pharmaceutical industry overview - medical tribune · •the u.s. pharmaceutical industry ......

Pharmaceutical Industry Overview

http://www.medical-tribune.ch

and

The Agenda


htttp://www.rxpromoroi.org

•Overview of Healthcare in the United States

•The U.S. Pharmaceutical Industry

•Two Pillars of the U.S. Rx Industry

Research & Development

Promotion

Detailing

Meetings and Events

Sampling

Journals

CME

Compliance and Disease Management

•Promotional Resource Allocation

•Return On Investment - Total Return vs. Average Marginal Return

•ROI Calculator

•Q&A

Data - A single piece of data without context“The return on Wyeth’s investment on promotion in 2002 was $9.21”

Information - Data put into context and linked with like data.“Wyeth ranks second among the major U.S. pharmaceutical manufacturers.”.

Knowledge - Information organized to help assimilate knowledge“Wyeth can improve its performance if it …”

Wisdom – The “Ah-Hah” moment“Oh, I get it…”

The Process Data

Information

Knowledge

Wisdom

$4,8

87

$3,1

60

$3,0

12

$2,8

08

$2,7

92

$2,7

19

$2,6

43

$2,6

26

$2,5

61

$2,5

03

$2,4

90

$2,3

50

$2,2

70

$2,2

12

$2,1

91

$1,9

92

$1,9

84

$1,9

35

$1,8

41

$1,7

10

$1,6

14

$1,6

00

$1,5

11

$1,1

05

$586

$911

$893

$682

$629

0

1000

2000

3000

4000

5000

6000

USA

Switze

rlandNorw

ay

German

y

Canad

a

Luxe

mbourg

Icelan

d

Netherl

ands

Franc

e

Denmark

Belgium

Austra

lia

Swed

en Italy

Austria UK

Japa

n

Irelan

d

Finlan

d

New Ze

aland

Portu

galSp

ain

Greece

Czech

Repub

lic

Hunga

ryKore

a

Slova

k Rep

ublic

Polan

d

Mexico

Per

Cap

ita $

US

ppp

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

% G

DP

Global healthcare expenditures

Source: ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT June 2003

United State Spent $5,440 per person in 2002 (+8.3%)

Life expectancy around the worldThe United States Ranks 12th

Source: World Health Organization; The World Health Report, 2002. 31.830Afghanistan63.815Mexico

3229Zimbabwe65.814Chile

42.928Congo66.613Cuba

43.027South Africa67.412United States50.426Iraq69.211United Kingdom

50.925Pakistan69.410Israel

51.224India69.79Canada

56.323Brazil70.18Germany

56.422Egypt70.47Greece

56.621Russian Federation70.76Spain

57.120Peru70.95Italy

58.419Bahamas71.14France

59.818Saudi Arabia71.43Australia

62.817China72.52Switzerland

62.916Argentina73.51Japan

Life ExpectancyRankCountryLife Expectancy

RankCountry

France

13% 11%76%

Germany

13%12%

75%

Italy

1%

26%73%

UK

0%19%

81%

How healthcare is financed

For year 2000 Source: OECD Health Data 2003

Government-sponsored

Private Insurance

Out of pocket / other

Includes OOP /other sources

Private Insurance33.1%

Out-of-Pocket15.4%

Medicare17.6%

Other Public (1)12.0%

Other Private (2)6.1%

Medicaid & SCHIP15.7%

Total Government

Total Government $0.45 $0.45

Total Private

Total Private $0.40$0.40

United States

US Healthcare Spending Has Grown to Over $1.6T

$73

$247

$700$767

$837$899

$948 $993$1,039

$1,088$1,149

$1,229$1,316

$1,424$1,600

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

1970 1980 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

$000 Billions

Source: CMS, 2003

+9.3%

That’s more than education and defense … combined!

Price Inflation 4-6%

Utilization andTechnology

6-8%%Aging 1-2%

Plan design 1-2%

Underlying Cost Drivers

Source: Towers Perrin

-

500

1,000

1,500

2,000

2,500

2000 2001 2002 2003 2004 2005 2006 2007 2008Hospital Care Professional Services Rx Drugs Gov't Admin / Net cost of Insurance Other

Source: HCFA, 2000

Shifting allocation of costs

Pharmaceuticals +10%

0.0

50.0

100.0

150.0

200.0

250.0

North America EU Europe Rest of Europe Japan Asia (exJapan), Africa,

Australia

Latin America

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%2002 Sales ($B) YTY Growth

2002 Global Pharma Sales by Region

Source IMSHealth World Review 2003

411

413

5441,019

1,187

1,3242,053

2,340

3,019

3,115

3,469

3,598

4,198

4,336

4,787

5,9966,079

130,716

Russia

India/Pakistan

Africa

Central/Eastern Europe

Middle East

Australia/NZ

Spain

Asia Pacific

Canada

UK

Italy

Germany

Uncategorzed

France

Latin America

Japan

Other Western Europe

United States

PhRMA company sales by geographic region

Source: PhRMA annual member survey 2003

5,443 7,13611,789

20,743

38,487

57,146

115,882

145,213

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

$160,000

1970

1975

1980

1985

1990

1995

2000

PhRMA Domestic Sales ($Mill.)

U.S. Pharmaceuticals are One of the Fastest Growing Segments in Healthcare…

• Easily isolated cost

• Highly profitable

• Frequent target of criticism

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

Pfize

r

GlaxoS

mithKline

Johnso

n & Jo

hnson

Merck &

Co.

Astra

Zene

ca

Bristo

l-Mye

rs Sq

uibb

Novart

isWyet

hEli L

illy

Amge

n '

Aven

tisAb

bott

Hoffman

-LaRoch

e

Tap P

harm

a

Sche

ring Pl

ough

Boeh

ringer

Ingleh

eim Fores

tTe

va

Sano

fi-Syn

thelab

o Esaii

-40.0%

-30.0%

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

40.0%$ 000 YTY Growth

80:20 rule – Top 20 Deliver 78.5% of Total Sales ‘03

MAT 10/02 – 9/03 Source: IMS National Sales Perspecive 11/2003

0

5,000

10,000

15,000

20,000

25,000

Pfizer

GlaxoS

mithKline

Johnso

n & Jo

hnson

Merck &

Co.

Astra

Zene

ca

Bristo

l-Mye

rs Squ

ibb Novartis

Wyeth

Pharm

acia

Eli Lil

ly

Sche

ring -P

lough Av

entis

Amge

n '

Abbo

tt

Tap P

harm

aRoc

he

Boeh

ringer

Ingleh

eim Fores

tTe

vaEs

aii

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%$ 000 YTY Growth

80:20 rule – Top 20 Deliver 81% of Total Sales ‘02

IMS Health Retail and Provider perspective 2003 Rx Products and Insulin, excludes co-marketing arrangements, JVs to prod owner, includes completed M&A

Retail Market Growth 1992 - YTD June 2002

•Total Rxs Have...

•Increased 65% from 1992 - 2001

•Increased 2% from 6 -2001 – 6 - 2002

•Retail Sales Have…

•Increased 222%222% from 1992 - 2001

•Increased 12% from 6 -2001 – 6 - 2002

Source: Verispan

1.8 1.9 2.02.2

2.3 2.42.5

2.72.9 3.0

1.6

0

0.5

1

1.5

2

2.5

3

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

YTD 6/

2002

Total Rxs (#Billion)

$47 $50 $56 $63 $72$83

$94$111

$132$152

$83

0

20

40

60

80

100

120

140

160

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

YTD 6/

2002

Retail Sales ($Billions)

Increased utilization

8.7%

Price inflation 3.9%

New medicines

2.1%

Source:PhRMAGrowth drivers

Top 10 Therapeutic Classes by U.S. Rx Sales 2002

0

2

4

6

8

10

12

14

Cholest

erol Redu

cers PP

I

SSRI/SN

RI

Antipsyc

hotics

Erythrop

oietins

Siezure

Disorde

rs Cox 2

Antihista

mines

Calcium

Blocker

s

ACE Inhibito

rs

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

($000) YTY Growth Source IMS

Pharmaceutical industry v. S&P 500Rx stocks lag despite growth

S&P = S&P 500 Index

DRG = AMEX drug index

Research and Development...Research and Development... Marketing….Marketing….

Understand how chemical compounds work in the

human body


human body

Communicate this understanding to

physicians, payers and patients



Two pillars of industry investment

Goal - Maximize return on each investment (ROI)

Leading Products: 2002 Total U.S. Sales

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

Lipitor Zocor Prevacid Prilosec Procrit Zyprexa Epogen Celebrex Zoloft Paxil

-25.0%

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

Sales ($Bill) % Inc. Sales

Source: IMS Retail and Provider Perspective – wholesale prices, Rx only including insulin

Patent Peak U.S.Expiration Product Maker Rev. ($Mill)

2006 Zocor Merck 6,700 Paxil GSK 2,500 Zoloft Pfizer 2,000 Pravachol BMS 2,000 Zofran GSK 1,400 Zithromax Pfizer 1,200 Imitrex GSK 1,000 Ambien Sanofi 1,000 17,800

2005 Prevacid TAP 3,700 Rocephin Roche 700 Celexa Forest 1,430 Klacid Abbott 600 6,430

2004 Procrit J&J 3,800 Allegra Aventis 1,364 Diflucan Pfizer 600 5,764

2003 Cipro Bayer 1,200 Flixotide GSK 600 Floxin J&J 400 2,200

2002 Prilosec AZ 4,200 Augmentin GSK 1,300 GlucophageBMS 1,800 Claritin Schering 1,700 Prinivil Merck 1,100 Zestril AZ 700 Nolvadex AZ 500 Accutane Roche 500 11,800

Total 43,994

Patent expirations will have a severe

impact on the industry

Many top 10 medicines are on the list

Source: Merrill Lynch 2002 / The Orange book www.fda.gov/cder/ob/default.htm

Source: IMS HEALTH, Pharmaceutical 1984-2000 2001-2004 projection S&P H. Saftlas + regression

19%22% 23%

27%30% 32% 33% 35% 35%

40% 42% 43% 43% 44% 46% 47% 47% 49% 51%

57%

0%

10%

20%

30%

40%

50%

60%

1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2005est

% of Total Rx units

Innovation vs. Imitation - Generic Share is Growing

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

France Italy Mexico Japan U.K. U.S. Canada Germany Chile

% o

f un

it sa

les

0%

10%

20%

30%

40%

50%

60%

70%

% o

f D

olla

r sa

les

% Units % Sales

Source: “Prices and availability of pharmaceuticals: evidence from nine countries,” P Denzon, M Furukawa, Health Affairs 10/2003

Generics use by country

Source: IMS HEALTH, Pharmaceutical 1984-2000 2001-2004 projection S&P H. Saftlas + regression

19%22% 23%

27%30% 32% 33% 35% 35%

40% 42% 43% 43% 44% 46% 47% 47% 49% 51%

57%

0%

10%

20%

30%

40%

50%

60%

1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2005est

% of Total Rx units

Innovation vs. Imitation - Generic Share is Growing

0200400600800

1,0001,2001,4001,6001,800

Brand Generic BrandedGeneric

0%

2%

4%

6%

8%

10%

12%# Rxs (Mil) % Increase

Source: IMS Health, National Prescription Audit Plus, 1/2003

# Prescriptions

70%30%

Traditional Generics"Branded Generics"

$ Dollars

48%52%

Source: WSJ 4/18/03

Value of Intellectual Property (IP) Example:

Value of U.S. Patent 4,572,909 (Amlodipine)

Annual Sales (~ $US 1.6 Billion in U.S. Market)x Effective Lifetime of Patent (~15 years)

= $US 24 Billion in Sales

Each Day of Patent Protection on Amlodipine in the U.S. is worth $US 4.4 Million

783

1992 2002

# Patent ChallengesGeneric manufacturers are becoming more aggressive with legal

challenges

0

5

10

15

20

Sal

es E

xpo

sure

to

p

aten

t ex

pir

atio

n (

$B)

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

U.S. Pharmaceutical Patent Expirations by value: 1990-2006

Source: FDA Orange Book; S&P research as of Jan. 2002

Patent expirations

Period Average

$28.9

$10.9

$12.5

$14.1

$10.6

$10.6

$7.2

$8.9

$6.7

$8.6$11.8

$3.0

$9.4

$4.0

$8.6

$3.9

$6.5$4.3

$5.2$3.1

$4.7$1.6

$4.1$1.9

0

5

10

15

20

25

30

35

40

$39.8 $26.6 $21.2 $16.1 $15.3 $14.8 $13.4 $12.5 $10.8 $8.3 $6.3 $6.0

27.4% 53.0% 50.0% 55.3% 56.2% 20.3% 29.9% 31.2% 39.8% 37.3% 25.4% 31.7%

Pfizer Glaxo Merck AstraZeneca

Bristol J&J Novartis Roche Lilly Schering Abbott Sanofi

Impact of Major Patent Expirations

2001 Sales of Other Products 2001 Sales of Expiring Products

Pharma Sales ($B)

Expiring Products

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

Canada Chile France Germany Italy Japan Mexico U.K

OTC Sole source Originator Generic

Global Drug Prices: OTC / On-patent brand / Generics (Manufacturer prices relative to U.S. prices adjusted for U.S. discounts – 1999)

Source: “Prices and availability of pharmaceuticals: evidence from nine countries,” P Denzon, M Furukawa, Health Affairs 10/2003

0.7%1.2%

3.8%3.9%3.9%

4.7%5.3%

7.8%8.4%

10.5%12.8%

15.6%17.0%

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0%

Paper and Forest Products

Metals & Mining

Aerospace & Defense

Automotive

All Industries Excluding Drugs

Leisure Time Products

Telecommunications

Office Equipment & Services

Electrical and Electronics

Computer Software & Services

Drugs and Medicines

Industrial Sector Comparisons

Global Pharmaceutical R&D

U.S. Pharmaceutical R&D

R&D as a Percent of Sales, Research-Based Pharmaceutical Companies and the U.S Industrial Sector

“Pharmaceutical R&D” tabulated by PhRMA“Drugs and Medicines” tabulated by Standard & Poor’s Compustat (includes research based and non-research based companies)

2421 22

14 12

27 28

14

22

30

20 21 2023 23

3026 25

2228

53

39 3835

27

24

1721

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

R&D productivity has not kept pace

$0

$5,000

$10,000

$15,000

$20,000

$25,000

1970

1975

1980

1985

1990

1995

2000

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%PhRMA R&D Expenses ($Mil) R&D % of Sales

R&D Spending Nearly Tripled in Last Decade

# NMEs approved

“Data, data everywhere and not a drug, I think”

107.8

182.3

664.5

696.6

846.7

1,366.8

2,305.0

2,717.0

3,872.0

3,955.4

4,299.5

Diagnostics

Skin

Biologicals

Respiratory

Digestive or genitourinary

Other Human

Cardiovascular

Infective and Parasitic

Neoplasms, endocrine,metabolic

Central Nervous System

Uncategorized

23.4%

20.0%

13.7%12.6%

9.6%

7.1%

4.1%

3.1%

6.4%

Antiinfective

Cardiovascular

Central Nervous System

Analgesic/Anesthetic

Antineoplastic

Endocrine

Respiratory

Gastrointestinal

Other

NCEs 1963-1999 by therapeutic category

Source: J. DiMasi, PhD Tufts University

R&D – Low Hanging Fruit Has Been Picked

R&D Spending by Category($ Millions)

Source: PhRMA 2001

5,000Compounds

SuccessRate

Assess Safety and

biologicalactivity

ResearchPurpose

Laboratoryand animal

studies

TestPopulation

3.5 YearsYears

Preclinicals

trialsenterOnly

5

Verify efficacymonitor

reactionslonger term

Efficacyand

Side Effects

Safetyand

Dosage

1,000-4,000patient

volunteers

100-300healthy

volunteers

20-80healthy

volunteers

3 years2 years1 year

PhaseIII

Phase II

PhaseI

IND

FILED

NDA

FILED Out of 5,000

1

Review/Process

Approval

2.5 years

FDAReview

LAUNCH

Recall?

Additional post-marketing

testingrequired

byFDA

PhaseIV

U.S. Drug Approval Process

12-16 Years

$900+ Million

NB: Only 3 Of 10 Marketed ProductsPays Back Its R&D Costs

“ It’s the pipeline, stupid!

Development Cycles Are Getting Longer

3.2

5.1

5.9

2.5

4.4

5.5

6.3

2.4

2.1

2.8

1.86.1

0 2 4 6 8 10 12 14 16

1960's

1970"s

1980's

1990's

Preclinical Clinical Approval

YearsSOURCE: DiMasi, J.A. “New Drug Development in the U.S. 1963-1999. Clinical Pharmacology & Therapeutics 2001. May 69

(Time From First Pharmacological Testing To New Drug Approval 1963-1996)

1,5761,321

3,233

4,237

3,567

30 30

36

68

60

0

500

1000

1500

2000

2500

3000

3500

4000

4500

'77-'80 '81-'84 '85-'88 '89-'92 '94-'950

10

20

30

40

50

60

70

80

# Patients # Trials

SOURCE: Boston Consulting Group & Peck, C. “Drug Development:Improving the Process”, Food & Drug Law Journal, Vol. 52, 1997

Number Of Trials And Number Of Patients Per NDA

The industry spends over $1 Billion simply to recruit patients for clinical trials

The Clinical Trial Process Has Become Far More Complicated…and Expensive

“Data, data everywhere and not a drug, I think.’

13.8%

11.5%

10.3% 10.3% 10.2% 10.2% 9.8%

8.2% 8.2% 7.9%

6.8%6.3%

4.3%3.9%

3.9%

-0.7%

3.9%

0.7%

5.1%5.2%

2.4%

4.7%

7.4%

8.9%

2.4%

5.8%

8.8%9.3%

23% 29% 30% 27% 15% 20% 28% 21% 19% 41% 40% 49% 46% 47%

7.3 15.1 13.1 10.6 10.9 17.2 42.6 9.3 17.8 6.9 12.8 28.7 16.6 20.8

Abbott Novartis Roche Lilly Wyeth JNJ Pfizer Schering Aventis Sanofi Bristol Glaxo AZ Merck

2002-2006 Pharma Sales Growth Growth without new products

Product launch dependence by company

Est 2002 Rx Rev ($B)

Patent Exposure

510ADHDLilly2003Strattera

Pain

Infection

Incontinence

Osteoporosis

Thrombosis

Cholesterol

Indication

Pfizer

Bristol

Pfizer

Novartis

AZN

AZN

Company

2003

2003

2003

2003

2003

2003

Year

Dynastat

Garenoxacin

Darifenancin

Prexige

Exanta

Crestor

Product

678

778

835

851

1,070

1,088

2006 Rev ($M)

581

631

822

855

952

2,066

2006 Rev ($M)

AllergySchering2002Asmanex

HepatitisRoche2002Pegasys

EDGSK2002Vardenafil

HypertensionPfizer2002Eplerenone

CholesterolSchering2002Zetia

SchizophreniaBMS2002Abifly

IndicationCompanyYearProduct

Source: FDA Orange Book; S&P research as of Jan. 2002

Squibb Bristol-Myers

Bristol-Myers Squibb1989

Dupont Pharma

Bristol-Myers Squibb2001

Astra Zeneca

AstraZeneca1998

Hoechst Roussel Marion Merrel Dow

Hoechst Marion1995

Rhone Poulenc Rorer

Aventis1998

Agouron1999

Warner-Lambert Pfizer

Pfizer2000

Pharmacia Upjohn

Pharmacia & Upjohn1995

Monsanto

Pharmacia1999

Boehringer Mannheim1997

Syntex1994

Roche Genentech

Hoffman-LaRoche1999

Ciba Geigy Sandoz

Novartis1996

Wyeth-Ayerst American Cyanamid

Wyeth (American Home)1994

Centocor ALZA

Johnson & Johnson2001

Abbott Laboratories

Knoll Boots

Knoll1995

Abbott Laboratories2001

Glaxo Burroghs Wellcome

Glaxo Wellcome1995

SmithKline Beecham

Glaxo/SmithKline2000

Schering Plough Key

Schering1985

To Manage Risk the Pharmaceutical Industry is Consolidating(PhRMA companies – 1990s)

Sanofi-Synthelabo Merck

Source: IMS HEALTH: Retail & Provider Perspective, 2003

Industry is “swinging for the fences”

2 3 46 6

13

18

22

35

41

0

5

10

15

20

25

30

35

40

45

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

# Products with$1 Billion in U.S.

Sales

$920 Million - $1.8 Billion

1%

$180 Million - $460 Million

6%

Less than $180 Million90%

$460 Million - $920 Million

2% $1.8 Billion and Above1%

SOURCE: PriceWaterhouse Coopers & Scrip

Average For All Drugs--$265 Million Per Annum

Only 2% of Drugs Reach $1 Billion in Sales

Research and Development...Research and Development... Marketing….Marketing….


human body


human body





Two pillars of industry investment

Goal - Maximize return on that investment (ROI)

Promotional spending by country ($000)January-June 2003 (Source: CAMM Group)

11,3

89,1

52

6,89

5,46

8

1,90

2,36

7

1,54

7,69

9

1,54

4,89

2

1,07

5,39

9

546,

808

536,

343

404,

618

357,

541

351,

739

225,

566

205,

357

153,

149

147,

042

130,

798

72,3

40

55,8

59

46,8

9342

,845

34,0

89

32,8

21

31,0

53

29,1

63

24,8

88

21,0

1317

,801

14,3

23

13,5

38

7,86

4

3,56

6

-

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

USAJa

pan

German

y Italy

France Spa

in

Mexico UK

Brazil

Canad

a

Turke

y

Portug

al

Poland

Austra

liaBelg

ium

Switzerlan

dAus

tria

Argen

tinaGree

ceKo

rea

Morocco

NL

Finlan

d

Roman

iaIre

land

Swed

en

Denmark

Hunga

ry

Norway

New Ze

aland

Luxem

bourg

U.S. = 40% of promotion – 45% of sales

Japan = 24% of promotion – 19% of sales

(1.20)

1.40

( 1 7 . 7 0 )

( 7 . 5 0 )

(51 .40)

9 . 3 0

0 . 3 02 . 4 0

4 . 4 0

8 . 2 0

( 1 9 . 9 0 )

(25.10)

7 . 8 0

( 1 0 . 0 0 )

18.20

11.20

15.60

6 . 6 0

(41 .70)

( 5 . 9 0 )

(12.80)

( 3 3 . 2 0 )

1.002 . 2 0

-60

-50

-40

-30

-20

-10

0

10

20

30

Germ

any

Switz

erlan

d

Austr

ia

Japa

n Fra

nce UK Italy

Spain

Belgi

umNe

derla

ndLu

xembo

urg

Irelan

dSw

eden

Norw

ayFin

land

Denm

arkPo

rtuga

l

Gree

ce USA

Cana

daAr

genti

na

Braz

ilMe

xico

Moroc

co

Promotion : Trend 2003/2002 (% Change)January-June 2003 (Source: CAMM Group)

(*) Growth not available : Poland and Hungary

WorldWide:

- 1,0

Direct Mail1%

Other 0%

Clin Trials2%

Print Advertising

2%

Pharma Detailing

3%

Meetings7%

E-Promotion0%

Web Advertising

0%Samples8%

DTC9%

GP/FP Detailing

31%

SP Detailing37%

Allocation by media

United States 1- 10/2003

Events , 16%

NP/PA 6%

Hosp Detailing,

8%

Office Detailing,

48%

DTC, 21%Journals, 2% e promo, 1%

24 countries 1-6/ 2003

(Source: CAMM Group)

Global

United States

$4.9

$0.8

$3.0

$0.5

$6.0

$1.1

$3.4

$0.5

$6.6

$1.3

$4.1

$0.5

$7.2

$1.8

$4.3

$0.5

$8.0

$2.5

$4.6

$0.5

$10.5

$2.7

$5.5

$0.4

0

2

4

6

8

10

12

14

16

18

20

$ B

illion

s

1996 1997 1998 1999 2000 2001

Samples DTC Detailing Journals

U.S. Allocation of Promotional Spending

Source: IMS Health and CMR

Sampling represents the retail value of sampling activities directed to office based physicians as reported by members of their front office staff. DTC represents TV, magazines and newspapers, radio and outdoors. Office promo includes representative costs for OB physicians. Hospital includes costs for HB physicians and directors of pharmacy.

$19.1$15.6$13.8$12.5$11.0$9.2

Source: Verispan's Pharmaceutical Sales Force Structures & Strategies

40

Specialty Reps as Percentage of Total Reps

0

20,000

40,000

60,000

80,000

100,000

1Q99 1Q00 1Q01 1Q02 1Q03

Specialty Reps All other reps Part-time/contract reps

18% 26%

64%67%

23%

69%

25%

68%

27%

10%10%

10% 6%

72%

5%

Detailing

Ratio of Reps to Physicians is Increasing

SOURCE: Scott-Levin’s Sales Force Structures and Strategies*Includes Contract, part-time and full time from the top 40 companies in the U.S** Office Based Physicians - Synavant

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

8.79 6.99 6.06 5.54 4.89 4.71

Ratio of Reps to Physicians

340,000

350,000

360,000

370,000

380,000

390,000

400,000

410,000

420,000

Total Reps OB MDs

1996 1997 1998 1999 2000 2001

*Reps **Physicians

Rep:MD Ratio

Ratio in Germany 12:1 ?

93,000 Reps

42,000 Reps

63.6 M Details48.7 M Details

46.5 M Calls33.4 M Calls

1996 1997 1998 1999 2000 2001 2002

Reps Details Calls

Whenever possible, reps make deliver multiple product details in a single call

Increasing sales force size v. productivity

SOURCE: Verispan’s Sales Force Structures and Strategies*Includes Contract, part-time and full time from the top 40 companies in the U.S

More Limited Access to Physicians by Pharmaceutical Representatives

Rep leaves without leaving samples or

seeing Doc15%

Rep leaves samples at front

desk28%

Meets Doc at sample closet

37%

Sit down with Doc20%

Source: Health Strategies Group, Inc. 1999

Schering – Allocation of Product DetailsNetwork:

Week Ending October 3, 2003Time:

October 3, 2003

Source: Impact Rx ImpactRx data is collected daily from our Network of PCP high-prescribers. The sample frame is based on the 30% of PCPs who write 60% of all Rx's. Each Network physician supplies detailed, non-identifying information for the following areas: 1) a census of all representative promotion, 2) a census of all physician-attended meetings/events and 3) 40% of all patients seen each week.

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

7/11 7/18 7/25 8/1 8/8 8/15 8/22 8/29 9/5 9/12 9/19 9/26 10/3

Sha

re o

f Atte

ntio

n - P

rodu

ct D

etai

ls

Clarinex Nasonex Zetia Foradil

Primary Care

Foradil 3%

Zetia 22%

Nasonex 30%

Clarinex 43%

All Other 1%

Merck – Allocation of Product DetailsNetwork:

Week Ending October 3, 2003Time:October 3, 2003


0%

5%

10%

15%

20%

25%

30%

7/11 7/18 7/25 8/1 8/8 8/15 8/22 8/29 9/5 9/12 9/19 9/26 10/3

Sha

re o

f Atte

ntio

n -

Pro

duct

Det

ails

Zocor Vioxx FosamaxZetia Singulair AR Cozaar

Singulair Asthma Hyzaar MaxaltMaxalt MLT

Primary Care

Hyzaar 3%Singulair

Asthma 3%

Maxalt 2% Maxalt MLT 1%

Cozaar 10% Zocor

24%

Vioxx 17%

Singulair AR 12%

Zetia 12% Fosamax 13%

All Other 2%

AstraZeneca Allocation of DetailsNetwork:


October 3, 2003

Source Insight Rx ImpactRx data is collected daily from our Network of PCP high-prescribers. The sample frame is based on the 30% of PCPs who write 60% of all Rx's. Each Network physician supplies detailed, non-identifying information for the following areas: 1) a census of all representative promotion, 2) a census of all physician-attended meetings/events and 3) 40% of all patients seen each week.

0%

10%

20%

30%

40%

50%

60%

7/11 7/18 7/25 8/1 8/8 8/15 8/22 8/29 9/5 9/12 9/19 9/26 10/3

Sha

re o

f Atte

ntio

n -

Pro

duct

Det

ails

Crestor Nexium Toprol XLAtacand Rhinocort Aqua ZomigAtacand HCT Zomig ZMT Pulmicort

Primary Care

Zomig 2% Zomig

ZMT 2%

Atacand HCT 2%

Pulmicort 2%

Rhinocort Aqua 5%

Atacand 7%

Toprol XL 13% Crestor

41%

Nexium 24%

All Other 2%

GlaxoSmithKline Allocation of DetailsNetwork: Week Ending October 3, 2003Time:

October 3, 2003


0%

5%

10%

15%

20%

25%

7/11 7/18 7/25 8/1 8/8 8/15 8/22 8/29 9/5 9/12 9/19 9/26 10/3

Sha

re o

f Atte

ntio

n -

Pro

duct

Det

ails

Levitra Advair Diskus Wellbutrin XL

Coreg Augmentin XR Paxil CR

Avandia Flonase AvandametImitrex Valtrex Avodart

Augmentin ES-600

Primary Care

Augmentin XR 9%

Advair Diskus 12%

Wellbutrin XL 10%

Coreg 10%

Paxil CR 9%

Augmentin ES-600 1%

Avodart 1%

Valtrex 3%

Levitra 13%

Imitrex 4%

Avandamet 6%

Flonase 7%

Avandia 9%

All Other 4%

Pfizer Allocation of DetailsNetwork:


October 3, 2003

Source Impact Rx ImpactRx data is collected daily from our Network of PCP high-prescribers. The sample frame is based on the 30% of PCPs who write 60% of all Rx's. Each Network physician supplies detailed, non-identifying information for the following areas: 1) a census of all representative promotion, 2) a census of all physician-attended meetings/events and 3) 40% of all patients seen each week.

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

7/11 7/18 7/25 8/1 8/8 8/15 8/22 8/29 9/5 9/12 9/19 9/26 10/3

Sha

re o

f Atte

ntio

n -

Pro

duct

Det

ails

Lipitor Viagra Bextra CelebrexZoloft Relpax Norvasc Zithromax

Aricept Zyrtec Detrol LA Neurontin

Primary Care

Neurontin 2%

Detrol LA 4%

Zyrtec 5%

Aricept 5%

Zithromax 6%

Norvasc 6%

Relpax 7%

Zoloft 8%

Lipitor 16%

Celebrex 10%

Bextra 11%

Viagra 15%

All Other 5%

Growing Physician Dissatisfaction

? Top decile physicians receive three to five times as many details as they did in 1990

? Two-thirds of primary care physicians have restrictive policies on rep visits

?Only 20% of US Reps visiting the office actually get to speak with the physician and 87% of those calls last less than 2 minutes

? Physicians recall only 4% of all sales details attempted

Access

0

50

100

150

200

250

300

350

1995 1996 1997 1998 1999 2000

events details 65

60

55

50

45

40

# of

Eve

nts

(000

)Detail Visits and Events Growth are Linked

Source: Scott-Levin and WR Hambrecht + Co EstimatesNote: Events include physician meetings

As access to physicians declined, companies increased events

# of

Det

ails

(Mill

.)

123.115151.434

166.699

225.46

281.93

314.022

370.348

402.9 420.057

0

50

100

150

200

250

300

350

400

450

1995 1996 1997 1998 1999 2000 2001 2002 1-10 03

All PMEA specialties

Almost 1,400 Meetings per day

Source: Verispan 2003 Physicians Meeting and Event Audit

Promotional Trends: Meeting & Event GrowthThru

Oct. 2003

Other12%3rd Party

13%

Lg. Group5%

Teleconf.20%

Sm. Group50%

Lg. Group4%

Other9%

3rd Party8%

Teleconf.9%

Sm. Group70%

1996 EventsBase = 151,434

165% increase

SOURCE: Physician Meeting & Event Audit from Verispan


Meeting Type Price Meeting Type PriceVideoconference 2,500$ Symposium >51 or 4 hrs + 50,000$ Teleconference 2,500$ Large Group 21-50, 2hr + 50,000$ Focus/Personal Interview 2,500$ Small Rep <20 5,000$ Third Party 2,500$ Small Group (restaurant) 5,000$

More “Creative” Event Locations

Res. Facility

8%

"Other"16%

Home10%

Unspec.2%

Hotel11%

Office19%

Convention1%

Restaurant33%

Office17%

"Other"19%

Res. Facility

4%

Unspec.2%

Home6%

Hotel6%

Convention.4%

Restaurant46%


YTD 9/01 EventsBase = 275,704

“Other” Event Locations Include…Baseball game WinerySpa Golf Course

SOURCE: Physician Meeting & Event Audit, Scott-Levin, 1996, YTD 9/01

$820,000 Surgery - Plastic

$936,000Surgery - Neurological

$911,000Radiology

$238,000Psychiatry

$271,000Pediatrics

$1,352,000ORS - Spine Surgery

$417,000Obstetrics/Gynecology

$245,000IM (Hospitalist)

$238,000Internal Medicine

$271,000Infectious Disease

$685,000Hematology/Oncology

$590,000Gastroenterology

$363,000FP - Sports Medicine

$241,000FP (with OB)

$811,000Interventional Cardiology

$647,000Cardiology: Invasive

Top CompensationPhysician Specialty

Even by U.S. standards

physicians are well compensated

SOURCE: Verispan's PMEA 55

0% 10% 20% 30% 40% 50% 60% 70% 80%

% of Invitations Accepted

Other

Textbooks

Gift Cert.

Medical Inst.

Cash

Charity Contrib.*

Meals

Honoraria Influence on Attendance

0% 10% 20% 30% 40% 50% 60% 70% 80%

% of Invitations Accepted

Other

Textbooks

Gift Cert.

Medical Inst.

Cash

Charity Contrib.*

Meals

• Although offered infrequently, acceptance rates for events that offered charitable contributions as honoraria increased throughout 2003, to 80% acceptance rates by the quarter ending Oct. 2003.

Note: Percentages may add up to more than 100% due to multiple responses.* Less than 30 raw events

QTR Oct 2003 - Base: 12,948 Event InvitationsQTR Apr 2003 - Base: 15,056 Event Invitations

•Meals with physicians feature education

•Meals only at “appropriate” locations

•Meals at “appropriate $$ levels”

•No meals with spouses or guests

•No entertaining (golf, baseball, etc.)

•Gifts (<$100) must be practice related (no golf balls, etc)

•Consultants must be bona fide (Payments are acceptable)•Advisory board meetings must be bona fide (no spouses or guests)

New Guidelines

•Integrity of data used by states and fed to establish payments (AWP)

•Kickbacks and illegal remunerations

•Compliance with laws regarding samples.

•COMPLIANCE STEPS

•Written standards addressing specific areas of potential fraud and abuse

•Appoint a compliance officer reporting to the Chairman and the Board to monitor programs

•Establish effective an ongoing education for all employees involved

•Establish a free line of communication for “whistleblowers”

•Establish audits to monitor compliance

Meetings and Events still used extensivelyNetwork:

Rolling 4 Weeks Ending October 3, 2003

Promotion Research Organization

Time:

October 3, 2003 n= 178

Share of MD Reported Meetings and Events

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

7/11n=115

7/18117

7/2581

8/184

8/872

8/1567

8/2281

8/2991

9/5101

9/12121

9/19140

9/26157

10/3178

Sha

re o

f MD

-Rep

orte

d M

eetin

gs a

nd E

vent

s

Crestor Lipitor Zetia Zocor

Pravachol Lescol Pravigard Pac

Primary Care

Pravachol 6%Zocor 7%

Zetia 15%

Lipitor 26%

Crestor 43%

Lescol 3%

Source: ImpactRx

Consumer Influence

Deg

ree

of In

fluen

ce Physician

Consumer

Managed Care

1970s 1980s 1990s 2000s

Source: IMS HEALTH Market Survey, 2001

. . . DTC emerges

Direct To Consumer Advertising

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

1995 1996 1997 1998 1999 2000 2001 2002

SOURCE: Scott-Levin’s Direct-to-Consumer Advertising Audit, CMR

93% 46% 28% 40% 33% 10% -5.4%

$ D

TC

Spe

ndin

g in

Bill

ions

0.00

50.00

100.00

150.00

200.00

250.00

300.00

350.00

400.00

450.00

Pfizer GSK Merck J&J AstraZeneca

DT

C s

pen

d in

$ m

illio

ns

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

YT

Y %

Gro

wth

$ Mil YTY Growth

DTC - First eight months 2002-2003

Source: TNSS Media Intelligence/CMR tracking 14 media platforms

DTC Is Used On Limited Categories and Brands But With Very Large Budgets

47.848.551.254.1

6162.3

73.5

74.876

78.38686.5

90.495.4

98.5104.5

119.9

134.3142.3

211

0 50 100 150 200 250

Zoloft

Diflucan

Valtrex

Plavix

Vioxx

Ambien

Imitrex

Flonase

Fosamax

Procrit

Paxil

Lipitor

Celebrex

Prevacid

Zocor

Viagra

Advair

Allegra

Clarinex

Nexium

Allergy20%

GI Disorder10%

Cholesterol8%

Depression8%

Arthritis6%

Asthma6%

Other42%

Leading DTC categories YTD 6/02Top 6 = 55%

Source: Market Measures/Cozint’s 2002 DTC Monitor

Source: Nielson Monitor-Plus TV, Print & Radio

Leading products by DTC spend 2002 $ Millions

0

500

1,000

1,500

2,000

2,500

Vicodin Viox

x

Celebre

xViag

raProz

acXana

x

Claritin

Ortho T

ri-Cycl

en Paxil

Percoce

t

Occ

urre

nces

(000

)Top Drugs Requested by Patients

Seven of the top 10 drugs requested by patients were DTC advertised in YTD 7/01.

SOURCE: Scott-Levin’s Physician Drug and Diagnosis Audit YTD 9/01; DTC Audit, CMR, YTD 7/01 - AARP

Source: Food and Drug Administration Surveys of patients in 1999 and 2002

Increasing the odds…

“More than 70% of physicians said that they were more likely to prescribe a brand name medication based on a patient’s request when a sample is readily available and can be provided during an office visit” IMS survey 2001

Physician Response to a Patient’s RequestsPatient Attitudes

14%14%

15%13%

29%41%

32%34%

50%49%

0 10 20 30 40 50 60

Recommend OTC

Recommend no drug

Behavior/lifestyle chg

Recommend diff. Drug

Gave Rx asked about

1999 2002

14.4%

48.8%

14.4%6.4% 9.6% 6.4%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

50.0%

% o

f MDs

repo

rting

None 1-10% 25% 50% 75% Over90%

% of Reps doctors would see

No Sample, no detail

The vast majority of doctors say they would see fewer reps if they did not provide samples

Accel Healthcare 2003

504,990

315,559

99,149

505,995

283,992

88,563

481,914

285,488

95,621

472,285

296,953

94,590

1997 1998 1999 2000

By Delivery Type

MailIn-PersonService Visit

Sample Volume(Volume in 000’s )

- 20,000 40,000 60,000 80,000 100,000

GlaxoSmithKline

Shering Plough

Pfizer

Merck

J&J

Aventis

Wyeth

Pharmacia

BMS

AstraZeneca By Manufacturer (2000)

- 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000

Claritin

Allegra

Vioxx

Celebrex

Zyrtec

Augmentin

Allegra D

Claritin D 12

Claritin D 24

PrilosecBy Product (2000)

$10 Billion Spent on Sampling64% of Professional Promotion

Source: IMS 2001

In a service visit, the physician is not seen

Drive-by sampling

120,

760

83,0

8772

,963

56,6

28

38,6

4230

,449

19,9

3819

,096

15,5

22

11,7

80

10,9

34

8,68

67,

694

7,47

1

7,08

36,

801

5,15

7

4,85

64,

835

4,11

0

2,25

72,

028

1,47

3

770

749

697

645

366

337

207

27

U.S.A

Franc

e

German

y U.K.

Spain

Canad

aIta

lyJa

pan

Austra

lia

Belgium

Switze

rland Kore

a NL

Portug

al

Austria

Irelan

dFin

land

Swed

enPola

nd

Denmark

Mexico

Norway

New Ze

aland

Greece

Turke

yBraz

il

Hunga

ry

Luxe

mbourg

Roman

ia

Morocc

o

Argentin

a

Print advertising by country ($000)January-June 2003 (Source: CAMM Group)

1.7

1.7

2.2

2.4

2.9

3.6

3.6

4.1

4.2

4.3

0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5

Video conferences

Direct mail

Pharmaceutical representatives

CD / Computer Instruction

Internet / Web sites

References

Medical Meetings

Colleagues

CME Courses

Medical Journals

Not very important Very important

Value of Clinical Information Sources

Source: Who are these Academy Doctors? AAFP 2003

Phone Pads

Phone Detail

e-Mail

Faxes

Calendars

e-Detail

Co-op DM

e-Conferences

Patient Records

Video

On-line

Rx Pads

Direct Mail

Study Club

Poster

Internet

Audio Cassettes

Govt Bulletin

Reference

Dinner Meetings

Detail Reps

Colleagues

Medical Journals

Conferences

CME Courses 76.1

50.2

50.4

58.4

67.3

70.1

31.6

11.0

10.3

8.9

7.6

6.6

6.4

6.0

4.6

3.8

22.5

17.9

19.1

12.6

14.5

11.9

16.8

16.3

17.3

% Response

Source: PERQ/HCI, FP/GP/IM/DO/CD, February 2001

The leading sources of information for physicians

Where do primary care physicians get medical information?

0

10

20

30

40

50

60

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 20020

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

200,000

FDA Approvals All Journal Pages

Journal Ad Pages Are Linked to Product Approvals

PAGESNMEs

$6.5

$10.7

$11.8

$8.4

5.6

$12.7

$10.6

$11.7

$7.5

9.3

$11.6

$10.8

$9.7

$6.3

$5.9

$13.0

$11.4

$8.1

$7.3

11.3

1999 2000 2001 2002

Lexapro Lipitor Norvasc Avandia CelexaNexium Prevacid Protonix Effexor

Top 5 products in journals

$43 MM$52 MM

$44 MM

Top Advertisers in Journals

NDCHealth and Quintiles Informatics

$51 MM

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

91 92 93 94 95 96 97 98 99 00 01 02

Multispecialty Internal Medicine OB/ GynPediatrics Oncology PsychiatryInfectious Disease Neurology Diabetes

Professional Ad Pages Vary By Specialty

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

91 92 93 94 95 96 97 98 99 00 01 02

Mul

tispe

cial

ty

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

Spe

cial

ty

Multispecialty Internal Medicine OB/ Gyn Pediatrics Oncology

Psychiatry Infectious Disease Neurology Diabetes

OB/GYNOncology PediatricsPsychiatry

NeurologyInfectious Disease

Diabetes

Professional Ad Pages Vary By Specialty

0%

10%

20%

30%

40%

50%

60%

70%

80%

Anti-s

eizure

Antipsy

chotic

s

Antibioti

cs

Antide

pressa

nts

Quinolo

nes PP

I

SSRI/S

NRI

Antihi

stamine

sCox

2

Beta b

locke

rs

Oral co

ntrac

eptive

s

ACE I

nhibit

ors

Calcium

Chann

el Bloc

kers

Choles

terol d

rugs

Diabete

s Med

s

% O

ff-la

bel R

x

0

2

4

6

8

10

12

14

16

18

20

# O

ff-la

bel

Rx

(Mil)

% off-label Rx Number of Rxs

Discussion of off-label use of medications is generally restricted to accredited CME programs

Source: Knight Ridder analysis of Rx data from Verispan’s Physician Drug and Dispensing Audit –St. Paul Pioneer Press 11/2/03 www.twincities.com/mld/twincities/news/special-packages/riskyrx

Analysis of top 3 drugs in each class – 8/02-7/03

$188.79

$461.19

$288.22

$437.25

$301.95

$586.59

$387.62

$722.86

$466.96

$804.22

$568.77

$825.16

$746.02

$850.18

0

200

400

600

800

1000

1200

1400

1600

1996 1997 1998 1999 2000 2001 2002

Commercial Support User Revenue and Other

Continuing Medical Education (CME) $1.6 Billion and Growing

Revenue in $ Millions by Source (ACCME Annual Reports)

$649.99 $725.47 $888.54 $1,110.48 $1,271.18 $1,393.93 $1,596.20

+14%

+31%

+3%

Physician use of Enduring Materials is GrowingFaster Than Live CME Events

43,848

9,548

42,445

4,684

43,217

6,233

43,218

7,831

46,319

9,648

1998 1999 2000 2001 2002

Activities

Live Enduring

544,683

75,865

549,105

36,343

506,666

45,074

539,327

44,142

572,785

76,141

1998 1999 2000 2001 2002

Hours

Live Enduring

2,958,679

945,402

3,468,707

967,491

4,018,948

1,074,587

3,946,932

1,231,924

4,018,693

1,397,252

1998 1999 2000 2001 2002

MD Participants

Live Enduring

1,339,791

399,161

1,580,567

179,938

1,726,889

156,922

1,876,764

282,552

2,127,035

565,936

1998 1999 2000 2001 2002

Non-MD Participants

Live Enduring

+6% +1% +5% 0%

+36% +48%+59% +42%

Source:ACCME

All that data – so well organized Terrific Information Jim !

Now…• What am I supposed to do with all this?• How can I use it to do my job better?

0.6%0.9%

1.8%1.4%

0.6%0.2%

-1.2%-1.2%-1.6%

-2.4%-2.5%-2.8%

2Q00

3Q00

4Q00

1Q01

2Q01

3Q01

4Q01

1Q02

2Q02

3Q02

4Q02

1Q03

Rx Gross Margin Rate of Change

Source: Company data

The U.S. Pharmaceutical Industry is facing new pressures

17% 16% 18% 16% 8%0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

YT

Y G

row

th R

ate

1998 1999 2000 2001 2002

Industry earnings growth(Source: Thomson’s First Call)

Margin pressure

Profit pressure

Cost Containment measures are everywhere

Range of Containment MeasuresRange of Containment Measures

Outright Price

Controls

Fixed Reference

Price

Mandatory Molecule

Substitution (Generic/PI)

Enforcementof

Prescribing Guidelines

Therapeutic Substitution

(under discussion)

Growth & Spending

Caps/ Penalties

GermanyItaly Poland

GermanySpainAustria

CanadaDenmarkFinlandGermanyPortugalSpainSwedenUK

AustriaBelgiumGermanySwedenFrance (emerging)

DenmarkGermany

FranceSpainItalyPortugal

IntellectualProperty

Czech RepublicPolandHungarySlovakiaCEERGermany

Manufacturer’s rebates to Medicaid 1991-2002

$550

$900

$1,500 $1,600$1,800 $1,900

$2,200 $2,300

$2,900

$3,700

$4,700

$5,400

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Source: Muse & Associates, May 2002 based on CMS State Medicaid Data

Rebates in Millions of Dollars

Other, 2%

Medicare HMO 15%

Medicaid, 10%

Employer sponsor, 28%

No Coverage,

38%

Medigap, 7%

Rx Drug Coverage under Medicare

In 2002, government = 32%

Government could soon control 70% or more

If U.S. seniors were concerned about how much drugs used to cost,

Just wait till they see how much they cost when they are free!

Demands for greater “efficiency” in marketing and sales.

•Eli Lilly

•Aventis

•Bristol Myers Squibb

•Johnson & Johnson

•TAP

• And so on ….

Source: IMS Health Integrated Promotional Services and CMR 2/2003 12 Months ending 9/02

0

5,000

10,000

15,000

20,000

25,000

Pfizer

GlaxoS

mithKline

Merck &

Co.

AstraZ

enec

a J&J

Novart

is

Pharm

acia

Sche

ring-P

lough Wye

th

Aventi

s

To

tal U

.S. S

ales

$M

il

0

500

1,000

1,500

2,000

2,500

3,000

3,500

Pro

mo

tio

n $

Mil

Sales $000 Promotion $000

Total Sales and Promotional Spending 2002

So, who are the most efficient U.S. companies?MEDICAL TRIBUNE GROUP

Higher spending doesn’t guarantee higher return

Source: IMS Health Integrated Promotional Services and CMR 2/2003 12 Months ending 9/02

$6.76

$7.50

$9.09

$6.07

$6.87

$9.27 $9.21

$8.48

$7.64$8.14

Pfize

r

GlaxoS

mithKline

John

son &

John

son

Merck &

Co.

AstraZ

enec

a

Novart

isW

yeth

Pharm

acia

Sche

ring -P

lough

Aven

tis

Source: Verispan

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

Pfize

r +14

%

GSK +0

%

Merck -

2%

J&J +

11%

A-Z +1

6%

Pharm

acia -

8%

Aventi

s +11

%

Novart

is +22

%

Wyeth

+6%

Sche

ring -

3%

Lilly

-16%

BMS -35

%

Abbott

+2%

Detail Sample $$ Journals DTC Events

Promotional Spending by tactic 2002

How do you improve return on investment?

Allocation of Promotional Spending 2002Allocation of promotional resources varies significantly

Source: Verispan

43%

10%3%

30%

15%

40%

7%1%

38%

13%

44%

11%1%

31%

13%

45%

7%3%

32%

13%

45%

7%2%

28%

18%

47%

9%1%

30%

12%

47%

3%4%

31%

14%

60%

7%3%9%

21%

49%

10%

5%

16%

20%

53%

4%1%

32%

9%

57%

14%

1%2%

26%

51%

6%1%

28%

15%

78%

8%3%0%

11%

Pfizer

GSK

Merck J&

J A-Z

Pharm

acia

Aventi

s

Novart

is

Wye

th

Sche

ring Lil

ly BMS

Abbott

Detail Sample $$ Journals DTC Events

SSRI/SNRI Market Retail Total Rx Volume/ Growth

24,550

27,634

25,34427,305

15,609

20,361

6,968

19,502

12,524

15,050

17,945

5,368

1,333 1,212

Paxil Family Zoloft Celexa &Lexapro

GenericProzac

EffexorFamily

ProzacFamily

Others

2001 2002

SSRI/SNRI 2001 2002

Retail TRx 92,247 104,273

% Increase +13%

Total Sales 10,375,313 10,239,404

% Increase -1%

Source: Verispan

The ROI on SSRI – (Paxil and Paxil CR)

YTY YTY 2000 2001 % Growth 2002 % Growth

Total Sales 22,995 24,550 7% 27,634 13% Total Sales 2,227,568$ $2,384,810 7% $2,757,980 16%

% of % of % Change % of % Change$ Spend Spend $ Spend Spend YTY $ Spend Spend YTY

Detail 65,093 33% 75,557 40% 16% 88,444 32% 17%Sample 20,747 10% 24,426 13% 18% 26,802 10% 10%Journals 2,370 1% 2,284 1% -4% 2,831 1% 24%DTC 91,572 46% 65,207 34% -29% 137,602 50% 111%Meet/Events 18,178 9% 22,160 12% 22% 17,456 6% -21%

Total Promo 197,960 189,634 -4% 273,135 44%

ROI 0.12$ 0.13$ 11% 0.10$ -22%

Source: Verispan

The ROI on SSRI – Effexor


Retail Trx 10,251 12,524 22% 15,050 20% Total Sales $1,040,433 $1,478,584 42% $1,878,307 27%


Detail 44,651 60% 49,207 51% 10% 60,427 48% 23%Sample 11,437 15% 20,610 21% 80% 24,194 19% 17%Journals 4,881 7% 5,292 5% 8% 9,257 7% 75%DTC 230 0% 28 0% -88% - 0% -100%Meet/Events 13,762 18% 21,538 22% 57% 31,828 25% 48%

Total Promo 74,961 96,675 29% 125,706 30%

ROI 0.14$ 0.13$ -5% 0.12$ -8%

Source: Verispan

PPI Market Retail Total Rx Volume/ Growth

23,530 23,209

27,294

20,608

3,848

12,792

5,694

9,967

5,7846,889

Prevacid Prilosec Nexium Protonix Aciphex

2001 2002

PPI 2001 2002

Retail TRx 56,269 66,151

% Increase +18%

Total Sales 12,345,688 13,659,237

% Increase +11%

Source: Verispan

The ROI on PPI – (Prevacid)


Total Sales 3,940,603$ 4,157,308$ 5% 4,073,553$ -2%

Retail Trx 22,485 23,530 5% 23,209 -1%


Detail 69,942 45% 76,578 46% 9% 81,436 45% 6%Sample 34,968 23% 38,685 23% 11% 35,786 20% -7%Journals 7,510 5% 5,856 4% -22% 5,893 3% 1%DTC 34,384 22% 36,859 22% 7% 48,983 27% 33%Meet/Events 7,883 5% 7,262 4% -8% 10,900 6% 50%

Total Promo 154,687 165,240 7% 182,998 11%

ROI 25.47$ 25.16$ -1% 22.26$ -12%

Source: Verispan

The ROI on PPI – (Prilosec +Nexium)


Total Sales 4,642,811$ 5,202,655$ 12% 5,409,568$ 4%

Retail Trx 29,603 31,142 5% 33,400 7%


Detail 60,915 28% 112,908 36% 85% 116,565 29% 3%Sample 23,987 11% 32,465 10% 35% 35,800 9% 10%Journals 9,318 4% 10,828 3% 16% 5,943 1% -45%DTC 106,087 49% 128,215 41% 21% 204,882 52% 60%Meet/Events 15,006 7% 28,909 9% 93% 34,042 9% 18%

Total Promo 215,313 313,325 46% 397,232 27%

ROI 21.56$ 16.60$ -23% 13.62$ -18%

Source: Verispan

How can you use this information to adjust the allocation of promotional

resources and improve the Return On Investment on your brand?

The Ebbinghaus memory curve

0%

10%

20%

30%

40%

50%

60%

70%

5 Minutes 1 Hour 8 Hours 24 Hours 2 Days 5 Days 31 Days

Herman Ebbinghaus (1850-1909) conducted the first research to isolate the factors that influence memory

% o

f inf

orm

atio

n re

tain

ed

Time interval

The Ebbinghaus CurveCreating awareness is not an instantaneous occurrence. Multiple appeals are needed before a message will be noticed and remembered. The communication task involves continuous reminders about a product using various media promotional tactics.

1st 2nd 4th 6th 8th 9th 10th 11th 12th3rd 5th 7th

50%

% o

f Mes

sag

e R

ecal

l

Months

100%

0%

Overcome Objections

Total

Follow-Up and Service

Generate the prescription

Make Specific Recommendations

Demonstrate Competitive Advantages

Build Basic Awareness

6 Steps required to win a prescription

Marketing Logic Step #1Based in part on the age of the product

15%Overcome Objections

100%Total

10 %Follow-Up and Service

15 %Generate the prescription

10 %Make Specific Recommendations

30 %Demonstrate Competitive Advantages

20 %Build Basic Awareness

% of Marketing Responsibility NON-PERSONAL

% of Marketing ResponsibilityPERSONAL

% of Marketing Effort



20 %Overcome Objections(Price, efficacy, safety)

100 %Total

5 %Follow-Up and Service

5 %Generate the prescription

10 %Make Specific Recommendations

25 %Demonstrate Competitive Advantages

40 %Build Basic Awareness(Professional/DTC)

% Of Marketing Effort


Steps needed to win shareAllocation varies based in part on the age of the product

20 %

100 %

15 %

15 %

10 %

25 %

15 %


25 %

100 %

15 %

10 %

10 %

15 %

10 %


Don’t use a tactic simply because your competitor doesYour objectives are different!

40%60%15%Overcome Objections

100%Total

75%25%10 %Follow-Up and Service

25%75%15 %Generate the prescription

70%30%10 %Make Specific Recommendations

30%70%30 %Demonstrate Competitive Advantages

80%20%20 %Build Basic Awareness

% of Marketing Responsibility NON-PERSONAL

% of Marketing ResponsibilityPERSONAL

% of Marketing Effort



20%40%100%Overcome Objections

5 %15 %80 % 100%Customer Follow-Up and Service

20 %5 %20 %50 %5 %100%Make Specific Recommendations

20%15 %5 %10 %25 % 25 %100%Demonstrate Competitive Advantages

10%10 %20 % 10% 50 %100%Build Basic Awareness

OtherSales Aids

Trade Shows

P.R. CME AdSpace

Total Effort

Non-Personal CommunicationObjectives

Marketing Logic Step #2

Allocation Matters!

Everyone company wants to be able to measure the Return On Investment (ROI) of their

promotion

This is a measure of Total ROI

If your salespeople are trying to grow market share, how many salescalls would it take before their efforts ceased to increase return?

1x Year 2x Year 4x Year 12x Year 26x Year 52x Year

5%

Market Share

Number of sales visits per year.

15%

10%

20% 20%20%

At what point would their efforts be better used elsewhere?

Hypothetical Example

The Concept of Average Marginal Return On Investment

1,080,000

1,070,000

1,060,000

1,050,000

1,040,000

1,030,000

1,020,000

1,010,000

1,000,000

990,000

980,0001-2 1-1 1-0 1+1 1+2 1+3 1+4 1+5 1+6 1+7 1+8 1+9 1+10 1+11 1+12 1+13 1+14 1+15 1+16 1+17 1+18 1+19 1+20 1+21 1+22 1+23 1+24

CD

A

B

E

Total / Average ROI v. Marginal ROI

A. Base CampaignB. Base Campaign + $0.5MMC. Base Campaign + $1 MMD. Base Campaign + $1.5 MME. Base Campaign + $2 MM

Total Avg ROI$ 8.82$ 12.10$ 10.79$ 9.22$ 7.64

Marginal ROI$ 8.82$ 8.65$ 6.86$ 2.93$ -0.21

Source: R.Anderson, Mattson Jack ROI Inc. 2003

Monthly Sales

Time in Months

Marginal Return on Investment v. Total Return on Investment

Wouldn’t you love to determine the Average Marginal ROIThe ROI on the Last Dollar Spent

for each promotional tactic?

The point where the next dollar spent will only generate that ROI or less

Dollars Spent

ROI


>

LAST

$$

SPENT

You need to do a regression analysis

Regression analysis examines multiple variables and analyzes howchanges in those variables correlate with the results over time.

Average Marginal ROI

ROI Analysis of Pharmaceutical Promotion (RAPP): Dr. Scott Neslin

Albert Wesley Fry Professor of Marketing Amos Tuck School of Business, Dartmouth College

May, 2001

Two Comprehensive Reviews of AMROI

Analysis of ROI for Pharmaceutical Promotion (ARPP)Dick R. Wittink, Ph.D.

General George Rogers Clark Professor of Management and MarketingYale School Of Management

September, 2002

Dean SlackDirector, Strategic AnalysisBayer Corporation

Treasurer, PMRG

Paul RabideauDirector, Marketing ScienceNovartis Pharmaceuticals

Past-President, Pharmaceutical Management Science Association

Bill FriedrichAssoc. Dir., Global Mkt. ResearchWyeth-Ayerst Global Pharmaceuticals

President, Pharmaceutical Marketing Research Group (PMRG)

ARPP Steering Committee

RAPP and ARPP

Objectives: Estimate the Average Marginal Return On Investment AMROI of marketing investments

DetailingDTC AdvertisingJournal AdvertisingMeetings and Events (ARPP only)

Data: All brands with $25,000,000 or more in revenue

Almost 400 branded drugsOver 100 generic drugsData from 1993 – 2000Over 20,000 monthly observations

For more detail visit www.RxPromoROI.org

ARPP and RAPP did determine Average Marginal ROIfor detailing, meetings & events, DTC and journals

You can use ARPP and RAPPfindings to determine:

Overspending/overutilizationof a tacticUnderspending/underutilizationof a tactic

AARP/RAPP Does Not

Indicate that one tactic is better than anotherIndicate that a tactic works or doesn’t workMeasure any particular brandIncorporate non-ROI strategies

Dollars Spent

ROI


>

LAST

$$

SPENT

RAPP Brands - Revenue/Launch Year CellsMedian Brand Profile by Cell

Launch Year

Annual Revenue ?1993 1994-1996 1997-1999

$25-$50MMNumber of Brands (n=104) 66 18 20PCP Fraction 39.3% 49.7% 22.3%Median Price/script $46 $55 $66Scripts / month 68,000 38,000 22,000Revenues/year $38MM $25MM $17MM

$50MM-$200MMNumber of Brands (n=181) 108 32 41PCP Fraction 39.6% 37.3% 41.9%Price/script $45 $53 $78Scripts / month 156,000 94,000 59,000Revenues/year $84MM $60MM $55MM

$200MM+Number of Brands (n=106) 60 27 19PCP Fraction 61.8% 54.6% 54.3%Median Price/script $57 $62 $76Scripts /month 674,000 332,000 229,000Revenues/year $461MM $247MM $209MM

ARPP - Revenue/Launch Year CellsLaunch Year

Annual Revenue <1994 1994-1997 1998-2000

$25-$100MMNumber of Brands (n=137) 86 37 14PCP Fraction 43% 37% 38%Scripts 1,000/mo 154 79 62Revenues/Year $43MM $34MM $46MM

$100-$500MMNumber of Brands (n=192) 112 59 21PCP Fraction 50% 43% 53%Scripts 1,000/mo 475 179 159Revenues/Year $144MM $134MM $143MM

$500MM+Number of Brands (n=63) 36 18 9PCP Fraction 52% 53% 58%Scripts 1,000/mo 1,126 718 609Revenues/Year $692MM $585MM $627MM

Range of Monthly Expenditures ($000)

Brand $ Detailing $ DTC $ Journals $ Meetings

Actos $ 658- 7,593 $0- 2,741 $0-1,244 $609- 3,065

Avandia 5,118-10,099 0-10,053 167-1,047 646- 2,912

Celebrex 10,965-28,750 0-12,424 6-1,345 2092-12,545

Celexa 3,840-11,300 0- 0 82-1,916 742- 4,642

Enbrel 88- 1,079 0- 3,204 0- 212 0- 334

Plavix 176- 6,692 0- 0 0- 876 133- 1,939

Singulair 1,926- 7,636 0-11,959 0-1,738 523- 3,619

Viagra 514-16,646 0-10,825 0-2,267 476- 4,325

Vioxx 4,293-19,226 0-28,455 0-1,754 689- 7,038

ARPP – Brands in $500MM+, Launch Year 1998-2000 Cell

Key Variables

• DET detailing dollars includes 1-to-1 physician visits, but excludes samples (Scott-Levin) may include some small sales driven meetings and events

• DTC direct-to-consumer dollars: includes television, print, radio, and outdoor (Scott-Levin)

• JAD medical journal advertising dollars (PERQ/HCI)

• PME physician meetings & events dollars (Scott-Levin)*

• Scripts number of scripts filled at retail (Scott-Levin)

• Price retail pharmacy price per script (Scott-Levin)

•Meetings and Events ROI has a large margin of error (Plus or Minus $1.92). It is highly correlated with other marketing variables (especially Detailing), making it particularly difficult to determine Meetings and Events ROI by size/launch date

Methodology - Computing ROI

• ROI (Return On Investment) = Increase in revenues per additionaldollar spent

• ROI is calculated by estimating how unit sales (prescriptions) depends on expenditures for each promotional tactic, and multiplying this unit sales change for an investment of $1 by the script price. The multiple regression result shows how unit sales depends on the individual expenditures, holding other things constant.

• So, ROI is the estimated increase in revenues for a $1 increase in each variable, DET, DTC, JAD, PME, one at a time.

• ROI = change in unit sales (for a $1 increase in a promotion tactic) x average unit price per script

Regression Analysis

• Regression analysis examines every brand in every month.

• Regression analyzes how changes in spending correlate with changes in Rx levels.

• Regression concludes that a marketing variable has a high ROI if that variable can consistently explain changes in Rx levels

• Regression analysis controls for causes of sales not attributed to a brand’s marketing (eg, generics, external trends affecting brand growth, competitive spending, price)

Average Marginal ROI by Revenue/Launch Date

ARPP ROI Results 2002

<1994 1994-1997 1998-2000

Detailing$25-$100MM $0.90 $1.00 $ 1.00$100-$500MM $1.20 $1.60 $ 2.10$500MM+ $3.10 $5.90 $11.60

Direct to Consumer$25-$100MM $0.00 $0.00 $ 0.00$100-$500MM $0.10 $0.20 $ 0.20$500MM+ $0.40 $0.70 $ 1.30

Journal Advertising$25-$100MM $6.20 $6.70 $ 7.20$100-$500MM $2.30 $3.10 $ 4.20$500MM+ $3.10 $6.20 $12.20

Meetings and Events$25-$100MM $0.10 $0.10 $ 0.10$100-$500MM $2.00 $2.70 $ 3.60$500MM+ $3.10 $6.00 $11.70

These Findings Can Be Used to PredictRevenue Changes

Based on Changes in Allocation

Add a $300,000 budget increase to a $250 Millionbrand launched in 1994-1997:

TacticDTCJournalsMeetings

AverageMarginal

ROI$0.20$3.10$2.70

Budget Change+$100,000+$100,000+$100,000

PredictedRevenue

+$ 20,000+$310,000+$270,000=$600,000

The resulting revenue increase would be $600,000.

For example:

X =

• Estimate the Average Marginal ROI for various allocations of a 15% increase ($.788MM)

Annual Annual Total Annual ROI on BudgetDetail*($2.68) DTC*($0.43) Budget* Revenues* Increase$5,256 $ 0 $5,256 $59,784 -$6,044 $ 0 $6,044 $61,922 $2.71$5,650 $394 $6,044 $60,998 $1.54$5,256 $788 $6,044 $60,090 $0.39

• Allocating additional funds to DTC, in this case is less productive

*Numbers are in $000

+15%

RAPP – Allocating New Marketing Funds Detailing vs Direct to Consumer (DTC)

Median Brand Profile: $50-200MM, Launched 1994-1996

• Estimated Average Marginal ROI for various allocations of a 15% increase ($2.513MM)

Annual Annual Total Annual ROI on BudgetDetailing($2.34) Journals($6.79)Budget* Revenues* Increase

$16,128 $ 624 $16,752 $461,139 -$18,641 $ 624 $19,265 $467,253 $2.43$17,384 $1,880 $19,265 $472,443 $4.50$16,128 $3,137 $19,265 $478,870 $7.06

• Allocating additional funds to Journal Advertising enhances the Average Marginal ROI

RAPP – Allocating New Marketing Funds Detailing vs Journal Advertising

+15%Median Brand Profile: $200MM+, Launched ?1993

• Estimated Average Marginal ROI when you reallocate the current $16.752MM Detailing and Journal budget?

Annual Annual Total Annual ROI onDET* ($2.34) JAD*($6.79) Budget* Revenues* Budget Change

$16,128 $ 624 $16,752 $461,139 $2.66$15,504 $1,248 (2X) $16,752 $464,101 $2.84$14,136 $2,496 (2X) $16,752 $470,728 $3.26$11,640 $4,992 (2X) $16,752 $488,372 $4.32

• Reallocating more toward JAD, which in this case is more productive than DET, enhances ROI

*Numbers are in $000

IncreaseRAPP – Reallocating Budget

Detailing vs Journal Advertising

Median Brand Profile: $200MM+, Launched ?1993

Thank you

The ROI calculator can be accessed at:http://www.rxpromoroi.org

For a powerpoint version of this presentation,

please contact Brigitte Niederberger

[email protected]

A pdf file of the slides can be obtained at


Source: Verispan ePromotion Annual Study.

128

Physician’s Use of the Internet

• Eighty percent of physicians surveyed reported using the Internet daily for general purposes, but 16% use it daily for health research or product information.

Internet Use for any Purpose

80%

12%

6% 2%0%

Daily 4-6 times/wk.1-3 times/wk. < once /wk.Never

n=1,004

Internet Use for Health Research/Information

3%

28%

36%

17%

16%

Daily 4-6 times/wk.1-3 times/wk. < once /wk.Never

n=1,004


129

Invitations/Participation in ePromotion

1 to 359%

None19%

10 or more3%

7 to 95%

4 to 614%

• Over half of physicians surveyed reported receiving one to three invitations per month to participate in ePromotion activities.

• Over one-quarter responded that they accept 20% or fewer of the invitations.

n=1,004

12%

28%

12%10% 9%

10%

0%

5%

10%

15%

20%

25%

30%

% o

f res

pond

ents

None 1-20% 21-40% 41-60% 61-80% 81-100%

n=815


130

Time Spent Participating in ePromotion Activities

21 - 30 min.34%

11 - 20 min.43%

1 - 10 min.12%

More than 60 min.

0%31 - 60 min.11%

• Two-fifths of respondents indicated they spend between 11 and 20 minutes on average for each ePromotion activity in which they participate. This is significantly longer than reported for detailing activity.

n=704

Source: Verispan's ePromotion Audit 131

Industry Trends: ePromotion

4Q02 1Q03 2Q03 3Q03

TherapeuticClasses 162 190 193 181

Corporations 93 98 99 107

Products 406 442 448 392

Activities 494,315 590,047 624,477 497,721

Expenditures $46million

$55million

$61million

$48million

pharmaceutical industry overview - medical tribune · •the u.s. pharmaceutical industry ......

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