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Policy Forum The Cost of Pushing Pills: A New Estimate of Pharmaceutical Promotion Expenditures in the United States Marc-André Gagnon*, Joel Lexchin

n the late 1950s, the late and the critics’ portrayal of an The number of promotional meetings Democratic Senator Estes industry based on marketing-driven has increased dramatically in recent IKefauver, Chairman of the profiteering. years, going from 120,000 in 1998 to United States Senate’s Anti-Trust IMS, a firm specializing in 371,000 in 2004 [6]. In 2000, the top and Monopoly Subcommittee, put pharmaceutical market intelligence, ten pharmaceutical companies were together the first extensive indictment is usually considered to be the spending just under US$1.9 billion on against the business workings of the authority for assessing pharmaceutical 314,000 such events [7]. Third, IMS pharmaceutical industry. He laid three promotion expenditures. The US does not include the amount spent charges at the door of the industry: General Accounting Office, for on phase IV “seeding” trials, trials (1) Patents sustained predatory prices example, refers to IMS numbers in designed to promote the prescription and excessive margins; (2) Costs and concluding that “pharmaceutical of new drugs rather than to generate prices were extravagantly increased by companies spend more on research scientific data. In 2004, 13.2% (US$4.9 large expenditures in marketing; and and development initiatives than on billion) of R&D expenditures by (3) Most of the industry’s new products all drug promotional activities” [3]. American pharmaceutical firms was were no more effective than established Based on the data provided by IMS spent on phase IV trials [5]. Almost drugs on the market [1]. Kefauver’s [4], the Pharmaceutical Research and 75% of these trials are managed solely indictment against a marketing-driven Manufacturers of America (PhRMA), by the commercial, as opposed to the industry created a representation of the an American industrial lobby group clinical, division of biopharmaceutical pharmaceutical industry far different for research-based pharmaceutical companies, strongly suggesting that the than the one offered by the industry companies, also contends that vast majority of these trials are done itself. As Froud and colleagues put it, pharmaceutical firms spend more on just for their promotional value [8]. the image of life-saving “researchers in research and development (R&D) than Finally, IMS data seem inconsistent white coats” was now contested by the on marketing: US$29.6 billion on R&D with estimates based on the one of greedy “reps in cars” [2]. The in 2004 in the US [5] as compared to information in the annual reports outcome of the struggle over the image US$27.7 billion for all promotional of pharmaceutical companies. For of the industry is crucial because of its activities.[4] example, in an accounting study based potential to influence the regulatory In this paper, we make the case environment in which the industry for the need for a new estimate of operates. promotional expenditures. We then Funding: The authors received no specific funding Fifty years later, the debate still explain how we used proprietary for this article. continues between these two depictions databases to construct a revised Competing Interests: The authors have declared of the industry. The absence of reliable estimate and finally, we compare our that no competing interests exist. data on the industry’s cost structures results with those from other data Citation: Gagnon MA, Lexchin J (2008) The cost of allows partisans on both sides of the sources to argue in favor of changing pushing pills: A new estimate of pharmaceutical debate to cite figures favorable to their the priorities of the industry. promotion expenditures in the united states. PLoS own positions. The amount of money Med 5(1): e1. doi:10.1371/journal.pmed.0050001 spent by pharmaceutical companies on The Case for a New Estimate of Copyright: © 2008 Gagnon and Lexchin. This is an promotion compared to the amount Pharmaceutical Promotion open-access article distributed under the terms of the Creative Commons Attribution License, spent on research and development is There are many concerns about which permits unrestricted use, distribution, at the heart of the debate, especially in the accuracy of the IMS data. First, and reproduction in any medium, provided the the United States. A reliable estimate IMS compiles its information original author and source are credited. of the former is needed to bridge the through surveys of firms, creating Abbreviations: AWP, average wholesale price; divide between the industry’s vision the possibility that companies may PhRMA, Pharmaceutical Research and Manufacturers of America; R&D, research and development of research-driven, innovative, and systematically underestimate some of life-saving pharmaceutical companies their promotional costs to enhance Marc-André Gagnon is with the Département their public image. Second, IMS does de Sociologie,Université du Québec à Montréal, Montreal, Quebec, Canada. Joel Lexchin is with the not include the cost of meetings and School of Health Policy and Management, York The Policy Forum allows health policy makers around talks sponsored by pharmaceutical University, Toronto, Ontario, Canada the world to discuss challenges and opportunities for companies featuring either doctors improving health care in their societies. * To whom correspondence should be addressed. or sales representatives as speakers. E-mail: [email protected]

PLoS Medicine | www.plosmedicine.org 0029 January 2008 | Volume 5 | Issue 1 | e1 in selected locations in the US. From Table 1. Pharmaceutical Marketing Expenditures in the United States in 2004: CAM’s newsletter [10], we obtained Data from IMS, CAM, and Our New Estimate access to data from CAM for the same Type of Promotion IMS (US$ CAM (US$ New Estimate Percent of Total promotion categories as from IMS. In Billions) Billions) (US$ Billions) of New Estimate addition, CAM provided figures for Samples 15.9 6.3 15.9 (IMS) 27.7 the amount of spending on company- Detailing 7.3 20.4 20.4 (CAM) 35.5 sponsored meetings, e-promotion, DTCA (Data provided by CMR) 4 4 4 (CMR) 7 mailings, and clinical trials. Meetings nd 2 2 (CAM) 3.5 We used 2004 as the comparison E-promotion, mailing, clinical trials nd 0.3 0.3 (CAM) 0.5 Journal advertising 0.5 0.5 0.5 (CAM/IMS) 0.9 year because it was the latest year for Unmonitored promotion (estimatea) nd 14.4 14.4 (CAM) 25 which information was available from Total 27.7 47.9 57.5 100 both organizations. We focused on the US because it is the only country for aIncludes incomplete disclosure and omissions by surveyed physicians, promotion to unaudited physician categories, which information is available for all promotion in unmonitored journals, and could possibly include unethical forms of promotion funded out of the firms’ marketing budget. See text for details about this category. important promotional categories. The DTCA, direct-to-consumer advertising; nd, no data US is also, by far, the largest market doi:10.1371/journal.pmed.0050001.t001 for pharmaceuticals in the world, on the annual reports of ten of the promotion expenditures by surveying representing around 43% of global largest global pharmaceutical firms, doctors instead of firms. (In July 2005, sales [11,12] and global promotion Lauzon and Hasbani showed that CAM was merged into the Cegedim expenditures [10,13]. between 1996 and 2005, these firms Group, another market research We asked both CAM and IMS globally spent a total of US$739 billion company.) We chose to compare about the procedures that they used on “marketing and administration.” IMS data to those produced by CAM to collect information on different In comparison, these same firms spent in order to provide a more accurate aspects of promotion. Based on the US$699 billion in manufacturing costs, estimate of promotional spending in answers we received, we determined US$288 billion in R&D, and had a net the US. Other proprietary sources of the relevant figures for expenditures investment in property and equipment data do not break down promotional for samples and detailing. Each of US$43 billion, while receiving expenditures into different categories author independently decided on US$558 billion in profits [9]. and therefore were not used in our which values should be used, based Annual reports, however, have their comparison. on an understanding of the methods own limitations. First, pharmaceutical that the companies used to collect firms are multinational and diversified; Methods the information and the limitations their annual reports provide no According to its Web site (http:// of those methods. Differences were information on how much they spend www.imshealth.com/), IMS resolved by consensus. on pharmaceutical marketing, as provides business intelligence and We queried CAM and IMS about compared to the marketing of their strategic consulting services for the the estimated value of unmonitored non-pharmaceutical products, and they pharmaceutical and health care promotional expenditures. IMS did do not provide information about how industries. It is a global company not provide an answer to this question. much is spent on marketing specifically established in more than 100 countries. In order to validate its estimates, CAM in the US. Second, annual reports IMS gathers data from 29,000 data relies on a validation committee that merge the categories of “marketing” suppliers at 225,000 supplier sites includes representatives from various and “administration,” without worldwide. It monitors 75% of pharmaceutical firms, including delineating the relative importance prescription drug sales in over 100 Merck, Pfizer, Bristol-Myers Squibb, of each. Finally, “marketing” is a countries, and 90% of US prescription Eli Lilly, Aventis, Sanofi-Synthelabo, category that includes more than just drug sales. It tracks more than 1 million AstraZeneca, and Wyeth. Under promotion; it also includes the costs of products from more than 3,000 active a confidentiality agreement, the packaging and distribution. In terms drug manufacturers. IMS data for 2004 firms supply CAM with internal data of offering a more precise estimate of were obtained from its Web site for related to their detailing activity and overall expenditures on pharmaceutical the amount spent on: visits by sales promotional costs in the US. Through promotion in the US, annual reports representatives (detailing), samples, the validation committee, CAM are thus far from satisfactory. direct-to-consumer advertising, and can thus compare totals obtained In the absence of any collection journal advertising. through its own audits with the firms’ of information on promotional The Cegedim Web site (http://www. internal data about their promotional spending by government or any cegedim-crm.com/index.php?id=12) budgets in order to evaluate if all other noncommercial source, the describes CAM as a global company promotion has been properly audited market research company IMS dedicated to auditing promotional through its physician surveys. As a has long been the only source of activities of the pharmaceutical result of this comparison, CAM’s such information, which it gains by industry, established in 36 countries validation committee considers that surveying pharmaceutical firms. Since worldwide. CAM annually surveys about 30% of promotional spending 2003, however, the market research a representative sample of 2,000 is not accounted for in its figures. company CAM has been providing primary care physicians and 4,800 CAM is unable to provide an exact comprehensive information on specialists in a variety of specialties breakdown of unmonitored promotion,

PLoS Medicine | www.plosmedicine.org 0030 January 2008 | Volume 5 | Issue 1 | e1 but it believes that around 10% is potential such as “seeding trials” or types of detailing, for example, the due to incomplete disclosure and educational grants might be included use of sales representatives for illegal omissions by surveyed physicians and in other budgets and would not be seen off-label promotion, whereas doctors the remaining 20% comes from a in the confidential material provided to are not likely to distinguish between combination of promotion directed CAM’s validation committee. on- and off-label promotion and at categories of physicians that are IMS and CAM data were used for would report all encounters with sales not surveyed, unmonitored journals comparison purposes for a number of representatives. in which pharmaceutical promotion reasons: data from both were publicly In the case of samples, there is appears, and possibly unethical available, both operate on a global also a large difference between the forms of promotion. We adjusted scale and are well regarded by the IMS (US$15.9 billion) and CAM total expenditures to account for this pharmaceutical industry, both break (US$6.3 billion) estimates. CAM unreported 30%. down their information by different estimates the amount spent on categories of promotion, and, most samples by multiplying the number Results importantly, they use different methods of samples declared by physicians For 2004, CAM reported total for gathering their data, thereby with their wholesale value. The latter promotional spending in the US of allowing us to triangulate on a more is determined by using the average US$33.5 billion [10], while IMS gave accurate figure for each category. wholesale price (AWP), which is the the figure of US$27.7 billion for the Methodological differences between amount set by manufacturers and used same year [4]. Both CAM and IMS the ways that IMS and CAM collect data by Medicare in the US to determine cited the media intelligence company will affect the values for promotional reimbursement. CAM then divides that CMR as the source for the amount spending depending on the category amount in half to account for the fact spent on direct-to-consumer advertising being considered. Because of the that samples are frequently given out (US$4 billion), and they also gave the problematic nature of some data from in small dosage forms. CAM admits, same figure for journal advertising each firm, we believe that the most however, that the amount for samples is (US$0.5 billion). precise picture of industry spending understated because, when physicians There were two major differences can be obtained by selectively using fill out their survey, any quantity of between the two sets of figures: the both sets of figures. samples of the same product left amounts spent on detailing and CAM compiles its data on the value during a call is considered to be only the amounts spent on samples. of detailing and samples through one sample unit. CAM’s calculations IMS estimated the amount spent systematic surveys of primary care also rely on the AWP, which has been on detailing at US$7.3 billion [4] providers and specialists and by criticized for not taking into account versus US$20.4 billion for CAM [10], estimating an average cost for each the various discounts and rebates that and while IMS gave a retail value of visit by a sales representative according are negotiated between manufacturers US$15.9 billion for samples [14], CAM to the type of physician. By contrast, and purchasers [18]. estimated a wholesale value of US$6.3 IMS compiles its data on the value IMS provides exact figures for the billion [10]. of detailing through surveys of firms, retail value for samples by monitoring Using the IMS figure of US$15.9 while its data on samples are obtained 90% of all pharmaceutical transactions billion for the retail value of samples, by monitoring products directly from and by tracking products directly and adding the CAM figures for manufacturers. from manufacturers. This method detailing and other marketing expenses There is a significant discrepancy for calculating the value of samples after correcting for the 30% estimate between the two sets of data in the cost is much more direct than CAM’s and of unaccounted promotion, we arrived of detailing: US$7.3 billion for IMS therefore is likely to be subject to less at US$57.5 billion for the total amount and US$20.4 billion for CAM. This error. spent in the US in 2004, more than difference can be explained by the fact Using the wholesale value for twice what IMS reported (see Table 1). that CAM offers a more complete data samples, the CAM figure would be set since it includes in the average cost appropriate if we were arguing that Discussion of a call (a sales representative’s visit to the money spent on samples should Our revised estimate for promotional a physician) not only the “cost to field go to another activity such as R&D. spending in the US is more than twice the rep” (salary and benefits of the However, we have used the retail value that from IMS. This number compares representative and the transportation of samples because this is consistent to US$31.5 billion for domestic cost) but also the costs for the area with companies’ reporting of drugs industrial pharmaceutical R&D and regional managers, the cost of the they donate [19]. As these are both (including public funds for industrial training, and the cost of detail aids such categories of products that are being R&D) in 2004 as reported by the as brochures and advertising material. distributed without a charge to the National Science Foundation [15]. By contrast, in reporting the cost of user, it is inconsistent for donations to However, even our revised figure detailing IMS only considers the “cost be reported in terms of retail value and is likely to be incomplete. There are to field the rep.” Furthermore, relying samples in terms of wholesale value. other avenues for promotion that on physician-generated data to estimate We believe that it is appropriate to would not be captured by either IMS the amount spent on detailing is likely correct for unmonitored promotion or CAM, such as ghostwriting [16] to give a more accurate figure than and that the figure we used is a reliable and illegal off-label promotion [17]. using figures generated by surveying estimate. The 30% correction factor Furthermore, items with promotional firms. Companies may not report some is based on a direct comparison that

PLoS Medicine | www.plosmedicine.org 0031 January 2008 | Volume 5 | Issue 1 | e1 CAM is able to make between the data the Office of Technology Assessment confirmation of Kefauver’s depiction it collects through its surveys and the derived an estimate for marketing costs of the pharmaceutical industry, amount reported by companies. in the US by extrapolating from the it confirms the public image of a There are other ways of combining cost structure of Eli Lilly. The Office marketing-driven industry and provides the data that we have presented, of Technology Assessment considers an important argument to petition in but with the exception of choosing that firms spend around 22.5% of their favor of transforming the workings of the lower amounts for detailing sales on marketing [23]. Based on the industry in the direction of more and samples and ignoring the 30% United Nations Industrial Development research and less promotion. ◼ for unmonitored promotion, all of Organization estimates, a report them yield a higher figure than the from the Organization for Economic Supporting Information one from IMS. Some examples of Cooperation and Development Abstract S1. English abstract alternative estimates follow: using the estimated that, in 1989, pharmaceutical Found at doi:10.1371/journal. CAM estimate for the wholesale value firms globally spent 24% of their sales pmed.0050001.sd001 (20 KB DOC). of samples and the 30% adjustment, on marketing [24], but few details of Alternative Language Abstract S1. the total amount would be US$47.9 the methodology used were provided, Translation of the abstract into French by MAG billion; without the 30% adjustment making it impossible to verify the CAM’s estimate is US$33.5 billion. accuracy of the estimate. Finally, in Found at doi:10.1371/journal. pmed.0050001.sd002 (20 KB DOC). Adding the figures for the categories 2006 Consumers International surveyed that IMS does not cover (meetings, 20 European pharmaceutical firms to Appendix S1. e-promotion, mailing, clinical trials) obtain more information about their The Web links displayed in the footnotes 4,7,10,13,14, and 21 are now defunct. In boosts its estimate to US$31 billion; exact expenditures on drug promotion. order to make accessible all data we used using the lower figures for detailing Among the 20 firms contacted, only for this article, this appendix provides and samples plus the CAM amounts for five agreed to provide separate figures supporting information or alternative the other categories and applying the for marketing, which ranged from 31% sources for the defunct Web links. 30% adjustment gives an amount of to 50% of sales depending on the firm Found at doi:10.1371/journal. US$29.1 billion. Therefore, the actual [25]. pmed.0050001.sd003 (994 KB PDF). amount could range from a low of The results are also consistent with Acknowledgments US$27.7 billion to a high of US$57.5 data on the share of revenue allocated billion. Our analysis shows, however, to “marketing and administration” The authors would like to thank Jean- that the figure of US$57.5 billion is the according to annual reports of large François Duplain from CAM Group (Canada), Sylvie Gaumond and Sue most appropriate one when using the pharmaceutical companies, if we Cavallucci from IMS Health Canada, Lesley most relevant figures for each category consider that the largest part of Shulenburg at Thomson CenterWatch, of promotional spending. “marketing and administration” is and Éric Pineault, Jean F. Gerbini, Marc Excluding direct-to-consumer devoted to promotion. Lauzon and Hasbani, and Marie Carpentier for their advertising, CAM considers that around Hasbani found that 33.1% of revenues help and comments. 80% of the remaining promotion is was allocated to “marketing and References directed towards physicians, with 20% administration” [9], similar to the 31% 1. Kefauver E (1965) In a few hands. of this figure going to pharmacists. reported by the Centers for Medicare Harmondsworth: Penguin. (IMS does not provide any comparable and Medicaid Services [26] and the 2. Froud J, Johal S, Leaver A, Williams K (2006) Financialization and strategy: narrative and values.) With about 700,000 practicing 27% from Families USA [27]. numbers. London and New York: Routledge. physicians in the US in 2004 [20], we The value of our estimate over 3. General Accounting Office (2002) Prescription drugs: FDA oversight of direct-to-consumer estimate that with a total expenditure these others is that it is not based on advertising has limitations. Available: http:// of US$57.5 billion, the industry spent extrapolating from annual reports www.gao.gov/new.items/d03177.pdf. Accessed around US$61,000 in promotion of firms that are both diversified and 27 November 2007. 4. IMS Health (2005) Total U.S. promotional per physician. As a percentage of US multinational. Our estimate is driven spend by type, 2004. Accessed 4 November domestic sales of US$235.4 billion [21], by quantifiable data from highly 2006 at http://www.imshealth.com/ims/ promotion consumes 24.4% of the sales reliable sources and concerns only the portal/front/articleC/0,2777,6599_49695992_ 75406357,00.html. dollar versus 13.4% for R&D. promotion of pharmaceutical products 5. Pharmaceutical Research and Manufacturers Our new estimate of total promotion in the US. The derivation of our figure of America (2006) Pharmaceutical industry profile 2006. Available: http://www.phrma. costs and promotion as a percentage is thus transparent and can form the org/files/2006%20Industry%20Profile.pdf. of sales is broadly in line with estimates basis for a vigorous debate. Accessed 27 November 2007. of promotional or marketing spending 6. Hensley S, Martinez B (2005 July 15) To sell Conclusion their drugs, companies increasingly rely on from other sources. The annual reports doctors. Wall Street Journal. p. A1. of Novartis distinguish “marketing” From this new estimate, it appears 7. Quintiles Transnational (2001) Promoting from “administration.” Marcia Angell that pharmaceutical companies drugs through physician meetings and events: Pfizer leads the way; antidepressants are top extrapolates from this annual report spend almost twice as much on category. Accessed 3 March 2002 at http:// to the entire industry and calculates promotion as they do on R&D. These www.quintiles.com/products_and_services/ informatics/scott_levin/press_releases/press_ a figure of US$54 billion spent on numbers clearly show how promotion release/1,1254,209,00.html. pharmaceutical promotion in the predominates over R&D in the 8. La Puma J, Seltzer J (2002) Phase IV market US in 2001 [22]. As a proportion of pharmaceutical industry, contrary to steams ahead. CenterWatch 9: 1, 9-13. 9. Lauzon L-P, Hasbani M (2006) Analyse socio- sales, she estimates 33% is spent on the industry’s claim. While the amount économique: industrie pharmaceutique marketing. Using similar methodology, spent on promotion is not in itself a mondiale pour la période de dix ans 1996-

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