Revenues surge as agencies adapt to health-tech, payer trends
Big multinational healthcare corporations are not usually known for agility. Fortunately, the trends they observe, but cannot quickly exploit due to size and silos, are those which their agencies have jumped on.
In 2015, from a biopharma perspective, two biggies were the intersection with health tech startups on innovation and the escalation of tension by payers to a sometimes exclusionary degree. In the past 12 months, nearly 20% of healthcare communications shops added practices that turned both of these opportunities into offerings.
As Ed Wise, CEO of Omnicom Health, said, “We are putting ourselves in a position to open those innovative doors for our clients. We know none of us can do this alone, so we are becoming super-partners to technology companies, we are becoming super-collaborators among our sister companies, and we are reaching into other industries and verticals to bring the best thinking to our client.”
HOW WAS BUSINESS IN 2015?
Their trend-spotting alacrity contributed to a 14.4% surge in revenue last year, to nearly $4.2 billion, according to information provided by the top 100 firms and MM&M's own estimates.
MM&M compiled revenue data and estimates for all of this year's top 100 agencies. It lacks revenue figures for two of 2014's top 100 firms, one that was founded in 2015 and another formed from the unification of five sibling shops.
Working in the marketing trenches for them were roughly 12,000 creative, account, and digital people, an impressive 20% surge in the workforce from the year before.
WHERE IS THE NEW BUSINESS?
For most firms in the Top 100, which are split evenly between independents and subsidiaries, growth came from a mixture of top- and bottom-line sales, and from new and organic business.
We know, anecdotally from FDA approvals, that the industry's launch work, in addition to a fair bit of its lifecycle management duty, lies in oncology, specialty areas, and rare diseases, and that access and reimbursement remain drivers.
And while a key area of focus is around technology, including data and analytics, for the 68 agencies responding to this question, the bread and butter is still digital/web/mobile work aimed at HCPs and patients, both of which account for about 25% of billings, followed by sales materials (16%) and professional print ads (8%). All of these tactics remained stable.
Incidentally, the amount of ink spilled on DTC advertising — a lightning rod for controversy this past tear — belies its prominence in the list of agencies' top billable services. The “glamorous” area of consumer broadcast actually took a backseat to the more staid areas of medical education and direct marketing channels.
And so far in 2016, the majority (70%) of the 83 that answered this question said that their business is looking up in the new year.
WHAT'S KEEPING THEM UP AT NIGHT?
Let's start with what they're not sweating over. Regulatory concerns, for one, were not cited by anyone as a major challenge in ‘15. Neither is scrutiny around social media setting off the same alarm bells as it has in years past. Is it a sign pharma marketers have finally cracked the code when it comes to working with their MLR colleagues in thorny areas like participating on social platforms? Perhaps.
After all the restructuring and horizontality this year among the holding companies, it's also somewhat surprising that network relationships/agency consolidation registered as being a relatively minor worry.
On the other hand, talent acquisition and retention was named the biggest concern for 2015 among the 83 respondents. This reflects the fierce talent war playing out as agencies try to staff up ahead of where business is heading. Communications is an endeavor rooted in having the best people, and the last thing agencies want to have to do is scramble for senior folks during a client onboarding.
Also garnering 5's on our 1-5 scale of top challenges: managing growth and increased concern around pricing. Medium challenges included shrinking pharma budgets and replenishing the new business pipeline.
WHAT ARE THE BIGGEST OPPORTUNITIES?
The continued shift toward mobile/digital, the need to create more and better content and experiences, and more personalization of communications (especially targeting audiences using new media tech) were three trends the 83 respondents heralded as areas of ongoing demand.
It's likewise a good bet, agencies said, that the specialty drugs/high-science categories will continue to fuel their work stream. That, of course, is a byproduct of pharma pipelines skewing toward areas of unmet need.
What's not likely to be a major focal point, they said, are regulatory changes, which again suggests either a comfort level with compliance or merely that no major new regulatory guidance is expected near term.