Another Pharmageddon? The Looming Threat to 2017 Ad Budgets

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Our Never Mind the President, Here's 7 Pages of Budget Bliss cover line this month pays homage to Jamie Reid's brash 1970s album cover, Never Mind the Bollocks, Here's the Sex Pistols.

An analogy to punk rock seemed apropos. As Larry Dobrow reports in the cover story, the MM&M/Guidemark Health Healthcare Marketers Trend Report showed a robust 14.9% increase in mean budgets from 2015 to 2016, snapping back from a decrease the year prior. Moving into 2017, 72% of respondents, director level or above, said they expect budgets to be flush.

The study is the largest of its kind fielded in the weeks after the election. We've tried to validate the findings by running a smaller poll this year, whose results confirmed the earlier one. Yet, some big threats have appeared that may make drugmakers a lot less counter-cultural.

It's been just a few years since the industry bounced back from what some were calling our own version of “Pharmageddon,” in which the combination of the patent cliff on blockbuster brands combined with thinning drug pipelines and what industry saw as an increasingly stodgy FDA led advertisers to slash promotional budgets, much to the chagrin of agencies and our larger reader ecosystem.

Read the report: What uncertainty? 72% of health marketers say 2017 budgets are up

History has been known to repeat itself, with a different cast of characters. What could a present-day Pharmageddon look like?

Recently, there's been much talk about the possibility of President Donald Trump pushing through Medicare price negotiation, not to mention a repeal and replacement of the Affordable Care Act. Both of those national healthcare policy moves could negatively impact budgets, either in terms of the financial austerity that one could foresee in the wake of severe price reform, or an ACA repeal leading to an erosion of pharma's customer base.

Regardless, their mere threat has already had an impact. Consider the following comments by one healthcare media CEO:

“We are seeing a level of conservatism as many pharma companies assess the evolving situation and delay and defer decision-making and deployment of budgets,” observed Steve Zatz, CEO of WebMD, on that company's February earnings call. He also predicted a decline in the growth of pharma advertising, although drugmakers have not specifically told the company their budgets.

Nevertheless, the firm, a digital advertising bellwether, is exploring a sale. And it printed a modest Q1 growth forecast, which takes into account the potential policy changes, as well as attention around pricing, managed care pressure, and recent drug launches that have disappointed.

See also: Infographic: How Trump will affect healthcare marketing budgets

Parsing these comments, it seems more than one pharma advertiser may have told their agency partner to put a hold on budget plans. Should any of the aforementioned policy changes come to fruition, we may see a difference between budgeting and actual spend.

Perhaps my devil's-advocate exercise is an academic one. The macro environment is unclear, and despite our best efforts, none of us has a precise fix on marketing budgets, nor a crystal ball.

What happens this year may come down to whether drugmakers are more like punk rockers, bucking convention, or a band of uber-conservatives, playing to the trends. Rock on.

 Marc Iskowitz is editor in chief of MM&M.

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