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GLAXO SALES FORCE ACCOUNTS FOR 40% OF FIRM’s OVERALL PROMOTION BUDGET,

Executive Summary

GLAXO SALES FORCE ACCOUNTS FOR 40% OF FIRM's OVERALL PROMOTION BUDGET, Glaxo Exec VP Robert Ingram said April 16 at a meeting of the Pharmaceutical Advertising Council. Ingram added that approximately 20% of Glaxo's annual promotional budget goes towards "mostly non-product specific" medical education activities and patient drug samples. The Glaxo exec encouraged the drug industry to make public where its promotional dollars are spent because, while "many people understand" the drug industry's spending on R&D, "far less understand our investment in advertising and promotion." Ingram recognized that the industry "never revealed the details of our business expenditures" in the past, but added: "yesterday's standards hold little bearing to what may be appropriate standards today and tomorrow." During its annual meeting with shareholders, Pfizer was asked to break out its advertising expenses. The company said only that "the majority" of its marketing expenses were for its detail force. "Less than 3%" of Glaxo's promotional budget is spent, Ingram said, on the "types of activities that the public traditionally associates with promotion -- advertising and promotional literature." Advertising and promotional literature are "a tiny piece of the pie, but a very important piece" and "we should never apologize for it" Ingram remarked. Glaxo's remaining promotional funds are spent on marketing support and infrastructure. Industry critics often complain, Ingram said, that drug firms spend approximately 16% of sales on R&D and 20%-22% on promotion and imply "that that somehow makes promotion a sleazy activity." He concluded: "That is a criticism and an implication that in this new environment...you and I cannot let go unanswered." At the same meeting, Ingram said promotional expenditures are "high on the list" of budget categories Glaxo is reviewing as part of an overall reassessment of its spending ("The Pink Sheet" April 19, p. 3). In addition to scrutinizing expenditures, Glaxo will work to "demonstrate and with [advertisers and promotional firms'] help we are going to communicate the value of our products." In particular, Ingram said that Glaxo intends to focus its promotional activities on providing managed-care drug buyers with information on drug product "value" as demonstrated by "meaningful data on outcomes, quality of life and cost-benefit ratios, which is the kind of information they need to make informed decisions." "We must realize once and for all that the days in which we could launch a product that only had marginal therapeutic benefits over existing therapy and make it successful primarily through well-planned and executed marketing and promotion are gone," Ingram said. "Promotion will come to rely less and less on therapeutic outcomes" and "we will be looking more and more at economic outcomes, cost-effectiveness of products and humanistic outcomes." Glaxo is changing "the way we are organized to deal creatively with the new structures on the buyers side," Ingram pointed out. In dealing with managed-care drug buyers, Ingram suggested that drug manufacturers should use their business and managerial talents "to help our customers also be successful." He said that managed care firms "are looking to us as an industry, not just for price concessions -- clearly that is one of their interests -- they are asking us to help them become better businessmen." The growth of managed care will bring a reduction in marketing expenditures by pharmaceutical companies, Bristol-Myers Squibb Senior VP-Policy, Planning and Development Bruce Ross predicted at an April 14 press briefing. Ross said many companies already have reduced their marketing costs; however, few drug companies have reduced their sales forces as part of that economizing ("The Pink Sheet" March 29, p. 5). Bristol-Myers Squibb eliminated "about 220 positions" from its 3,000-rep sales force in January, as part of wider cutbacks announced by the company in a downsizing, economizing move, Ross reported. "That's brought about by the free market, by managed care," he said. "There are fewer buyers and they're becoming big buyers." More than two-thirds of Bristol-Myers Squibb's marketing costs "are tied up in jobs, in supporting" the company's sales force, Ross pointed out.
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