 percent of DTC-driven discussions lead physicians to write a prescription or provide a sample for the advertised brand – whether or not the patient ever directly asks for the product (Gatti, 2003). “Clearly, DTC is a powerful tool, for driving both awareness and action”, said Sue Ramspacher, senior vice president of consumer services for Market Measures/Cozint.
the physician. Many believe that, in fact, the “principal effect of DTC marketing is to create consumer demand, changing the physician-patient relationship to a physician-consumer relationship” (Hollon, 1999). It is claimed that pharmaceutical manufacturers are using enlightened “health-care consumers” to market their drugs through health-care providers (Hoffman, 1993; Mehta and Purvis, 2003). There is concern whether inappropriate prescribing is leading to people obtaining drugs they should not be getting. “The problem with DTC advertisements for prescription drugs is that patients think that drugs are right for them without knowing the full story of their condition,” says John Bertolini, Director of DDB Remedy. “I believe it puts extra pressure on doctors and possibly inappropriate prescribing.” Not the least of all, DTC advertising’s impact on costs of medications is also a serious consideration (Sudhaman, 2004). However, these conflicting views are only part of the picture. What has changed, perhaps more than anything else, is the way in which the potential buyer of a prescription drug has come to be viewed as a “consumer” rather than as a “patient.” DTC advertising is responsible for that change, and because of that, the laws and regulations governing DTC advertising are changing.
Laws and regulations governing the sale of prescription drugs and medical devices
This is particularly true for magazine campaigns, which generate both higher doctor contact rates and higher prescribing rates than television ads. In spite of magazines’ superior performance, television continues to be the medium of choice for DTC advertisers, due mostly to its broader reach. The gap is narrowing, however, as marketers experience the impressive results that print can deliver (Gatti, 2003).
Drugs are dangerous products As do all products, sales of prescription drugs and medical devices are governed by state product liability laws. The general rule of product liability law is that the manufacturer and seller are liable to an injured consumer for injury caused by a product which is unreasonably dangerous – even if the manufacturer is not negligent in the design or manufacture of the product. Prescription drugs and devices, by their very nature, are dangerous, because they pose risks to patients even if they are used as intended. However, in 1965, the law recognized that:
Proponents and opponents of DTC Proponents of DTC prescription drug advertising believe that the knowledge and information function of such advertising has enormous benefits. It is claimed that DTC advertising “is an excellent way to meet the growing demand for medical information, empowering consumers by educating them about health conditions and possible treatments” (Holmer, 1999). DTC advertising helps to educate consumers about the choices available in treatment, as well as provide information about various health conditions, which may not be widely known or easily recognized by patients. In some cases, patients may not even be aware that treatment exists. Armed with knowledge from DTC advertising, proponents say, consumers may discuss their treatment options with their doctors and be better qualified to help manage their own health care. Patient compliance may also be improved as a result of this interaction. With an aging population and the cultural trend toward increasingly easy access of medical information, DTC advertising is seen by many as appropriate, relevant, and beneficial (Mehta and Purvis, 2003). Opponents, on the other hand, believe that DTC advertising, even when truthful, may not always be completely read, so that consumers will not fully comprehend the side effects and risks associated with a drug’s use. Further, some feel the increased patient involvement in the prescription development process may have unfavorable medical consequences since physicians may be persuaded, even pressured, by patients to prescribe the requested medication even when it is not the first choice of
There are some products which, in the present state of human knowledge, are quite incapable of being made safe for their intended and ordinary use. These are especially common in the field of drugs . . . [B]oth the marketing and the use of [prescription drugs] are fully justified, notwithstanding the unavoidable high degree of risk which they involve. Such a product, properly prepared, and accompanied by proper directions and warnings, is not defective, nor is it unreasonably dangerous (Restatement 2nd of Torts, Section 402A, comment k (1965)).
Therefore, even an unsafe product can be made and sold without liability if it is properly prepared, adequate instructions are given for its use, and warnings are given about any risks, both known and knowable. The sale of prescription drugs and devices is different in another way: before the prevalence of DTC, such instructions and warnings were not given to the patient-consumer directly, but rather to his doctor. The learned intermediary rule Ordinarily, the manufacturer or seller who sells an unreasonably dangerous product is liable if the consumer is injured as a result of using the product. However, in the case of the sale of prescription drugs and medical devices, the Learned Intermediary Rule was developed as an exception to the liability for failure to warn of risks and dangers. Simply 413
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stated, the Learned Intermediary Rule (as to prescription drugs) stands for this proposition:
jurisdiction of the US courts, leaving the plaintiff with no recourse (Hall 2004, p. 239). Under today’s new health care system, the physician or health care provider is not necessarily a “learned intermediary”. Frequently, there is no doctor-patient relationship, or there is no time for the kind of interaction between doctor and patient which is required in order for the doctor to function as a “learned intermediary”. This presents a problem for marketers, because it is on the learned intermediary that marketers rely, and because the learned intermediary may not be able to do what is expected. Now, it depends. Now, the restatement recommends that instructions and warnings be given to: . prescribing and other health-care providers who are in a position to reduce the risks of harm in accordance with the instructions or warnings; or . the patient when the manufacturer knows or has reason to know that health-care providers will not be in a position to reduce the risks of harm in accordance with the instructions or warnings (emphasis provided). (Restatement 3rd of Torts, § 6(d) (1998)).
A prescription drug manufacturer or seller is not liable for failure to warn a patient-consumer directly of the dangers of the prescription drug if the manufacturer or seller adequately warns the patient’s prescribing physician, or other medical professional, (a “learned intermediary”) of the potential risks inherent in the use of its product (American Law Reports, 5th 1, 2005, Vol. 57).
Under the Learned Intermediary Rule, instructions and warnings could be relayed to a patient-consumer’s doctor, rather than directly to the patient himself. Although FDA regulations later came to require direct warnings for some products, such as birth control pills, this was the law in 1966 and until recently, when direct-to-consumer advertising became widely used. Now, drugs are advertised directly to the patient-consumer, bypassing the traditional physicianpatient relationship, and influencing a patient’s health care decisions directly. “The modern medical marketplace focuses on the patient as consumer to an extent unimaginable forty years ago” (Hall, 2004, p. 197). The presumptions underlying the sale and purchase of prescription drugs and devices have changed, and the law is changing with them. By 1998, the Restatement of Law relating to the sale of prescription drugs and devices had modified its advice. No longer would manufacturers and sellers be able to rely completely on the Learned Intermediary Rule to escape liability. No longer would the act of providing information and warnings to a “learned intermediary” automatically exculpate the drug manufacturer or seller from liability. Now, it is recognized that in this changed landscape, warnings given to a learned intermediary might do no good. It is not just pharmacological advertising that has changed. It is much more than that.
In essence, there is now an exception from the Learned Intermediary Rule for direct-to-consumer advertising – an exception to the exception. This new view of the law was adopted by the New Jersey courts in the case of Perez v. Wyeth Labs, 834 A.2nd 1245 [N.J. 1999][1], a case involving the sale of a Norplant medical device, sold by prescription. The court’s well-reasoned opinion recounted that the Learned Intermediary Rule was adopted in 1966, at a time when Dr Kildare was a popular television show, doctors still made house calls, and the relationship between patient and physician was a comfortably close one in which doctor advised patient, and patient believed that “doctor knows best”. But, the court recognized, “for good or ill, that has all changed”. The court posed the question “whether our law should follow these changes in the marketplace or reflect the images of the past”, and concluded:
Changes in the health care system Gone are the days of Dr Kildare and Marcus Welby, M.D., when physicians were autonomous providers of medical advice and counsel in a traditional American health care system. Then, a patient’s health insurer had nothing to do with health care decisions. Today, however, 78 million Americans under age 65 receive health care through managed care organizations (MCOs), which exercise significant oversight of the independent authority of the physicians who treat them. Doctors are now required to provide more services in a given amount of time, leaving less time for each patient, and less time for doctor-patient interaction, during which discussion of medications might take place. “These circumstances allow physicians little time to process warnings provided by drug manufacturers into forms in which they will be heard, understood and heeded by patients” (Hall, 2004, p. 195– 197). Patients without a primary care physician are treated at clinics or in emergency rooms, where they see a doctor once, and not again. Or they are prescribed drugs by a physician they never see, who writes a prescription based on the patient’s answers to a questionnaire, submitted to a web site. Prescription drugs are being increasingly sold outside the usual channels, and without any meaningful doctor-patient relationship on which the patient may make an informed decision. In this situation, no one in the supply chain has any incentive to provide the patient with adequate warnings. The internet pharmacy and physician, if any, may be outside the
“. . .when mass marketing of prescription drugs seeks to influence a patient’s choice of a drug, a pharmaceutical manufacturer that makes direct claims to consumers” should not be relieved of liability for its actions (Perez v. Wyeth Labs, 834 A.2nd 1247 [N.J. 1999][1].
Some states still apply the Learned Intermediary Rule, but others do not. Some states have never adopted the Learned Intermediary Rule. And, some states have banished the Rule by statute, incorporating into the state’s laws a duty to warn, but excluding the Learned Intermediary Rule from the statute, so that the Learned Intermediary Rule cannot be adopted in those states. Increasingly, courts have come to the realization that the Learned Intermediary Rule should not apply when the reasoning behind the Rule does not exist. (Hall, 2004, p. 239) “Precedents drawn from the days of travel by stage coach do not fit the conditions of travel [by automobile] today.” (Hall, 2004, footnote 342, citing MacPherson v. Buick Motor Co., 111 NE 1050, 1053 [NY 1916][2]). What all of this means for the marketer is that an ad that appears in one state may be subject to very different laws in another. The only way to be sure to avoid liability for a failure to warn is for the drug manufacturer or seller who sells to the patient-consumer to provide adequate instructions and warnings directly to the patient-consumer. In essence, the duty to warn which was always originally the duty of the 414
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manufacturer or seller, has returned to the drug manufacturer and seller. Today, a drug manufacturer or seller who sells its products nationwide no longer enjoys a freedom from liability across the nation based on state law. Moreover, there are calls for reform at the federal level. Many members of Congress would like to see stricter policing of DTC messages. And that has prompted talk of the mandatory pre-approval DTC ads. Two bills were recently submitted to Congress for the purpose of further regulating DCT advertising. One was an amendment to the Medicare prescription-drug benefit bill, sponsored by Sen. John Edwards, D-N.C. The second was a proposal to require DTC drug ads to include information on how each drug compared with others on the market. Both were defeated (Thomaselli, 2003). But when Congress begins to suggest legislation, it is time to take a look at the industry’s practices to see if further legislation can be avoided. Even if no new federal legislation is passed, the drug manufacturer must comply with existing federal laws
.
often, these ads are extremely informative, and helpful to the patient-consumer. Examples are ads that mention high cholesterol or diabetes, then direct the viewer to see a physician (Rados, 2004).
FDA compliance requirements Among the requirements for product-claim ads for prescription drug and medical devices are these: . Advertising for prescription drugs must disclose certain information about the product’s uses and risks. . Ads must contain information about risks and benefits in a “brief summary”. . Recognizing the time constraints of broadcast ads, instead of a brief summary, a broadcast ad may include only information about the major risks of the drug, if “adequate provision” is made for the viewer to obtain complete FDA-approved labeling information about the product. . “Adequate provision” refers to the concept of providing ways for consumers to find more complete information about the drug. (Most ads fulfill this requirement by including a toll-free telephone number, or web site address, or advise viewers to see their health care providers.) . Any ad directed at consumers, either print or broadcast, may not make any claim that is not supported by scientific evidence. . Ads may not be false or misleading, or omit material (important) facts. . Each ad must show “fair balance” between the risks and benefits. Risks and benefits must be presented with comparable scope, depth, and detail. . Pre-approval of DTC ads is not required, but a copy of the ad must be submitted to the FDA when the ad begins to run. However, the Agency will preview an ad if requested (Rados, 2004).
The FDA and direct-to-consumer advertising The FDA oversees the advertising of prescription drug products under the Federal Food, Drug, and Cosmetic Act and related regulations. That means the agency must ensure that prescription drug information provided by drug firms is truthful, balanced, and accurately communicated. This is accomplished through a comprehensive surveillance, enforcement, and education program, and by fostering better communication of labeling and promotional information to both health professionals and consumers (Lewis, 2003). Bringing a prescription drug to market requires the approval of the FDA. In addition, the FDA’s Division of Drug Marketing, Advertising and Communications (DDMAC) controls the advertising of prescription drugs. In 1997, the FDA approved a trial run of direct-to-consumer advertising without the necessity of including complete risk information in each ad, as long as “adequate provision” was made for the viewer to get complete information elsewhere. This made television broadcast ads possible. DTC advertising began in earnest. Since then, the FDA has continued to monitor DTC, providing guidances for its use, and regulating the content of ads and labels. Currently, pharmaceutical companies face no limit on the amount of money that can be spent on those promotions. In 2002, drug companies spent a combined $2.5 billion on DTC ads (Thomaselli, 2003). Prescription drug ads may be broadcast on television or radio, communicated over the telephone, or printed in magazines and newspapers. Under FDA regulations, there are three categories of ads: (1) Product-claim ads: . mention a drug by name; . describe the condition it is intended to treat; . describe the risks and benefits of the drug. (2) Reminder ads: . mention a drug by name; . but do not say what it is used for; . need not include risk information. (3) Help-seeking ads: . contain information about a disease, but do not mention a specific drug; . need not include risk information;
FDA guidance and warning letters In 1997, the FDA released a draft “guidance” describing the “adequate provision” requirements, and giving suggested ways the requirement might be met, such as a toll-free telephone number, a reference to print ads, or a suggestion that the patient-consumer see a physician (Nordenberg, 1998). Based on its experience, and on comments from patients, physicians and others, in August, 1999, the FDA released its final Guidance for Industry, Consumer-Directed Broadcast Advertisements, which did not differ substantially from the draft. The final Guidance described the “brief summary” as “information in brief summary relating to side effects, contraindications, and effectiveness (available online at www.fda.gov). The FDA monitors ads as they are presented or released. If the agency finds that a company has broadcast an ad that is false or misleading, the agency may take enforcement actions, beginning with one of two types of letters. “Untitled” letters are usually sent to first time violators, or for less serious violations. “Warning” letters are sent to companies that have violated the law repeatedly, or that have committed serious regulatory violations in their advertising. Such letters typically demand corrective advertisements to ensure that the audience that received the original false or misleading information also receives truthful and accurate information (Rados, 2004). 415
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The FDA is more closely scrutinizing drug ads. Of 18 warning letters sent by the FDA in 2003, seven were for DTC ads. Two were sent within 22 days of each other in the month of August, 2003, to major pharmaceutical companies that were asked to pull their advertising – one to Bristol-Myers Squibb for a misleading print ad for Pravachol, and the other to Novartis for a television spot for Lamisil (Thomaselli, 2003). In reprimanding the pharmaceutical companies for the Lamisil and Pravachol ads, the FDA took issue with what it called misleading claims of efficacy and for targeting illnesses and ailments for which the drugs had not been approved. In the case of the anti-cholesterol Pravachol, the FDA also asked for “prompt dissemination” of corrective ads (Thomaselli, 2003). Public input and FDA experience with DTC led to FDA’s publication of two new draft guidances in February, 2004, one on the brief summary, and one on help-seeking ads (Both may be downloaded from www.fda.gov). A continuing problem the FDA has encountered had to do with the requirements of particular kinds of ads. Rather than use a product-claim ad, which requires the disclosure of risk information, some marketers have been known to combine help-seeking ads with reminder ads in a way that causes the audience to perceive the two pieces as one advertisement. Individually, these ads require no disclosure of risk information. But by the use of this strategy, the patientconsumer knows the name of the drug (pursuant to the reminder ad), while the marketer has avoided disclosing risk information by using a “help-seeking” rather than a productclaim ad. The FDA’s 2004 Draft Guidance bans such a strategy, and mandates that if those two types of ads are used in combination, there must be separation between them – in print ads, by space, and in television ads, by time. With all of these efforts, the FDA’s goal is to encourage more informative, understandable ads. Nevertheless, a broad public perception of escalating problems with DTC continues.
(8) Are not fairly balanced as required by FDA regulations, and actually convey 30 percent more benefit information than risk information (Kaphingst and DeJong, 2004). (9) Present risk information in one continuous segment rather than interspersed with benefit information, thereby reducing its impact (Kaphingst and DeJong, 2004). (10) Did not change tone or speed when conveying risk information, in order to convey different content (Kaphingst and DeJong, 2004). (11) Conveyed “adequate provision” information (where to go for more information) entirely in text form, making it much less understandable to those with limited literacy. (12) Had SMOG scores (SMOG readability formula) that exceeded the maximum eighth-grade reading level recommended for material used with the general public, in all but one of the tested ads. College-level reading ability would be required to read the brief summary information (McLaughlin, 1969; Kaphingst and DeJong, 2004). (13) Showed several factors in the tested ads (Kaphingst and DeJong, 2004), which increased reading difficulty according to the suitability assessment of materials (SAM) method, including: . extensive information was presented which was not essential for consumers (for example, pharmacokinetic data); . lack of key idea summaries; . use of passive voice, complex sentence structure and technical vocabulary; . lack of illustrations for key ideas; . lack of visual and typographic cues to highlight key content; . use of small type, long line lengths and crowded layout; and . presentation of text without sub-divisions (Doak et al., 1996); (14) The typical “brief summary” is not brief, and uses technical language. Usually, it reprints the entire FDA labeling information intended for physicians. Patientconsumers cannot understand it (see Figures 1 and 2). (15) A patient-consumer might not understand the admonition to “tell your doctor what other medications you are taking” to mean that other medications could interact with the advertised medication. Such an approach assumes the patient understands the context, which may not be true (Kaphingst and DeJong, 2004). (16) Drug firms have tended to promote the sale of so-called “lifestyle” drugs, such as Viagara, Rogaine and Botox, which provide higher profit margins, leaving fewer resources devoted to the research and sale of drugs which are more medically necessary (Hall 2004, p. 197). (17) Promoting a drug for a rare but minor condition which arguably, does not warrant drug therapy, and consequently detracting from the efforts to find treatments for conditions which do warrant therapy (Pollack, 2005).
Problems with direct-to-consumer advertising Among the problems encountered with DTC advertising (as reported by Rados (2004), unless otherwise indicated), are those listed below. Critics contend that DTC advertising: (1) Encourages overuse of prescription drugs. (2) Encourages the use of the most costly treatments, instead of less expensive treatments that would be just as satisfactory. (3) May cultivate the belief among the public that there is “a pill for every ill”. (quoting Michael S. Wilkes, M.D.). (4) May contribute to the medicalization of trivial ailments, leading to an even more over-medicated society. (5) May encourage patients to withhold information from their doctors or try to treat themselves. (6) Can affect the dynamics of the patient-physician relationship in negative ways. Some physicians report it time-consuming “trying to talk people out of something they have their hearts set on”(quoting Carol Salzman, MD, PhD). (7) Often masquerade as educational tools, but are more promotion than education; ads provide little information that not biased. 416
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Figure 1 Physician label version
whether the patient actually had a meaningful interaction with a learned intermediary. If no meaningful interaction took place, the rule should not apply, and the manufacturer would be strictly liable (Hall, 2004). This change is not merely an academic one; it directly affects litigation costs. If the Learned Intermediary Rule is an absolute exemption from liability, a manufacturer may be dismissed early in the litigation. But if it is to be a case-by-case, fact-based inquiry, those cases will go to trial, and the jury will decide whether the patient had any meaningful interaction with a learned intermediary. If the patient did not have the benefit of a learned intermediary, and no adequate direct notice of risks was received, the manufacturer will be strictly liable to the patient for his injury, or to his family for his death.
DTC advertising faces mounting criticism, and if it continues to escalate, then DTC ads may be regulated out of any meaningful existence. The FDA is not under a legal mandate to allow DTC and, as it has before, may study the evidence and restrict or restrain the use of DTC for medical reasons that can vary widely. The agency may discover evidence that consumers are receiving many improper medicines from the doctors they pressure for new products. They may find evidence of consumer perceptions of ad claims being incorrect. They may be under political pressure related to any number of public and political reasons to restrict an allegedly wasteful tool that does not produce demonstrable benefits for patients better than a world without DTC (Richardson and Luchsinger, 2004).
The FDA itself says: Assessing DTC advertising is an ongoing process for the FDA. As more research surfaces, the agency will continue to evaluate DTC drug promotion and will take additional measures as appropriate to protect the public health (Rados, 2004).
Recommendations – how to prevent DTC from coming to mean “direct to court”
Attempts to use federal laws to pre-empt state tort laws have failed for decades. There is a strong belief not only that states have the right to govern the health, safety and welfare of their citizens, but also that a patient must have the information necessary to give an informed consent. There are calls to change the Learned Intermediary Rule in those states where it still exists from an absolute exemption from liability to a fact-based case-by-case determination of
It is very easy to see the dilemma faced by the marketing professional, who must find a way to promote a product while disclosing certain information which is contra-promotional, all within certain parameters and, in the case of broadcast media, also within strict time-frames. Yet, this is the task facing today’s professional marketer of prescription drugs. 417
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Figure 2 Consumer-friendly version
How can this be done in a way which protects the patient, and does not jeopardize the future of DTC advertising? First, many of the criticisms of DTC advertising appear to be well-deserved, and would stand as the primary reasons to abolish DTC advertising, or severely curtail it. Those practices which have received universal criticism should be changed first. And this is not to say that all DTC ads are suspect. Many firms do a creditable job and a public service with DTC advertising, but some do not. If the industry does not regulate itself, the government will surely do it. Second, DTC advertising of prescription drugs has the potential to provide many benefits – truly educating the public, making the public aware of under-diagnosed and under-treated illnesses such as high blood pressure and high cholesterol, and helping to remove the stigma associated with certain disorders such as erectile dysfunction and depression (Rados, 2004). But that potential is not being realized. So much opportunity exists to adopt and accomplish these goals, and improve the perception of direct-to-consumer advertising, and the pharmaceutical manufacturers, but that opportunity is being wasted.
If the perception of DTC advertising continues to worsen, you may be sure that new laws and regulations will follow. Even now, the Learned Intermediary Rule can no longer be relied on to shield drug manufacturers from liability for their products. Because the health care system has changed so dramatically, and because DTC advertising has essentially filled the void created by those changes, DTC advertising is at risk. Can it fulfill its promise? The authors offer these recommendations: (1) Always remember that your customer is a “patient” before he is a “consumer.” If you approach advertising with this in mind, you will build credibility – your most important asset in any promotional endeavor. At the same time, you will be protecting your customer, and avoiding liability. (2) Provide full disclosure of relevant information, particularly about the risks of your products, directly to the patient-consumer. Remember that any patient needs enough information about your product to make an “informed consent.” She must know the risks, as well as the rewards. If you do this, you will protect your patient-consumer, and avoid liability. 418
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(3) Make it a primary goal to educate your patientconsumer (Thomaselli, 2005), rather than to merely sell to him. It is a change of perspective which will have many benefits. (4) Make sure your drugs come to market only after full testing. Avoid the kind of disaster brought about by Vioxx and Celebrex, both of which leave their manufacturers facing expensive litigation. Adequate pre-testing to make sure the product was safe would have been less expensive in many ways, not the least of which is the appearance to the public of the rush to market of an unsafe drug in order to make huge profits. (5) Comply with FDA regulations and guidances in all respects; give no cause for further regulation. (6) Comply with all state laws in all respects; avoid losing what protection remains of the Learned Intermediary Rule. (7) Establish and safeguard your company’s credibility: . Avoid the kinds of activities that have led to criticism by doctors, patients and consumer groups. For example, don’t encourage overuse of prescription drugs. Liquor ads tell viewers to “drink responsibly.” Why not include in your ads some cautionary advice like “As with all medication, take it only if you need it,” or something similar. You will be doing a public service. . If you promote new or costlier treatment, advise the patient that other treatment may be available. And tell him that his doctor will be able to advise which will be best for him. . Make sure ads are fairly balanced between benefit and risk information, and do it in a way that calls attention to the risk information (Kaphingst and DeJong, 2004). (8) Bring the physician back into the decision-making process. Make sure your patient-consumer knows that individual health factors may affect a decision to use any medication, and that only her doctor can make this assessment. (9) Direct at least some product ads to the physician or health-care provider. You will be building credibility with both doctor and patient. (10) Be mindful of the patient who does not read well. When preparing “adequate provision” information, be sure that everyone knows where to get more information – even those who do not read well (Kaphingst and DeJong, 2004). (11) Compose your advertising at the recommended level for adults, an eighth grade reading level, and not to the college level. Use sub-titles, bullet points and key ideas to make your ads both more readable and more understandable (Kaphingst and DeJong, 2004) (see samples from FDA Draft Guidance for print ads, included at the end of this paper; Samples may be downloaded from www.fda.gov). (12) Make sure that any admonition to “tell your doctor,” includes the reason why – because this medicine may interact with others. You will be protecting your patientconsumer, and avoiding potential liability (Kaphingst and DeJong, 2004). (13) Your “brief summary” should be just that – brief, written in laymen’s terms, relaying key ideas, and understandable at an eighth grade reading level
(14)
(15)
(16)
(17)
(Kaphingst and DeJong, 2004). Be certain to provide a way for your patient to get access to full information. Do not default to copying the FDA labeling requirement. Your patient-consumers cannot understand it. This increases your risk of liability. Promote medically necessary drugs at least as much as “lifestyle” drugs such as Viagara, Rogaine and Botox. Make sure your priorities are correct. Your credibility depends on it. Avoid creating a disease just to be able to sell a drug. In the eyes of many observers, this is pharmaceutical marketing at its worst, and cannot be justified. Do more than is required by the laws and regulations. Your most important asset is your firm’s credibility. Establish it; maintain it. A company which acts ethically will avoid liability. An industry which acts ethically will avoid new laws and regulations which are almost certain to reduce its options for conducting business, and increase its costs. Create more “help-seeking” ads. Provide the public service of raising awareness of undiagnosed and undertreated illnesses. With medical advice, include in your ads symptoms (Kaphingst and DeJong, 2004) the viewer should watch for, and if he finds them, tell him to see his physician to determine if what he thinks may be true actually is true. Educate your patient-consumer; establish your credibility.
The goal is do all of this, and still sell your product. That is undoubtedly a challenge. The professional marketer must combine marketing skills with compliance dictates in a way that is both appealing and understandable, and conveys all information necessary to any patient-consumer’s informed decision. This will require a new kind of creative thinking. Compliance with creativity The FDA has this to say about one DTC television ad: You may have seen the advertisement: A melodrama of crime and corruption, conflict and emotion, centering on indoor hit men like dust and danger, and outdoor hit men such as pollen and ragweed, all threatening to offend a young and very beautiful woman’s nose. The 45-second broadcast ad covers everything from talking to your doctor to the possible side effects that people can expect. Then the narrator mentions “Flonase”. Entertaining though it may be, the Food and Drug Administration says this promotional piece about nasal allergy relief also has all the elements of a well-crafted, easy-to-understand prescription drug advertisement directed at consumers, and it meets agency requirements for these ads (Rados, 2004).
Direct-to-consumer advertisers are becoming more innovative, and are resorting to tactics more often associated with consumer-packaged goods marketers such as buy-oneget-one-free promotions and money-back guarantees. “It’s a movement toward promotions as a form of marketing, which is different than we’ve ever seen, at least to the consumer”, noted Lynda Maddox, professor of marketing and advertising at George Washington University, who noted that physicians have been subject to promotionally positioned pharmaceutical messaging and samples for some time (Johnsen, 2004). “What you’re seeing is an evolution of the strategy for DTC, as well as the expectation”, commented D. Chauncey Smith, senior brand manager at Glaxo-Smith Kline Consumer Healthcare and spokesman for the Medical Marketing Association. The industry has transitioned from fitting the square peg of stiff, pharmaceutical-oriented marketing into the round hole of a broadcast television format. “It really stuck out”, he said. “The manufacturers and 419
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Volume 22 · Number 7 · 2005 · 412 –420
the marketing personnel have gotten a little more sophisticated in following the consumer model for copy development and what the creative strategies look like” (Johnsen, 2004). However, some new ideas should be used sparingly and only for appropriate products. Remember always that your customer is a “patient” first, and a “consumer” only after that. Achieving the proper tone is everything. Appealing to your audience at the proper level is everything. Offering volume discounts for patients who must take a medication for the rest of their lives makes sense, and helps the patientconsumer. But the offer of “buy-one-get-one-free” will not always be appropriate. Any marketing practice which gives off echoes of the days when hucksters sold snake-oil to unwitting townspeople will raise the calls for an end to DTC advertising. But marketers who maintain credibility and professionalism will thrive. Changing the face of DTC advertising will require many things, not the least of which is creativity. It is the new challenge facing the marketers of direct-to-consumer advertising.
Hollon, M.F. (1999), “Direct-to-consumer marketing of prescription drugs: creating consumer demand”, JAMA: The Journal of the American Medical Association, Vol. 281 No. 4, pp. 382-4. Holmer, A. (1999), “Direct-to-consumer prescription drug advertising builds bridges between patients and physicians”, JAMA: The Journal of the American Medical Association, Vol. 281 No. 4, pp. 380-2. Johnsen, M. (2004), “Are DTC ads for pharmaceuticals too promotional?”, Drug Store News, August 23, p. 96. Kaphingst, K.A. and DeJong, W. (2004), “Market watch: the educational potential of direct-to-consumer prescription drug advertising”, Health Affairs, Vol. 23 No. 4, pp. 143-51. Lewis, C. (2003), “The impact of direct-to-consumer advertising”, FDA Consumer, March-April, p. 9. McLaughlin, G. (1969), “SMOG grading – a new readability formula”, Journal of Reading, Vol. 12 No. 8, pp. 639-46. Mehta, A. and Purvis, S. (2003), “Consumer response to print prescription drug advertising”, Journal of Advertising Research, Vol. 43 No. 2, pp. 194-207. Nordenberg, T. (1998), “Direct to you: television drug ads that make sense”, FDA Home Page, available at: www.fda. gov/ fdac/features/1998/ 198_ads.html Pollack, A. (2005), “Marketing a disease, and also a drug to treat it”, New York Times Online, available at: www.nytimes. com/2005/05/09/business/09avanir.html Rados, C. (2004), “Truth in advertising: Rx drug ads come of age”, FDA Consumer Magazine, July-August, available at: www.fda.gov/fdac/features/2004/404_ads.html Richardson, L. and Luchsinger, V. (2004), “International pharmaceuticals industry: the new marketing paradigm in the United States and unresolved issues of public policy”, The Journal of American Academy of Business, Vol. 5 Nos 1/2, pp. 21-6. Sudhaman, A. (2004), “Writing a prescription for trouble?”, Media Asia, p. 21. Thomaselli, R. (2003), “DTC industry fears FDA preapproval”, Advertising Age, Vol. 74 No. 39, p. 63. Thomaselli, R. (2005), “J&J stance on DTC ads irks rivals”, Advertising Age, Vol. 76 No. 13, p. 1.
Notes 1 Perez v. Wyeth Labs, 834 A.2nd 1247 [N.J. 1999]. 2 MacPherson v. Buick Motor Co., III NE 1050, 1053 [NY 1916] (see Hall, 2004).
References Brumback, N. (1999), “Rx report card”, Brand Marketing, March 12. Doak, C.C., Doak, L.G. and Root, J.H. (1996), Teaching Patients with Low Literacy Skills, J.B. Lippincott Company, Philadelphia, PA. Gatti, J. (2003), “Study: DTC ads are driving strong consumer awareness and response”, Direct Marketing, December 1. Hall, T.S. (2004), “Reimagining the learned intermediary rule for the new pharmaceutical marketplace”, Seton Hall Law Review, Vol. 35, pp. 193-254. Hoffman, J.R. (1993), “Direct to consumer advertising of prescription drugs: an idea whose time should not come”, British Medical Journal, Vol. 31 No. 980, pp. 1301-2.
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Pharmaceutical marketing on the internet: marketing techniques and customer profile Caˇlin Guraˇu Groupe Sup. de Co. Montpellier, Montpellier, France Abstract Purpose – Attempts to investigate the perceived advantages and risks associated with online pharmaceutical transactions, and on this basis, to propose a specific segmentation of consumers. Design/methdology/approach – Analyses the marketing procedures applied by pharmaceutical sites to emphasise the specific advantages and to minimise the perception of transactional risks, as well as the segmentation techniques applied online. Findings – The results of the study indicate the existence of four main consumer categories. This schematic categorisation needs further development, in order to define more precisely the decision taking process and the online shopping behaviour for each customer segment, as well as the level of postpurchase satisfaction. On the other hand, the paper demonstrated that the marketing approach of various online pharmacies is determined by the transactional model applied. Originality/value – The empirical analysis presented in this paper should be complemented by future qualitative study, in order to facilitate a deeper understanding of the factors determining the growing success of online pharmacies. Keywords Pharmaceuticals industry, Consumer psychology, Marketing strategy, Internet Paper type Research paper online pharmacies that offer an online consultation and prescription (Rowland, 2005). However, on the other hand, the practice of prescribing without a physical examination does not violate the US federal law, as long as the sites do not dispense narcotics or other controlled substances. Despite the strong warnings launched by governmental agencies, the online sales of medicines seem to prosper: in the last trimester of 2004, 17.4 million Americans have visited online pharmacies, an increase with 36 per cent compared with the third trimester of 2004 (Rowland, 2005). A study conducted by comScore Networks reported that the main advantage sought by online buyers is price – nearly two-thirds of respondents used online pharmacies to save money. Also, 66 per cent of respondents considered that online pharmacies provide a healthy competition to regular pharmacies (Kerner, 2005). Customer satisfaction with online prescription drug buying is high. A study conducted by eMarketer (2004) indicated that only 10 per cent of the respondents felt less satisfied with buying their drugs online than through a traditional pharmacy, 32 per cent were more satisfied with the experience, and 56 per cent were equally satisfied. In Germany, the trend is similar: in 2004, 1.7 million people have bought medicines over the Internet, which is almost double the figure from previous year (Gfk, 2005). Considering this situation, the present paper attempts to investigate the perceived advantages and risks associated with online pharmaceutical transactions, and on this basis, to propose a specific segmentation of consumers. On the other hand, the study analyses the marketing procedures applied by pharmaceutical sites to emphasise their specific advantages and to minimise the perception of transactional risks, as well as the segmentation techniques used online.
An executive summary for managers and executive readers can be found at the end of this issue.
Introduction The explosive development of the internet in the last ten years has created new commercial opportunities. Despite the strict regulations enforced by national states, the commercialisation of medicines was introduced with success on the web by an increasing number of online pharmacies. The therapeutic products sold on the internet include over-the-counter (OTC) and prescription drugs, as well as alternative remedies, vitamins and nutraceutical supplements (Smith et al., 2002). In most cases, the drugs sold online have lower prices that the offer on the classical market (Sweet, 2001), either because the pharmacies outsource generic drugs from developing countries, or they take advantage of price differentials introduced by health system regulations in different countries (such as the difference between the medicines’ prices in the USA and in Canada). This issue has created a heated debate between national regulatory bodies, consumer groups, and the large pharmaceutical companies. In the USA, The American Medical Association and the Food and Drug Administration (FDA) declared that doctors who issue prescriptions without personally examining the patient are engaging in substandard health care. FDA has strongly recommended consumers to not buy drugs from The Emerald Research Register for this journal is available at www.emeraldinsight.com/researchregister The current issue and full text archive of this journal is available at www.emeraldinsight.com/0736-3761.htm
Online pharmaceutical marketing
Journal of Consumer Marketing 22/7 (2005) 421– 428 q Emerald Group Publishing Limited [ISSN 0736-3761] [DOI 10.1108/07363760510631165]
The internet represents an attractive alternative channel for gathering information and purchasing healthcare products 421
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(Kanungo, 2004; Klein-Fedyshin, 2002). The US and European audience for online health information is substantial and growing. Web sites have become just as important as some offline sources of health information. A study published by Datamonitor in 2002 indicated that 57 per cent of those who looked for health information in the past 12 months consulted internet sources (Datamonitor, 2002). The deficiencies of regular medical services, such as long waiting list, insufficient doctors and poor service quality, have determined people to search for more efficient ways to treat their diseases. For the elderly, ill, handicapped, or isolated consumers, online health information and drug sales with home delivery can be lifesavers. Other customers are attracted by low prices, the virtual anonymity, or the discreet delivery promised by online pharmacies (Spain et al., 2001). The old people are particularly attracted by the transactional convenience of the web. Wilson Health Information (2005) reports that only 10.7 of the people under 50 use online pharmacies as the preferred channel of medication; but for the customers between 50 and 65 years old, the percentage increases to 21.6 per cent, and for people older than 65 years to 23.9 per cent. Pharmacychecker (2004), an organisation specialised in evaluating and validating the profile and the activity of online pharmacies, has identified the following benefits of buying medicines from the web: . Lower prices: lower drug prices in some countries, and lower overhead costs compared to “brick and mortar” pharmacies often result in savings compared to local pharmacy prices. In addition, the Internet offers specialised tools that can provide a quick comparison of prices available in various online pharmacies. . Privacy/anonymity: some customer feel more comfortable purchasing or asking questions online, for certain medication – as for example the so called “lifestyle drugs”, treating obesity, hair loss or male impotence. . Access to more generic drugs: due to difference in patent protection, more generic drugs can be available in foreign countries, for medicines sold on the local market only under branded names. . Prescription not needed: some web sites do not require any prescription for the medication sold, even when the drugs are regulated in the domestic market. Other sites offer to write a prescription based on an online consultation/ questionnaire. . Convenience: for people in remote rural areas, handicapped or old customers, ordering online can be more convenient than the physical visit to a pharmacy, especially when the medicines are delivered by mail at their domicile. . Medical information: some pharmaceutical sites provide rich information about diseases, symptoms and medication, as well as links to other medical resources, such as universities, specialised government agencies and health organisations.
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some online pharmacies do not give their address and/or telephone number, which reduces the possibility to contact them directly or to send a complaint; additional fees are sometimes added to the drug price, such as medical fees, order fees and/or account set up fee; prices can change quickly – online pharmacies reserve the right to update their prices, some very frequently; some online pharmacies do not provide adequate protection for customers’ health: the sale of drugs without a proper prescription, health history or a medical exam, can be sometimes dangerous, due to possible incompatibilities with the patient or with additional medication.
Despite the importance of this phenomenon, there are very few academic studies that analyse the marketing techniques used by online pharmacies, or the profile of customers (Maddox, 1999). Most of the publications published on this topic focus on the legal/regulatory issues (Spain et al., 2001; Sweet, 2001), analyse the impact of online sales on traditional pharmacies (Schmidt and Pioch, 2003), or present isolated cases of online marketing of medicines (Sweet, 2001; Wrobel, 2002). However, the existing interest for this topic is indicated by the rich offer of professional reports, published by market research organisations (Datamonitor, 2002; Gfk, 2005; Wilson Health Information, 2005). In order to fill this empirical gap, the present study focuses on the following research objectives: . To identify the advantages and risks associated with the online commercialisation of medicines. . To investigate the consumers’ perceptions regarding online pharmacies and their activity. . To identify the profile of various consumer segments that would buy medicines online. . To analyse the marketing techniques used by online pharmacies to emphasise the advantages, reduce the perceived risk of internet sales, and segment the market. After the presentation of the research methodology applied to collect and analyse primary and secondary data, the findings are discussed in direct relation to the formulated research objectives. The paper concludes with a summary of research findings and with propositions for future research projects.
Research methodology To answer the research objectives presented above, both secondary and primary data were collected and analysed. In the first stage of the research process, secondary information about the pharmaceutical sector, pharmaceutical marketing, and online pharmacies were accessed using the academic and professional literature, as well as the Internet. This information facilitated the understanding of the main advantages and risks related with online pharmacies, as well as the specific application of pharmaceutical marketing techniques on the internet. In the second stage of the research project, a semistructured questionnaire was applied to 300 UK consumers. The respondents were contacted in the city centre of five large UK cities (60 respondents in each city), by applying a random sampling technique, during May-June 2004. The questions focused on the respondents’ perception about the advantages and the risks related with online pharmacies, as well as the consumer behaviour concerning the purchase of drugs on the
The same organisation has also outlined the associated risks with the online purchase of medicines: . some web sites are not licensed pharmacies; . some online pharmacies do not adequately protect the privacy of customers, selling personal information to third parties; the web line for online payments might not be secured; 422
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internet (type and location of preferred online pharmacies, source of medicines). These data were then processed using the SPSS software for data analysis. Finally, in the third stage of the research project, the sites on 300 online pharmacies were accessed, and the main marketing procedures used by online pharmacies were identified and analysed. The survey also collected data concerning the methods used by pharmaceutical web sites to segment the online population of customers. These data were again analysed using the SPSS package.
The use of online pharmacies services A total of 102 respondents (34 per cent) indicated that they buy or consider buying medicines over the net; 130 answered that they do no want to use the services of online pharmacies (43.3 per cent), and 68 (22.7 per cent) said that they do not know, or “it depends” on particular circumstances. All online buyers were exclusively using the NHS. Table I shows that the localisation of online pharmacies (country of registration) and the country-of-origin of drugs sold on the web, influences the choice of online buyers. The large majority of respondents would only buy online from pharmacies located in economically developed countries that have a clear system of drug regulation and high standards of quality (96.1 per cent of respondents). The respondents are even stricter with the country-of-origin of the medicines acquired online – 97.1 per cent want their drugs to originate from economically developed countries. However, in this case a lower proportion of respondents indicated that they will buy only drugs produced in the UK, since it is common knowledge that the pharmaceutical industry is a global sector.
Analysis and interpretation of data The socio-demographic profile of respondents A total of 173 (57.7 per cent) of the respondents were male and 127 (42.3 per cent) female. 42 respondents were between 18 and 25 years old (14 per cent), 57 between 26 and 35 (19 per cent), 85 between 36 and 45 (28.3 per cent), 60 between 46 and 60 (20 per cent), and 56 older than 60 (18.7 per cent). 86 (28.7 per cent) respondents had a low level of revenue (less than £1000 per month), 134 (44.7 per cent) a medium level (between £1,000 and £2,000 per month), and 80 (26.7 per cent) a high level of revenue (more than £2,000 per month). In order to understand the consumers’ behaviour and attitudes towards online pharmacies, it is important to assess the particularities of the UK National Health System (NHS). In UK, the patients need to register to a medical surgery, which usually has more general practitioner (GP) doctors. These doctors provide a wide range of family health services such as: advice on health problems, vaccinations, examinations and treatment, prescriptions for medicines, and referrals to other health and social services. Most surgeries can also provide family planning/contraception services, care during pregnancy, child health checks and immunisations, health promotion/health screening services, and other minor operations and procedures. The doctors can be seen on appointment, which can be sometimes quite long (three to ten days), depending on the number of patients registered and on specific circumstances. However, there is also an emergency service for special cases. The patients that require specialist consultation need a recommendation from the GP surgery. For cases that are not considered emergencies, the waiting list for a specialist consultation or operation can be as long as 6 to 12 months. People with high revenues can register in a private medical system - The British United Provident Association (BUPA), which has its own network of GPs, specialists, clinics and hospitals. It is also becoming more common for people to travel to Belgium, France, Germany, but also India or China, to have their operations – cataracts, hip replacements, hernias, heart by-pass surgery, gallbladder removal, etc. These operations are performed at reputable hospitals to the same high standard as in the UK, but for less money than is usually charged in the UK private system. Once a GP or a specialist prescribes a treatment, the patient can buy the medicines from a pharmacy, for a fixed, affordable, price per medicine. The difference between the real cost of a drug and the price paid by the patient is covered by the NHS. The GP and the specialist consultation are also covered, entirely or in a high proportion, by the NHS. The majority of respondents were using only the National Health System (262 – 87.3 per cent), and 38 were registered with BUPA.
The perceived advantages and risks of online pharmacies The results presented in Tables II and III indicate that consumer decision on using or not online pharmacies represent a complex, multidimensional process. Both buyers and non-buyers are aware of the advantages and risks involved in online transactions, however, the overall perception of buyers is more positive – proportionally, more online buyers Table I The preferences of online buyers concerning the location of the pharmacy and the country-of-origin of the drugs acquired on the internet
Possible answers UK only EU countries Economically developed countries (e.g. EU countries, US, Canada, Australia, etc.) Any country Total
Localisation of pharmacy n %
Country-oforigin of drugs n %
35 36
34.3 34.4
14 40
13.7 39.2
27 4 102
26.4 3.9 100
45 3 102
44.1 2.9 100
Table II The advantages of online pharmacies perceived by various categories of respondents
Category of respondents/ perceived advantages of online pharmacies Price Convenience Choice Anonymity Information Total
423
Buy online n %
Do not buy online n %
78 76.5 75 57.7 76 74.5 35 26.9 39 38.2 28 21.5 68 66.7 44 33.8 72 70.6 51 39.2 102 100 130 100
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Table III The risks of online pharmacies perceived by various categories of respondents
Perceived risks of online pharmacies Lack of proper license Privacy Security of online payment Additional charges Quality of drugs Superficial prescription Total
Do not buy online n %
Buy online n % 32 28 23 22 18 22 102
Table V Cross-tabulation between the perceived risks of online pharmacies and the gender of online buyers
31.4 27.4 22.5 21.6 17.6 21.6 100
87 86 90 79 89 89 130
Male
66.9 66.1 69.2 60.8 68.5 68.5 100
Price Convenience Choice Anonymity Information Total
%
42 68.9 45 73.8 16 26.2 39 63.9 36 59 61 100
%
36 87.8 31 75.6 23 56.1 29 70.7 36 87.8 41 100
3.242 4.611 5.280 9.139 2.145 6.411
p ¼ 0:072 p ¼ 0:032 p ¼ 0:022 p ¼ 0:003 p ¼ 0:143 p ¼ 0:011
Low Revenue/perceived n % advantages
Medium
Price Convenience Choice Anonymity Information Total
29 76.3 27 71.1 11 28.9 25 65.8 27 71.1 38 100
24 96 17 68 7 28 14 56 14 56 25 100
n
High
n
%
%
25 64.1 32 82.1 21 53.8 29 74.4 31 79.5 39 100
Chi-square test values 8.615 1.965 6.522 2.332 4.054
p ¼ 0:013 p ¼ 0:374 p ¼ 0:038 p ¼ 0:312 p ¼ 0:132
Table VII Cross-tabulation between the perceived risks of online pharmacies and the revenue of online buyers Low Revenue/perceived risks
Chi-square test values 4.895 0.044 9.262 0.510 9.788
17 41.5 16 39 14 34.1 15 36.6 10 24.4 14 34.1 41 100
Chi-square test values
statistical differences between various categories of customers, it can be noted that these advantages are positively considered by a high proportion of high-revenue buyers. Table VII shows that there are no clear trends in the perception of risks by various categories of online buyers. As it is logical, many low-revenue customers are concerned about the security of online payment. On the other hand, the highrevenue customers present the higher percentages concerning perceptions about possible lack of proper license, privacy, quality of drugs, and superficial prescriptions. These responses probably indicate a request for high quality services, for which they might be willing to pay additional charges. The data presented in Table VIII supports the previous findings regarding the preference of various age categories to
Female
n
%
Table VI Cross-tabulation between the perceived advantages of online pharmacies and the revenue of online buyers
Table IV Cross-tabulation between the perceived advantages of online pharmacies and the gender of online buyers
Gender/perceived advantages n
n
%
Lack of proper license 15 24.6 Privacy 12 19.7 Security of online payment 9 14.8 Additional charges 7 11.5 Quality of drugs 8 13.1 Superficial prescription 8 13.1 Total 61 100
perceive benefits and less of them perceive risks, in comparison with non-buyers. It is also interesting to note that significant percentages of non-buyers consider online drug sales attractive because of lower prices (57.7 per cent), and health information (39.2 per cent). The respondents indicated that the decision to buy online medicines involved in most cases a detailed cost (risks)/ benefits (advantages) analysis, determined by their dissatisfaction with the regular medical system. After the first experience with online pharmacies, many people continue to use their services because of the benefices provided and the high level of satisfaction. The female online buyers seem to be more receptive to the advantages offered by online pharmacies (see Table IV), especially concerning price, choice, and information services, but on the other hand, they are also more concerned about the risks of online transactions – the differences between male and female buyers regarding online privacy, security of online payment, additional charges and the superficial prescription of drugs are statistically significant to a level of p , 0:05 (see Table V). These results indicate the need of market segmentation, and the application of differentiated marketing procedure to attract potential customers and maintain the existing ones. The revenue of online buyers is significantly shaping their perceptions about web-based pharmacies (see Table VI) in the case of price advantage – the lower the revenue, the higher is the percentage of people perceiving this advantage; and for the choice offered online – the higher the revenue of respondents, the higher is the proportion of people appreciating the advantage. Although the convenience of online shopping, the virtual anonymity, and the health information published online have not indicated significant
Male
n
Gender/perceived risks
Female
n % n
Lack of proper license 5 Privacy 6 Security of online payment 8 Additional charges 4 Quality of drugs 4 Superficial prescription 4 Total 25
p ¼ 0:027 p ¼ 0:834 p ¼ 0:002 p ¼ 0:475 p ¼ 0:002
424
Medium %
High
n
%
Chi-square test values
20 13 34.2 14 35.9 2.015 p ¼ 0:365 24 10 26.3 12 30.8 0.390 p ¼ 0:823 32 16 16 16 100
6 9 5 6 38
15.8 23.7 13.2 15.8 100
9 9 9 12 39
23.1 23.1 23.1 30.8 100
2.279 0.611 1.365 3.160
p ¼ 0:320 p ¼ 0:737 p ¼ 0:505 p ¼ 0:206
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Table VIII Cross-tabulation between the perceived advantages of online pharmacies and the age of online buyers 18-25
26-35
36-45
46-60
60 <
Age/perceived advantages
n
%
n
%
n
%
n
%
n
%
Price Convenience Choice Anonymity Information Total
14 8 3 7 7 15
93.3 53.3 20 46.7 46.7 100
13 10 4 12 12 17
76.5 58.8 23.5 70.6 70.6 100
24 26 15 27 26 36
66.7 72.2 41.7 75 72.2 100
16 20 10 17 16 22
72.7 90.9 45.5 77.3 72.7 100
11 12 7 5 11 12
91.7 100 58.3 41.7 91.7 100
shop online medicines (Wilson Health Information, 2005). The older respondents (more than 60 years old) have clearly indicated the convenience of online shopping as a significant advantage, but also the availability health information and the low price. Price is also important for the majority of young buyers (18-25 years old), while anonymity is important for a large percentage of middle-age customers (26-60 years old), probably as a result of their active social and professional life. Table IX indicates that although the old customers can represent an important target for online pharmacies, a relatively large percentage of these buyers are concerned about the risks of online transactions. These findings outline the need for friendly customer interfaces and the dissemination of information explaining in detail the functioning of online pharmacies and the mechanism of online transactions.
Chi-square test values 6.005 13.064 6.386 8.431 6.797
p ¼ 0:199 p ¼ 0:011 p ¼ 0:172 p ¼ 0:077 p ¼ 0:147
gave the prescription, in order to facilitate the validation process. Most of these online pharmacies are selling medicines only nationally, many of them representing online alternatives of existing regular pharmacies. (2) Model B. The online pharmacies applying this transactional model ask customers to register, and then to fill in and submit an online questionnaire requiring information about the symptoms/disease of the patient, his medical history, and his/her specific level of responsibility (the patient has to acknowledge that he/ she has submitted truthful information and assumes responsibility for the online order of drugs). Based on the submitted information, a doctor prescribes a treatment, and the online pharmacy sells the drugs to the patient. These pharmacies usually sell internationally, and use a system of additional delivery charges. Although remote medical consultations are legal in many countries, this model was strongly criticised in the professional literature for failing to provide the required standards of healthcare, because of the superficial nature of online consultation (Rowland, 2005; Sweet, 2001). There are also other possible risks associated with this system: it is difficult to verify if the questionnaire was really analysed by a licensed doctor, and sometimes the customers themselves might provide false information in order to obtain a specific medicine. (3) Model C. This transactional model presents the highest level of risk, since the medicines are sold without prescription. These sites clearly indicate that the responsibility for the selection and the purchase of drugs is entirely assumed by the buyer. Usually these pharmacies attempt to limit the perceived risk by stating that they are not selling and delivering any illegal drugs.
The transactional models used by online pharmacies Not all online pharmacies use the same transactional model. The analysis of secondary data Pharmacychecker (2004), combined with the information collected through the survey of 300 web sites of online pharmacies indicated four main alternatives: (1) Model A. The customer is required to send an existing prescription, written by a licensed doctor, either by post, fax, or e-mail. The validity of the prescription is than verified by the pharmacist, who eventually approves the online transaction. After the customer pays using online systems, the medicines are delivered to his/her address. Usually the medicines are delivered directly to the patient, who has to provide a valid identification document and to sign for their receipt. In some cases, the customer is also required to provide the contact address of the doctor who
Table IX Cross-tabulation between the perceived risks of online pharmacies and the age of online buyers 18-25
26-35
36-45
46-60
60 <
Age/perceived risks
n
%
n
%
n
%
n
%
n
%
Lack of proper license Privacy Security of online payment Additional charges Quality of drugs Superficial prescription Total
2 1 2 0 0 2 15
13.3 6.7 13.3 0 0 13.3 100
3 3 2 1 1 3 17
17.6 17.6 11.8 5.9 5.9 17.6 100
13 12 10 9 7 6 36
36.1 33.3 27.8 25 19.4 16.7 100
9 7 4 5 3 4 22
40.9 31.8 18.2 22.7 13.6 18.2 100
5 5 5 7 7 7 12
41.7 41.7 41.7 58.3 58.3 58.3 100
425
Chi-square test values 5.650 6.128 5.177 16.454 18.826 11.005
p ¼ 0:227 p ¼ 0:19 p ¼ 0:27 p ¼ 0:002 p ¼ 0:001 p ¼ 0:027
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They are selling internationally, and their headquarters are located in developing countries. (4) Model D. These pharmacies sell only non-prescription drugs, including vitamins, dietary supplements and homeopathic remedies. The online customers can freely select and order the remedies, although the quantity of drugs that can be purchased in one transaction is limited. Despite the lower risks presented by these medicines, there can still have secondary negative effects, which are usually presented in detail by most of these web sites, in order to offer the customer an informed choice. Many of these outlets sell internationally, although there are cases of sites that distribute only nationally or regionally, to avoid possible incompatibilities between different national regulations regarding OTC drugs.
respondents, maybe because of their clear conformity with safety standards and regulations. Among all categories of respondents, the younger customers (18-25 years old) have shown the stronger willingness to buy from Model C pharmacies (53.3 per cent) (see Table XII). Marketing procedures applied by online pharmacies The mix of perceived advantages and risks associated with online medical transactions indicates the necessity of an active marketing strategy. The online pharmacies can increase the acceptance of their offer and transactional model by providing on their web sites information that, on one hand, explain the selling process and provide guarantees – reducing the perceived risks, and, on the other hand, that emphasise the advantages of an online transaction. These organisations can also increase the effectiveness of their communication strategy, by creating procedures for an effective segmentation of the online market. Table XIII presents the information categories identified on the surveyed web sites, that can reduce the perceived risk of online transactions. All types of online pharmacies provide contact information, although the level of detail differs: in some cases only a brief postal address and/or an email address is published online, while the majority of sites include also the telephone and the fax number. A large percentage of Model A pharmacies publish a privacy policy, information about the security of payment, and about their licence. At the other extreme, many “no prescription needed” sites attempt to reduce the perception of risk by providing information about the source of their drugs. Many Model B sites are also characterised by a high level of transparency and details, that try to reassure customers about the feasibility of remote medical consultations. In order to enhance the perceived advantages of online transactions, the sites publish information concerning price, convenience, choice, and discreetness of service (see Table XIV). In addition, many sites using the transactional models B, C and D, that have the highest level of potential risks, provide testimonials of existing customers to reinforce their positive messages. The advantage of price is not particularly emphasised by Model A pharmacies since in some case the range of prices proposed is quite similar with the regular system; however, they try to outline the convenience of shopping online. Price, convenience and discreetness of service are used as main arguments by Model B and C pharmacies, some of them being specialised in “lifestyle pharmaceuticals”, such as Viagra for erectile dysfunction, Propecia for hair loss or Xenical for obesity (Sweet, 2001). The influence of the transactional model is statistically significant for all categories of information presented online. The segmentation techniques applied by online pharmacies are strictly determined by the specific characteristics of the internet (see Table XV). Since the customer has the control over the information that he/she accesses online, the procedures applied are self-segmentation mechanisms, such as lists of diseases or drugs, that can be selected by the internet user, or mini-search engines. The large majority of sites are using a combined segmentation, applying sometimes two or three different criteria, such as gender, age (by presenting gender-specific or age-specific treatments), and diseases. Overall, the system applied on most sites includes a first list of diseases, and then,
Table X presents the preference of male and female customers for various transactional models (the respondents were required to indicate all the models that they use or would use to buy drugs online). The male customers prefer in a slightly higher proportion the first transactional model (and the less risky one) than the female respondents. On the other hand, a very high percentage of women are inclined to buy drugs from non-prescription outlets (85.4 per cent), which can be explained by their high consumption of dietary and natural remedies. The higher percentages of online buyers in all transactional models are the low-revenue customers, while the highrevenue buyers clearly prefer less the web sites selling medicines without prescription (only 17.9 per cent of this category of respondents indicated that they would buy from this type of outlets) (see Table XI). The older customers prefer in large numbers the online pharmacies using models A, B and D, but they show a clear avoidance of the “no prescription required” model. Overall, the OTC pharmacies seem to be preferred by many
Table X Cross-tabulation between the transactional models of online pharmacies and the gender of online buyers Gender/online model
n
Send prescription Online consultation and prescription No prescription required OTC medicines Total
41 27 18 41 61
Male % 67.2 44.3 29.5 67.2 100
n
Female %
25 23 14 35 41
61 56.1 34.1 85.4 100
Table XI Cross-tabulation between the transactional models of online pharmacies and the revenue of online buyers Revenue/online model
Low n %
Medium n %
n
High %
Send prescription Online consultation and prescription No prescription required OTC medicines Total
18 72 14 56 11 44 22 88 25 100
24 63.2 18 47.4 14 36.8 27 71.7 38 100
24 61.5 18 46.2 7 17.9 27 69.2 39 100
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Table XII Cross-tabulation between the transactional models of online pharmacies and the age of online buyers 18-25
26-35
36-45
46-60
60 <
Age/online model
n
%
n
%
n
%
n
%
n
%
Send prescription Online consultation and prescription No prescription required OTC medicines Total
12 5 8 14 15
80 33.3 53.3 93.3 100
9 11 7 13 17
52.9 64.7 41.2 76.5 100
20 16 11 24 36
55.6 44.4 30.6 66.7 100
16 10 5 15 22
72.7 45.5 22.7 68.2 100
9 8 1 10 12
75 66.7 8.3 83.3 100
Table XIII Cross-tabulation between the transactional models of online pharmacies and the information categories presented online to reduce the perceived risk Online model/information
n
Contact information Privacy policy Payment security Licence pharmacy Licence doctor Source of drugs Professional certification Total
86 84 81 75
Model A % 100 97.7 94.2 87.2
147 127 139 114 84 104 5 147
N/A 35 6 86
Model B %
n
40.7 7 100
Model C %
n
100 86.4 94.6 77.6 57.1 70.7 3.4 100
18 10 9 8 3 14 0 18
100 55.6 50 44.4 16.7 77.8 0 100
Model D %
n 49 27 38 32
100 55.1 77.6 65.3 N/A
26 11 49
53.1 22.4 100
Chi-square test values 50.16 41.527 19.182 10.54 23.701 21.26
N/A p , 0:0001 p , 0:0001 p , 0:0001 p ¼ 0:001 p , 0:0001 p , 0:0001
Table XIV Cross-tabulation between the transactional models of online pharmacies and the information categories presented online to enhance the perceived advantages Online model/advantages
n
Price Convenience Choice Testimonials Discreetness Total
43 64 23 26 12 86
Model A % 50 74.4 26.7 30.2 14 100
n
Model B %
136 121 78 115 124 147
n
92.5 82.3 53.1 78.2 84.4 100
18 15 15 16 17 18
Model A n %
Gender Age Disease Medicine Total
14 2 67 12 86
16.3 2.3 77.9 13.9 100
Model B n % 38 17 123 6 147
25.8 11.6 83.7 4.1 100
Model C n %
Model D n %
3 0 7 11 18
21 8 34 15 49
16.7 0 38.9 61.1 100
100 83.3 83.3 88.9 94.4 100
n
Model D %
34 16 36 36 25 49
69.4 32.7 73.5 73.5 51 100
Chi-square test values 62.366 46.781 37.905 62.471 122.137
p , 0:0001 p , 0:0001 p , 0:0001 p , 0:0001 p , 0:0001
Concluding remarks
Table XV Cross-tabulation between the transactional models of online pharmacies and the criteria used for market segmentation Online model/ segmentation
Model C %
The popularity of online pharmacies represents an intriguing phenomenon. On one hand, most people acknowledge the risks of online transactions, but on the other hand a high proportion of customers that buy drugs online declare a high level of satisfaction. As any commercial activity, the success of online pharmacies is directly related to their capacity to segment the market, understand the customers and satisfy their needs. The popularity of professional market reports that analyse consumer preferences and profiles prove the importance of this marketing approach. This paper attempted to investigate and present the perceptions of UK customers about the advantages and the risks of online health transactions, and the marketing procedures applied by online pharmacies to modify and/or reinforce these perceptions. The information presented permits the definition of specific consumer profiles: . Consumer A: young, with low revenues, less interested in online service quality and less sensitive to online risks, but concerned about price and online payment security.
42.8 16.3 69.4 30.6 100
for each disease, a range of specific drugs. A large majority of “no prescription needed” sites offer only a list of drugs or a mini-search engine, since the customer is supposed to select him/herself the medication. On the other hand, almost all sites require customer registration, a procedure that collects general sociodemographic and medical information about buyers, which can be eventually used for database analysis and segmentation. 427
.
.
.
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Consumer B: middle-aged, with good purchasing power, requiring privacy and discreetness of delivery. Consumer C: middle-aged, high-revenue customer that requires a high service quality, anonymity, rich online information and choice. Customer D: old-aged, with low or medium purchasing power, attracted by the convenience of online shopping and home delivery, but highly concerned about online transaction risks.
might be a stricter regulation of medicines sales at transnational level, combined with better customer education.
References Datamonitor (2002), Who is Looking for Health Information Online ?, Datamonitor, London. eMarketer (2004), “Only 10% of respondents felt less satisfied”, eMarketer, available at: www.emarketer.com/ news/article.php?1002721& trackref ¼ edaily (accessed April 2005). Gfk (2005), The 2005 Online Shopping Survey, Enigma Gfk, Nu¨rnberg. Kanungo, R.P. (2004), “E-commerce in the pharmaceutical industry: threshold of innovation”, Management Research News, Vol. 27 No. 8, pp. 98-108. Kerner, S.M. (2005), “Online pharmacies continue to grow”, available at: www.clickz.com/stats/ sectors/healthcare/ article.php/ 3495456 (accessed April 2005). Klein-Fedyshin, M.S. (2002), “Consumer health informatics – integrating patients, providers, and professionals online”, Medical Reference Services Quarterly, Vol. 21 No. 3, pp. 35-50. Maddox, L.M. (1999), “The use of pharmaceutical web sites for prescription drug information and product requests”, Journal of Product & Brand Management, Vol. 8 No. 6, pp. 488-501. Pharmacychecker (2004), “About online and mail-order pharmacies: what you need to know”, Pharmacychecker, available at: www.pharmacychecker.com/ aboutop.asp (accessed April 2005). Rowland, C. (2005), “Buyers flock to lax online pharmacies”, The Boston Globe, 10 April, available at: www. ecommercetimes.com/ story/49091.html (accessed April 2005). Schmidt, R.A. and Pioch, E.A. (2003), “Pills by post? German retail pharmacies and the internet”, British Food Journal, Vol. 105 No. 9, pp. 618-33. Smith, M.C., Kolassa, E.M., Perkins, G. and Siecker, B. (2002), Pharmaceutical Marketing: Principles, Environment, and Practice, Pharmaceutical Product Press, Binghamton, NY. Spain, J.W., Siegel, C.F. and Ramsey, R.P. (2001), “Selling drugs online: distribution-related legal/regulatory issues”, International Marketing Review, Vol. 18 No. 4, pp. 432-49. Sweet, M. (2001), “Policing online pharmacies: bioterrorism meets the war on drugs”, Duke Law and Technology Review, No. 41, available at: www.law.duke.edu/ journals/dltr/ articles/ 2001dltr0041.html (accessed April 2005). Wilson Health Information (2005), Age Segmentation Report, WHS, New Hope, PA. Wrobel, U. (2002), “‘Not in front of your mother!’: online marketing for pharmaceutical products addressing taboo topics”, Qualitative Market Research: An International Journal, Vol. 5 No. 1, pp. 19-27.
This schematic categorisation needs further development, in order to define more precisely the decision taking process and the online shopping behaviour for each customer segment, as well as the level of post-purchase satisfaction. On the other hand, the paper demonstrated that the marketing approach of various online pharmacies is determined by the transactional model applied. Model A pharmacies emphasise their compliance with national health regulation standards, and propose an alternative channel of drug distribution, that for specific categories of customers might be more convenient than the regular pharmaceutical system. Considering that often these pharmacies have also a physical presence in the pharmaceutical distribution, their strategy can be considered as a diversification/development of classical retail channels, to a “bricks and clicks” model. On the other hand, the pharmacies that offer remote consultations, or that do not require any medical prescription, attempt to create an image of transparency and honesty by providing detailed information about the online transaction system, security of payment, and origin of drugs. Finally, the pharmacies specialised in OTC remedies emphasise the low prices and the rich choice offered by their sites. The present study has a number of limitations, determined by its exploratory nature. The number of people and online pharmacies included in the study were relatively small, although the representativity of the sample permits the generalisation of findings. The profiles of online customers presented in this paper is valid only for the UK market, since national and cultural conditions can determine specific customer behaviour and preferences. From this perspective, the findings can be used as a starting basis for future research on this topic. A replication of this research methodology in other countries can provide an opportunity for comparison studies at international and transnational level. On the other hand, the quantitative analysis presented in this paper should be complemented by qualitative information, in order to facilitate a deeper understanding of the factors determining the growing success of online pharmacies. Despite the risks created by some illegal webbased organisations, it would be a mistake to demonise the entire phenomenon. In fact, their very existence and development proves that online pharmacies answer to a real and present need expressed by customers. The online sales of drugs should be surely improved, and the best way forward
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Direct-to-consumer advertising of prescription drugs: help or hindrance to the public’s health? Greg Finlayson Manitoba Centre for Health Policy, Community Health Sciences, University of Manitoba, Winnipeg, Canada, and
Ross Mullner School of Public Health, University of Illinois at Chicago, Chicago, Illinois, USA Abstract Purpose – The purpose of this paper is to review the issues regarding direct-to-consumer advertising that have been identified in the literature from the perspective of consumers, consumer groups, physicians, the medical profession and the pharmaceutical industry. Design/methodology/approach – Literature from international sources was reviewed to identify themes relating to direct-to-consumer advertising. Findings – Direct-to-consumer advertising is expressly permitted in only two developed countries (USA and New Zealand). All other countries place various limitations on the practice. The debate surrounds whether or not the advertising provides a public health benefit. Originality/value – The debate over direct-to-consumer advertising continues in jurisdictions around the world. This paper identifies and summarizes the issues that are being considered. Keywords Prescription medicines, Pharmaceuticals industry, Advertising, Public health, Health education Paper type General review
Direct-to-consumer advertising of prescription drugs can be defined as the presentation of messages regarding pharmaceuticals directly to the public. Strictly speaking, in countries where DTCA is prohibited, no information about prescription drugs may be provided to the general public through print or the electronic media such as radio or television. However, in practice, such bans may not be total. For example, in Canada advertising of a product is permitted, but only if the medical condition it is designed to treat is not indicated; or a medical condition that may be treatable by a drug can be presented, but the product that could be used may not be mentioned. Further, marketing information on drugs is readily available through the internet. Those who support DTCA argue that drug advertising is a form of public health education that will ultimately result in the improved health status of the population. Detractors of DTCA, however, see it as being exclusively driven by a profit motive, and they argue that it encourages excessive, unnecessary, and potentially dangerous use of prescription drugs. The main arguments of both groups are presented below.
An executive summary for managers and executive readers can be found at the end of this issue.
Introduction Pharmaceutical companies in the USA spent $3.45 billion on direct-to-consumer advertising (DTCA) of prescription drugs in the year ending March 31, 2004 (Lam, 2004). This represents a substantial operating expense for the companies, and the trend over the past few years is to spend an increasing proportion of marketing budgets on DTCA. The USA is only one of two industrialized countries in the world that expressly permits DTCA of prescription drugs. In New Zealand, the other country that currently allows DTCA, the issue has been hotly debated over the past several years as a result of a treaty between that country and Australia that would result in a common drug standard between those two countries. However, DTCA is not permitted in Australia, and several professional and consumer organizations are supporting the implementation of a ban in New Zealand. In the United States no such debate is apparent. This article will review the main arguments posited by both sides of the debate. While New Zealand is considering banning DTCA, other countries including Canada and the countries of the European Union are considering relaxing their restrictions on the practice.
DTCA is important for health education The pharmaceutical industry actively promotes DTCA as a method of getting important health information to the general public. Pharmaceutical advertising messages make the public aware of the availability of treatments, and it encourages them to see a physician to talk about their health problems. Indeed, appropriate messages could be a valuable public health tool (Berndt, 2005). DTCA may result in people seeing physicians earlier, receiving treatment earlier, and potentially avoiding future medical complications. In addition, advertising may result in people who would not otherwise have seen physicians to make appointments, possibly allowing other health problems (i.e. hypertension, diabetes, heart disease) to be identified and treated (Holmer, 2002). Some consumer
The Emerald Research Register for this journal is available at www.emeraldinsight.com/researchregister The current issue and full text archive of this journal is available at www.emeraldinsight.com/0736-3761.htm
Journal of Consumer Marketing 22/7 (2005) 429– 431 q Emerald Group Publishing Limited [ISSN 0736-3761] [DOI 10.1108/07363760510631174]
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Volume 22 · Number 7 · 2005 · 429 –431
groups agree with the pharmaceutical industry, and provide additional support for DTCA. Starting in the twentieth century and continuing today, there has been a growing consumer movement directed to empowering the public to take greater control of their health. This has resulted in increased demands for information about medical conditions and health care, and a heightened need for physicians and other health professionals to disclose to, and educate, their patients. Further, there has been an increase in the medicalization of various human conditions. Medical care is now expected to provide treatments for conditions that were previously considered to be societal problems, such as alcoholism, drug addiction, and domestic violence. As a result of these two trends, the general public has an increasing interest in prescription drugs. They also have heightened expectations that drugs can be used to treat a wide array of medical conditions. While physicians recognize the limitations of drugs, they may also support DTCA because of the impact that it can have on their practices, and the care they can provide to their patients. Studies have shown that DTCA increases the utilization of physician services (Holmer, 2002). If a person sees a physician earlier for a health problem, the physician may be in a better position to provide treatment. Having a medical appointment also allows the assessment of other possible medical problems, which may allow prevention or treatment that would not otherwise be possible. From a physician’s perspective, these are good reasons to allow and support DTCA. Finally, physicians who receive fee-for-service payments would expect to receive increased income due to seeing more patients. Proponents of DTCA include the pharmaceutical industry, the general public, and many physicians.
potential risks. While some consumers have these concerns, there are also issues raised by the medical profession. Despite the fact that DTCA may motivate people to seek medical care, many physicians are concerned about this type of advertising. In particular, some physicians may feel pressured to give a prescription, or to prescribe a particular drug, when they would not have, had the patient not made a specific request for it, placing a strain on the physician-patient relationship. Further, when the physician deems the requested drug to be inappropriate, they may need to spend additional time with the patient to discuss why they will not issue the prescription, or why alternative pharmaceutical or nonpharmaceutical approaches may be preferred.
Is the evidence for either side conclusive? In spite of much study, there are only a few aspects of the issue for which there is strong evidence, either supporting or refuting the arguments raised. Research has clearly shown that DTCA does indeed affect consumer behavior. And, DTCA does result in physicians prescribing more. For example, between 1999 and 2000, prescriptions of the 50 drugs most heavily advertised in the USA rose by 24.6 percent while the prescriptions for the remaining 9,850 drugs rose only by 4.3 percent (National Institute for Health Care Management Research and Education Foundation, 2001). This increased utilization understandably results in an overall increase in the nation’s expenditure for drugs.
What is the answer? Countries around the world are debating the merits of DTCA. Options range from an outright ban, to setting no limitations whatsoever on the practice. Many countries in the future are likely to allow some form of DTCA, but it seems likely they will regulate it. For example, the New Zealand Ministry of Health (Meek, 2001) has proposed the following regulations: . Only allowing drug advertisements in the public media such as newspapers, magazines, or on the radio and television, and preventing the practice of drug companies promoting pharmaceuticals by directly writing to individual patients, running competitions, giving free offers, and paying for physician’s visits. . Banning advertisements by pharmaceutical companies of brand names on vehicles such as buses, because it is difficult for the public to read the mandatory risk information. . Banning sponsorship of events by pharmaceutical companies using a brand name, because it may promote a drug name, but without the responsibilities. . Increasing fines for non-compliance with legislation and regulations. . Specifying the length of time for television advertisements for the mandatory risk information to be presented, as well as the font size of the information. . Requiring voice-overs of risk information (mandatory in the USA). . Shifting the onus from the complainant having to find an example of the offensive advertisement to the pharmaceutical company. . Requiring a fair balance of benefit and risk information (again, required in the USA).
DTCA is contrary to the public interest Education in general, and health education in particular, is considered important. What is it about the provision of prescription drug information directly to the public in the form of advertising that is objectionable to some? In general, the argument is that DTCA is different from other forms of health education because prescription drugs are only one component of the health care system, and should not be removed from the context of a continuing relationship between a patient and their physician. As well, prescription drugs may be considered different from other drugs (i.e. overthe-counter drugs) in that they are generally used to treat medical conditions that are more difficult to self-diagnose, and may be more toxic than other drugs. In addition to these general concerns, some consumer groups and some physicians present additional arguments against DTCA. Those who support the restriction of DTCA believe that the primary motivation of the pharmaceutical industry is to produce as large a profit as possible, not to educate the public. Hence, the foundation for advertising of prescription drugs is potentially contrary to the public’s interest. Some consumer groups argue that DTCA should be banned because it encourages the unnecessary utilization of drugs, thus increasing the overall cost of health care. Further, advertising primarily focuses on drugs that are new to the market. These drugs frequently do not have a proven safety record compared to older more established drugs. And, the actual content of DTCA may maximize benefits and minimize 430
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While there is little support for unrestricted DTCA, those proposing a full ban on the practice recommend that statesupported public education campaigns be used as a means of making people aware of treatments that are available, and encouraging them to see a physician. The inherent additional cost to already stretched health care budgets makes this alternative politically unattractive. In the USA, where freedom of speech, including commercial speech, is constitutionally protected, it is unlikely that a full ban would be effected. However, there have been limitations placed on DTCA by the Food and Drug Administration (FDA), particularly the requirement to include information on risks, and that this information be provided in a way that it is accessible to consumers such as voice-overs in television ads. This article has outlined the main arguments in support of and opposing direct-to-consumer advertising of prescription drugs. The discussion is one that has increased in intensity in recent years, and it is likely to continue for some time to come. Countries around the world where the debate is taking place will be looking for the best balance between educating the consumer, and protecting them.
Lam, M.D. (2004), “A $20 billion bill and plenty of change”, Pharmaceutical Executive, September. Meek, C. (2001), Direct-to-Consumer Advertising of Prescription Medicine: A Review of International Policy and Evidence, Royal Pharmaceutical Society of Great Britain, London, available at: www.rpsgb.org.uk/ pdfs/dtcarep.pdf National Institute for Health Care Management Research and Education Foundation (2001), Prescription Drugs and Mass Media Advertising, 2000, NIHCM Foundation, Washington DC, November, available at: www.nihcm.org/ DTCbrief2001.pdf
Further reading Canadian Health Services Research Foundation (2004), “Myth: direct-to-consumer advertising is educational for patients”, Mythbusters, December, available at: http://chsrf. ca/ mythbusters/pdf/ myth16_e.pdf Jeffords, J.M. (2004), “Perspective: direct-to-consumer drug advertising: you get what you pay for”, Health Affairs Web Exclusive, April 28, available at: http://content.healthaffairs. org/ cgi/reprint/hlthaff.w4.253v! Kelly, P. (2004), “Perspective: DTC advertising’s benefits far outweigh its imperfections”, Health Affairs Web Exclusive, April 28, available at: http://content.healthaffairs.org/ cgi/ reprint/hlthaff.w4.246v1 Mansfield, P.R., Mintzes, B., Richards, D. and Toop, L. (2005), “Direct to consumer advertising is at the crossroads of competing pressures from industry and health needs”, British Medical Journal, Vol. 330, pp. 5-6. Milne, C. (2004), “Direct-to-consumer drug ads still raising debate”, The Medical Post, Vol. 20 No. 34.
References Berndt, J. (2005), “To inform or persuade? Direct-toconsumer advertising of prescription drugs”, New England Journal of Medicine, Vol. 352 No. 4, pp. 325-8. Holmer, A.F. (2002), “Direct-to-consumer advertising – strengthening our health care system”, New England Journal of Medicine, Vol. 346 No. 7, pp. 526-8.
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Herbal product claims: boundaries of marketing and science Stephanie Y. Crawford Department of Pharmacy Administration, University of Illinois at Chicago, Chicago, Illinois, USA, and
Catherine Leventis McKesson Medication Management, Chicago, Illinois, USA Abstract Purpose – The purpose of this article is to explore boundaries in marketing and science with respect to labeled claims of herbal products and other dietary supplements. Design/methodology/approach – Supplement manufacturers are allowed to include claims on product labels without meeting an acceptable substantiation standard, as long as such claims are accompanied by an FDA disclaimer statement. While manufacturers are prohibited (though the regulation is often violated) from making specific claims about prevention or treatment of disease, the implied associated health benefits of using dietary supplement products are usually clear from marketed claims. A case example on themes expressed in labeled structure-function claims for ginkgo biloba is presented to illustrate the issues. Findings – Marketing of product claims is controversial due to differing perspectives about the truthfulness of claimed health benefits and quality of information presented to consumers. Although dietary supplements could have pharmaceutical-like properties, they are not required to demonstrate safety and efficacy before market availability. The US Food and Drug Administration (FDA) can take action only if supplements are shown to be unsafe after market introduction. Practical implications – The need for consumer choice, meaningful information and free-market access to dietary supplements must be balanced with the demands for truth-in-advertising and consumer protection from unreliable claims and adverse health events. Marketing and policy implications are described. Originality/value – The outcome would help increase consumer confidence, while continuing to allow free-market forces for the dietary supplement industry, to a large extent. Keywords Diet, Natural products, Marketing, Labelling Paper type General review
unhealthy ingredients) to behaviors that promote health, prevent or treat disease.(Mason and Scammon, 2000) From 1990 to 1997, sales of herbal remedies increased by 380 per cent.(Eisenberg et al., 1998) Sales of herbal products are estimated to be greater than $4 billion annually,(Mar and Bent, 1999; Eisenberg et al., 1998) which represents a sizeable portion of the $18 billion dietary supplement market (Morris and Avorn, 2003). Herbal therapies are used by approximately 38 million US adults and are the most common form of complementary and alternative medicine (Tindle et al., 2005). These products are readily available for purchase in a variety of retail settings (e.g. pharmacies, health food stores, grocery stores and supermarkets, and mass merchandisers) and the internet. Passage of the Dietary Supplement Health and Education Act of 1994 (DSHEA) and its regulatory implementation led to unprecedented growth in sales and widespread promotion of herbal products and other dietary supplements (Morris and Avorn, 2003; US Department of Health and Human Services, US Food and Drug Administration, 2000). The associated promotional activities have become increasingly contentious due to differing perspectives about the reliability of claimed benefits and quality of information presented to consumers (Mason and Scammon, 2000). Debate centers around the need for consumer choice balanced with truth-in-advertising and consumer protection from unsubstantiated claims (Nesheim, 1999; Ernst, 2001).
An executive summary for managers and executive readers can be found at the end of this issue.
Introduction This article explores boundaries in marketing and science with respect to the labeled claims of herbal products and other dietary supplements. Use of herbal therapies in the USA predates the nation’s founding, experiencing a golden age of usage during the latter nineteenth and early twentieth centuries.(Tyler, 2000) The popularity of herbal remedies waned and usage curtailed in the 1940s with the advent of breakthrough, synthetically-derived pharmaceutical agents. Renewed interest in herbal remedies rebounded in America over the past 15 years. During this period, consumer efforts shifted from avoidance behaviors (e.g. of bad nutrients or The Emerald Research Register for this journal is available at www.emeraldinsight.com/researchregister The current issue and full text archive of this journal is available at www.emeraldinsight.com/0736-3761.htm
Journal of Consumer Marketing 22/7 (2005) 432– 436 q Emerald Group Publishing Limited [ISSN 0736-3761] [DOI 10.1108/07363760510631183]
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Background on regulation of dietary supplements under DSHEA
abound with respect to the safety concerns, as well as unsubstantiated and unreliable claims of dietary supplements, with calls for increased regulatory scrutiny over the dietary supplement industry (Hampton, 2005).
The DSHEA defined dietary supplements as herbs or similar botanicals, vitamins, minerals, amino acids, enzymes, organ tissues and metabolites that are intended to supplement the diet (US Food and Drug Administration, 1995). The definition is limited to products that are taken by mouth, e.g. capsules, tablets, liquids, powders and other oral formulations (Nesheim, 1999). Dietary supplements are in a distinct category, neither considered to be drugs nor conventional foods, which raises questions about product classification and regulation (Harris, 2000). Categorization of dietary supplements is based more on labeling than biological data (Lewis and Strom, 2002). Product labeling for herbs and other dietary substances is regulated by the US Food and Drug Administration (FDA) under a much less stringent regulatory system than what exists for drug products (Morris and Avorn, 2003). Product labeling for dietary supplements includes the affixed label, packaging, inserts or point-of-sale promotional materials (Harris, 2000). Supplement manufacturers are responsible for ensuring product safety before marketing. Unlike drug products, dietary supplements are not required to demonstrate safety and efficacy before market availability. Supplement manufacturers establish their own guidelines for manufacturing practices because good manufacturing practices for the industry have not been developed (Fontanarosa et al., 2003). With limited exceptions, manufacturers of dietary supplements are not required to obtain FDA approval before producing or selling the products. The FDA has authority to take action if supplement products are deemed unsafe after market introduction (US Food and Drug Administration, 2005a), i.e. if the product poses a significant or unreasonable safety risk for consumers (Harris, 2000; Fontanarosa et al., 2003). In the most serious cases, FDA actions could include product seizure and pursuance of injunctions and sanctions. In reality, though, the FDA has limited resources and insufficient manpower for these activities. Misleadingly labeled products could remain commercially available for months or years before possible regulatory action ensues (Hampton, 2005). While there are voluntary guidelines, no regulation exists to ensure the identity, purity, quality, strength, and composition of dietary supplements (Fontanarosa et al., 2003). Many herbal products have some pharmaceutical-like properties. While often touted as natural, they are not harmless. Dietary supplements often act in ways similar to drugs and consumption of large or small amounts may lead to side effects and untoward interactions with drugs and other substances. Concerns have also been raised because of limited evidence on product consistency and standardization issues (Mar and Bent, 1999; Harris, 2000; Tyler, 2000). Currently, reporting on adverse events for herbal products and other dietary supplements is on a voluntary basis only. Scientists and many in the medical and health communities have decried the lack of scientific justification to establish safety and efficacy (Hampton, 2005; Harris, 2000; Morris and Avorn, 2003; Tolstoi, 2001). Product sales are often driven by non-scientific, anecdotal evidence (e.g. word of mouth, consumer perceptions) of potential health benefits and manufacturer-marketing justification through labeling and advertising (Harris, 2000; Grivetti, 2002). Controversies
Controversies over marketed claims of dietary supplements FDA regulatory authority over health claims in labels and labeling of dietary supplements was restricted by the Pearson v. Shalala [1999] court decision[1], which the agency complied with in its final rule (US Department of Health and Human Services, US Food and Drug Administration, 2000) The court ruled that dietary supplement claims could be based on less than a “significant scientific agreement”, as long as such claims were accompanied by an acceptable disclaimer, as described later in this section. If manufacturers or distributors choose not to make a claim, no disclaimer is necessary (Mason and Scammon, 2000). Herbal products and other dietary supplements are prohibited from using a disease or therapeutic claim. In other words, dietary supplements may not imply a drug, nor use statements that claim to prevent, diagnose, treat, mitigate, or cure a specific disease (US Food and Drug Administration, 1995) For example, a dietary supplement cannot claim to “cure cancer” or “treat heart disease.” Health maintenance and non-disease claims are allowed for dietary supplements, including minor, common symptoms associated with life stages, e.g. hot flushes, mild memory loss related to aging (Harris, 2000). DSHEA provides for use of three types of other claims, as appropriate, on the labels of dietary supplements – nutrient content claim, health claims, or structure-function claims. Nutrient content claims pertain to relative amounts of nutrient levels in dietary supplements, e.g. “high” or “good source of calcium,” based on guidelines provided by FDA. Health claims express the effect of a dietary supplement on preventing or reducing the processes of a disease or other health-related condition (US Food and Drug Administration, 2005b) As such, health claims must be evaluated and authorized by FDA in the preapproval stage, based on significant scientific evidence. Examples of health claims include “reduces the risk of osteoporosis” (or other disease) or “does not promote tooth decay”. Structure-function claims do not require FDA pre-approval and may describe how a dietary substance is intended to affect or maintain the structure or function of the human body. Structure-function claims may state benefits of the dietary supplement related to nutrient deficiency, general well-being of product consumption, and other statements regarding maintenance of body structure and function (US Food and Drug Administration, 2005b) Examples are “promotes vitality” or “helps maintain healthy heart function”. Structure-function claims are often included on labels of herbal products. Statements on structure and function cannot be false or misleading. However, if the claims are unsupported, that would potentially make them false and misleading. Structure-function claims, if present, must be labeled with an FDA disclaimer. A typical disclaimer would be: This statement has not been evaluated by the Food and Drug Administration. This product is not intended to diagnose, treat, cure, or prevent any disease (US Food and Drug Administration, 2005b)
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Tyler (2000) criticized the hypocrisy of the dual message in allowing nebulous statements on product labels in reference to structure and function, while requiring a follow-up disclaimer. Accompanying the structure-function claim is the paradoxical requirement of language that essentially states the herb is not “good for anything”, i.e. no therapeutic claim (Tyler, 2000). Consumers tend to disregard disclaimer language since they purchased the herbal products with the expectation of some beneficial health purpose. From a scientific perspective, structure-function claims can be valid only if the supplement displays inherent biological activity (Fontanarosa et al., 2003).The disclaimer is often of limited utility when present (Morris and Avorn, 2003). Readability and effectiveness can be easily compromised, e.g. small font size, separation of the claim from disclaimer (such as claim on front of label and disclaimer on back; or one near top of label and the other near bottom), or placing the claim in an inconspicuous location. Consumers who read the disclaimers may consider them to be confusing or hard to comprehend (Mason and Scammon, 2000). The differentiation between structure-function claims and express or implied disease claims is sometimes hard to distinguish. For example, the claim, “maintains urinary tract health” is allowable, but “treats urinary tract infections” would not be permitted since it refers to a specific disease. Disease conditions are sometimes included on trademarked product names, such as “Migraine B-Gone”, as well as pictures, symbols and vignettes on product packaging (Harris, 2000). Although the FDA does not approve structure-function claims, manufacturers are required to notify the agency of such labeled claims within 30 days of product marketing (Nesheim, 1999; Harris, 2000). Manufacturers are also required to have data that substantiate the truthfulness of claims on file, although that data is not reviewed by FDA or made public unless there is the need for enforcement action post marketing (Nesheim, 1999). The lax nature of this requirement for substantiation of claimed effects limits the accessibility and scrutiny of information to consumers, health clinicians, and researchers. Consumers are not seeing the scientific data, if any, on which the claims are based. Rather, consumers see the manufacturer’s interpretation of the data. It is questionable if a consumer could understand the data; however, the issue is raised about the availability or accessibility of data. Consumers are generally unaware of the type of evidence used to meet a substantiation standard, the type of evidence on which the claim was made (whether or not the claim was made on the basis of clinical or scientific study), and source of sponsorship (Mason and Scammon, 2000).
on the effectiveness of the monitoring and regulation of dietary supplement advertisements, especially on the internet (Morris and Avorn, 2003; Harris, 2000; Ashar et al., 2003). One study reported that 55 percent of analyzed web sites reported health claims that also included statements to prevent, diagnose, treat or cure specific diseases in blatant disregard of DSHEA regulations (Morris and Avorn, 2003). Further, more than half of these web sites failed to include the required FDA disclaimer statement. Findings have shown that internet sites often fail to disclose potential adverse effects, contraindications, and toxicities of herbal products (Morris and Avorn, 2003; Ashar et al., 2003). The distinction between labeling and advertising is often blurred for herbal products and dietary supplements (Morris and Avorn, 2003).
Case example from Leventis (2001) study on herbal product structure-function claims To illustrate issues related to marketed claims, a case example is presented on summarized findings from a 2001 thesis by Leventis (2001). The thesis analyzed the structure-function claims used for the then ten top-selling herbs in the USA, which represented 54 per cent of market sales.(Richman and Witkowski, 1998; Mar and Bent, 1999). Common names for the herbs are echinacea, St John’s wort, ginkgo biloba, garlic, saw palmetto, Asian ginseng, goldenseal, aloe, Siberian ginseng, and valerian. These top-selling herbs have been studied more extensively than other herbs on issues of safety and efficacy (Tyler, 2000). Leventis collected data for the herbal products sold in retail sites (i.e. pharmacies and/or drug stores, natural products outlets, supermarkets, and mass merchandisers) located within Chicago, Illinois, web sites were excluded. After removal of duplicate entries, the following results were found: . 151 different products from 44 manufacturers; . 103 (68 percent) of products listed a structure-function claim on the label; . 114 (75 percent) of the products did have the FDA disclaimer statement; . 37 (25 percent) of the products did not have the FDA disclaimer, yet five (14 percent) of these products still listed a structure-function claim on the label. Structure-function claims were categorized into macrothemes, which represented a subject or general theme, and microthemes listing the actual structure-function claim on the product label. Labeled claims were designated as declarative or suggestive (included the words “may” or “might”). A total of 61 macrothemes were identified. Most of the structure-function claims were associated with words such as regulate-maintain-support or promote-assist-enhance. As an example, Table I presents results for ginkgo biloba (Leventis, 2001). While no disease condition is listed, the themes might imply health benefits to some consumers that the herb is associated with the treatment or prevention of Alzheimer’s type diseases, dementia and/or peripheral vascular disease. Leventis also reviewed the published literature to investigate if there was support for the labeled structure-function claims. Depending on the literature source evaluated, literature support (albeit inconsistent) ranged from 44 per cent to 68 per cent for the listed structure-function claims among the top-selling herbs (Leventis, 2001). With ginkgo biloba, for
Advertising issues The Federal Trade Commission (FTC) regulates advertising of dietary supplements, including claims in print or broadcast ads, infomercials, catalogs, direct marketing materials and the internet (Harris, 2000; Fontanarosa et al., 2003). Advertising is supposed to be truthful, not misleading and substantiated by sound science. Regular users of dietary supplements are more likely to believe that advertising claims are generally true than non-regular users (Blendon et al., 2001). Hyperbolic advertising of unsubstantiated claims is used by some dietary supplement manufacturers (Tyler, 2000). There are questions 434
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Table I Examples of labeled structure-function claims of ginkgo biloba
(Mason and Scammon, 2000). This has created a “safe harbor” for supplement manufacturers to market products that fall into the gray area of acceptable claims. Herbal products, especially, are not inert commodities. In addition to their use by some consumers as supplements to the diet, other consumers purchase the products in the attempt to provide self-care in the treatment or prevention of serious disease and health-related conditions (Mason and Scammon, 2000; Tolstoi, 2001). This paper has attempted to summarize some of the compelling reasons for more attention to the problems. Appropriate use of quality herbal products and other dietary supplements can have medical and economic benefits. The US relies primarily on the free-market system to balance and control issues regarding safety and efficacy of dietary supplements. Reconsideration of requirements for product marketing is evident because the current system is ineffective (Lewis and Strom, 2002). National surveys have shown positive views on derived benefits of dietary supplements, as well as support for increased government regulatory efforts on issues of safety and claims (Blendon et al., 2001). While this paper has focused on the American system, the need for global harmonization on health claims of herbal products and other botanicals has also been recognized (Mahady, 2001). In 2000, the FDA Center for Food Safety and Applied Nutrition published its Dietary Supplement Strategy: Ten Year Plan (US Food and Drug Administration, 2000). Among the planned objectives is future publication of a final rule on structure-function claims and the need to establish valid substantiation of such claims. The document also listed plans to clarify boundaries between dietary supplements and drugs, as well as boundaries between dietary supplements and foods. The need for this clarification is great, especially in light of the new marketing of so-called nutraceuticals or functional foods, which are food products that have been enriched with herbs or other dietary supplements (Ernst, 2001). Examples include cereals with ginkgo biloba, kava candy bars, and fruit drinks with echinacea. While these food products cannot use therapeutic claims, the industry has been successful in getting consumers to associate their products with implied health benefits despite the small amounts of pharmacologically-active ingredients in the products, as well as unknown and potentially destructive effects of the manufacturing processes on the herbs or other active dietary substances (Ernst, 2001). To some extent, the overlapping jurisdiction of the two government agencies responsible for dietary supplements allows problems with product claims to fall through the cracks. The FDA and FTC are working together on an increasing basis. The two agencies recently formed a Dietary Supplement Enforcement Group in the attempt to thwart health care fraud (Hampton, 2005). Individual and joint initiatives by the agencies have included Internet searchers to identify and police fraudulent marketing, which resulted in warning or advisory letters sent to hundreds of product distributors and internet supplement marketers who promoted unsubstantiated claims (considered to be product misbranding by FDA and deceptive practices by FTC) (Hampton, 2005; Harris, 2000; Fontanarosa et al., 2003). Dietary supplements are subject to far less regulation than prescription drugs, non-prescription drugs, food additives, infant formulas, and virtually any other products subject to public consumption (Fontanarosa et al., 2003).
Macrothemesa
Microthemesb
Enhances focus/ concentration
Enhances mental focus Promotes focus Improves concentration Promotes concentration Maintains focus/ Maintains focus concentration Helps maintain concentration Maintains concentration Enhanced mental Herbal supplement for enhanced mental alertness alertness Maintains mental Helps maintain normal mental alertness alertness Mental alertness dietary supplement Improves mental Improves mental sharpness sharpness For improved mental sharpness Promotes mental sharpness Supports memory Supports memory Helps maintain memory Improves memory Improves memory Dietary supplement for improved short-term memory Supports circulation Supports circulation Supports circulation to the Supports circulation to the brain brain Helps circulation to the brain Cerebral circulation Increase blood circulation Helps increase blood circulation to the brain to the brain Supports increased blood flow to the brain May enhance blood flow to brainc Enhances peripheral Helps enhance peripheral circulation circulation Notes: a General subject area; b Actual structure-function claim statement on product label; c Suggestive claim statement (contains “may”); all other listed claim statements designated as declarative
example, evidence-based literature supported an effect in circulation or peripheral circulation. There was no substantive literature evidence on the relationship between ginkgo biloba and brain circulation. For the common memory/focus/ concentration macrothemes, there were inconsistent findings about benefit of use among targeted populations. Other authors have published literature support on the benefit of using ginkgo biloba for dementia (Mar and Bent, 1999). While generally well tolerated, side effects of the herb include mild gastrointestinal distress, headache, and anticoagulant effects. Side effects are not required to be listed in product labeling.
Marketing and policy implications Promoting consumer empowerment to make choices and facilitating access to desired products are laudable goals. The marketplace should share the burden of providing useful and meaningful information that will assist consumers in making decisions about potential health benefits related to particular dietary supplements (Mason and Scammon, 2000). The Pearson v. Shalala decision expressed the court’s preference in disclosing limitations of marketed claims of dietary supplements, rather than suppressing such claims in the absence of meeting an acceptable substantiation standard 435
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Unsubstantiated claims of benefit represent a threat to business and the public health. After the unprecedented growth experienced in the 1990s, sales of herbal products and other dietary supplements have been strong, but flat (Tyler, 2000). Possible reasons include negative publicity about adverse events and the availability of junk products, which may prompt consumer word-of-mouth about ineffectiveness. We agree with other authors that increased government regulation is inevitable in realizing the goal of promoting claims that are truthful and not misleading. Such an undertaking will likely take a dozens of years because of the enormous costs and efforts that would be necessary. The outcome would help increase consumer confidence, while continuing to allow free-market forces for the dietary supplement industry, to a large extent. In addition to increased government scrutiny, however, is the need for greater involvement by physicians, pharmacists and other health practitioners, the business community, and the ultimate consumers in reporting problems and demanding product quality.
Leventis, C. (2001), “Analysis of structure-function claims of herbal products”, unpublished Master’s thesis, Department of Pharmacy Administration, The University of Illinois at Chicago, Chicago, IL. Lewis, J.D. and Strom, B.L. (2002), “Balancing safety of dietary supplements with the free market”, Annals of Internal Medicine, Vol. 136, pp. 616-8. Mahady, G.B. (2001), “Global harmonization of herbal health claims”, Journal of Nutrition, Vol. 131, pp. 1120S-3S. Mar, C. and Bent, S. (1999), “An evidence-based review of the 10 most commonly used herbs”, Western Journal of Medicine, Vol. 171, pp. 168-71. Mason, M.J. and Scammon, D.L. (2000), “Health claims and disclaimers: extended boundaries and research opportunities in consumer interpretation”, Journal of Public Policy & Marketing, Vol. 19, pp. 144-50. Morris, C.A. and Avorn, J. (2003), “Internet marketing of herbal products”, Journal of the American Medical Association, Vol. 290, pp. 1505-9. Nesheim, M.C. (1999), “What is the research base for the use of dietary supplements?”, Public Health Nutrition, Vol. 2, pp. 35-8. Richman, A. and Witkowski, J.P. (1998), “Herb sales still strong”, Whole Foods Magazine, pp. 19-26. Tindle, H.A., Davis, R.B., Phillips, R.S. and Eisenberg, D.M. (2005), “Trends in use of complementary and alternative medicine by US adults: 1997-2002”, Alternative Therapies in Health and Medicine, Vol. 11, pp. 42-9. Tolstoi, L.G. (2001), “Herbal remedies: buyer beware!”, Nutrition Today, Vol. 36 No. 4, pp. 223-30. Tyler, V.E. (2000), “Herbal medicine: from the past to the future”, Public Health Nutrition, Vol. 3, pp. 447-52. US Department of Health and Human Services, US Food and Drug Administration (2000), “Regulations on statements made for dietary supplements concerning the effect of the product on the structure or function of the body; final rule”, Federal Register, 65(4), 21 CFR part 101. Docket No. 98N-0044, available at http://www.cfsan.fda. gov/ , lrd/fr000106.html (accessed June 6, 2005). US Food and Drug Administration, Center for Food Safety and Applied Nutrition (1995), “Dietary Supplement Health and Education Act of 1994 (DSHEA)”, available at: www.cfsan.fda.gov/ , dms/dietsupp.html (accessed June 4, 2005). US Food and Drug Administration, Center for Food Safety and Applied Nutrition (2005a), “A dietary supplement labeling guide, chapter VI, Claims”, available at: www. cfsan.fda.gov/ , dms/dslg-6.html (accessed June 4, 2005j0. US Food and Drug Administration, Center for Food Safety and Applied Nutrition (2005b), “Dietary supplements, overview”, available at: www.cfsan.fda.gov/ , dms/ supplmnt.html (accessed June 4, 2005). US Food and Drug Administration, Center for Food Safety and Applied Nutrition (2000), “Dietary supplement strategy (ten year plan)” available at: www.cfsan.fda.gov/ , dms/ds-strat.html (accessed June 6, 2005).
Note 1 Pearson v. Shalala [1999], 164 F.3d 650 (D.C.Cir.)
References Ashar, B.H., Miller, R.G., Getz, K.J. and Pichard, C.P. (2003), “A critical evaluation of internet marketing of products that contain ephedra”, Mayo Clinic Proceedings, Vol. 78, pp. 944-6. Blendon, R.J., DesRoches, C.M., Benson, J.M., Brodie, M. and Altman, D.E. (2001), “Americans’ views on the use and regulation of dietary supplements”, Archives of Internal Medicine, Vol. 161, pp. 805-10. Eisenberg, D.M., Davis, R.B., Ettner, S.L., Appel, S., Wilkey, S., Van Rompay, M. and Kessler, R.C. (1998), “Trends in alternative medicine use in the United States, 1990-1997: results of a follow-up national survey”, Journal of the American Medical Association, Vol. 280, pp. 1569-75. Ernst, E. (2001), “Functional foods, neutraceuticals, designer foods: innocent fad or counterproductive marketing ploy?”, European Journal of Clinical Pharmacology, Vol. 57, pp. 353-5. Fontanarosa, P.B., Rennie, D. and DeAngelis, C.D. (2003), “The need for regulation of dietary supplements – lessons from ephedra”, Journal of the American Medical Association, Vol. 289, pp. 1568-70. Grivetti, L.E. (2002), “Dietary supplements in American children: scientific vs marketing justifications”, Nutrition Today, Vol. 37 No. 3, pp. 128-9. Hampton, T. (2005), “More scrutiny for dietary supplements?”, Journal of the American Medical Association, Vol. 293, pp. 27-8. Harris, I.M. (2000), “Regulatory and ethical issues with dietary supplements”, Pharmacotherapy, Vol. 20, pp. 1295-302.
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This special issue scrutinizes aspects of this marketing especially against the backdrop of liberalization in the promotion of prescription drugs in the USA. In some respects this is the most significant change in drugs marketing and has to be seen in the context of drug company performance, the ethical limits of marketing in healthcare and political pressures to remove (or at least limit) big business involvement in health.
Executive summary This summary has been provided to allow managers and executives a rapid appreciation of the content of this issue. Those with a particular interest in the topic covered may then read the article in toto to take advantage of the more comprehensive description of the research undertaken and its results to get the full benefit of the material present.
Commercial freedom of speech – is there a limit? The debate over commercial freedom of speech is significant (although the term is seldom heard outside of the USA) since it governs our appreciation and understanding of advertising. And we should remember that, in operational terms, advertising lies second only to direct sales in its significance to marketing. We start with the idea that, all other things being equal, we have an absolute right to advertise. This does not excuse misrepresentation, passing off or the slandering of competitors but it does say we have a right to communicate our message to those who may wish to buy what we make or do. The limits to commercial freedom of speech have been debated in such areas as tobacco advertising and we now have an emerging debate around the targeting of advertisements to children – especially those promoting “unhealthy” food and drink. Within this big debate sits this issue of directly advertising prescription drugs to consumers and whether it provides benefits or represents a retrograde step in the effective delivery of health care. Most of those commenting on this debate within this special issue start with the US Food & Drug Agency’s (FDA) decision in 1997 to allow the direct-to-consumer advertising of prescription drugs in such a way as to open up mass media channels. Prior to this removal of requirements for detailed statements of risks and side effects, direct-to-consumer advertising, while technically possible on TV, was limited to specialized publications. The results of this liberalization have got something of a mixed press. The industry has welcomed the opportunity to extend brand development beyond the medical profession and argues that direct-to-consumer advertising is of real social benefit. On the other hand others – health activists, some physicians, politicians and consumer campaigners – argue that such advertising undermines the doctor-patient relationship, adds to already high drug prices and gives a false sense of empowerment to the consumer. Some of the work in this special issue – while it cannot set aside ideological objections to the US healthcare system – helps us to place support and criticism of direct-to-consumer drugs advertising in the context of factual information about consumer response. As Singh and Smith point out in the opening article: “. . .the central question revolves around whether or not DTC (directto-consumer) advertising is truly beneficial to consumers and, if so, how?”
What is wrong with consumers having a little more information? Healthcare is an enormous industry absorbing a considerable – and growing – proportion of what we earn. At the same time the wider health debate is of central political significance with every aspect of the industry under some kind of scrutiny. The debate in the UK over the non-availability of expensive cancer treatments through the National Health Service, the disaster of last summer when a heatwave drove the French care system into crisis contributing to the death of thousands of elderly people, the critical importance of Medicare and the prescription drugs debate to swing states like Florida – these are big issues. At the same time as we in the developed world argue over whether we should put up taxes to pay for an enhanced healthcare system, the developing world struggles on with limited resources for the basic health provision we take for granted. Our complaints about facilities at public hospitals seem churlish when we consider the kind of conditions in the third world. Beyond this central debate over health sits a still wider debate around health promotion, disease prevention and the thoroughly modern concept of well-being. These debates take us into the realms of regulations, bans and non-traditional medicine. Whole new categories emerge – foods offering medical benefits such as reducing cholesterol, for example. And then there is the growth in supplements. Healthcare is huge and, because it is so important, subject to considerable regulatory control, legislative restraint and risk. In places such as the USA, growing consumer activism and awareness leads to the growth in medical liability and malpractice law suits – and the creation of a whole new industry servicing this process. And, as people live longer, we see still more pressure on medical services and growing demand for new care services delivered cost-effectively. The days of the local council providing a couple of day care centres and a few home helps are gone – this will never satisfy the requirements of a richer, more aware and more active older population. And, to return to politics for a moment, old people vote! Which makes them the most pampered old folk in history. It is not far from the truth to observe that the purpose of the USA’s welfare system is not the transfer of resources from rich to poor but the transfer from younger to older. It is no surprise therefore to find that healthcare and pharmaceuticals marketing are a huge concern to some and a big issue to all.
Three in the bed? Drug ads and the doctor-patient relationship One of the central accusations from those who argue against direct-to-consumer advertising of prescription drugs is that is compromises the doctor-patient relationship. Rather that the
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doctor dealing with the symptoms presented by the patient and making an appropriate diagnosis and prescription, the doctor is faced by an “informed” patient demanding a specific, branded solution they have seen advertised on TV. The doctor runs the risk of falling out with the patient by refusing to prescribe (at which they may well take their business elsewhere) or else goes with the flow and prescribes the desired drug. Singh and Smith, Baca et al. and Shin and Moon appear to concur in their assessment of this situation. While the concerns about DTC advertising remain, most of the evidence suggests that such advertising is, on balance, benefiting consumers. This chimes with the FDA’s review (reported by Baca et al.) describing the benefits of DTC as “. . .creating increased levels of awareness, involvement, compliance, reach and doctor-patient interaction.” The advent of DTC advertising has resulted in rather better informed patients rather than misled consumers demanding inappropriate prescriptions of potentially dangerous drugs. As Singh and Smith argue, where consumers “. . .once felt entrapped in their relationships with their physicians, the acquisition of information regarding branded drugs has given consumers more power than ever before”. The system is not perfect and does run some risk of abuse but it is an improvement over the third party moderated system that prevailed before 1997. Perhaps the main concern that remains and is hard to set aside stretches beyond the issue of advertising and into the much wider debate about health care. This is the ethics of taking profit from making and selling drugs and from providing health care. To some (and you only have to peep at the health debate in the UK or Canada to appreciate this) any involvement of the private sector in health is a matter for at best regret and often anger. And the big, bad drug companies are a favourite target of many looking for reasons behind failures or problems in the health system.
markets in the USA, the drugs market acts ineffectively resulting in far higher prices than we find elsewhere. And while Holdford does not propose specific strategies or policies to correct this dysfunction, it is clear that market reform is one way in which US healthcare might improve (or at least become more efficient). The problem with the system is not that drugs companies are making profits but that the industry is acting to sustain an inefficient system that acts to the benefit of producers rather than to the advantage of consumers. And any market that acts in this way is perverse since the operation of free markets usually results in direct benefits to the consumer (e.g. lower prices or higher quality). In order to reform the system we have to get over our occasional distaste at the “profiteering” of drugs companies and set about getting greater consumer control over the system and hence a downward pressure on costs. One factor that will begin to drive down drug costs is the Internet and the emergence of online pharmacies. Holdford refers to the use of Canadian online pharmacies by consumers in several US states and notes that some states have actively encouraged such use in order to apply pressure to the drugs companies. The challenge online is dealing with the need for input from a medical practitioner in many drug choices. Guraˇu explores the growth of online pharmacies noting that they can be seen as a way “round national regulation” and (as we have seen above) a means of reducing the cost of drugs to the consumer. Indeed this grey market for prescription drugs is significant as it takes advantage of the long-term price differentiation practiced by most multinational drug companies. The result is that, for important and widely prescribed drugs, there is a significant downward pressure on the price. However, lower prices are not the sole perceived benefit of online pharmacies and we need to understand that, as with other areas of business, the internet represents a massive challenge. Indeed, many of the peculiarities of general practice and primary care across national boundaries may be undermined by the role of the internet.
Why is profit such a rude word in health care?
Online healthcare – the way of the future?
Holdford’s article looking at applying a social marketing framework to health campaigns (of which more later) shows us why there are so many criticisms of the perceived profiteering of drugs companies. Not only do these companies make enormous profits on the back of the USA’s strict patent laws but they work actively and assiduously to prevent any move towards more affordable drugs. We read that (taken in aggregate) consumers have little or no trust or confidence in drug companies or their executives. These businesses protect a system that allows little or no consumer interaction with the market. As Holdford points out many take the view that “. . .the pharmaceutical industry makes excessive profits by taking advantage of perverse incentives in a market where consumers rely on third parties . . . to choose drugs for them and prescription drug insurance coverage . . . that shields consumers from the full cost of paying for those drugs”. The result of this perverse system (and despite the debate around DTC advertising 80 per cent of drugs marketing spend is still directed to the medical profession) could be inappropriate prescribing, incorrect drug use, unreasonable consumer expectations and wasteful expenditure. Unlike most
In looking at the growth in online pharmacy, Guraˇu refers to the deficiencies of regular medical services arguing that “. . . long waiting lists, insufficient doctors and poor service quality . . . ” are leading people to seek out more efficient ways to obtain good medical care. We have little confidence that the everyday health care systems (and this is especially the case where socialized medicine predominates) will go the extra mile in improving service or support. At the same time as one section of the medical and pharmacy professions is using the Internet to deliver real improvements in service quality, others continue to resist the use of online advice, support and service. In many ways this mirrors the debate over direct-to-consumer advertising where some consumer advocates and some medical practitioners are enthusiasts for the extension of advertising whereas others see only problems, risks and dangers in such an extension. It is clear that the online supply of drugs presents some risks to the consumer and there has to be some reassurance. But the general public experience of online pharmacy (as reported 438
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by Guraˇu) suggests high levels of consumer satisfaction. In Guraˇu’s UK sample around one-third of respondents had used online pharmacies – a significant percentage in a country that is not especially adventurous when in comes to healthcare markets. It seems to be that case that other factors are as significant as the price – protection of privacy and convenience are especially important. Guraˇu reports that online pharmacy is especially popular with older people who value the convenience it affords. This last point is significant – we do not have the information to hand as to the proportion of prescriptions that are straightforward repeats but for many older people there will be the regular bother of renewing supplies of drugs taken to manage chronic conditions such as arthritis and heart conditions. The ability to get this service from the convenience of the home computer represents a significant step forward. And, if the medical profession stop and think for a moment, such a system frees up doctors time currently spent writing out repeat prescriptions. The other aspect of online activity takes us back to the discussion about direct-to-consumer advertising and the extent to which it provides real consumer benefits. It seems likely that those seeking to preserve the doctor’s gatekeeper role will win the short-term battle and secure tighter regulation (or as is possible in New Zealand a ban of DTC advertising). But in the long-term consumers will – via the medium of the internet – get the detailed information about drugs, medical conditions and treatments.
the stage where it becomes pointless, public authorities charged with promoting health messages should seek partnerships with pharmaceutical advertisers intended to embed core public health messages into such advertising. Taking such a proactive approach would be a considerable shift away from the traditional command and control approach beloved of bureaucracies. However, this does not exonerate marketers involved with drugs promotion from the job of acting ethically and responsibly. Cunningham and Iyer’s checklist is an ideal start for anyone looking at developing strong strategies to DTC advertising in the USA. And the list is underscored by the real risk that one or more drug company will find itself in court as a result of claims made in DTC advertisements. However, the most important observation that Cunningham and Iyer make is that the drugs industry in the USA has done nothing to sort out its own house. Aided and abetted by the advertising business (who have to take some responsibility here), drug companies have created a rod for their own back through weak strategies predicated on shifting boxes rather than developing long-term engagement with consumers.
Drug brands and DTC advertising The pharmaceuticals industry is unusually placed in respect of brands since its most profitable products exist behind a strong patent protection. This protection is necessary because of the significant costs associated with research and development in the drugs business. Getting a drug from the lab, through trial, tests and approvals to the point where it can be sold represents a huge commitment. The patent allows the firm to get a satisfactory return on that investment in R&D. Without this return future investment in the development of new drugs is jeopardized. As with the health promotion situation, the argument that governments can pick up this strain does not hold up since the industry invests over $30 billion each year in research (and that is just in the USA). So drug companies enjoy greater protection for the brand than is the case in many other markets. And the opportunity to promote directly to the consumer gives a brand building opportunity too good to miss. However, because drug businesses are concerned with driving consumers into seeing their doctors – with short term sales – brand development is overlooked. And this oversight is exacerbated by a salesoriented marketing culture. It is ironic that the skills and expertise many drug companies have developed in the promotion of branded over-the-counter drugs have not transferred to the development of prescription drug brands. It is reasonable to assume however, that most drugs marketing strategies assume a huge change at the point when the patent expires. Given the current approach in respect of patents where the high margins are sustained behind the protective barrier of the patent, it is not surprising that any long-term strategy depends on existing patented drugs being replaced by a new generation of patented drugs. Once a drug is out of patent, it becomes a mere formulation that any manufacturer can produce. The result is that generic drugs are treated as commodities – sold unbranded. Perhaps this need not be the case (and we should note that some manufacturers have begun to appreciate that there is a far wider issue that extends beyond price). In some cases drug promotions have been assisted by the development of OTC
Consumer awareness – the main objective of DTC advertising Given that most of the information – and much more – currently given to consumers via DTC advertisements is available online in an almost entirely unregulated environment, is seems rather foolish to spend so much time worrying about such advertising. The 1997 FDA guidance on DTC advertising opened up the use of such advertising as a gateway to far greater information supplied on web sites. This is not to say that drug companies are wholly honourable in their advertising – the detailed assessment of the US legal environment presented by Cunningham and Iyer shows some of the problems and Finlayson and Mullner’s brief review of the current state of play reveals some real worries about the approaches adopted by some drugs advertisers. If we set aside the online diagnosis and prescription offered by some internet pharmacies, most drugs advertising is aimed at driving consumers to visit their physician to discuss a given condition and drugs associated with its treatment. The positive side of this activity is that, as Finlayson and Mullner point out, consumers may be “. . .seeing physicians earlier, receiving treatment earlier and potentially avoiding future medical complications”. The contra-argument that this promotion of public health is a specific public sector function not only gets drugs companies off the hook (the Government takes responsibility) but the costs would be considerable. If drugs companies are spending over $3 billion per year promoting drugs directly to US consumers, it represents an enormous opportunity to develop substantial public health promotion budgets outside the limited scope of public investment. Rather than trying to regulate the advertising to 439
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Despite a widespread recognition that endemic diseases in the developing world require urgent action, there has been reluctance (from all sides) to see a significant role in such action for the private sector. The assumption is that developed world Governments will use their taxpayers’ money to fund health programmes elsewhere. And, while some of such actions are probable (e.g. the US Government’s considerable contribution to the AIDS/HIV crisis in subSaharan Africa), they will never be sufficient or sustainable. The long-term solution lies with local Governments and with the private sector. And, as Mascarenhas et al. point out, to get the most out of the private sector you present them with the opportunity to make some money. Mascarenhas et al. stress the significance of entrepreneurial actions in the successful delivery of health care in the developing world – some of this is through NGOs (the authors cite the example of Medicines sans Frontie`res) while other success is via local managed private businesses. The central tenet of Mascarenhas et al.’s essay is that we must package the “goods” in such as way as to make them affordable by those at the bottom of the income pile and that it makes sense to use communal institutions and associations as a way to sustain very local business models. The lesson for the drugs companies here is that they can package drugs to make them applicable in the developing world without necessarily crippling pricing strategies elsewhere. With the right model we can avoid (or at least significantly reduce) the risk of low priced drugs leaking back into higher priced markets. For drug companies the changed business model will require a very different approach that works very closely with local people on the ground. But this approach stands more chance of succeeding than does the unsustainable approach of governments in the rich world subsidizing wealthy drug companies to provide low cost drugs to people in the third world. This approach appeals to the moralists but fails to deliver the change we need on the ground. Importantly, this need to look at the strategies used in the developing world presents an opportunity to re-examine the strategies used in the rich world. We have noted that the internet, consumer activism and other factors are changing the dynamics of the health market. If drug companies are to sustain their position, they will need to adjust business models to deal with this new reality. And all this takes places at the same time as the “wellness” market begins to take off.
versions of prescription drugs – the liberalization of OTC drug markets has assisted this process in some countries. But the company should be considering how the investment in brand development during the drug’s protected period is captured and maintained after the drug loses its patent. There is an argument to be made that drug manufacturers should develop corporate brands and should pull away from the individual product branding approach that prevails at present. Such a change represents a radical step for the drug manufacturer but, as we have seen, the market is changing rapidly. Consumers will be better informed, price levels will be pushed down by online trading and the general practitioner will lose a great deal of the gatekeeper role that currently contributes to the drug companies’ power – patients do not have the specific medical knowledge, nor do they know how much the drug costs or how much money the drug company have spent promoting the drug to the doctors. In the new environment there should be greater openness and a level of product knowledge sufficient for many patients to make a real assessment of the advice they receive from the doctor. Cunningham and Iyer report on one legal ruling (Perez v. Wyeth Labs, NJ [1999]) that recounted how many aspects of the laws governing drug promotions date back to a time when “. . . Dr Kildare was a popular television show, doctors still made house calls and the relationship between patient and physician was a comfortably close one in which doctor advised patient and patient believed that ‘doctor knows best’”. This is no longer the case and becoming less so with each passing day – new means of communications, the size and significance of the health care system, the growth in Government involvement and intervention and the complexity of treatment all make for a less personal system. What ever we do to make the most of this changed world, it should centre on the provision of good quality information to the patient as a consumer of health care. To achieve this, drugs companies need to examine their business and marketing models. The emerging challenge to patent-based systems from developing countries is significant as is the focus in the development world on “wellness”. These two considerations are the subject of the remaining two articles in this special issue: Crawford and Leventis looking at the growing market for herbal remedies and Mascarenhas et al. examining radical business models for addressing the moral challenge of delivering drugs and health care in poor countries.
Health foods, diet supplements and alternative medicine
In a connected world health care in Mali really does matter
The US market for dietary supplements is very large at $18 billion (although not so massive set next to the market for traditional pharmaceuticals which sits at around $180 billion). In addition there is a growing market made up of foods with health claims (led by the dairy industry). Much of this market focuses on overall well-being rather than on addressing specific conditions indeed, the limitations on herbal remedies are such that is suits their promoter to pull them back from specific claims as to the herb’s effect. Compared to other parts of the healthcare sector, the marketing of herbal remedies and supplements is relatively unregulated. And we should note that the drugs companies and many parts of the medical profession are very protective
In the latter case we should start by understanding that we cannot isolate ourselves from the health care and medical challenges in the developed world. It is not just the high profile “pandemics” like SARS, avian ’flu and AIDS/HIV but many other conditions – resistant TB, malaria and hepatitis variants are all significant challenges in the developing world that will affect us in the developed world if we do not take actions to assist in managing their spread. Mascarenhas et al. focus on the challenge of AIDS/HIV which has been the subject of considerable debate and controversy especially given the complex nature of treatment for the condition and the expense of the antiretroviral drugs used in that treatment. 440
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of health claims relating to anything other than a properly formulated and clinically tested drug. There is often frustration about this but it is wholly reasonable given the protection that governments wish to extend to the population and the extensive regulation that applies to traditional drugs. Nevertheless, there is a lesson for drug companies in the success of dietary supplements and herbal remedies. This market builds on levels of health awareness, on the desire to promote our own good health and on the view that we should regulate what we put into our body. This health awareness extends beyond the market for supplements and we can see it as one factor in the positive response from consumers to DTC advertising of prescription drugs.
the prescribing doctor and dispensing pharmacist act as protectors for the consumer. The consumer in today’s developed market is looking for the information that allows sensible choice. Sometimes the use of information is moderated (in this case via a physician) but this does not provide a reason for withholding that information. However, there remains a worry for consumers that the advertiser is being less than complete in their provision of information. Nevertheless, much of this is verifiable and we operate on the principle that our doctor is not going to prescribe drugs we do not need (there is a separate debate to be had on the extent to which the promotional tactics of drugs companies could compromise the independence of physicians). The articles in this special issue direct us as marketers towards the appreciation that, in general terms, what we do is morally good. Despite the dreadful stories of misplaced marketing and the voices opposing the making of profits, allowing consumers to be fully informed about the drugs others are buying for us improves the quality of health care. Given the opportunities presented by the Internet and by the sophisticated broadcast media available to advertisers it seems rather foolish to prevent their use because we are worried about the ability of consumers to understand the information it brings.
Consumer empowerment is to be welcomed not restrained Those who resist the opening up of access to information about drugs run counter to the trend in consumer marketing. This is especially the case with DTC advertising of prescription drugs where one of the commonest arguments against such advertising is that consumers might not understand the information. Leaving aside the rather patronizing implications of this stance, we need to recognize that prescription drugs are a directly regulated market where
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Book reviews The 18 Immutable Laws of Corporate Reputation Ronald J. Alsop Kogan Page Ltd London 2004 286 pp. £17.99 Keywords Corporate identity, Organizational behaviour, Corporate communications Review DOI: 10.1108/07363760510631192 When the Journal of Consumer Marketing, sent me The 18 Immutable Laws of Corporate Reputation I thought, “Great: another book of lists for success” And, I tossed it on my desk for a couple of months. I was the poorer for those months because this substantive, welldocumented book basically shows how proper management leads to strong public image and reputation. Not a book for your public relations and advertising people, it is a book for your entire management team. Alsop’s basic argument is that corporate reputation is ultimately a function of corporate practice. While there are occasions when a public relations crisis must be managed, the bottom line is, every functional area of the business and every management decision either builds or diminishes your reputation. You can skim the book’s cases and go straight for the key points of each chapter – they are nicely marked with bold headers and have a relatively quick read. On the other, reading the contemporary substantive cases reveals how each principle played out or was violated in the real world. As each chapter develops a law, there are boxes with important research information that supports the key point. Divided into roughly three equal parts, Part 1: “Establishing a good reputation”, Part 2: “Keeping it”, and Part 3: “Repairing it”; The 18 Immutable Laws of Corporate Reputation can help you if you are in good shape, if you want ideas on maintaining your reputation, or if you are in the middle of a crisis. Law 1: “Maximizing your most important asset” opens with FedEx’s
nightmare of losing a truck to fire being prominently featured on televised news. Alsop lays out how FedEx’s established reputation, thorough preparation, and planning for dealing with such a disaster via an aggressive but substantive and thoughtful response, minimized any damage. A firm needs to actively develop its reputation, build an organizational culture that weighs decisions in terms of impact on reputation, and uses its reputation capital wisely. Laws 2, 4, and 6 are the heart of this first section as Alsop calls on firms to know themselves and operate on that basis. His suggestion that firms make decisions in the light of reputational impact is not suggesting duplicity but rather looking at your firm positively. Does this decision represent who we really are? Is it consistent with our own values and ethical standards? The author suggests that a firm’s leadership, its CEO, needs to cast a compelling vision that builds on its values, as both BP or Dell have. Then its managers and employees will make decisions that do right by the customer and confirm the company’s reputation. In fact the personality of the firm’s public figures, the CEO, president, are often closely linked to the vision and the firm’s reputation. Laws 3 and 5 demonstrate the importance of a company knowing its constituencies and regularly giving back to its community. But it is not calculation and weighing costs and opportunities; it is about creating emotional attachment and commitment. It can be as simple as Sue Harness at Wawa baking cookies for departing employees or as expensive and time consuming as the effort to redesign the airplane seats and flight crew uniforms by Continental, moves that significantly improved customers’ feelings about the airline. Companies need to consider the feelings of their internal and external constituencies and ask themselves what business decisions will enhance their customers’ and employees’ satisfaction, thereby building “reputational capital” that can be stored and used in times of need. Unfortunately, carefully establishing a good reputation by doing the right things and making good decisions is not enough. Hence why Part 2 and Laws 8 through 13 address the need to protect that reputation. As Home 442
Depot learned, a firm needs to track its reputation and be aware of its shortcomings (Law 8). Home Depot lost its focus in its drive to profitability and moved away from its vision. It took a survey to bring HD back to its senses, and it took specific, concrete actions to address customer service. Consequently, over time its reputation rebounded. This is Alsop’s point. Reputation is a function of doing business correctly; it is not an add-on through manipulation or heavy promotional budgets. Understanding this, HD held back on emphasizing service quality in its advertising until it felt they could legitimately claim it. Laws 9 and 11 are the ones that will keep you awake at night. Law 9, “Stay vigilant to ever-present perils”, opens with the mistake of a misguided employee in a moment of high stress deciding to sell water (rather than give it as other businesses in the area did with food, etc.) to the firefighters and rescue personnel at the Twin Towers site on 9/ 11. Then Starbucks sought to defend itself by “setting the facts straight”, even though it was in conflict with their own published customer service policies. They underestimated the power of word-of-mouth and the internet in spreading the story, not to mention the print media. Law 11 – “Control the internet before it controls you”, brings home the power of the internet for good and ill for any business. The case of how Tommy Hilfiger countered a negative urban myth by aggressively countering, seeking its origins, etc., is consistent with Alsop’s continuing proactive message. Reputation is something you actively build and defend. Alsop then goes into how companies can positively use the web to enhance reputation by providing customers with product information, company information, even posting “myths and legends” and offering counters to them. In Laws 10, 12 and 13 we learn the importance of consistency in a public message and having employees who communicate that consistent message in all they say and do. The author closes Part 2 by reminding us of the importance of deciding and acting in ways consistent with whom the company is, even to the point of being careful of partnerships, strategic alliances, etc. Do these cooperative efforts not only make business sense
but are they consistent with whom we are as a company? The four of the last five laws under Part 3 – “Repairing a damaged reputation”, carry a consistent message – fixing a reputation problem requires skill, honesty, and humility, and it needs to be done right the first time. The closing Law 18 – “If all else fails change your name”, may seem like an attempt at humor but it is practical advice with a caveat. Even that may not be enough. While this is the most “defensive” portion of the book, Alsop wants us to understand that anyone, even DuPont, can recover from a crisis. Responding with the customer in mind, being willing to humbly accept even what is not the firm’s fault, and acting at the right time, usually sooner than later, go a long way to restoring company image. The public’s cynicism – Law 16 and their desire for contrition – Law 17, make it critically important that a company deal with the issue right the first time – Law 15, and with care – Law 14. It is clear that no course of action, no event is isolated. It is the coordination of doing the right things, of basically good humane management, and appropriate timing that result in success in dealing with crisis. The author’s final advice in Law 18 seems mixed. He offers as many examples of name changes not working as working. I believe he included it to argue the opposite. It is not change your name; it is do everything you can to not reach this point because you only have a 50-50 chance that this last-ditch strategy will work. Entertainingly written, exemplified with many current and some classic case studies, and adequately supported with research, The 18 Immutable Laws of Corporate Reputation is a practical management tool for understanding both the importance of corporate reputation and how ethical, humane management practices support and enhance it. If you react to the title and “judge the book by its cover”, you will miss an excellent, integrated management book that your entire management team will benefit from. And, it may help you head off a future reputation crisis. Because while we can control our firms to some extent, we cannot control the future. Jim Dupree Professor of Business, Grove City College, Grove City, Pennsylvania, USA
ageless marketing: Strategies for Reaching the Hearts & Minds of the New Customer Majority David B. Wolfe with Robert E. Snyder Dearborn Trade Publishing, a Kaplan Professional Company Chicago, IL 336 pp.ISBN 0-7931-7744-3 US $25.00, Can 37.95 Keywords Ageless marketing, Anti-being experience, Being experiences, Boomers, Experiential segmentation, Left brain/right brain, Seasons of life, Value portraits Review DOI: 10.1108/07363760510631200 ageless marketing, divided into five parts, of three chapters each, presents a compelling charge to marketers, advertisers and salespeople to look at the market in a new light. Beginning with Part I, “An era of new rules”, all the way through and including Part V, “Preparing landing sites for marketing messages”, readers will find new ideas and concepts mixed with classic philosophical quotations that support the new. A delightful twist in format is offering the readers an interlude in the middle of the book and then a later chapter that chronicles five generations of a family. The Erskine family logs give enhanced credibility to all of the author’s “seasonal” concepts. Wolfe uses this particular family as a “microcosm of the marketplace” (p. 217). Its members range from ten months to 91 years of age. Mr Wolfe, with Mr Snyder, insists that marketing is missing the boat without recognizing, addressing, and implementing many ideas he has brought together. For serious marketers, this business book requires thorough reading with attention to, and retention of, the many terms the author creates and uses. It comprehensively includes and builds upon these terms, the most frequently uses of which I list above as keywords. While many may argue that younger consumers pay more attention to advertising and act on it, the new consumer majority becomes larger each day and thus has the potential for greater revenues. Their sheer volume makes appropriate advertising a must.
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There is often much-appreciated connectivity in the book to examples and relationships from past chapters. These serve readers as both a review of major applications and, while the same time, introducing new topics. For one example, in Chapter 12, where the discussion of the “marketer as a healer” arises, the author takes readers back only one chapter, to Chapter 11, where he cited the success of a Trappist monk, Abbot Joseph, for the importance of story telling. Another example of connectivity is in the “Conclusion” to Chapter 13. Here, when discussing the importance of symbols and avoidance of “anti-being experience symbols”, Wolf and Snyder take readers back to Figure 7.1 that delineates the seasons of life in matrix form. The authors begin, and continue throughout the book, by stressing the importance of developmental psychology, “a field almost completely ignored in consumer research” (p. 37). They call on marketers to understand the relationships of related fields to current marketing needs. They spend a good deal of time providing an understanding the roles of the right and left brain. Their major contention states that we can no longer target markets by chronological age and by the statistics we gather from questionnaires. The first challenge presented is the “extraordinary population shrinkage taking place in the historically-mostimportant age group in the consumer economy – adults from 25 to 44. The grim outcome of this is a total absence of sales growth in this age group throughout this decade” (p. 331). To meet the new demands of “ageless marketing,” we need to understand fully the three “Experiential stages of adult life”: (1) possession experiences of the earlier years; (2) catered experiences of the mid years, or “the first stage of being someone versus becoming someone”; and (3) Being experiences of the later seasons of life (p. 242). The authors go on and quote Peter Kim, who said: As Americans redefine what it means to grow old, age, in many ways, will become an obsolete marketing concept (p. 243).
Instead of putting our beliefs into focus group outcomes and questionnaire results exclusively, we must look at the
life span as two halves, under and over age 40. Wolfe includes comments for and against focus groups and suggests times to have panelists record their thoughts rather than speaking aloud to influence one another’s responses. A major problem Wolfe deals with is that the often, and incorrectly, sympathetic symbols and words addressing the senior market, those in the “winter season” of life, are offensive and, equally important, probably causing companies to lose business. He gives examples of people, who probably think they are being courteous, without request take the arm of the elderly to help them walk. There is grave concern about advertising and marketing people, who are still in their first halves of life, having responsibility to create messages targeting those in later seasons of life without yet having had the personal experience of the second half of life. Thus, there is an urgent and immediate need to correct the many inappropriate ads targeting people in the fall and winter life stages. These messages convey a lack of awareness of things in which seniors are still interested in, such as excitement and sex, to name only two. The author suggests such creators have coaching and guidance from those in the “winter” stages. Offensive advertising and marketing to those in the second half cannot continue with the rapid growth of the “fall and winter” markets. Values of members in each season accompany this discussion. Unchanging values mold the behaviors and actions of most consumers. An emerging segment Wolfe feels marketers overlook, because of current and inappropriate segmentation precepts, is comprised of another unaddressed group: those who have wound up in different circumstances, such as divorced people, single people who have always been single, and others out of the anticipated molds. Wolfe faults corporations for being more concerned with moving product than for understanding their customers. He does give examples of companies that have been unusual in their successful customer recognition programs, such as Southwest Airlines. He and Robert Snyder have worked in community development and “senior” housing. They get to the crux of the matter by pointing out that most senior developments advertise golf courses and
other amenities that presume those in the winter season of life either place strong value on these amenities or have no other values they treasure and want to use in their retirement. Promotions inappropriately and regularly show pictures of a senior couple walking hand in hand with “pasted smiles” on their faces. In this section, Wolfe provides many enjoyable ways in which he has listened to, and then accommodated, consumers. He even continues by advising the best practices for attracting people in different seasons of life at the same time to the same property, rather than limiting the property to seniors. He provides photos of collateral publicity he and his clients used to coax the younger segment to share events in one formerly senior-only housing complex. Later, he concludes that in “over 400 communities, representing over 600,000 homes, no developer client was ever sued” (p. 303). They maintained dialogs with residents by invoking what they called “the four Cs – communicate constantly with candor and control”. Until then many people had stereotypical images of housing especially for seniors. This practice of listening to, and talking with, consumers of various life seasons, and his amalgamation of the members of the Spring stage of the life cycle with the Winter stage people, is one way Wolfe addresses the questioned ability of marketing to bring various groups together. Wolfe is consistent with his argument against restricting market knowledge to numbers when he says that customer relationship management (CRM) has not worked. He talks in the opening chapter, with a sub-heading of “Why marketing stopped working”, of the “dehumanization of customer experiences with a company” (p. 7). There needs to be a way to learn about customers, especially the ever-growing customer majority, which mostly the boomers comprise. To do this, we must consider that people are in four seasons of life, beginning with spring. We must understand what values exist in each season and how the members of that group relate to the corresponding season. The end of “ageless marketing” directs attention to the ever-growing consumer majority, the “seniors.” Wolfe identifies symbols, nomenclature, and 444
terms that this huge group of winter people (seniors) like and dislike. To use better terminology is imperative. These negative symbols repel people from advertising. At one time, Wolfe asked a 66-year old to review a stack of brochures from extended service communities. These brochures opened with a promise to people that they would remain independent. After one paragraph, the brochures told everything about what the property would offer to keep people from being independent; i.e. how they are going to feed you, clean your apartment, launder your linens, bus you to where you want to go, and, with a social director, decide what you will do each day. The book provides additional knowledge to marketers of the state of the five senses during aging. Anyone committed to getting a 360-degree view of customers in their 50s and older needs to be aware of these changes because they can influence product design, marketing, sales, point-of-sale environments, and post-sale servicing (pp. 305-306). Marketers must address these issues. He wants to know why companies put so much effort and money into package design and yet pay no attention to whether or not seniors have the strength with which to open the packages. Before the appendix, which defines the research that went into this book, the author concludes by repeating his objective was to provide “for the first time in a business book” (p. 332) the integration of psychology with marketing and more. The legacy Wolfe wants to leave readers with by the end of the book is a much greater understanding of self, those around us, and, in fact, the “Family of man”. This book is a “must read” for those in marketing, advertising, publicity, and sales. It could be a “light read” for seniors and those interested in segmentation. Wolfe accomplished his objective with me, and I implore those involved in marketing and related fields to carry on to the end of this book. It is a slow read of changes requiring high speed. Sylvia Keyes Professor, School of Management, Bridgewater State College, Bridgewater, Massachusetts, USA and Immediate Past Vice President, American Marketing Association, Collegiate Chapters Division
Celebration of Fools: An Inside Look at the Rise and Fall of JCPenney Bill Hare AMACOM New York, NY www.amacombooks.org 284 pp. $24.95 Keywords Partnerships, Merchandise versus Merchandising, Specialist Review DOI: 10.1108/07363760510631219 Who knew or cared what was happening? “In 1994, after all, they had a record year of immense profit. The party was Texas-sized, with praise and rewards all around. It was a ‘celebration of fools’” (p. 173). When I saw the jacket covering the hard copy of Celebration of Fools, the author’s background as a speechwriter and filmmaker was notable. I presumed the book would contain discrete press releases and short stories of the corporate history. Instead, Bill Hare presents a saga, in non-fiction, that I did not want to put aside. He recounts the ups and then the downs of this leading department store chain from his own eight years with its executives and combines it with knowledge of others from JCPenney. Since the company tended to maintain an insular position in the retailing and business world, there was little for the writer to find externally. Thus, admittedly, Hare presumes his conclusions from many conversations. He makes it clear on that “the book concentrates on the major events that drove the company up . . . and down” (p. 3). I enjoyed every page of this book. However, I showed it to a professor from a Texas university, who was unable to get beyond the first chapter – even though, ultimately, JCPenney moved its corporate headquarters to Dallas. Perhaps Hare’s story had so much meaning for me because, in the ’60s, for a short-lived part of my career, I worked for Federated Department Stores. There were no first names in the JCPenney nor in the Federated vintage, when I reported to Mr Maurice Lazarus, the Vice Chairman of Federated and the President of Filene’s, its Boston Federated store. At the same time, Mr Harold Krensky rose
to be the successor to Mr Maurice Lazarus as the President of Filene’s and then replaced Mr Ralph Lazarus, who is mentioned ion this book as the top officer of Federated. So, to me, the climb to the top was similar in the two famous organizations. In fact, as I read about a CEO of JCPenney trying to systematize its business by a secret, manual record of consolidated transactions, I was, in the same year, working on what sounded like the same project for Mr Lazarus. Similarly to Filene’s, the people at the top of JCPenney rose from their ability in merchandising or strategy and overall vision; and their wives became a part of the interviewing process. In fact, James Cash Penney’s wife was always “Mrs Penney”, even to him. For me, this was of interest in demonstrating the need for a company to establish a posture in consumers’ minds, its human resources’ development, and its contributions within surrounding communities. To most readers, who are probably those with interest in retailing and management, either from experience or from study, Bill Hare presents a continuing and convincing argument in favor of the retail giant’s founding fathers, beginning with J.C. Penney and continuing through Walt Neppl and Don Seibert, of the wonderful years that included success in acquiring personnel and training them in the JC Penney ways. In 1936, in Salt Lake City, at a company gathering of then 36 stores, Mr Penney introduced the “body of doctrine” of H-C-S-C. He invoked this acronym, which represented Honor, Confidence, Service, and Cooperation (p. 37). As simplistic as it seemed, numerous CEO’s followed this credo until the time of Bill Howell, the chairman and CEO, responsible for moving the company from New York to Dallas. The leaders, prior to Howell, followed the beliefs of both merchandise and merchandising, had the ability to withstand and ameliorate the differences among people at the store level and others at the buying level, held appreciation for a varied product mix – in spite of these managers leading the path to the malls of America – and showed foresight in attempting to computerize systems with leaders in the cash register industry. Mr Hare, at the other extreme, presents a convincing argument against those at the helm, beginning with W.R. Howell, 445
and, especially Jim Oesterreicher. These top officers were “preening themselves” (p. 169), and pushing toward further self-aggrandizement by acquiring the Eckerd Corporation, an unsuccessful venture into the pharmacy business. It is not surprising that AMACOM published this book. In addition to retailing, it contains many management lessons. In the early years, Penney’s management training endorsed leading by example. Employees moved up who followed the H-C-S-C doctrine and the procedures that related to it. Hare explains the result of this philosophical underpinning by saying: “Remember, Penney was the godfather of sharing. If you produced, you did very well” (p. 15). An important word from the beginning of James Cash Penney’s regime was “partnerships”. After people of the Golden Rule Stores proved their worth, they received offers to become partners, a managerial technique that accounted for the stores’ ability to thrive. They paid attention to the customers and provided the product mix important to those customers. Many years later, the top officers lost this objective and replaced it with profit. In the center of the book, among glossy photographs, readers can see the James C. Penney Meat Market. Jim Penney’s first venture failed because he would not pay bribes. The picture shows both Jim Penney and his beloved, Berta, who worked in the market where they met. Berta had arrived in Jim’s hometown after deserting the location of her first marriage, which ended in divorce. She and Jim worked together in his first Golden Rule Store and, while he was away on a buying trip, Berta learned she was pregnant. Jim returned much later and, on learning of the pregnancy, proposed to Berta. She worked tirelessly in both the home and the business, keeping the baby’s basket on the premises. When she needed to have her tonsils removed, she walked to and from the surgeon’s office, and thereafter became very ill. Jim had planned a trip for the then family of Berta and two children because they never had a real vacation. However, Berta never recovered from her illness and Jim never recovered from the fact she was gone even when she died. This caused him to institutionalize himself much
later in life. Fortuitously he did recover. Frugality did remain a major part of his life, as his tips were an embarrassment to those around him. From a company that began around 1903 and that had no Jewish employees until the 1960s, it turned into a company that later claimed to be interested in equal opportunity for women and minority members. Long before this, the wife of one manager was rude and haughty to a woman salesperson. Another CEO soon thereafter tried to picture his own wife having to stand there all day for less pay than her male counterparts. Along came the upwardly mobile Gale DuffBloom, who oversaw the successful movement toward equity. At the same time, Gale suffered hurt when she went to celebrate her achievements for women with the top officers. The men were whispering to one another before and during this jaunt, and, only on arrival, Ms Duff-Bloom, learned she had to return to her office alone, as the men remained to play at this golf course that did not welcome women. The men,
allegedly supportive of her efforts, did not leave and return with her. A further personal frame of reference in the “Celebration of fools” led me to read about Dr Barton Weitz. Dr Weitz received the full respect of Gale DuffBloom. When she arrived on his campus, she felt a pang of regret that she had, by her own design and demands, risen to the top without a formal, on-campus college education. Barton is the JCPenney Scholar at the Warrington School of Business at University of Florida. Moreover, I agree with Duff-Bloom’s assessment of Professor Weitz, who was Chairman of the Board of the American Marketing Association, when I was its top officer of the collegiate division in 2002 and 2003. He is as bright, “amiable,” and effective as Ms Duff-Bloom describes him. Hare divides the book into four chronological parts: (1) The founder; (2) The visionary; (3) The betrayer; and (4) The end.
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There are 27 chapter titles, which become apparent and appropriate as readers understand the text preceding each heading. For example, Chapter 9 bears the title of “The common touch”. This chapter describes the commonalities of JCPenney’s top executives. Only one, Mil Batten, who was the fourth Chairman and CEO, never managed a store. He did train under and work with others in the organization and moved up until he retired to become the head of the United States’ Securities and Exchange Commission. Most chapters were under 20 pages. For me, not one chapter dragged and there was no redundancy. It is a read those in retailing and management should not miss. Sylvia Keyes Professor, School of Management, Bridgewater State College, Bridgewater, Massachusetts, USA and Immediate Past Vice President, American Marketing Association, Collegiate Chapters Division
For example, the WGU624 garnered excellent overall throughput scores in CNET Labs’ technical tests. CNET is a website that maintains a professional evaluation staff and performs numerous tests of software and hardware. Speed is only one aspect of wireless technology: the other is security. Since it is based on radio waves, security is of special concern. All radio waves can be intercepted. To provide security, a security protocol is necessary. The router uses secure WPA technology. WPA is short for Wi-Fi Protected Access, a standard that was designed to improve upon the security features of protocols. Wi-Fi is short for wireless fidelity and is meant to be used generically when referring of any type of 802.11 network, whether 802.11b, 802.11a, or other. WPA technology and extensive firewall features should protect your transmissions in both modes. This sounds good but there is another requirement. Not only do you need a router, you need a specific wireless PC card to reap these benefits. In this case, the WGU624 requires use of a Netgear WG511U PC card or another brand of dual band adapter, in each of the computers on your network.
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A fast and secure wireless network for home or office When Bill Gates recognized the internet as the next big opportunity, he repositioned Microsoft to emphasize Internet Explorer and added networking capabilities to Windows 98 Second Edition. At the time, the networking was accomplished using network cards and cables. Networking in turn spurred cable and telephone providers to roll out broadband connections for small businesses and individual consumers. The reliance on cable connections was logical. At the time only cables provided the speed necessary to give fast internet access. Cable installation was one of the more difficult tasks, especially in older business buildings. When necessary, the task of drilling through concrete walls made the task more costly. As a result, companies and individuals faced with laying out the networking infrastructure embraced wireless connectivity. As the internet and networking grew in popularity, wired networking became a challenge for both the individual with a small office at home and the small business owner. The following review represents actual experience in entering the wireless domain. Our personal wired networking experience concentrated on integrating hardware made by Netgear. Netgear’s equipment earned a reputation for easy configuration, flawless performance and economy. It was logical that we chose Netgear equipment for a wireless network. Netgear marketed a new wireless router, which forms the heart of a wireless network. Our choice was the new WGU624 wireless firewall router. Wireless routers require a communications protocol to communicate. The protocol determines the ceiling of communication speed. When a radio frequency current is supplied to an antenna, it creates an electromagnetic field that can propagate through space. The protocol determines how that field is used for communication. Many wireless technologies are based on radio frequency field propagation. Since the WGU624 uses two protocols, 5 GHz 802.11a and 2.4 GHz 802.11b/g, it allows sending data in two separate radio frequencies instead of just one. 802.11 refers to a family of specifications developed by the Institute of Electrical and Electronics Engineers, (IEEE pronounced I-triple-E). 802.11 specifies an over-the-air interface between a wireless client and a base station or between two wireless clients. The IEEE accepted the specification in 1997. That specification promises enhanced performance. Netgear also promises that its router will deliver fast delivery of data over significant distances using either frequency. Independent laboratory tests support the claim.
Setup Netgear provides a browser-based tool to configure the WGU624. The setup tool allows the user to manipulate aspects of its integrated 802.11as well as its 802.11b/g access points. Using the tool one can create keys for 64-, 128-, and 152-bit Wired Equivalent Privacy encryption. Wired Equivalent Privacy (WEP), is a security protocol for wireless local area networks defined in the 802.11b standard. It is designed to provide the same level of security as that of a wired LAN (WLAN). In essence LANs are inherently more secure than WLANs. Because they rely on physical connections, they do not have the radio wave “leak point” that wireless LANs have. In fact, national security agencies, which know how to hack an enemy’s communications, view WLAN’s as security risks and tend to rely more on wired networks. Since WLANs are more vulnerable to tampering, other safeguards are needed. WEP attempts to provide security by using encryption to protect the data sent via WLANs. In the world of secrecy, it is clear that few encryption schemes are totally secure. If communications use the same encryption algorithm over time, eventually the cipher becomes vulnerable. Spies sometimes use a “one-time encipher pad”, a non-repeated cipher that cannot be broken because it is not repeated to give clues to help the code breaker. Since WEP is used repeatedly, it is not as secure as once believed. If security is paramount, perhaps wired LAN’s will be required. The tool does provide a log of access attempts so that a vigilant LAN manager may use it to discover attempts to penetrate security. The WGU624’s configuration tool allows users to foil external attempts to gain access to LAN connected computer contents. The WGU624’s setup guide and documentation are supplied on a CD. The WGU624 setup guide is clear and offers a good explanation of how to hook up the router’s hardware. The documentation on the CD is detailed and explains the configuration tool well. Users report that it is easy to setup and get working out of the box Performance Netgear WGU624 seems to deliver the speedy performance it promises. Tests in both the 2.4 GHz and 5 GHz bands showed
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Still others report that the unit fails to deliver its promised range, even at distances much less than 200 feet.
fast data throughput. LAN performance is measured in Mega bits per second. Modern wired LAN’s may reach 100 Mbps. The WGU624 mode, the router can attain 42.1Mbps, slower than wire but still fast. There are other wireless routers that are rated a bit faster. However, the WGU624 performs very well compared to most routers. Speed is a critical metric of LANs. WLANs also must deliver performance at a distance from a router. Like the old “portable” telephones, the farther the handset traveled from the telephone base, the weaker the signal became. Tests of the WGU624 at 200 feet showed that the router transferred data quickly.
Specifications for the Netgear WGU624 . Networking form factor – external. . Connectivity technology – wired, wireless. . Data transfer rate – 108 Mbps. . Data link protocol – Ethernet, IEEE 802.11a, IEEE 802.11b, IEEE 802.11 g, Fast Ethernet. . Transport protocol – L2TP, PPTP, IPSec, PPPoE, TCP/IP. . Features – DMZ port, Manageable, Auto-uplink, NAT support, DHCP support, E-mail alert, URL filtering, VPN pass through, Content filtering, Firewall protection, DoS attack prevention, MAC address filtering, Intrusion Detection System (IDS), Stateful Packet Inspection (SPI) . Networking compliant standards – IEEE 802.11a, IEEE 802.11b, IEEE 802.11 g. . Routing protocol – RIP-1, RIP-2.
Warranty The WGU624 comes with one-year warranty. In addition, Netgear provides 24/7, toll-free phone support during the warranty period. The FAQ and troubleshooting info on the company’s support web site is okay. However, Netgear sees the value in customer-to-customer communication and set up a nicely organized customer forum. A sampling of the communication shows it to be helpful in getting router advice.
Overall evaluation – Netgear WGU624 As far as wireless routers go, the WGU624 offers a wellrounded bundle of fast throughput, long range, and tight data security. On the plus side it has 802.11a/b/g support; fast maximum throughput at both short and long ranges; good security via WPA and firewall settings. On the negative side, it is more expensive than other routers, and its one year warranty is considered short. Personally, it was found to be very good for exploiting both of its internal protocols to send multiple streams of data across a wireless network simultaneously. Therefore it was speedy and speed is vital. I am somewhat technically oriented and like to play with new technological toys. For my office, and me the router worked well and gave me the performance I expected. I have several PC’s networked without the need to run cable over the building. Truthfully, it is a little less tweakable than I like but relatively unsophisticated users (with standardized configurations) will find it fine. In summary, time and money are required to properly install the WGU624. Therefore it is most suitable for companies with an available technical staff or individuals with a technical bent. Without these, it might be better to find another alternative. Robert Jameson Practice Management LLC, Columbia, Maryland, USA
Cost The WGU624 lists for $105. If you use the WG511U PC Card, each will cost $65. Thus the cost for the router and a few wireless connected PC’s can add up. Caveats While wireless hardware is better today than it was last year, there can be lurking problems. PC configurations vary and some can cause unforeseen performance problems. While some users praise the unit for ease of setup and performance, others report stability problems with the WGU624. They range from having to reboot once a month to once each morning. Some users report that the router is buggy. Actually the Netgear user forum had numerous complaints. One of the most damaging is that users have to “constantly reboot the router to get it to work for just a few hours”. In many cases the router just seems to continually reboot. Sadly, Netgear does not seem to respond to consumer complaints about stability. Users also complain about the technical support. It is 24/7 but as with many products, technical support is offshore. Users report that the support is not effective in solving their problems.
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professionally done which is expected. The one aspect of interest in this review is the facility that allows individuals to design his or her own Nike products. Other companies have used the “design a product” idea to gain insight into the customer’s preferences. For example, Proctor Silex the small appliance manufacturer used the “Design a toaster” interactive module to plumb customer preferences. Their results were mixed since toasters may be inherently less interesting than other products. No consumer supplied a “category busting” design. There were some interesting features that customers designed into their products but there was no provision to assess a consumer’s tradeoff of cost versus features. The lesson is that it takes more than a slick computer module to learn what bundle of features might make a successful product. It also requires a knowledgeable and skilled staff to sort out the noise and fun and isolate the “voice of the customer.” Nike’s site offers a breakthrough feature: it allows individuals to “Design” and “Buy” products that can actually be produced for sale. It exemplifies one to one marketing perfectly. We decided to explore a sample of the “design it yourself” choices that Nike offers. The designer required a choice of region and then a further choice of country. We chose the UK. The next step is to select a reference shoe (the inspiration for the design) and a shoe size. In this case we chose a shoe, the Nike Dunk Low Parque iD, described as the Soul of Brazil. Notably, the description also features the price: US$75. One can take a basic shoe and customize the color of five interchangeable components: the base color, the secondary color, the lining, the Nike swoosh accent and the outsole. Different combinations of each element create strikingly different designs. It is fun to change one element and see the effect on the total shoe design. Design choices are strictly multiple-choice to minimize the difficulty in manufacturing. Mercifully, the combinations of several designs we played with yielded few horrid results. Most were at least acceptable. Several had a striking appearance. For individuals or groups of individuals like sports teams, the chance to customize a style of footwear is valuable. The price is also attractive and approximates the normal retail price. Nike has selected a series of styles each of which has enough customizable elements to create a shoe with a distinctive appearance. They have also minimized the manufacturing difficulties by concentrating on “assembly”. In other words, shoes can be assembled using elements that correspond to the customer’s color choices. So a red base color upper can be combined with a white Nike swoosh (accent) and a gray secondary color outer cover. There is a lot of computer aided design and manufacturing behind the scenes here. The results are not totally unique, since statistically someone on the net will have chosen “our” exact design. In addition, one cannot yet specify a particular style of sole pattern that is not part of the basic shoe design. However, the website conveys the benefits of mass customization, namely allowing individuals to buy something they would have designed for themselves and really want.
Internet currency Edited by Dennis A. Pitta University of Baltimore
One to one marketing finally hits its stride Not too long ago, marketers talked about one to one marketing and mass customization. The idea, which was promoted by Pepper and Rogers, sought to satisfy customer wants at a profit by giving them exactly what they wanted. The idea was based on getting to know exactly what the customer wanted and creating want satisfying goods and services that met those wants. Information technology was vital in helping companies learn and remember the wants of a specific customer. Some of the earliest examples involved items like coffee purchased from a Starbuck’s like shop or specific preferences of hotel guests. The one to one concept requires that customers divulge what they want when they interact with an organization. The communication occurs naturally in some settings. For example, the hotel guest who wants a larger number of towels, an extra pillow or a bathrobe to use at the pool would ask the front desk. Similarly, revealed preferences for a special type of room service meal, or a room located on a lower floor would help the hotel keep satisfying the guest. Pepper and Rogers and other authors stressed the need to remember that information using sophisticated databases. For chain retailers, the customer information could be stored in a central database accessible from any retail location. The benefits include being able to access customer address and contact information, payment data, and preferences without having to ask the customer every time he or she trades with the company. In fact, the concept was more easily applied to services rather than products. Customizing products for individuals is often beyond the means of the typical manufacturer. Often the emphasis is on making a uniform product or a uniform set of products to satisfy the largest number of consumers. The limitations of production have only recently been overcome. Now, computer aided design and computer aided manufacturing have made it possible to allow the customer to design his or her own customized product. In this issue we look at a recent project devised by a venerable shoe manufacturer, Nike. Nike (www.nike.com/main.html) The Nike web site is animated and asks the visitor to choose his or her geographic region of interest. The rest of the site is Journal of Consumer Marketing 22/7 (2005) 449–450 q Emerald Group Publishing Limited [ISSN 0736-3761]
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In our next issue, we will investigate other informative sites and invite readers to submit their favorite internet sites for our consideration.
Overall comments After years as a concept and topic of marketing discussion, a company has finally implemented mass customization for a physical product well. Hotels and restaurants may have pioneered the one to one marketing concept in the service industry. Nike has done so in manufacturing and product design. Moreover, Nike has not neglected the pricing or promotional aspects of its customized shoes. It has progressed beyond the limited product design websites of the past. Currently, Nike has created another engine for online sales. As online retail sales continue to grow, Nike may find its distinctive “create a shoe design” web site is a valuable competitive tool.
Reader requests Please forward all requests to review innovative internet sites to: Dr Dennis Pitta, University of Baltimore, 1420 North Charles Street, Baltimore, MD 21201-5779, USA. Alternatively, please send e-mail to:
[email protected] for prompt attention.
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Note from the publisher .
Outstanding Doctoral Research Awards .
As part of Emerald Group Publishing’s commitment to supporting excellence in research, we are pleased to announce that the 1st Annual Outstanding Doctoral Research Awards have been decided. Details about the winners are shown below. 2005 was the first year in which the awards were presented and, due to the success of the initiative, the programme is to be continued in future years. The idea for the awards, which are jointly sponsored by Emerald Group Publishing and the European Foundation for Management Development (EFMD), came about through exploring how we can encourage, celebrate and reward excellence in international management research. Each winner has received e1,500 and a number have had the opportunity to meet and discuss their research with a relevant journal editor. Increased knowledge-sharing opportunities and the exchange and development of ideas that extend beyond the peer review of the journals have resulted from this process. The awards have specifically encouraged research and publication by new academics: evidence of how their research has impacted upon future study or practice was taken into account when making the award selections and we feel confident that the winners will go on to have further success in their research work. The winners for 2005 are as follows: . Category: Business-to-Business Marketing Management Winner: Victoria Little, University of Auckland, New Zealand Understanding customer value: an action research-based study of contemporary marketing practice. . Category: Enterprise Applications of Internet Technology Winner: Mamata Jenamani, Indian Institute of Technology Design benchmarking, user behaviour analysis and linkstructure personalization in commercial web sites. . Category: Human Resource Management Winner: Leanne Cutcher, University of Sydney, Australia Banking on the customer: customer relations, employment relations and worker identity in the Australian retail banking industry.
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Category: Information Science Winner: Theresa Anderson, University of Technology, Sydney, Australia Understandings of relevance and topic as they evolve in the scholarly research process. Category: Interdisciplinary Accounting Research Winner: Christian Nielsen, Copenhagen Business School, Denmark Essays on business reporting: production and consumption of strategic information in the market for information. Category: International Service Management Winner: Tracey Dagger, University of Western Australia Perceived service quality: proximal antecedents and outcomes in the context of a high involvement, high contact, ongoing service. Category: Leadership and Organizational Development Winner: Richard Adams, Cranfield University, UK Perceptions of innovations: exploring and developing innovation classification. Category: Management and Governance Winner: Anna Dempster, Judge Institute of Management, University of Cambridge, UK Strategic use of announcement options. Category: Operations and Supply Chain Management Winner: Bin Jiang, DePaul University, USA Empirical evidence of outsourcing effects on firm’s performance and value in the short term. Category: Organizational Change and Development Winner: Sally Riad, Victoria University of Wellington, New Zealand Managing merger integration: a social constructionist perspective. Category: Public Sector Management Winner: John Mullins, National University of Ireland, Cork Perceptions of leadership in the public library: a transnational study.
Submissions for the 2nd Annual Emerald/EFMD Outstanding Doctoral Research Awards are now being received and we would encourage you to recommend the awards to doctoral candidates who you believe to have undertaken excellent research. The deadline by which we require all applications is 1 March 2006. For further details about the subject categories, eligibility and submission requirements, please visit the web site: www.emeraldinsight. com/info/researchers/funding/doctoralawards/2006awards. html
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