Big Pharma: Modern Robber Barons

With vast pots of money, it happily breaks all the rules

Check out the July 15th story in the IN THE NEWS section at right.

The diabetes drug Avandia has been allowed to remain on the market even though a large percentage of the medical community believes it raises the risk of heart attacks and should be banned.

The next day, Avandia’s maker, GlaxoSmithKline, announced it had set aside $2.4 billion to settle lawsuits from consumers that believe they suffered harm from the drug.

Outrageous? Nah.

Business as usual in the gazillion-dollar world of Pharmaceuticals.

Spreading Cash Around Like a Farmer Spreads Manure
Last year, the Pharmaceuticals/Health Products industry spent $267 million on lobbying activities and employed 1,733 lobbyists to deal with 446 clients.

In the 2008 election cycle, folks at Big Pharma gave $29.7 million in political contributions—$14.9 million to Democrats and $14.6 million to Republicans.

Thanks to years of bribing Congress, Big Pharma was permitted to write into the Prescription Drug Plan (Part D) that Medicare could not negotiate lower prices with drug makers. Only the Veteran’s Administration has the right to barter.

So I pay in excess of $1,000 a year for my two prescription pills a day.

That’s where all Big Pharma’s money comes from—the result of rapacious congressmen who, in their frenzy to be reelected, do not give a damn for me or tens of millions like me.

In short, this industry has so much money, it corrupts everything in its path.

How Big Pharma Contaminated TV Network News
Network evening news has devolved into the pharmaceutical industry’s private on-air infirmary. The overwhelming percentage of commercials feature a parade of pusillanimous whining boomers and seniors who can’t pee, poop, get it up, sleep or deal with myriad aches, pains, itchies and other icky bodily symptoms.

In addition, Big Pharma is responsible for incubating the most rare of all diseases—one that afflicts only three people in the world.

This disease is Cronkitis—the pathological compulsion to emulate Walter Cronkite.

Cronkitis turns normally upbeat, intelligent, sometimes droll and occasionally funny network anchors into a trio of ponderous pontificators, whose mission is to project gravitas and pander to advertisers by introducing at least one mawkish health feature a night as editorial content that will give cred to what is being hawked—medicines with more side effects than unpasteurized snake oil.

No wonder ratings of the torpid network news are on the skids while the manic mischievous glee of Shep Smith, Bill O’Reilly, Joe Scarborough, Rachel Maddow, Keith Olberman, Chris Matthews, Glen Beck, Jim Cramer, Lara Spencer and Mary Hart is like a breath of fresh Advair.

TV as an Advertising Medium
It’s a given that the efficient way to build a business is to find prospects that need or want your product and make an offer. When they become customers, you keep careful track of them and treat them so well that they not only continue to buy from you, but also tell their friends, neighbors, work associates and family.

Contrary to popular belief, the main business of television is not selling products and services via commercials. Rather it is to create programs that will assemble viewers into certain demographic groups and sell those groups to advertisers.

Network news has become the town meeting for age 50+ couch-potato hypochondriacs.

The Bizarre Arithmetic of TV Commercials
Let’s say the cost to run a spot for diabetes medicine on a prime-time network TV newscast is $25 per thousand ($25/M)—or 2.5¢ per viewer. Sounds like a reasonable deal until you take a close look at the numbers:

• Roughly 8 percent of the U.S. population has diabetes or only 80 out of the thousand viewers you bought and paid for. Money is being wasted on advertising to 920 non-diabetics.

• Let’s say 20 percent—or 16 of the remaining 80 prospects—surf away during the commercials, and 16 more go to the john or the kitchen. That leaves you with 48 of your original 80.

• Finally, let’s say that 5 percent—or 4 more—have DVR’d the show and will fast-forward through the commercials at a later time, while another 4 are very happy with their diabetes medicine and have hit the mute button so that they can yak in peace with others in the room.

In actuality you are reaching just 40 prospects—not the thousand promised by that glib ad salesperson from the network.

Your actual cost per qualified prospect is not $25/M, but more like $25/40 or 62.5¢ each ($625/M)—which is precisely the cost of a direct mail package—a far more efficient and cost-effective medium to tell this kind of story.

(Check out the takeaways to see 8 advantages of direct mail over TV.)

Quite simply, the drug makers are so rich they don’t need to play by the rules of advertising or the rules of anything else. And their lazy agencies happily book the same commercials in the same time slots night after night and collect their fat 15 percent commissions.

Is It Fair to Equate Big Pharma to the 19th Century Robber Barons?
I have been downloading stories about the drug business for the last five years and have been stunned to discover that this is an industry of rapscallions, reprobates, rogues, scallywags, scamps, scoundrels, thieves and thugs. Below are the fines and settlements paid out during that time by Big Pharma for its misbehavior:

Abbott Laboratories—$1.67 billion to Centocor for patent infringement, 2009.

AstraZeneca—$520 million “over marketing” Seroqueo, 2010.

Bayer—$97.5 million kickbacks, 2008; $16 million aspirin price fixing, 2008.

Bristol-Myers Squibb—$515 million marketing and pricing, 2007; $300 million criminal investigation of accounting practices, 2005.

Cephalon—$443.9 million improper sales and marketing practices 2008.

GlaxoSmithKline—$2.5 billion set-aside for Avandia settlements, 2010; $150.8 million Medicare fraud; 2005; $3.4 billion tax fraud, 2006.

Johnson & Johnson—$81 million illegal promotion of Topomax, 2010.

Lilly—$700 million Zyprexa claims, 2005; $1.42 Billion Zyprexa marketing abuse, 2009.

Merck—$650 million marketing practices, 2008; $4.85 billion Vioxx settlements, 2007, $2.3 billion tax fraud, 2007.

Novartis—$250 million sex discrimination, 2010.

Pfizer-Wyeth—$2.3 billion Bextra marketing fraud, 2009; $103 million Prempro damages 2009.

This adds up to $22+ billion—roughly the amount in civil fines BP will be paying under the U.S. Clean Water Act for the Gulf spill at $4,300 per barrel.

On the Positive Side: Two Examples of Brilliant Marketing in the Big Pharma Arena
1. Being of a certain age with typical male problems, I was standing at a urinal in the men’s room of a moderately upscale Philadelphia restaurant and found myself staring at a framed advertisement at eye level. The product: the prostate manager Uroxatral, an upscale version of Flomax that reportedly has none of the unpleasant side effects. On the wall beside me was a small box of take-one brochures and a promise (as I recall) of the first month free. Never have I seen a more perfect offer to precisely the right people with the right income in the right place at precisely the right time. Marketing doesn’t get any better than that.

2. In a fascinating turnabout, it must have been a physician or a pharmaceutical lawyer that inadvertently came up with the most powerful single line of selling copy in the history of advertising:

For an erection lasting more than 4 hours, call your doctor immediately.