Direct-to-Consumer Advertising: Gauging Its Impact On Utilization, Drug Mix

Forget about Star Wars. This year, the "Force" that PBMs and plan sponsors are talking about is direct-to-consumer (DTC) advertising. Its potential impact was highlighted over and over again at PBMI's 2002 Drug Utilization Management Conference in Scottsdale, Arizona.

Experts are predicting that more than $5 billion will be spent on DTC advertising over the next two to four years. Its impact is being felt with five of the top 10 drugs among the highest dollar expenditures for advertising in 2001. In 2002, seven drugs with the biggest DTC budgets are in the top 10. This trend, with profound implications for cost and utilization, is impacting the drug mix.

A myriad of factors contributed to the 17.1% increase in retail drugs costs from 2000 to 2001: 39% was due to an increase in the number of prescriptions dispensed, 37% was related to price increases, and 24% was due to a shift to higher-cost drugs or drug mix, explained Ryan Lee, pharmaceutical data manager for United Healthcare. These data are illustrated in Figure 1.

Experts attribute much of this 24% change in the drug mix to the surge in DTC advertising. In 1994, manufacturers spent about $250 million on DTC. By 2001, that spending had climbed to nearly $3 billion per year according to Lee.

Data indicate that this strategy works ­ the most heavily advertised drugs have the highest trends. Ironically, manufacturers currently spend only 13% of their promotional budget on DTC advertising. Seventy-nine percent (79%) is spent on physician detailing and sampling. Given the enormous return on investment generated by DTC advertising, this trend has profound implications for the future. Employers will need to develop successful strategies to deal with the effects of DTC on utilization and drug mix.

It is important to understand that DTC advertising is a mixed bag with pros and cons. On the plus side, DTC advertising provides consumer education. It increases patient communication with the physician and can result in early treatment, provide information about side effects, promote compliance and improve health care education.

On the negative side of the equation, DTC advertising contributes to increased costs, increased patient demand for high-dollar drugs, and its condensed package insert/side effects information can be misleading or misinterpreted. Patients often overlook or minimize warnings and potential adverse effects. There is the potential for inappropriate utilization as well as a general lack of information about the value of behavior modifications or lifestyle changes and alternative therapies. Furthermore, patients are often unaware of the actual costs of these drugs and have no way to compare cost of competing therapies.

"The physician's job is to use drugs when the benefits outweigh the risks," said Glen Stettin, MD, internist and vice president of clinical products for Merck-Medco Managed Care. He cautioned that the aging baby boomer population is not "known for suffering easily and they will take any pill to enjoy a happy and healthy life." He also states that increasing utilization is responsible for more than 50% of the drug trend. As the population ages there are more people taking more drugs. He added that the drug mix also is becoming more expensive with people switching from less expensive to more expensive drugs.

Countering the impact of these new, high cost drugs coming into the market will be the effect of the drugs that are scheduled to go off patent soon. As Figure 2 illustrates, there is about $28 billion in drugs coming off patent in 2002 alone. This will have a significant impact on prescription drug management, considering that generic substitution can result in as much as two-thirds of the savings compared with brand-name drugs.