Category Archives: hospitals

The cost of pushing pills: $61,000 per physician

A new report finds the pharmaceutical industry spends twice as much on promotion in the U.S. as it does on research and development. The numbers work out to about $57.4 billion in total advertising and sales promos, or $61,000 per physician, or about $190.82 for every man, woman and child in the United States. Just under 7% of the total, or $4 billion, was spent on direct-to-consumer advertising.

There are three ways to look at this. On one hand, Merck, Pfizer, Bristol-Myers Squibb, Eli Lilly, Aventis, Sanofi-Synthelabo, AstraZeneca, and Wyeth could be driving healthcare costs through the roof with these huge investments in promoting new drugs. On the other, stimulating market demand for emerging remedies builds the revenue funnel that allows breakthroughs in medicine to happen — and without a profit motive, new drugs would never make it through the complex pipeline to save you from cancer 20 years from now.

The third conclusion: Healthcare is a field in which advertising and promotions work. No one invests $57 billion without getting a return. We’ve heard regional hospitals argue, sure, that’s great — but we don’t have billion-dollar budgets like pharmas. Well, if pharma spends $13.30 per U.S. consumer for D2C advertising, and you have 200,000 consumers in your hospital footprint, the equivalent advertising budget for a 300-bed regional hospital would be $2.6 million. That’s manageable, and if you’re spending less, you’re underperforming.

There’s a lot of debate inside hospital walls over whether consumer decision pathways and physician referrals can be manipulated. We find it interesting that big pharma bets so much that they can.

(Credit to Marc-André Gagnon, the Département de Sociologie, Université du Québec à Montréal, Montreal, Quebec, Canada, and Joel Lexchin, the School of Health Policy and Management, York University, Toronto, Ontario, Canada.)