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SBJ/April 5 - 11, 2004/SBJ In Depth
Prescription for profit
Published April 5, 2004
There are days when Burns Sports & Celebrities Vice President Marc Ippolito pursues endorsement deals with the zeal of an autograph hound at a Super Bowl party. On other days, deals come over the transom; more frequently, the latter have come from pharmaceutical companies.
"It happens at least once a week," said Ippolito, who's also the talent agency's general counsel. "Someone calls asking if I know an athlete who has diabetes, or high blood pressure, or arthritis. Or do any of their relatives have it — that works, too. Last week, I got a call asking about irritable bowel syndrome. The money sounded good, but medical histories are personal enough. Do I really want to ask people about that?"
As consumer marketing in the $200 billion U.S. pharmaceutical industry matures some seven years after the Food and Drug Administration allowed it, prescription drug manufacturers are increasingly turning to sports as a way to reach consumers. They are doing so for the same reasons as any other consumer product marketers. Pharmaceutical marketers rent sports' deep affinities to boost their own brands, and they value the demonstrated ability of sports or any sponsorship property to target an audience.
Eight years ago, there was none of what the pharmaceutical industry likes to call "DTC," or direct-to-consumer advertising, in the United States. Last year it reached $2.8 billion, according to Pharma Marketing News. As for sponsorships, IEG projects that pharmaceutical marketers will spend about $220 million on U.S. sponsorships in 2004, a year-to-year increase of 14 percent.
Spending at those levels and the amplified marketing efforts from Viagra competitors Levitra and Cialis — the most male-targeted and the first two drugs to buy Super Bowl ads — has attracted the attention of sports properties and agencies across the country, all searching for their claim to the pharmaceutical gold rush.
But getting a handle on pharmaceutical marketing is about as simple as understanding the warnings the Food and Drug Administration requires with every drug ad making an efficacy claim.
Pharmaceuticals couldn't be more different from categories like autos, soft drinks, beer and fast food, which have long been the biggest buyers of sports marketing inventory.
Unlike other industries coming out of deregulation, such as banking, airlines and telecommunications, pharmaceuticals is an industry that historically never had to talk to consumers. It didn't have to worry about service or even packaging, said Mike Reisman, a founding partner at Velocity Sports & Entertainment. "All of this [consumer marketing] is uncharted waters for them, so every new dialogue starts at zero."
Velocity, based in Wilton, Conn., handles sponsorships for the PGA and Champions tours, and the Western Open entitlement for Lilly Icos' Cialis brand.
Add to that dynamic a regulatory environment that's byzantine even by government standards and you have an industry with money at the ready, but one that doesn't move at the speed of any other consumer marketer.
Anyone who wants to do business with pharmaceutical marketers had better get used to decelerating. It's like the difference between the Internet on a high-speed connection and plain old dial-up, and sometimes just as frustrating.
"You should know going in that something that would take a month with a traditional marketer will take three to six months with a pharma company, because of the oversight," said Marc Wasserman, a New York-based consultant specializing in pharmaceutical sports marketing. "They are much more conservative and toe the line the way a Budweiser or Doritos marketer would never do."
Slower marketing cycles means an altogether different kind of transaction. Accordingly, Reisman, while happy with his client, said he has changed Velocity's fee structure to account for the relatively sluggish pace of his pharmaceutical client.
For drug companies, getting product approvals is a deliberate process for good reason; the wrong drug prescribed for the wrong condition can be life threatening. Still, no industry's advertising is more regulated.
"This is done for all the right reasons, because there are benefits and risks associated with every drug, but the FDA review of DTC is unlike anything else in advertising," said Stu Klein, president of Quantum Group, a Parsippany, N.J., ad agency. "There aren't many other industries where you have to spend a third of your ad telling people why not to buy your product."
Quantum's clients include NFL sponsor Levitra (GlaxoSmithKline), PGA Tour sponsor Crestor (AstraZeneca), and over-the-counter allergy medication Clarinex (Schering-Plough), whose pharmaceutical forerunner Claritin is believed to have been the first sponsor of a big sports property, having signed with Major League Baseball in 1999.
Sarah Wilcox, group account director for the health-care practice of IPG agency Draft, Chicago, said it often takes six weeks for ads to get approved. In a sports marketing world built on speed, that takes some getting used to. "All of the big pharma companies have very, very conservative medical regulatory committees that oversee every piece of communication," said Wilcox, who worked on Rogaine, one of the original, big-budget direct-to-consumer launches. "They are not marketers and they don't care that you are."
Even when they don't have to, pharmaceutical marketers submit almost every ad for approval. The reason? The FDA has the ultimate hammer. The agency's oversight board is the Division of Drug Marketing, Advertising and Communications.
"Since DDMAC can pull your entire campaign, which is like death, most companies submit for pre-approval‚" said Don Apruzzese, who held marketing slots at Gillette and Ford before joining AstraZeneca as senior director of consumer marketing a year ago.
Watch your words
In simplest terms, the FDA requires that direct-to-consumer ads that include a particular pharmaceutical brand and the malady it's made for (aka, the indication) provide "fair balance" — an explanation of the risks.
For marketers, that's challenging; if a 60-second TV ad is "indicated‚" as much as 20 to 25 seconds can be taken up listing potential side effects.
Sometimes that knowledge alone can be enough to make a sale, as in the case of Merck's Vioxx arthritis pain relief medication, which occupied a space on the back wall at the U.S. Open last year under a last-minute deal.
"Generally, they are trying to get a brand name out there, so TV visibility is important and international visibility is even better since most drug companies market globally," said Pierce O'Neil, the U.S. Tennis Association's chief business officer.
Michael Neuman, vice president and group account director at Strategic Sports Group, New York, advises that every logo placement on site at an event requires FDA approval. Thus, Pfizer's center court Diflucan logo at last year's Pilot Pen tennis tournament in New Haven, Conn., also carried an FDA approval number.
"If we'd known how much time a lot of these programs take, we would have charged more going in," said Neuman, who works with various GlaxoSmithKline and Pfizer brands.
Drugs that treat erectile dysfunction have been marketed heavily in sports, with athletes such as soccer great Pele (above) serving as spokesmen.
To stay within the erectile dysfunction category, since that's where the most money has been of late, a Canadian TV ad for Viagra shows a businessman going to work happy, because "It's great to stay up late." For more information, you'll have to take the ad's advice and see your doctor.
Likewise, Levitra's original American TV ads depicted an older man throwing a football through a tire, as his partner looked on admiringly.
Levitra has used the NFL and former coach Mike Ditka to convey a message of macho and to establish credentials, perfect for a brand challenging an entrenched competitor like Viagra. "It's a delicate topic and the NFL has a lot of younger people watching; we chose to do branded, but not indicated, advertising so we didn't have to go into all the explanation," said Dave Pernock, senior vice president of sales and marketing for GlaxoSmithKline.
Cialis used "indicated" ads to introduce its biggest differentiator — the drug's claim of 36-hour efficacy, compared to four hours each for competitors Viagra and Levitra. Since Cialis made a claim, it had to include a caution that four-hour erections are a possible side effect.
Cialis chose to counter Levitra's macho NFL muscle with a message directed at couples and without a celebrity spokesman. "We felt like our benefits message was important in and of itself, and we didn't want a celebrity to get in the way," said Matt Beebe, brand manager for Cialis.
Sports property salesmen had best be advised that even with all the money spent by high-profile drugs like Viagra, the erectile dysfunction category still produces some red flags. O'Neil said it's still undecided whether the USTA would sell to an ED medication. Van Wagner Sports & Entertainment President Mike Levine said some of the college conferences to which Wagner's Dorna unit sold rotational signage would not accept ads for Cialis. Given the NCAA's normally conservative stance regarding any new marketing program, it's not surprising that John Bogusz, CBS Sports executive vice president of sales, said he would sell a sponsorship/media package to a pharmaceutical company but not to an erectile dysfunction brand.
Do celebrities matter?
The question of celebrity endorsers for pharmaceutical brands is one that's constantly debated, even as the tactic is increasingly employed (see chart). Largely, it's been used as a PR ploy: Athlete-celebrity X has medical condition Y, cured by medication Z. Said athlete-celebrity then tours on behalf of the pharmaceutical company behind the drug. The athlete/celebrity tours are cheaper than, say, the Super Bowl ads bought by Levitra (with Ditka) and Cialis, and outside the United States it is one of the few weapons in the marketing arsenal.
One of the biggest problems is that it won't last, marketing experts say.
"PR is the tried and trusted way to market pharma using sports, but it's not sustainable after launch and too much attention is on the athlete or celebrity," said John Von Stade, who brought the Cialis account with him from Millsport when he joined Velocity as a vice president last year.
"It use to be that PR was all you could do, but now if it's a competitive category, you have to advertise, because your competition can," said Joe Perello, who opened a direct-to-consumer agency in between stints as the New York Yankees' vice president for business development and his current position as New York City's first chief marketing officer.
Would New York ever sell a pharmaceutical sponsorship? "Why not?" said Perello. "I'd love do a deal with a stop-smoking patch. Clean up the city — it's a great hook."
Quantum's Klein said that, more than in any other category, athletes must have a personal connection to the product they endorse. So he touts the Mets' Mike Piazza as a Claritin endorser, because Piazza needed the drug to perform outdoors. On the other hand, "100 million Americans have high blood pressure, so I'm not sure what John Elway is bringing to the table [in an unbranded campaign for drug maker Novartis], whether he has it or not," Klein said.
While PR tours are less controlled by the FDA than straight advertising, they are still under a watchful eye. Endorsers are generally required to indicate who is paying them, even if they are only talking about the Super Bowl matchup. More important, when referring to the medication, they may only talk about how it worked on their condition — generalizations are off limits.
"They can say, 'this brand works for me,' but 'this is it for everyone' statements are verboten," said Wasserman, who helped manage an unbranded prostate cancer awareness campaign last year for Merck. The company used an MLB sponsorship, along with Tampa Bay manager Lou Piniella and hall of famer Ozzie Smith as spokesmen.
Just as the FDA can order ads pulled, so too can it require corrective advertising or clarifications to ads. In the "how not to do it" file is an oft-cited case of how Mickey Mantle's overenthusiastic product claims for a forgotten anti-inflammatory agent got the ad pulled. More recently, when Cal Ripken endorsed Merck's Prinivil hypertension medication, the FDA insisted that the ads include the fact that Ripken neither suffers from high blood pressure nor takes Prinivil.
Sponsorship is seemingly less affected by the FDA. Still, since direct-to-consumer marketing is governed by a combination of voluntary and involuntary regulation, it can still be confusing. "You can talk to 10 different [pharmaceutical marketing] people and get 10 different answers about what's allowed and what isn't," said the Los Angeles Dodgers' sales and marketing vice president, Sergio del Prado.
Adds Von Stade, who's been working with direct-to-consumer marketers for five years, "People talk about being experts in this area, but the reality is, every day is a learning experience, because the rules are being established, broken or changed every day."
Ortho Biotech hired Alonzo Mourning to drive a campaign, featuring this brochure, that was aimed at people at risk for anemia.
One important thing to know is that the entertainment factor that makes tickets and hospitality an integral part of almost every sports sponsorship is meaningful to pharmaceutical companies. Their biggest trade is doctors, and, as of a few years back, new restrictions on entertainment meant that doctors can't be schmoozed with tickets. Another once-popular marketing ploy now off limits was the popular "gas and go‚" during which a pharmaceutical rep would lecture a busy doctor on the virtues of a new drug compound at the pumps, while filling the physician's car with free gas.
To date, golf seems the biggest beneficiary from pharmaceutical sponsorships. The NFL and NASCAR generate the biggest TV ratings, but between them they only have one league sponsorship in Levitra (Viagra's deal is with Mark Martin). The PGA Tour has three pharmaceutical sponsors — Crestor, Cialis and Pfizer's arthritis pain relief medication, Celebrex, which signed on as a tour sponsor in 2000. Aventis' Allegra allergy relief drug dropped its PGA Tour sponsorship after the 2003 season.
"Pharmaceuticals have been a tremendous business opportunity for us and a way to be associated in a positive way with an emerging category," said PGA Tour CMO Tom Wade.
Golf works because it's a low-risk sport for a business as risk-averse as any, and because it targets an older demographic that's the sweet spot for many pharmaceutical marketers. Oh, and not so coincidentally, a lot of doctors play golf.
On site at PGA tournaments, Cialis has a tent ostensibly oriented to golf tips, but there's an interesting dynamic justifying Cialis' marketing strategy of addressing couples, and not just sexually frustrated males.
"Golf became a way for us to communicate with couples about its value‚" said Beebe. Accordingly, on site, "A lot of men snicker at the Cialis tent and walk by," said Von Stade, "but then you see the 50-plus couples, the woman taps the man on the shoulder and steers him in." Information on erectile dysfunction is considerably more in demand than golf instruction.
With costs as high as a billion dollars to bring a new drug to market, the pharmaceutical industry can be extraordinarily competitive. Reports of rivals calling each other's ads into question by the FDA are not uncommon.
Even so, properties and agencies should be aware that having more than one pharmaceutical client — even from competing companies — is not considered a conflict, as long as the medications are for different conditions. Thus, it's common for agencies to handle different drugs from competitors. Likewise, the PGA Tour has no shame in having three pharmaceutical sponsors.
"There's room for more," said Wade. "We will obviously be cautious and protect the partners we have, but saying pharmaceuticals is a category is like saying food is a category. We have a cholesterol-lowering agent, a pain reliever and an ED drug. None of those conflict."
Pharmaceutical product intros have slowed. The FDA approved 21 new drugs in 2003 (among them Crestor, Levitra and Cialis), about half the number that passed muster five years earlier.
"More drugs than ever are being put into the [approval] pipeline," said Draft's Wilcox, "but fewer are coming out."
Some to keep an eye on are the increasing number of cholesterol treatments. AstraZeneca's Crestor, Pfizer's Lipitor and Merck's Zocor compete in what is already a $12.8 billion market, about a billion dollars more than the next biggest drug sector and still growing by double digits.
Pfizer spent $36.51 million on sports advertising in 2003, which represented 10 percent of the company’s total ad budget for the year.
And while the industry has yet to face the political backwash of targeting a teen demo with a direct-to-consumer campaign, wouldn't it make sense for an acne medication to sponsor something like the X Games?
Strategic Sports Group's Neuman suggests that the various oncological treatments coming on the market are the next series of drugs that will leverage sports. "They are drugs that will have a lot money behind them, and they require a fair amount of consumer education," he said.
Another trend to look for is more cause-related efforts, along the lines of Crestor's PGA-based Charity Challenge, which will raise about $3 million annually for PGA Tour charities and health-care organizations.
The pharmaceutical industry has battled a notoriously bad image, and drug prices are a convenient political football, especially in election years. More cause-related programs are a certainty for an industry with nagging price concerns and an image problem.
"Even with all the regulations, this is a category I've grown to love because the benefits are real," said AstraZeneca's Apruzzese. "I used to work on developing an emotional attachment between consumers and a hunk of metal with four wheels. You don't have to work hard on benefits after you see an asthmatic kid able to play baseball because of your product."