Medical Device Makers Pull Back on Adspend; DTC Sinks to Pre-2003 Levels

I went on CNBC last week to talk about consumer advertising for medical device companies like Zimmer’s Gender Knee and Stryker’s knee replacement joint. Both have done TV spots; Zimmer has a campaign running right now and Stryker used to use golfer Arnold Palmer in its ads.

At one point in the interview I was asked if we’ll see more “body parts” being advertised on TV. I replied yes, because the population is getting older and more likely to need them, and because DTC generally drives requests at doctors’ offices and thus the category as a whole.

Since then, I’m kind of having second thoughts. I pulled these numbers from TNS Media Intelligence on total device advertising in the U.S.:

2002 = $384 million
2003 = $444 million
2004 = $483 million
2005 = $510 million
2006 = $443 million

As you can see, they show that adspend dropped last year to a level not seen since ’02 or ’03. The stats are in stark contrast to spending by Big Pharma, which topped $4.7 billion last year and has never seen a declining year.

So, is the bloom off the rose for consumer marketers in the device industry?

Some highlights:

• J&J accounts for about 25% of the entire category. Its total device spend was $105 million last year, down from $150 million in ’05.
• Procter & Gamble’s various devices at $34 million last year is exactly half what it was in ‘02.
• Roche’s spending on its Accuchek brands collapsed from nearly $16 million to just $5 million.
• Transitions Lenses is down from historic highs of $28 million to $25 million.
• Church & Dwight down from $22 million to $18 million.
• Novartis's various eyecare brands down from $30 million to $19 million.
• Bayer down from $24 million to $22 million.
• Bausch & Lomb down from $24 million to $21 million.
• Invisalign down from $22 million to $15 million.
• Abbott Labs down from $20 million to $18 million.

One thing to notice: the trend with major spenders is the same across devices: They all peaked last year or the year before and are spending at lower ranges. This makes me think that the great device gold rush might be over. Where is the money going? Probably onto the web, or perhaps many of these brands have discovered that the ROI just isn’t there, particularly for brands involved in long-term decision making cycles or where doctors more strictly control the barriers for entry than GP pill pushers do.

It’s not all gloom, though. Still spending freely:

• Stryker’s spending is still at record levels in the $5.1 million range.
• Philips’ Lifeline Medical Alert did a $5 million campaign last year.
• New entry: Chattem’s Icy Hot spent $18 million last year.

The bottom line: J&J et al drive this category. J&J previously decided to cut its DTC spend dramatically. It looks like other major companies hve done the same thing on a less dramatic scale. Until those companies see a change in the performance of above-the-line activity,  don't expect to see a return to  the $500 million level any time soon.

Comments

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[jon]

From what I've seen this is still the case. I feel a bit better about DTC advertising on devices than I do on just general drugs. I think our whole medical industry in the US is a bit off. Wish I had an exact solution to propose but I don't. I just think DTC with drugs is a bit "off".

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