Welcome to Analysis of ROI for Pharmaceutical Promotion

Executive Summary

Background
ARPP was an independent study conducted by Dr. Dick Wittink (General George Rogers Clark Professor of Management and Marketing, Yale School of Management) under an unrestricted educational grant from the Association of Medical Publications (AMP). The results were presented to pharmaceutical industry marketing, advertising, media and publishing executives on September 18, 2002.

Dr. Wittink is an expert in customer-focused marketing strategies, customer satisfaction and loyalty, and model building for marketing decisions. Guidance and direction for the study was provided by a Steering Committee that included representatives from four major pharmaceutical companies: Wyeth, GlaxoSmithKline, Novartis and Bayer. These Steering Committee Members were also officers of either the PMRG or PMSA, the two leading pharmaceutical industry research groups.

Data for the study was that commonly used by the industry and was provided directly to Dr. Wittink by Scott-Levin, now Verispan, (Detailing, Direct-to-Consumer, Physician Meetings & Events) and PERQ/HCI (Journal Advertising). The AMP did not have possession of nor access to the data supplied to Dr. Wittink.

Study Objectives
To follow up on an earlier study conducted by Dr. Scott Neslin (Amos Tuck School of Business, Dartmouth College) that measured the ROI of four major industry promotional tactics: detailing (DET), direct-to-consumer advertising (DTC), advertising in medical publications (JAD) and, physician meetings & events (PME) for the period 1995-1999.

The ARPP study modified the earlier study by including:

•	Data for 2000, providing additional observations for analysis
•	Revised brand revenue categories of $25-100MM, $100-500MM, $500MM+, to more closely reflect market realities
•	Measurement of the average marinal ROIs for three therapeutic categories: Arthritis, Asthma, Hypertension.

Overall Approach

•	Used historical data and is therefore a retrospective analysis as opposed to an experimental design
•	Analyzed the data using regression analysis, a widely used statistical technique utilized by business, the social sciences, and, the biological and physical sciences
•	Measured the average marginal ROI (incremental return on investment) of the last dollar spent on a promotional tactic
•	Evaluated the data in aggregate for average brands based on their brand revenue categories and launch years (<1994, 1994-1997, 1998-2000)

Data
Evaluated 392 branded drugs with revenues of $25MM or more for the time period 1995-2000, which yielded a total of 21,436 observations for analysis.

Results-Overall
Results are shown for the average brand in a revenue level/launch year cell. The average brand represents the results only for those brands that spent money on that tactic during the study period. The results are presented as the average marginal ROI for the last dollar spent on a tactic.

The average marginal ROI does not represent a “report card” on an individual tactic indicating that the tactic works or doesn’t work. The average marginal ROI can be interpreted as an indication of overspending (overutilization) or underspending (underutilization) on a tactic.

An average marginal ROI of close to or less than $1.00 indicates overspending (overutilization), if there had been less spending on that tactic a higher average marginal ROI would most likely have been generated. The higher an average marginal ROI is above $1.00 the greater the level of underspending (underutilization) for that tactic. If the spending level had been higher a lower average marginal ROI would most likely have
resulted.

The average marginal ROI results shown below represent those for the average brands, those brands that spent money on that tactic.

•

DET (Detailing) average marginal ROIs for the average brands in each Revenue/Launch Year cell

	Year of Launch
Revenue Level	< 1994	1994-1997	1998-2000
$25-$100MM	$0.9	$1.0	$1.0
$100-$500MM	$1.2	$1.6	$2.1
$500+MM	$3.1	$5.9	$11.6

•

DTC (Direct-to-Consumer) average marginal ROIs for the average brands in each Revenue/Launch Year cell

	Year of Launch
Revenue Level	< 1994	1994-1997	1998-2000
$25-$100MM	$0.0	$0.0	$0.0
$100-$500MM	$0.1	$0.2	$0.2
$500+MM	$0.4	$0.7	$1.3

•

JAD (Advertising in Medical Publications) average marginal ROIs for the average brands in each Revenue/Launch Year cell

	Year of Launch
Revenue Level	< 1994	1994-1997	1998-2000
$25-$100MM	$6.2	$6.7	$7.2
$100-$500MM	$2.3	$3.1	$4.2
$500+MM	$3.1	$6.2	$12.2

•

PME (Physician Meetings & Events) average marginal ROIs for the average brands in each Revenue/Launch Year cell

	Year of Launch
Revenue Level	< 1994	1994-1997	1998-2000
$25-$100MM	$0.1	$0.1	$0.1
$100-$500MM	$2.0	$2.7	$3.6
$500+MM	$3.1	$6.0	$11.7

Conclusions
Based on these average marginal ROI results for the 392 brands it can be concluded that all four promotional tactics work, but there are opportunities to increase the efficiency of the spending (utilization) for each tactic.

The results suggest that:

•	There is overspending on Direct-to-Consumer advertising
•	Due to underspending, additional resources could be allocated to Physician Meetings & Events, Detailing and Advertising in Medical Publications for brands of $500MM+, launched after 1997
•	Very positive returns could be obtained by allocating additional resources to Advertising in Medical Publications for medium brands between $100-500MM, and especially small brands of $25-100MM

Results – Therapeutic Classes
The ARPP analysis also included results for three therapeutic categories that were part of the analysis. These results follow:

•	Arthritis – Advertising in Medical Publications had the highest average marginal ROI at $5.5 followed by Detailing at $1.9, Physician Meetings & Events at $0.2, and Direct-to-Consumer advertising at $0.1
•	Asthma – Advertising in Medical Publications had an exceptionally high average marginal ROI of $15.6, the average marginal ROI for Detailing was $1.4, Physician Meetings & Events was $0.7, and Direct-to-Consumer advertising was $0.1
•	Hypertension – The Detailing average marginal ROI was $3.0, followed by Advertising in Medical Publications with a $2.5 average marginal ROI, Physician Meetings & Events with $1.3, and Direct-to-Consumer advertising with $0.1