The Inflation Reduction Act (IRA) may have caused brands to rethink one of the immutable laws of pharma marketing.
Direct-to-consumer (DTC) advertising spending usually decreases in proportion to a drug’s life cycle. At what point that pull-back happens — either prior to patent expiry, or post-expiry but with expectations for lower return-on-investment (ROI) — typically depends on the drug and indication type, the payer mix and other factors.
These calculations have always been subject to competitive scenarios, as well, and drug-price negotiation is just another new variable that disrupts the timeline. Eligibility for negotiation kicks in nine or more years from approval for small-molecule drugs and 13 or more years for biologics.
Since drugmakers often extend their brands’ exclusivity beyond nine or 13 years, the economics for negotiated drugs are curtailed before loss of exclusivity. As such, the thinking goes, the law may also dampen the ROI for DTC.
In fact, one might be tempted to attribute changes in DTC ad expenditures among the Biden administration’s initial list of drugs selected for price negotiation to marketers anticipating the law’s impact.
For example, during the first half of 2023, Bristol Myers Squibb and Pfizer’s blood thinner Eliquis lowered TV spend by 56.5% to $8.1 million, versus last year’s first-half outlay of $18.6 million, as per figures supplied by iSpotTV.
Eliquis isn’t expected to lose patent exclusivity until 2028. There have been no new indications since 2014 on the drug’s label that would spur the need for marketing. Its lower price will start in 2026, curtailing revenue two years before generic competition would be expected to start.
According to a consensus of sell-side analyst reports compiled by Evaluate, a Norstella company, Eliquis revenue is expected to reach a high water mark of $14.1 billion in 2025, after which sales will shed an average of 8% a year through 2028.
However, as tempting as it may be to ascribe the DTC pullback to marketers bracing for IRA’s impact, it’s premature to do so, cautioned Daniel Chancellor, director of thought leadership, consulting and analytics at Norstella’s Citeline.
“There are countermeasures that are taking place in pharma currently to get ahead of IRA, but I don’t think managing DTC budgets is a direct consequence in 2022 or 2023,” Chancellor said. “I don’t think 2023 will be affected materially by trying to game what’s going to happen with the IRA.”
That’s because any money spent on DTC in 2023 can be realized and recouped from the return in 2024 and 2025, he explained.
Few surprises selected
Most analysts were fully anticipating Eliquis to be included on the list of the 10 drugs singled out for the initial round of Medicare price negotiation.
Medicare spent $12.6 billion on the drug in 2021, the most of any on its Part D spend list. Ditto for AbbVie and J&J’s blood cancer treatment Imbruvica, which spent $6.9 million from January to June 2022, per iSpotTV, but went completely dark on DTC this year.
Making a connection less likely, some of the drugs that already began slashing TV outlays weren’t even expected to be on Medicare’s initial list. Amgen arthritis drug Enbrel cut its DTC spend to $11.1 million during the first six months of 2023, a 74% decrease versus the $43.2 million the brand spent in the first half of 2022, according to iSpotTV’s data.
Enbrel and Imbruvica are also the most impacted based upon duration before loss of exclusivity (LOE). Enbrel has estimated LOE in 2029, while Imbruvica’s estimated LOE is in 2032, differences of three and six years, respectively, from the effective start date of the IRA, although Imbruvica sales have been eroding rapidly due to competitive pressure.
Still, there are other class- or lifecycle-stage dynamics that may be able to account for the changes in question.
Consider the products that will only be affected by negotiation for a year or less. Due to anticipated generic or biosimilar competition, they’re set to hit their patent cliff shortly before or after exposure to price negotiation begins in 2026.
Stelara, the psoriasis drug from J&J, finds itself in this camp. The pharma giant recently settled for an entry of a biosimilar version (bStelara) in January 2025. That’s prior to CMS’s deadline of September 1, 2025 to constitute a “biosimilar delay” for selection.
Additionally, there’s another potential reason Stelara throttled back DTC spend by 59% during the January to June period. The immunology category has seen the launch of multiple biosimilars to AbbVie’s megablockbuster Humira this year.
“With the biosimilars trying to gain market share, any kind of voice [Enbrel and Stelara] are trying to put out there won’t be as strong because there are many more competitors,” said Chancellor. While not interchangeable biosimilars for either brand, the bHumiras “clearly impact the category quite strongly.”
The Jardiance bump
Novartis heart drug Entresto and J&J/Bayer blood thinner Xarelto — both set to “cliff” in 2027 — will only be affected for a year. If generics are approved for Xarelto or Entresto prior to March 31, 2027, then either would be deselected on January 1, 2028.
Entresto dialed back DTC by 19.5% this year, per iSpotTV, although data provider Nielsen estimated the first-half decrease was closer to 4%.
Meanwhile, Merck’s Januvia and AstraZeneca’s Farxiga are both diabetes drugs with LOEs in 2026, minimizing the price control impact of these products given the likelihood of imminent generic entry.
Farxiga trimmed its TV spend by 32.6%, according to Nielsen, while Januvia had no detectable TV spend during this time period. Nor did Novo Nordisk’s Fiasp, a drug for diabetes which is already available in biosimilar form. However, Novo boosted its spend on corporate-level diabetes TV ads by more than 100% this year, per Nielsen.
The biggest spender on the Medicare list — and the sole member of the 10 to increase DTC — was Boehringer Ingelheim and Eli Lilly’s Jardiance. The brand, approved in 2014 and facing LOE in 2027, spent almost $74 million on TV ads in the first half of the year, a 5.7% boost versus the same period in 2022, according to iSpotTV.
Jardiance is hoping to win approval for an expanded indication in chronic kidney disease between now and 2026, so its expanded outlays make sense, Chancellor pointed out.
“Jardiance was already the highest current spend on DTC campaigns and I would expect that if that new indication is granted, we will see another uptick in order to drive market share,” he said.
Building ‘aggressive’ clinical trial datasets
While hesitant to blame the IRA for the spending drops, Chancellor said the legislation could impact advertising in some interesting ways. For one, the peak-and-trough nature of DTC as new indications are collected is one phenomenon that could change as companies start to “front-load” their ad buys.
Specifically, drugmakers have already begun tilting some of their R&D toward biologics and rare disease drugs. They may also start running more clinical trials pre- and post-approval, so that by the time the IRA clock starts ticking on these assets, the companies have large data sets and potentially broader product labels.
“Of course, drugmakers wil continue to run post-marketing studies to expand their product labels, but the economics and the potential return when you have a shorter drug life cycle is smaller,” Chancellor explained. “A countermeasure is that pharma companies will try and build aggressive clinical trial datasets, so at the time of launch they will have more to talk about, more to educate and more to promote.”
This might have the effect of increasing DTC expenditures. Although, we might not see drugs that are 15 or 20 years old continue to accrue indications.
“Rather than that continued DTC drip feed, we might see a sharp peak and then it falls away,” Chancellor predicted.
It should be noted that amid this dynamic shift, drugmakers are not taking the regulatory change sitting down. A number of companies have already sued the government, claiming that the law constitutes illegal appropriation of private property.
In addition, the day may come when duration before LOE of drugs subject to Medicare price negotiation shortens the DTC ad cycle. For now, though, pharma companies may actually see the benefit in sales volume that’s possible from boosting awareness through TV commercials as a way to counter the loss of discretionary pricing.
“There probably will be a point in which you do consider DTC spend in light of potential negotiations with CMS,” Chancellor observed, “but we’re not in that window yet.”
