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Banning drug ads could cost $10B
Frist wants drug makers to back off from consumer ads, while some see the ads as public education.
August 1, 2005: 3:07 PM EDT
By Aaron Smith, CNN/Money staff writer

NEW YORK (CNN/Money) Senate Majority Leader Bill Frist's proposed moratorium on direct-to-consumer advertising could cost the industry as much as $10 billion if it ever comes to fruition, an analyst said.

"It would have a multi-billion dollar impact," said Andrew McDonald, analyst for ThinkEquity Partners. "$10 billion is not an unreasonable number."

Frist, a Republican from Tennessee and a heart-lung replacement surgeon, on July 1 asked drug makers for a voluntary, two-year moratorium on direct-to-consumer advertising, the type that consumers see on television and in magazines. Drug makers also spend a considerable amount of money marketing directly to doctors.

Despite the estimated impact on drug sales, McDonald said he would support more government control of direct-to-consumer advertising, because he believes the drug makers have too much influence over physicians and patients.

"Why are doctors prescribing Celebrex, and why did they used to prescribe Vioxx, when naproxin [a generic painkiller] is far cheaper and works just as well?" said McDonald. "It can be explained by direct-to-consumer advertising. You have patients going to doctors and demanding Celebrex."

The research firm Harris Interactive released a survey on July 21 showing that more than half its respondents would support a temporary advertising ban on newly-approved direct-to-consumer drugs, while one-quarter of respondents believe a ban is a bad idea.

Harris Interactive's nationwide survey of more than 2,200 respondents revealed that 51 percent believe "it is a good idea to forbid direct-to-consumer advertising for new prescription drugs for some period of time after the FDA approved a new drug, so that doctors have time to become familiar with the new drug."

But Robert Hazlett, analyst for Suntrust Robinson Humphrey, believes that a moratorium would be a bad idea, and not just because of lost sales. Hazlett sees direct-to-consumer advertising as more of a public service than an effort to control physicians.

"The pharmaceutical industry, I think, will be prudent in the way it manages direct-to-consumer advertising, but I don't see them stopping it for important drugs that would be a benefit to the consumer any time soon," said Hazlett. "I wish Mr. Frist the best of luck."

Frist, a Republican from Tennessee and heart-lung replacement surgeon, on July 1 made this appeal to drug makers for a voluntary moratorium:

"Used appropriately, direct-to-consumer advertising can empower patients without inflating need or medical realities," said Frist. "But research evidence indicates that this blitz in direct-to-consumer advertising has unwittingly led to inappropriate prescribing, which most importantly can compromise patient safety and care."

Since that time, drug makers have continued to tout direct-to-consumer advertising as a valuable service to the public. On July 21, the Pharmaceutical Research and Manufacturers of America said that direct-to-consumer advertising was "vitally important to patient education" and issued "guiding principles" for the industry. These principles suggest more interaction with physicians before the launch of a new advertising campaign and more information on assistance programs for uninsured and low-income patients.

Eli Lilly & Co. (up $0.44 to $56.76, Research) spokesman Ed Sagebiel told CNN/Money that direct-to-consumer advertising provides a health service by "bringing patients into the doctor's office" for the treatment of serious medical conditions. He also downplayed the amount of money spent on advertising, saying that Lilly's annual costs in direct-to-consumer advertising are equally to two weeks of research and development costs, which are important in discovering new drugs.

But Dr. John Abramson, clinical instructor at Harvard University, former family doctor and author of "Overdosed America: The Broken Promise of American Medicine," said that direct-to-consumer advertising is "detrimental" to health care because it "drives a wedge" between patients and physicians by playing on the patients' "sense of autonomy."

"I could not convince many of my patients that the marketing they were hearing about Vioxx was maximizing the benefits and minimizing the risks," said Abramson, recounting his days as a family doctor prior to the Vioxx recall on Sept. 30, 2004. "That's how powerful the advertising is."

Abramson said that establishing a moratorium is not impossible, but it would require an outcry from the public and physicians.

A moratorium on advertising would not be entirely bad for the industry, said Bernstein analyst Gbola Amusa, as drug companies would save on marketing costs and potential damages from litigation.

"A ban for the first two years might mean that the pharm companies are less culpable for litigation if a safety issue pops up," said Amusa.

The analysts in this story do not own stock in the companies mentioned here, though an affiliate of Suntrust has done business with Pfizer and Lilly.  Top of page


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