Sales of generic drugs could be much higher

Pharmaceutical companies stop marketing drugs as soon as their patents are about to expire. As a result, sales of generic drugs available at low cost once the patent has run out are much lower than they could be. Doctors prescribe new, more expensive drugs instead, and that costs society tens of millions. This is the conclusion reached by Ernst Osinga after studying the motives behind and effects of drug marketing in the United States. He will be awarded a PhD on 20 June 2011 by the University of Groningen.

Every year tens of millions worldwide are invested in marketing drugs – up to twice the amount invested in developing them. In the USA some of that marketing is targeted at consumers, for example in television commercials, but a large part of it targets the doctors who will be prescribing the drugs, in the form of conference sponsorship and through sales reps and advertising in trade journals. Osinga notes that drug manufacturers stop promoting their products when they cease to be moneyspinners because the patents will soon expire: ‘Doctors then switch to competing drugs that are still being promoted. Once the patent expires they do not revert to the original drug, which is now available as a cheaper generic version. That costs society a lot of money.’

Permanent effect 

Osinga studied the pharmaceutical market in the United States, which differs from that in Europe in some respects. In the USA, for instance, all drugs can be advertised on television, whereas in Europe only pills and potions available over the counter can be advertised. Many of his conclusions do apply to the European situation, however, and this is true of his research into the permanent effects of marketing on sales of a drug. He found that these permanent effects only apply in the case of marketing work in the first two years after market launch: ‘If companies are smart they will focus all their efforts on informing doctors about the new product during those two years. After that, although any money put into marketing will have a temporary effect on sales of the drug, it’s the early investments that pay off.’

Shareholder value

Companies have other reasons for investing in marketing, however. Their share prices go up with greater brand awareness even if the economic climate is against them. Osinga comments: ‘Here we’re talking about marketing targeted at consumers, of course, which is only possible in the USA. There it creates shareholder value. This is an effect that managers need to take into account when investing in marketing.’

Innovation

There has been a lot of public criticism of the way drug manufacturers try to sell their products to doctors and other professionals: the opposition is not just to the enormous sums involved but also to the influence exerted on doctors. The reality, says Osinga, is more complex: ‘If doctors cannot be persuaded to prescribe new drugs, manufacturers lose their motivation to innovate. In fact it is pretty hard to win over doctors, who tend to be faithful to the drugs they are familiar with. Manufacturers really have to come up with enhancements.’

Curriculum vitae

Ernst Osinga (Harlingen, 1981) completed a Research Master’s programme at the University of Groningen’s Faculty of Economics and Business in 2005. He went on to write his PhD thesis at the same faculty, where his supervisor was Prof. Peter Leeflang and his co-supervisor Dr Jaap Wieringa. His research has been published in the authoritative Journal of Marketing and Journal of Marketing Research. He is currently working as Assistant Professor at Tilburg University.

Contact

Ernst Osinga, e.c.osinga uvt.nl; tel. 013-466 8774