Those Marketing Dollars Get Spent Very Early

Do these numbers include the marketing research companies need to do when they talk to docs and patients to find out about:

A) existing unmet needs. B) issues about existing needs that, if improved in a new product, would make a real difference.

Hi Jack2,

Unfortunately, I don't know the answer to your question. I don't have access to the full report, just an excerpt, which doesn't mention the detail you ask about. I will try to learn more, though.

Regards ed

Jack2 and Ed,

It is likely that marketing research costs are included in this spend.

Atlex

These costs include most of the costs of running the clinical trials themselves. Even reimbursements paid to patients (parking, transportation, diems) in order to participate in the trial. They also include grants to hospitals and doctors participating in the trial and fees to medical writers who will eventually write up the results - under the name of the P.I. of course.

Thanks for highlighting this report Ed...

I agree with Atlex. And as the graph shows, the marketing dollars escalate considerably during the transition from phase 2 to phase 3, in anticipation of a drug launch. However, the success rate of phase 3 is reported to be only 25%-30%. So a sizeable chunk of the pre-launch marketing spend is eaten by what turns out to be a dud drug.

Can a direct link be established to the full report? Planning to use this for class. Current link just brings you to the main website and report not easy to locate.

Thanks!

B. Martin, The success rate of phase 3 trials runs at around 70% these days. (for NCEs) Phase 2 is the problem -- only about 25% succeed (ie only 25% of compounds that enter phase 2 will eventually end up in a phase 3 trial).

I agree with Atlex that these figures have to include Mkt research. Market research dollars for pre-launch are significant and typically fall under marketing budgets. Product positioning, pricing, preparation and testing of promotional materials (including development of DTC campaigns), etc. -- all can run into big $$$ (multi-millions per year).

I would also suggest that this probably does not include the cost of running the trials themselves, as that typically does not come out of the marketing budget.

Who are the authors of this report? What is the source of the data? Sample size, etc...

Pre-launch market/marketing research includes a wide variety of activities. Market assessment, forecasting, competitive intelligence, prescriber (and now consumer) perception work to assess for the best niche, closer to launch, promotional material development and testing. Other marketing expenses include PR, "grassroots" interest group development, speakers bureau/advisory panel development/ego-stroking. Marketing and research spend go toward attending conventions and conducting research meetings.

My experience (which ended about a decade ago in Market Research) was that while the clinical trial expenses were not in the Marketing budget, a good portion of the researcher meetings (internal and external, needed or not) were carried by Marketing.

My prelaunch market research budget for a $250-300 million potential drug was about the same as my first year budget. The second year budget was less, but our Market Research budget rose again as we got into DTC advertising. This was a while back (early 90s).

Back then, external marketing - even if it was subtle - didn't start too much before the phase III trials were over, and you had some idea of the direction the FDA would go. Certainly also there was the idea then that the medical professional segment got first priority over consumer directed promotion. Now apparently if you have a potentially promising prostate cancer drug, you begin consumer promotion at the same time as the Phase III trial. This way your "grassroots" supporters can put pressure on the FDA and their congressional representatives to grant approval if you can show even as much as "progression free survival."

Nathan, a phase 3 success rate of 70% seems awfully high (but bully for the company that can consistently achieve it). The reports I've seen indicate a phase 1 success rate of ~70%; a phase 2 success rate of ~30%, and a phase 3 success rate of 25%-30% (sources are NIH and CDER). But I'm sure those numbers vary, depending on the therapeutic area. I'd be interested to know what your source is.

M. Helm, MD:

Phase III-B trials are often in the marketing budget although managed by Medical Affairs. Is that your experience also? Phase IV is certainly is funded by marketing.

One major investment analyst told me her best estimate of marketing costs for the first year of launch is 50% of expected sales and then drops to 25% in year 2 post-launch.

I would be shocked if anyone really keeps any costs related to any clinical trial conducted post approval, let alone a phase III(b) study, in the marketing budget. Keeping these costs as in a medical research cost center (clinical development or medical affairs) allows them to be declared tax deductible research costs. The companies will allow these trials to be run the way the marketing organization wants them handled (i.e., loosely designed, limited site oversight/management, but they will defend them as legitimate research that are well thought out phase III(b)'s really meant to answer a clinical question even whether this is truly the case or whether the trial is really a seeding study.

Bob Freeman,

Not sure where the money ultimately came from, but there was never a trial, after the pivotal trials, not approved by marketing. I believe this applied to investigator initiated trials too. Protocols were scrutinized closely. I and the medical research manager had to lobby the SVP of Marketing and Sales to fund a direct comparative trial for our product versus the apparant market leader (fastest growth rate, but not yet highest share). We finally got approval, did the study, and compared favorably, but effort was about 9 months too late. If it hadn't looked good, it would not have been published.

Ol Cranky is probably correct about the accounting, but at least in my experience, Marketing always called the shots in Phase III and beyond.

The estimates on expenses as a percent of sales are probably right. But, first year sales are pretty slow, and launch meeting and the initial blitz of printing, ads and frebies are pretty expensive. Second year marketing budgets are still pretty high (more convention spending than in year one to make up for the lack of a launch meeting), but sales are supposed to be much greater too.

Thanks Dr. Helm and Ol' Cranky:

I recall one of the reasons 1st year promotional spend was so high was due to heavy sampling.

My recollection of accounting is getting fuzzy but I absolutely agree that every trial or study after the pivotal trials were determined by marketing. A lot of "happy" money was given out.

IITs are most definitely the domain of marketing but, again, companies will deny this and claim they are all really 100% initiated by the investigator, 100% good clinical science, 100% compliant and 0% impacted by a need to make a physician happy/desire to create or promote off-label uses/find a way to sample off-label. Nope, no sham grants there. . . honest.

From my days in health economics and outcomes research, I recall managed care organizations holding a gun to our heads to "study" the drug in their population as a criterion for formulary decision-making.

I swear there was one PBM that made the Mafia look like fair negotiators. Most were more subtle.

not too long ago I had to deal with putting together a phase IV study at a certain pharmacy organization that would distribute our product. Med Affairs/Strategic Business was all for it because it would have been a "jusifiable" seeding study to get docs in an area that just had received off label coverage for the drug. It seems what they really may have wanted was for us to use them as a distributer of clinical trial supplies. I bumped it up to regulatory and operations to get out of doing the study.

As "Someone" who has worked in the industry for many years, we had a saying borrowed from another saying actually - "If marketing ain't happy, ain't nobody happy"...

Nothing gets done unless marketing says so. Helping patients is just the gravy and absolutely not the primary objective...

Ergo, is it any wonder managed care facilities do not trust the approved drug - c'mon....