51 Advertising and Marketing

Jonathan Belsey

51.1 The pharmaceutical

enterprise compared with

other industries

The process of developing a new pharmaceutical
product incurs both significant costs and risks. On
average, only 1 in 5000 pharmaceutical products
tested is eventually approved for patient use, and
only 3 out of 10 approved drugs in the United States
generateenough revenue to meet orexceed average
research and development (R&D) costs, currently
estimated at $800 million to $1.7 billion per pro-
duct (Certified Medical Representatives Institute,
2002; Mullin, 2004). The average lead time
between patenting a new chemical entity and
achieving approval for marketing is 12 years, but
patent protection is only 20 years post-filing, typi-
cally leaving only 8 years of exclusive marketing to
recoup the R&D costs. Furthermore, extending
patent duration does not guarantee reduced com-
petition as 90% of patented drugs have direct com-
petitors (Australian Academy of Science, 1995).
Pharmaceutical companies in the United States
spent $24 billion developing and testing new drugs
in 2000, equivalent to about 21% of sales, and
twice as much as computer software companies
(Matthews, 2001). However, only 17 new drugs
were introduced across the industry in 2002,

compared to 53 in 1996, making it even more

crucial that maximal sales are achieved for each

new product. Marketing of older drugs under new

names and indications is becoming more common

as new drugs in the pipeline become less prevalent

(Vogenberg, 2003). In the past six years, it has been

claimed that 78% of ‘new’drugs were classified by

the FDA as being no better than those already in the

market and in 60% there were no new active ingre-

dients (Paukstis, http://www.amfar.org).

In 2000, 48.2% of the world pharmaceutical

sales were in the United States, 16.2% in Japan,

23.7% in Europe, 6% in Latin America and 5.9%

in Africa, Asia and Australia (Oxfam/Save the

Children/VSA Joint Report, 2002). Unlike many

industries, the pharmaceutical market is very frag-

mented. In the developed world, there are at least

390 pharmaceutical manufacturers, and no single

pharmaceutical company has more than 8% of the

overall market (Matthews, 2001).

This investment in R&D can only be turned to

profit if sales of the new product are maximized,

and that requires a successful marketing strategy.

The efficiency of this process must be all the

greater when there are exceptionally long develop-

ment cycles, an absence ofmarket dominance, high

product–failure rates and unpredictable, staccato

advances in technology.

Principles and Practice of Pharmaceutical Medicine, 2nd Edition Edited by L. D. Edwards, A. J. Fletcher, A. W. Fox and P. D. Stonier
#2007 John Wiley & Sons, Ltd ISBN: 978-0-470-09313-9