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Magazine Industry Hooked on Pharma?

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Change is in the wind for the pharmaceutical industry and magazines, as a rash of potential curbs on pharma advertising spotlights one of the medium’s most dependable categories.

With healthcare issues on the front burner, lawmakers are taking aim at the tax deduction on ad expenses for prescription drugs, while TV ads for sex aids like Viagra are coming under scrutiny. Even before President Obama took office, buyers and publishers noticed a tempering in pharma spending, which some interpreted as an anticipation of a less-friendly attitude toward the industry. Some drug marketers—including Pfizer, Johnson & Johnson and Merck—last year said they had voluntarily put a moratorium on advertising for new drugs.

Direct-to-consumer drug advertising has long been politically sensitive, but since the Food & Drug Administration relaxed its rules for drug ads on TV in 1997, spending to reach healthcare consumers directly has ballooned. Magazines have shared in the wealth. From 2003-’08, drugs & remedies in consumer magazines soared 58 percent to $2.2 billion, ranking it No. 2 behind toiletries & cosmetics, according to Publishers Information Bureau.

And with mainstay print categories like financial, auto and travel tanking, pharma is one category that’s been a bright spot.

“It’s still a very robust category for us,” said Stephanie George, president of Time Inc. ad sales and marketing, and executive vp, Time Inc. “Print is considered…educational. You can still tear out that page and bring it to your doctor. It’s a top-of-funnel medium. And that’s not going away. They definitely have stepped up their media spend in digital. But the reason why we haven’t seen a fall off the cliff is, with patent windows closing, they have to spend.”

But along with fighting potential ad restrictions, publishers have to fight for their share. Pharma’s relative reliability has meant stiffer competition from other media, including those that once would have shunned ads for erectile dysfunction products and the like. The Web, with its search capabilities, has been fertile ground for drug ads. Total DTC ad spending declined 11.3 percent in first-half 2009, but the share that went to online, 4 percent, was unchanged, per data compiled by eMarketer.

“What I’ve seen is, DTC brands are more and more looking at how you can behaviorally target on the Web,” noted one print media buyer for a major drugmaker. “Our DTC dollars
haven’t been what they were a few years ago. I think that’s fairly common across DTC.”

Added one highly placed media executive, who declined to speak for attribution: “In this kind of economy, any media type is willing to accept pharma, and pharma spending on the Web has been a major growth space. In terms of accountability, targetability and measurability, the medium that leads the league is digital. All of that’s going to put pressure on the mass use of magazines.”

The growth in pharma revenue in print also has come with a catch. As the ad category grew in importance, media agency negotiators dangled out the guarantee of huge numbers of pages through book-of-record deals to publishers. The effect was to drive pricing down to make pharma one of magazines’ lowest-priced ad categories today, if not the lowest. “I think it’s fair to say no one gets lower rates than pharma,” the executive said. Part of the reason:
The required disclaimer pages that list a drug’s complications and interactions are deeply discounted, if not free, to the advertiser.

“The net revenue per page is typically lower than a display page,” said Martin Walker, chairman of Walker Communications, a magazine consultancy. “You’ll call any publisher, and he’ll take any pharma page he can get. It’s still a page. Everyone would like to get more per page, but that’s not a battle that can be won.”

Magazine sellers shrug off the low rates. “It might lower your effective CPM, but you get a lot of cash,” one publisher said.

“The pressure is really on results,” said Dick Porter, CEO, Publishing Group of America.

“When the volume is down, there are companies that are really pushing the price button. And certainly in this category, one way to be more effective is, if you can’t fix the response [rate], you fix the costs.”

In these lean times, a page is a page, which is why some are stepping up efforts to offer multi-pronged deals and accountability measures to drug marketers.

Integrated deals have paid off for Meredith, whose pharma ad revenue grew 12.6 percent to more than $200 million in the first nine months in the year, even as the category has spent less in magazines overall. The spending increase was largely through Meredith’s Better Homes and Gardens and Family Circle.

Michael Brownstein, senior vp, corporate sales, Meredith’s National Media Group, credited the gain to cross-platform packages Meredith has created that involve print, online, doctor’s office and pharmacy presence, and Big Communications, its recently acquired healthcare communications firm. He said pharma, along with beauty, has helped replace softened auto and shelter-related advertising.

Time Inc.’s budget-focused women’s service magazine All You, which expects to be better positioned to get pharma ads when its rate base goes up to 1 million in January, is offering a guarantee to one marketer that its ad will generate a better response than the same offer in any comparable women’s magazine.

And PGA just launched a proof-of-performance program for drug ads running in its newspaper-distributed inserts, American Profile, Relish and Spry, using data from third-party data collector SDI. Porter said the program, two weeks old, has already roped one new pharma advertiser. “The talk about regulations has been there a while,” said Porter. “Until it comes, you’ve still got to do business.”

Click here for a pharma-spend chart.