If you’re looking at the results of the 2019 MM&M/Deloitte Consulting Healthcare Marketers Trend Report in a vacuum, there’s a lot to like. The mean marketing budget of the more than 200 companies surveyed jumped to $10.5 million from $8.3 million during the previous fiscal year, representing an increase of more than 26%. Of the respondents who shared a budget figure with MM&M, nearly 92% reported a year-over-year increase. By comparison, in MM&M’s 2018 survey, the year-over-year budget increase was just 7%.
So if budgets are up by that much, everything’s gotta be sunshine and rainbows, right?
Not exactly. With the 2020 U.S. presidential election around the corner and the possibility that Congress will limit or eliminate the tax deduction for marketing expenses, the fortunes of healthcare marketers could soon take a turn. Then there’s the very real concern that pharma companies will soon have to reveal list prices of drugs in their TV ads, which would insert yet another element into an already confusing marketing mix. Should political action of some sort — widely expected this year — result in either removal of the ad tax deduction or an onerous compliance burden, a marketing crash could be imminent.
Indeed, if there is one industry around which the Democrats and Republicans can find common ground, it’s pharma. Congress has already opened hearings on rising drug prices, while more investigations could be launched into pharma’s sales and marketing practices.
That pessimism may not be baked into this year’s data, but in-house pharma, biotech, device, and diagnostic marketers who were surveyed for the 2019 MM&M/Deloitte Consulting Healthcare Marketers Trend Report foresee change as inevitable. And they say its impact could be significant on healthcare marketing budgets.
“If you look at the recent past, we’ve been pretty blessed, all things considered,” says Joe Plevelich, a commercial operations exec at FemmePharma, which develops products that treat menopause symptoms. “You could still at least raise prices somewhat when you felt it was necessary and as long as you had a compelling story that could convince third-party payers that it was justified. And you could manage your P&Ls, to the degree that [product] wasn’t moving, by offsetting losses with a little higher-than-expected price.”
Plevelich believes this pricing flexibility is soon to go the way of the dodo bird, which could have a cascading impact on marketing budgets. “If price restrictions cause product revenues to drop, marketing budgets will likely take a similar hit,” he says. “Healthcare marketers will continue to try to spend the same percentage of their revenues as they’ve established as the norm within their respective companies. It could be two or four years before we really start to see a material impact.”
Back to the numbers
But again: If you’re looking at the survey data alone, marketers are riding high as we head into the second quarter of the year. The 2019 MM&M/Deloitte trend report takes into account information supplied anonymously by 233 marketers who agreed to divulge their previous- and current-year budgets. Almost 80% of survey respondents work for companies with annual revenues in excess of $500 million.
The vast majority of respondents (71%) self-identified as having director-level positions, with the remainder at C-suite level. Slightly more than 17% of respondents were CMOs, followed by COO/CFO (11.6% of respondents), chairman/president/CEO (10.7%), and brand manager (9.9%).
Whether biotech firm, device manufacturer, diagnostics maker, or pharma company, every sector of the industry appears to be flush with richer budgets. As noted previously, among those who shared their numbers, 92% of respondents said annual marketing budgets increased for the current fiscal year. That figure rose to 94% for marketers at pharma companies.
Not surprisingly, those pharma companies trended higher than other organization types in 2018, with a mean budget of $11.5 million. That’s up 29.2% year over year. Device manufacturers came in on the lower end — albeit with a smaller respondent pool — at $7.8 million, up about 15%.
Only 4% of respondents indicated a decrease in marketing budget in 2018, as opposed to 16% in the prior year’s survey.
While this is not an apples-to-apples comparison, it is a reflection of last year’s strong across-the-board financials, the record number of FDA approvals for new treatments, and the Trump administration’s hands-off approach to the industry.
Healthcare marketers have many audiences and stakeholders to reach. But they weren’t divvying up their budget increases equally among them. Significantly more respondents than not indicated budgets had increased for targeting physicians and specialists, patients/consumers, and payers/managed care. It was a different story for marketers targeting nurse practitioners and physician assistants, caregivers, NGOs/advocacy groups, pharmacists, and shareholders and investors, all of whom saw flat or decreasing budgets.
A tactical evolution
According to the survey, healthcare marketers devoted the largest percentage of their budgets to sales reps (8.6%), analytics and market research (6.8%), which represents a budget increase among almost two-thirds of respondents, websites and microsites (6.5%), and professional meetings and conferences (6.3%). PR, advocacy relations, machine learning, and mobile and apps had the lowest percentages.
When it comes to their evolving marketing mix, the winning formula for healthcare marketers still appears to be a combination of traditional and digital tactics. Almost 86% of respondents reported using digital marketing (digital ads/websites/mobile and tablet apps/social media) for marketing to consumers. By contrast, 77% used traditional marketing (print/outdoors/TV/radio) for the same audience.
Asked to identify their biggest challenges, big data came out on top. Forty-three percent of respondents ranked it as “extremely challenging” and an additional 33% characterized it as “challenging,” most likely due to the perennial difficulty of extracting insights but also possibly due to marketers’ fear that incidents like the Cambridge Analytica fiasco could make people more skittish about sharing the information needed to power campaigns.
Quirky results abounded. For instance, more than three-quarters of respondents reported that the budget for marketing technology sits within their marketing organization, as opposed to its traditional home in IT.
And while traditional agencies continue to brace themselves for intensified competition from consultancies big and small, more than half of survey respondents reported they had increased their use of AOR-type agencies. That represents a significant jump from 30% in the 2018 Healthcare Marketers Trend Report. Respondents attributed this decision to the addition of new agency services/groups (data science, machine learning, etc.), the duration of their relationships with agencies/networks, and increased sales in the wake of previous agency-led campaigns.
The threat posed by consultancies to traditional agencies remains very real, with 42% of healthcare marketers increasing their use of consultancies, up from 27% the year prior. Their primary reasons were an increase in available budget/resources for outside partners, a desire to shake up existing thinking or teams, and subpar results from recent programs with agency partners.
Plevelich believes Veeva Systems, IQVIA, and other pharma-adjacent vendors have evolved into agency-like resources. “What you will start to see is more reliance on these emerging full-service providers who can help pharma companies in development and marketing, especially as they realign and continue to reduce their head count,” he predicts.
Finally, as was the case last year, branded campaigns remained favored over unbranded both in terms of budget and sentiment. They scored well on a 1-to-5 scale of effectiveness in changing market share and increasing ROI, with a large number of respondents agreeing that “my firm’s culture has an appetite for it.”
As for the months and years ahead, most marketers appear to be bracing themselves for the lethargic low that often follows a sugar high. They’re happily apportioning their enhanced 2019 budgets across a range of programs and channels, but they also harbor no illusions that they’ll have the same sums to play with in 2020.
“If you look at some of the leading potential contenders for the presidency and some of the platforms they are trying to establish, [many] are talking about better controls and transparencies around pharma pricing and profits,” Plevelich says. “I think there are definitely changes afoot. Whoever is going to be in power is going to have an impact on pharma pricing and our recent ability to continue to raise pricing on a whim.” In other words: Like everyone else, marketers should keep one eye trained on the presidential derby and another on their marketing budgets.
Survey link was sent in an email to approximately 61,000 contacts, with respondents screened to ensure status as healthcare marketing professionals who reside in the U.S. A total of 233 healthcare professionals completed the online survey in early January 2019. Results are not weighted and are statistically tested at confidence levels of 90% and 95%.