Pharmaceutical Industry Overview

Transcription

1 and Pharmaceutical Industry Overview

2 The Agenda Overview of Healthcare in the United States The U.S. Pharmaceutical Industry Two Pillars of the U.S. Rx Industry Research & Development Promotion Detailing Meetings and Events Sampling Journals CME Compliance and Disease Management Promotional Resource Allocation Return On Investment - Total Return vs. Average Marginal Return ROI Calculator Q&A htttp://

3 The Process Data - A single piece of data without context The return on Wyeth s investment on promotion in 2002 was $9.21 Data Information Knowledge Wisdom Information - Data put into context and linked with like data. Wyeth ranks second among the major U.S. pharmaceutical manufacturers.. Knowledge - Information organized to help assimilate knowledge Wyeth can improve its performance if it Wisdom The Ah-Hah moment Oh, I get it

4 Global healthcare expenditures 6000 United State Spent $5,440 per person in 2002 (+8.3%) $4, Per Capita $ US ppp USA Switzerland Norway $3,160 $3,012 $2,808 $2,792 $2,719 $2,643 $2,626 $2,561 Germany Canada Luxembourg Iceland Netherlands France Denmark Belgium Australia Sweden Italy Austria $2,503 $2,490 $2,350 $2,270 $2,212 $2,191 UK $1,992 $1,984 $1,935 $1,841 $1,710 $1,614 $1,600 $1,511 $1,105 $911 $893 $682 $629 Japan Ireland Finland New Zealand Portugal Spain Greece Czech Republic Hungary Korea Slovak Republic Poland Mexico Source: ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT June 2003 $ % GDP

5 Country Japan Switzerland Australia France Italy Spain Greece Germany Canada Israel United Kingdom United States Cuba Chile Life expectancy around the world The United States Ranks 12th Rank Life Expectancy Country Argentina China Saudi Arabia Bahamas Russian Federation Egypt Brazil India Pakistan South Africa Congo Zimbabwe Source: Mexico World Health Organization; 15The World Health 63.8 Report, Afghanistan Peru Iraq Rank Life Expectancy

6 France How healthcare is financed 13% 11% 76% 13% Germany 12% 75% Other Public (1) 12.0% Other Private (2) 6.1% United States Total Private $0.40 Private Insurance 33.1% Total Government $0.45 1% 26% Italy 73% Medicaid & SCHIP 15.7% Medicare 17.6% Out-of-Pocket 15.4% UK 0% 19% 81% Includes OOP /other sources For year 2000 Source: OECD Health Data 2003 Government-sponsored Private Insurance Out of pocket / other

7 US Healthcare Spending Has Grown to Over $1.6T $000 Billions $1,600 $1,400 $1,200 $1,000 $800 $600 Source: CMS, 2003 $700 $1,229 $1,149 $1,039 $1,088 $837 $899 $948 $993 $767 $1, % $1,600 $1,424 $400 $247 $200 $0 $ That s more than education and defense combined!

8 Utilization and Technology 6-8%% Price Inflation 4-6% Aging Plan design 1-2% 1-2% Underlying Cost Drivers Source: Towers Perrin 2,500 2,000 Shifting allocation of costs Source: HCFA, ,500 Pharmaceuticals +10% 1, Hospital Care Professional Services Rx Drugs Gov't Admin / Net cost of Insurance Other

9 2002 Global Pharma Sales by Region Sales ($B) YTY Growth 15.0% % % 0.0% % % 0.0 North America EU Europe Rest of Europe Japan Asia (ex Japan), Africa, Australia Latin America -15.0% Source IMSHealth World Review 2003

10 PhRMA company sales by geographic region United States Other Western Europe Japan Latin America France Uncategorzed Germany Italy UK Canada Asia Pacific Spain Australia/NZ Middle East Central/Eastern Europe Africa India/Pakistan Russia 3,469 2,340 2,053 1,324 1,187 1, ,787 4,336 4,198 3,598 3,019 3,115 6,079 5, ,716 Source: PhRMA annual member survey 2003

11 $160,000 U.S. Pharmaceuticals are One of the Fastest Growing Segments in Healthcare 145,213 $140,000 Easily isolated cost $120,000 Highly profitable 115,882 $100,000 Frequent target of criticism $80,000 $60,000 57,146 $40,000 38,487 $20,000 5,443 7,136 11,789 20,743 $ PhRMA Domestic Sales ($Mill.)

12 80:20 rule Top 20 Deliver 78.5% of Total Sales $ 000 YTY Growth 40.0% % % 10.0% Pfizer GlaxoSmithKline Johnson & Johnson Merck & Co. AstraZeneca Bristol-Myers Squibb Novartis Wyeth Eli Lilly Amgen ' Aventis Abbott Hoffman-LaRoche Tap Pharma Schering Plough Boehringer Ingleheim Forest Teva Sanofi-Synthelabo Esaii 0.0% -10.0% -20.0% -30.0% -40.0% MAT 10/02 9/03 Source: IMS National Sales Perspecive 11/2003

13 80:20 rule Top 20 Deliver 81% of Total Sales 02 25,000 $ 000 YTY Growth 50.0% 20,000 15,000 10,000 5,000 0 Pfizer GlaxoSmithKline Johnson & Johnson Merck & Co. AstraZeneca Bristol-Myers Squibb Novartis Wyeth Pharmacia Eli Lilly Schering -Plough Aventis Amgen ' Abbott Tap Pharma Roche Boehringer Ingleheim Forest Teva Esaii 40.0% 30.0% 20.0% 10.0% 0.0% -10.0% -20.0% IMS Health Retail and Provider perspective 2003 Rx Products and Insulin, excludes co-marketing arrangements, JVs to prod owner, includes completed M&A

14 Retail Market Growth YTD June Total Rxs (#Billion) Retail Sales Have 1 Increased 222% from Increased 12% from Total Rxs Have Increased 65% from Increased 2% from Increased utilization 8.7% Growth drivers 1999 Price inflation 3.9% New medicines 2.1% 2000 Source:PhRMA 2001 YTD 6/ Retail Sales ($Billions) $72 $63 $47 $50 $ $152 $132 $111 $83 $94 $ YTD 6/2002 Source: Verispan

15 Top 10 Therapeutic Classes by U.S. Rx Sales % % % 10.0% 5.0% 2 0.0% 0-5.0% Cholesterol Reducers PPI SSRI/SNRI Antipsychotics Erythropoietins Siezure Disorders Cox 2 Antihistamines Calcium Blockers ACE Inhibitors ($000) YTY Growth Source IMS

16 Pharmaceutical industry v. S&P 500 Rx stocks lag despite growth S&P = S&P 500 Index DRG = AMEX drug index

17 Two pillars of industry investment Research and Development... Marketing. Understand how chemical compounds work in the human body Communicate this understanding to physicians, payers and patients Goal - Maximize return on each investment (ROI)

18 Leading Products: 2002 Total U.S. Sales 7.0 Sales ($Bill) % Inc. Sales 25.0% % 15.0% % % 0.0% % % -15.0% % 0.0 Lipitor Zocor Prevacid Prilosec Procrit Zyprexa Epogen Celebrex Zoloft Paxil -25.0% Source: IMS Retail and Provider Perspective wholesale prices, Rx only including insulin

19 Patent expirations will have a severe impact on the industry Many top 10 medicines are on the list Source: Merrill Lynch 2002 / The Orange book Patent Peak U.S. Expiration Product Maker Rev. ($Mill) 2006 Zocor Merck 6,700 Paxil GSK 2,500 Zoloft Pfizer 2,000 Pravachol BMS 2,000 Zofran GSK 1,400 Zithromax Pfizer 1,200 Imitrex GSK 1,000 Ambien Sanofi 1,000 17, Prevacid TAP 3,700 Rocephin Roche 700 Celexa Forest 1,430 Klacid Abbott 600 6, Procrit J&J 3,800 Allegra Aventis 1,364 Diflucan Pfizer 600 5, Cipro Bayer 1,200 Flixotide GSK 600 Floxin J&J 400 2, Prilosec AZ 4,200 Augmentin GSK 1,300 Glucophage BMS 1,800 Claritin Schering 1,700 Prinivil Merck 1,100 Zestril AZ 700 Nolvadex AZ 500 Accutane Roche ,800 Total 43,994

20 Innovation vs. Imitation - Generic Share is Growing 60% % of Total Rx units 50% 40% 42% 43% 43% 44% 46% 49% 51% 47% 47% 40% 27% 30% 32% 35% 35% 33% 30% 22% 23% 20% 19% 57% 10% 0% Source: IMS HEALTH, Pharmaceutical projection S&P H. Saftlas + regression est % of unit sales 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Generics use by country % Units % Sales France Italy Mexico Japan U.K. U.S. Canada Germany Chile 70% 60% 50% 40% 30% 20% 10% 0% % of Dollar sales Source: Prices and availability of pharmaceuticals: evidence from nine countries, P Denzon, M Furukawa, Health Affairs 10/2003

21 Innovation vs. Imitation - Generic Share is Growing 60% % of Total Rx units 50% 40% 42% 43% 43% 44% 46% 49% 51% 47% 47% 40% 27% 30% 32% 35% 35% 33% 30% 22% 23% 20% 19% 57% 10% 0% Source: IMS HEALTH, Pharmaceutical projection S&P H. Saftlas + regression est 1,800 1,600 1,400 1,200 1, # Rxs (Mil) % Increase 12% 10% 8% 6% 4% 2% 0% Traditional Generics "Branded Generics" # Prescriptions 30% 70% 52% $ Dollars 48% Brand Generic Branded Generic Source: IMS Health, National Prescription Audit Plus, 1/2003 Source: WSJ 4/18/03

22 Value of Intellectual Property (IP) Example: Value of U.S. Patent 4,572,909 (Amlodipine) Annual Sales (~ $US 1.6 Billion in U.S. Market) x Effective Lifetime of Patent (~15 years) = $US 24 Billion in Sales Each Day of Patent Protection on Amlodipine in the U.S. is worth $US 4.4 Million Generic manufacturers are becoming more aggressive with legal challenges # Patent Challenges

23 Patent expirations Sales Exposure to patent expiration ($B) Period Average U.S. Pharmaceutical Patent Expirations by value: Pharma Sales ($B) Expiring Products $10.9 $28.9 Impact of Major Patent Expirations $14.1 $12.5 $10.6 $10.6 $8.9 $ Sales of Other Products 2001 Sales of Expiring Products $8.6 $6.7 $3.0 $11.8 $4.0 $9.4 $3.9 $8.6 $4.3 $6.5 $3.1 $5.2 $1.6 $4.7 $39.8 $26.6 $21.2 $16.1 $15.3 $14.8 $13.4 $12.5 $10.8 $8.3 $6.3 $6.0 $1.9 $ % 53.0% 50.0% 55.3% 56.2% 20.3% 29.9% 31.2% 39.8% 37.3% 25.4% 31.7% Pfizer Glaxo Merck Astra Zeneca Bristol J&J Novartis Roche Lilly Schering Abbott Sanofi Source: FDA Orange Book; S&P research as of Jan. 2002

24 5 4.5 Global Drug Prices: OTC / On-patent brand / Generics (Manufacturer prices relative to U.S. prices adjusted for U.S. discounts 1999) OTC Sole source Originator Generic Canada Chile France Germany Italy Japan Mexico U.K Source: Prices and availability of pharmaceuticals: evidence from nine countries, P Denzon, M Furukawa, Health Affairs 10/2003

25 R&D as a Percent of Sales, Research-Based Pharmaceutical Companies and the U.S Industrial Sector U.S. Pharmaceutical R&D Global Pharmaceutical R&D 15.6% 17.0% Industrial Sector Comparisons Drugs and Medicines Computer Software & Services Electrical and Electronics Office Equipment & Services Telecommunications Leisure Time Products All Industries Excluding Drugs Automotive Aerospace & Defense Metals & Mining Paper and Forest Products 1.2% 0.7% 5.3% 4.7% 3.9% 3.9% 3.8% 8.4% 7.8% 10.5% 12.8% Pharmaceutical R&D tabulated by PhRMA 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% Drugs and Medicines tabulated by Standard & Poor s Compustat (includes research based and non-research based companies)

26 $25,000 $20,000 $15,000 $10,000 $5,000 $0 R&D Spending Nearly Tripled in Last Decade PhRMA R&D Expenses ($Mil) R&D % of Sales 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% R&D productivity has not kept pace 53 # NMEs approved Data, data everywhere and not a drug, I think

27 R&D Low Hanging Fruit Has Been Picked Other Gastrointestinal Respiratory Endocrine Antineoplastic Analgesic/Anesthetic Central Nervous System Cardiovascular Antiinfective 6.4% 3.1% 4.1% 7.1% 9.6% 12.6% 13.7% 20.0% 23.4% NCEs by therapeutic category Source: J. DiMasi, PhD Tufts University Uncategorized 4,299.5 Central Nervous System Neoplasms, endocrine,metabolic Infective and Parasitic 2, , ,872.0 Cardiovascular Other Human Digestive or genitourinary Respiratory Biologicals Skin Diagnostics , ,305.0 R&D Spending by Category ($ Millions) Source: PhRMA 2001

28 U.S. Drug Approval Process It s the pipeline, stupid! Years Test Population Research Purpose Success Rate Preclinicals 3.5 Years Laboratory and animal studies Assess Safety and biological activity 5,000 Compounds I N D F I L E D Phase I 1 year healthy volunteers Safety and Dosage Only 5 Phase II 2 years healthy volunteers Efficacy and Side Effects enter Phase III 3 years 1,000-4,000 patient volunteers Verify efficacy monitor reactions longer term trials N D A F I L E D FDA Review 2.5 years Review/ Process Approval Out of 5,000 1 L A U N C H Phase IV Additional postmarketing testing required by FDA Recall? Years $900+ Million NB: Only 3 Of 10 Marketed Products Pays Back Its R&D Costs

29 Development Cycles Are Getting Longer (Time From First Pharmacological Testing To New Drug Approval ) Preclinical Clinical Approval 1990's 's "s 's Years SOURCE: DiMasi, J.A. New Drug Development in the U.S Clinical Pharmacology & Therapeutics May 69

30 The Clinical Trial Process Has Become Far More Complicated and Expensive The industry spends over $1 Billion simply to recruit patients for clinical trials # Patients # Trials Number Of Trials And Number Of Patients Per NDA 3,233 1,576 1, , , '77-'80 '81-'84 '85-'88 '89-'92 '94-'95 0 Data, data everywhere and not a drug, I think. SOURCE: Boston Consulting Group & Peck, C. Drug Development:Improving the Process, Food & Drug Law Journal, Vol. 52, 1997

31 Product launch dependence by company 13.8% Pharma Sales Growth Growth without new products 11.5% 10.3% 10.3% 10.2% 10.2% 9.8% 9.3% 8.8% 8.9% 8.2% 8.2% 7.9% 7.4% 6.8% 6.3% 5.8% 2.4% 4.7% 2.4% 5.2% 5.1% 3.9% 4.3% 3.9% 3.9% Patent Exposure Est 2002 Rx Rev ($B) 0.7% -0.7% 23% 29% 30% 27% 15% 20% 28% 21% 19% 41% 40% 49% 46% 47% Abbott Novartis Roche Lilly Wyeth JNJ Pfizer Schering Aventis Sanofi Bristol Glaxo AZ Merck Product Year Company Indication 2006 Rev ($M) Product Year Company Indication 2006 Rev ($M) Abifly 2002 BMS Schizophrenia 1,088 Crestor 2003 AZN Cholesterol 2,066 Zetia 2002 Schering Cholesterol 1,070 Exanta 2003 AZN Thrombosis 952 Eplerenone 2002 Pfizer Hypertension 851 Prexige 2003 Novartis Osteoporosis 855 Vardenafil 2002 GSK ED 835 Darifenancin 2003 Pfizer Incontinence 822 Pegasys 2002 Roche Hepatitis 778 Garenoxacin 2003 Bristol Infection 631 Asmanex 2002 Schering Allergy 678 Dynastat 2003 Pfizer Pain 581 Strattera 2003 Lilly ADHD 510 Source: FDA Orange Book; S&P research as of Jan. 2002

32 To Manage Risk the Pharmaceutical Industry is Consolidating (PhRMA companies 1990s) Bristol-Myers Squibb 2001 AstraZeneca 1998 Aventis 1998 Pfizer 2000 Bristol-Myers Squibb 1989 Dupont Pharma Astra Zeneca Hoechst Marion 1995 Rhone Poulenc Rorer Warner-Lambert Pfizer Squibb Bristol-Myers Hoechst Roussel Marion Merrel Dow Agouron 1999 Pharmacia 1999 Hoffman-LaRoche 1999 Novartis 1996 Wyeth (American Home) 1994 Pharmacia & Upjohn 1995 Monsanto Roche Genentech Ciba Geigy Sandoz Wyeth-Ayerst American Cyanamid Pharmacia Upjohn Boehringer Mannheim 1997 Syntex 1994 Johnson & Johnson 2001 Abbott Laboratories 2001 Glaxo/SmithKline 2000 Schering 1985 Centocor ALZA Abbott Laboratories Knoll 1995 Glaxo Wellcome 1995 SmithKline Beecham Schering Plough Key Sanofi-Synthelabo Knoll Boots Glaxo Burroghs Wellcome Merck

33 Industry is swinging for the fences # Products with $1 Billion in U.S. Sales Source: IMS HEALTH: Retail & Provider Perspective, 2003

34 Only 2% of Drugs Reach $1 Billion in Sales $180 Million - $460 Million 6% Less than $180 Million 90% $460 Million - $920 Million $920 Million - $1.8 2% $1.8 Billion and Above Billion 1% 1% Average For All Drugs--$265 Million Per Annum SOURCE: PriceWaterhouse Coopers & Scrip

35 Two pillars of industry investment Research and Development... Marketing. Understand how chemical compounds work in the human body Communicate this understanding to physicians, payers and patients Goal - Maximize return on that investment (ROI)

36 12,000,000 Promotional spending by country ($000) January-June 2003 (Source: CAMM Group) 10,000,000 8,000,000 U.S. = 40% of promotion 45% of sales Japan = 24% of promotion 19% of sales 6,000,000 4,000,000 2,000,000-11,389,152 6,895,468 USA Japan Germany 1,902,367 1,547,699 1,544,892 1,075,399 Italy France Spain Mexico 546, ,343 UK Brazil Canada 404, , , , , , , ,798 Turkey Portugal Poland Australia Belgium Switzerland Austria 72,340 Argentina 55,859 46,893 42,845 Greece Korea Morocco 34,089 NL 32,821 31,053 29,163 24,888 Finland Romania Ireland Sweden Denmark Hungary 21,013 17,801 14,323 13,538 7,864 Norway New Zealand Luxembourg 3,566

37 30 Promotion : Trend 2003/2002 (% Change) January-June 2003 (Source: CAMM Group) WorldWide: - 1,0 (1.20) -10 (7.50) (10.00) (5.90) (12.80) -20 (17.70) (19.90) -30 (25.10) (41.70) (33.20) (51.40) -60 Germany Switzerland Austria Japan France UK Italy (*) Growth not available : Poland and Hungary Spain Belgium Nederland Luxembourg Ireland Sweden Norway Finland Denmark Portugal Greece USA Canada Argentina Brazil Mexico Morocco

38 Global Samples 8% DTC 9% Meetings 7% Pharma Detailing 3% Print Advertising 2% Clin Trials 2% Direct Mail 1% Web Advertising E-Promotion 0% 0% Other 0% Allocation by media GP/FP Detailing 31% SP Detailing 37% United States 1-10/2003 DTC, 21% Journals, 2% e promo, 1% 24 countries 1-6/ 2003 (Source: CAMM Group) Events, 16% Office Detailing, 48% NP/PA 6% Hosp Detailing, 8% United States

39 U.S. Allocation of Promotional Spending Samples DTC Detailing Journals $0.5 $0.4 $5.5 $ Billions $0.5 $3.0 $0.8 $4.9 $0.5 $3.4 $1.1 $6.0 $0.5 $4.1 $1.3 $6.6 $0.5 $4.3 $1.8 $7.2 $4.6 $2.5 $8.0 $2.7 $ $9.2 $11.0 $12.5 $13.8 $15.6 $19.1 Source: IMS Health and CMR Sampling represents the retail value of sampling activities directed to office based physicians as reported by members of their front office staff. DTC represents TV, magazines and newspapers, radio and outdoors. Office promo includes representative costs for OB physicians. Hospital includes costs for HB physicians and directors of pharmacy.

40 Specialty Reps as Percentage of Total Reps 100,000 80,000 60,000 40,000 10% 72% 10% 64% 10% 67% 6% 69% 5% 68% 20, % 26% 23% 25% 27% 1Q99 1Q00 1Q01 1Q02 1Q03 Specialty Reps All other reps Part-time/contract reps Source: Verispan's Pharmaceutical Sales Force Structures & Strategies 40

41 *Reps 100,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 - Rep:MD Ratio Detailing Ratio of Reps to Physicians is Increasing Ratio of Reps to Physicians Total Reps OB MDs **Physicians 420, , , , , , , , ,000 SOURCE: Scott-Levin s Sales Force Structures and Strategies *Includes Contract, part-time and full time from the top 40 companies in the U.S ** Office Based Physicians - Synavant Ratio in Germany 12:1?

42 Increasing sales force size v. productivity Reps Details Calls 93,000 Reps 48.7 M Details 42,000 Reps 33.4 M Calls 63.6 M Details 46.5 M Calls Whenever possible, reps make deliver multiple product details in a single call SOURCE: Verispan s Sales Force Structures and Strategies *Includes Contract, part-time and full time from the top 40 companies in the U.S

43 More Limited Access to Physicians by Pharmaceutical Representatives Meets Doc at sample closet 37% Sit down with Doc 20% Rep leaves samples at front desk 28% Rep leaves without leaving samples or seeing Doc 15% Source: Health Strategies Group, Inc. 1999

44 Network: Primary Care Schering Allocation of Product Details Time: Week Ending October 3, 2003 October 3, % Foradil 3% All Other 1% 40% 35% Zetia 22% Nasonex 30% Clarinex 43% Share of Attention - Product Details 30% 25% 20% 15% 10% 5% 0% 7/11 7/18 7/25 8/1 8/8 8/15 8/22 8/29 9/5 9/12 9/19 9/26 10/3 Clarinex Nasonex Zetia Foradil Source: Impact Rx ImpactRx data is collected daily from our Network of PCP high-prescribers. The sample frame is based on the 30% of PCPs who write 60% of all Rx's. Each Network physician supplies detailed, non-identifying information for the following areas: 1) a census of all representative promotion, 2) a census of all physician-attended meetings/events and 3) 40% of all patients seen each week.

45 Network: Primary Care Merck Allocation of Product Details Time: Week Ending October 3, 2003 October 3, % Singulair Asthma 3% Singulair AR 12% Cozaar 10% Hyzaar 3% Maxalt 2% Maxalt MLT 1% Zocor 24% All Other 2% Share of Attention - Product Details 25% 20% 15% 10% Zetia 12% Fosamax 13% Vioxx 17% 5% 0% 7/11 7/18 7/25 8/1 8/8 8/15 8/22 8/29 9/5 9/12 9/19 9/26 10/3 Zocor Vioxx Fosamax Zetia Singulair AR Cozaar Singulair Asthma Hyzaar Maxalt Maxalt MLT Source: Impact Rx ImpactRx data is collected daily from our Network of PCP high-prescribers. The sample frame is based on the 30% of PCPs who write 60% of all Rx's. Each Network physician supplies detailed, non-identifying information for the following areas: 1) a census of all representative promotion, 2) a census of all physician-attended meetings/events and 3) 40% of all patients seen each week.

46 Network: Primary Care AstraZeneca Allocation of Details Time: Week Ending October 3, 2003 October 3, % Zomig 2% Atacand 7% Rhinoco rt Aqua 5% Toprol XL 13% Atacand HCT 2% Nexium 24% Zomig ZMT 2% Pulmicor t 2% Crestor 41% All Other 2% Share of Attention - Product Details 50% 40% 30% 20% 10% 0% 7/11 7/18 7/25 8/1 8/8 8/15 8/22 8/29 9/5 9/12 9/19 9/26 10/3 Crestor Nexium Toprol XL Atacand Rhinocort Aqua Zomig Atacand HCT Zomig ZMT Pulmicort Source Insight Rx ImpactRx data is collected daily from our Network of PCP high-prescribers. The sample frame is based on the 30% of PCPs who write 60% of all Rx's. Each Network physician supplies detailed, non-identifying information for the following areas: 1) a census of all representative promotion, 2) a census of all physician-attended meetings/events and 3) 40% of all patients seen each week.

47 GlaxoSmithKline Allocation of Details Network: Primary Care Time: Week Ending October 3, % October 3, % Augmenti n XR 9% Coreg 10% Wellbutrin XL 10% Advair Diskus 12% Paxil CR 9% Levitra 13% Avandia 9% All Other 4% Flonase 7% Avandam et 6% Imitrex 4% Valtrex Avodart 3% 1% Augmenti n ES-600 1% Share of Attention - Product Details 15% 10% 5% 0% 7/11 7/18 7/25 8/1 8/8 8/15 8/22 8/29 9/5 9/12 9/19 9/26 10/3 Levitra Advair Diskus Wellbutrin XL Coreg Augmentin XR Paxil CR Avandia Flonase Avandamet Imitrex Valtrex Avodart Augmentin ES-600 Source: Impact Rx ImpactRx data is collected daily from our Network of PCP high-prescribers. The sample frame is based on the 30% of PCPs who write 60% of all Rx's. Each Network physician supplies detailed, non-identifying information for the following areas: 1) a census of all representative promotion, 2) a census of all physician-attended meetings/events and 3) 40% of all patients seen each week.

48 Network: Primary Care Pfizer Allocation of Details Time: Week Ending October 3, 2003 October 3, % 18% All Other 5% Lipitor 16% Neuronti n 2% Detrol LA 4% Viagra 15% Zyrtec 5% Aricept 5% Bextra 11% Celebre x 10% Zoloft 8% Relpax 7% Zithroma x 6% Norvasc 6% Share of Attention - Product Details 16% 14% 12% 10% 8% 6% 4% 2% 0% 7/11 7/18 7/25 8/1 8/8 8/15 8/22 8/29 9/5 9/12 9/19 9/26 10/3 Lipitor Viagra Bextra Celebrex Zoloft Relpax Norvasc Zithromax Aricept Zyrtec Detrol LA Neurontin Source Impact Rx ImpactRx data is collected daily from our Network of PCP high-prescribers. The sample frame is based on the 30% of PCPs who write 60% of all Rx's. Each Network physician supplies detailed, non-identifying information for the following areas: 1) a census of all representative promotion, 2) a census of all physician-attended meetings/events and 3) 40% of all patients seen each week.

49 Growing Physician Dissatisfaction Top decile physicians receive three to five times as many details as they did in 1990 Access Two-thirds of primary care physicians have restrictive policies on rep visits Only 20% of US Reps visiting the office actually get to speak with the physician and 87% of those calls last less than 2 minutes Physicians recall only 4% of all sales details attempted

50 Detail Visits and Events Growth are Linked As access to physicians declined, companies increased events events details # of Events (000) # of Details (Mill.) Note: Events include physician meetings Source: Scott-Levin and WR Hambrecht + Co Estimates

51 Promotional Trends: Meeting & Event Growth Almost 1,400 Meetings per day Thru Oct All PMEA specialties Source: Verispan 2003 Physicians Meeting and Event Audit

52 3rd Party 13% 1996 Events Base = 151,434 Teleconf. 20% Other 12% 2001 Events Base = 370,000 Lg. Group 4% 3rd Party 8% Teleconf. 9% Other 9% Lg. Group 5% Sm. Group 50% 165% increase Sm. Group 70% SOURCE: Physician Meeting & Event Audit from Verispan Meeting Type Price Meeting Type Price Videoconference $ 2,500 Symposium >51 or 4 hrs + $ 50,000 Teleconference $ 2,500 Large Group 21-50, 2hr + $ 50,000 Focus/Personal Interview $ 2,500 Small Rep <20 $ 5,000 Third Party $ 2,500 Small Group (restaurant) $ 5,000

53 More Creative Event Locations 1996 Events Base = 151,434 YTD 9/01 Events Base = 275,704 Restaurant 33% Office 19% Hotel 11% Restaurant 46% Office 17% Unspec. 2% Res. Facility 8% "Other" 16% Convention 1% Home 10% Unspec. 2% Res. Facility 4% "Other" 19% Home 6% Hotel 6% Convention.4% Other Event Locations Include Baseball game Winery Spa Golf Course SOURCE: Physician Meeting & Event Audit, Scott-Levin, 1996, YTD 9/01

54 Even by U.S. standards physicians are well compensated Physician Specialty Cardiology: Invasive Interventional Cardiology FP (with OB) FP - Sports Medicine Gastroenterology Hematology/Oncology Infectious Disease Internal Medicine IM (Hospitalist) Obstetrics/Gynecology ORS - Spine Surgery Pediatrics Psychiatry Radiology Surgery - Neurological Surgery - Plastic Top Compensation $647,000 $811,000 $241,000 $363,000 $590,000 $685,000 $271,000 $238,000 $245,000 $417,000 $1,352,000 $271,000 $238,000 $911,000 $936,000 $820,000

55 Honoraria Influence on Attendance Although offered infrequently, acceptance rates for events that offered charitable contributions as honoraria increased throughout 2003, to 80% acceptance rates by the quarter ending Oct Meals Charity Contrib.* Cash Medical Inst. Gift Cert. Textbooks Other 0% 10% 20% 30% 40% 50% 60% 70% 80% % of Invitations Accepted QTR Apr Base: 15,056 Event Invitations Meals Charity Contrib.* Cash Medical Inst. Gift Cert. Textbooks Other 0% 10% 20% 30% 40% 50% 60% 70% 80% % of Invitations Accepted QTR Oct Base: 12,948 Event Invitations Note: Percentages may add up to more than 100% due to multiple responses. * Less than 30 raw events SOURCE: Verispan's PMEA 55

56 New Guidelines Meals with physicians feature education Meals only at appropriate locations Meals at appropriate $$ levels No meals with spouses or guests No entertaining (golf, baseball, etc.) Gifts (<$100) must be practice related (no golf balls, etc) Consultants must be bona fide (Payments are acceptable) Advisory board meetings must be bona fide (no spouses or guests) Integrity of data used by states and fed to establish payments (AWP) Kickbacks and illegal remunerations Compliance with laws regarding samples. COMPLIANCE STEPS Written standards addressing specific areas of potential fraud and abuse Appoint a compliance officer reporting to the Chairman and the Board to monitor programs Establish effective an ongoing education for all employees involved Establish a free line of communication for whistleblowers Establish audits to monitor compliance

57 Network: Primary Care Meetings and Events still used extensively Time: Rolling 4 Weeks Ending October 3, 2003 Share of MD Reported Meetings and Events October 3, 2003 n= 178 Zocor 7% Zetia 15% Lipitor 26% Pravachol 6% Lescol 3% Crestor 43% Share of MD-Reported Meetings and Events 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 7/11 n=115 7/ / /1 84 8/8 72 8/ / / / / / / /3 178 Crestor Lipitor Zetia Zocor Pravachol Lescol Pravigard Pac Source: ImpactRx Promotion Research Organization

58 Consumer Influence... DTC emerges Degree of Influence Physician Managed Care Consumer 1970s 1980s 1990s 2000s Source: IMS HEALTH Market Survey, 2001

59 Direct To Consumer Advertising $3.0 $2.5 $ DTC Spending in Billions $2.0 $1.5 $1.0 $0.5 93% 46% 28% 40% 33% 10% -5.4% $ SOURCE: Scott-Levin s Direct-to-Consumer Advertising Audit, CMR

60 DTC - First eight months $ Mil YTY Growth 40.0% DTC spend in $ millions % 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% YTY % Growth 0.00 Pfizer GSK Merck J&J AstraZeneca -15.0% Source: TNSS Media Intelligence/CMR tracking 14 media platforms

61 GI Disorder 10% Allergy 20% Cholesterol 8% DTC Is Used On Limited Categories and Brands But With Very Large Budgets Depression Advair 8% Viagra Arthritis Zocor 6% Prevacid Asthma Celebrex 6% Lipitor Other 42% Leading DTC categories YTD 6/02 Top 6 = 55% Source: Market Measures/Cozint s 2002 DTC Monitor Nexium Clarinex Allegra Paxil Procrit Fosamax Flonase Imitrex Ambien Vioxx Plavix Valtrex Diflucan Zoloft Leading products by DTC spend 2002 $ Millions Source: Nielson Monitor-Plus TV, Print & Radio

62 Top Drugs Requested by Patients Seven of the top 10 drugs requested by patients were DTC advertised in YTD 7/01. 2,500 Occurrences (000) 2,000 1,500 1, Vicodin Vioxx Celebrex Viagra SOURCE: Scott-Levin s Physician Drug and Diagnosis Audit YTD 9/01; DTC Audit, CMR, YTD 7/01 - AARP Prozac Xanax Claritin Ortho Tri-Cyclen Paxil Percocet

63 Physician Response to a Patient s Requests Patient Attitudes Gave Rx asked about Recommend diff. Drug Behavior/lifestyle chg Recommend no drug Recommend OTC 13% 15% 14% 14% % 34% 29% 41% 49% 50% Source: Food and Drug Administration Surveys of patients in 1999 and 2002 Increasing the odds More than 70% of physicians said that they were more likely to prescribe a brand name medication based on a patient s request when a sample is readily available and can be provided during an office visit IMS survey 2001

64 The vast majority of doctors say they would see fewer reps if they did not provide samples 50.0% % of MDs reporting 45.0% 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% 14.4% 48.8% 14.4% 6.4% 9.6% 6.4% None 1-10% 25% 50% 75% Over 90% % of Reps doctors would see No Sample, no detail Accel Healthcare 2003

65 Source: IMS 2001 $10 Billion Spent on Sampling 64% of Professional Promotion By Delivery Type Sample Volume (Volume in 000 s) 99,149 88,563 95,621 94,590 Drive-by sampling 315, , , , , , , ,285 Mail In-Person Service Visit In a service visit, the physician is not seen BMS Pharmacia Wyeth Aventis J&J Merck Pfizer Shering Plough GlaxoSmithKline AstraZeneca By Manufacturer (2000) Prilosec Claritin D 24 Claritin D 12 Allegra D Augmentin Zyrtec Celebrex Vioxx Allegra Claritin By Product (2000) - 20,000 40,000 60,000 80, ,000-5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000

66 Print advertising by country ($000) January-June 2003 (Source: CAMM Group) 120,760 83,087 U.S.A France Germany 72,963 U.K. 56,628 38,642 30,449 19,938 19,096 Spain Canada Italy Japan Australia 15,522 Belgium 11,780 10,934 Switzerland Korea 8,686 7,694 NL 7,471 7,083 6,801 5,157 Portugal Austria Ireland Finland Sweden 4,856 4,835 4,110 2,257 2,028 Poland Denmark Mexico Norway New Zealand 1,473 Greece Turkey Brazil Hungary Luxembourg Romania Morocco 207 Argentina 27

67 Value of Clinical Information Sources Medical Journals CME Courses Colleagues Medical Meetings References Internet / Web sites 2.9 CD / Computer Instruction 2.4 Pharmaceutical representatives 2.2 Direct mail Video conferences Not very important Very important Source: Who are these Academy Doctors? AAFP 2003

68 The leading sources of information for physicians CME Courses 76.1 Conferences Medical Journals Colleagues Detail Reps Dinner Meetings Reference Govt Bulletin Audio Cassettes Internet Poster Study Club Direct Mail Rx Pads On-line Video Patient Records e-conferences Co-op DM e-detail Calendars Faxes Phone Detail Phone Pads % Response Where do primary care physicians get medical information? Source: PERQ/HCI, FP/GP/IM/DO/CD, February 2001

69 Journal Ad Pages Are Linked to Product Approvals , , , , , ,000 80, , ,000 20,000 0 NMEs FDA Approvals All Journal Pages 0 PAGES

70 Top Advertisers in Journals Top 5 products in journals $43 MM 5.6 $8.4 $52 MM 9.3 $7.5 $11.7 $44 MM $5.9 $6.3 $9.7 $51 MM 11.3 $7.3 $8.1 $11.8 $10.6 $10.8 $11.4 $10.7 $6.5 $12.7 $11.6 $ Lexapro Lipitor Norvasc Avandia Celexa Nexium Prevacid Protonix Effexor NDCHealth and Quintiles Informatics

71 Professional Ad Pages Vary By Specialty 70,000 60,000 50,000 40,000 30,000 20,000 10, Multispecialty Internal Medicine OB/ Gyn Pediatrics Oncology Psychiatry Infectious Disease Neurology Diabetes

72 70,000 Professional Ad Pages Vary By Specialty 14,000 60,000 12,000 50,000 10,000 Multispecialty 40,000 30,000 8,000 6,000 Specialty 20,000 OB/GYN Oncology Psychiatry Pediatrics 4,000 10,000 0 Neurology Infectious Disease Diabetes ,000 0 Multispecialty Internal Medicine OB/ Gyn Pediatrics Oncology Psychiatry Infectious Disease Neurology Diabetes

73 Discussion of off-label use of medications is generally restricted to accredited CME programs % Off-label Rx 80% 70% 60% 50% 40% 30% 20% 10% 0% % off-label Rx Number of Rxs Analysis of top 3 drugs in each class 8/02-7/ # Off-label Rx (Mil) Anti-seizure Antipsychotics Antibiotics Antidepressants Quinolones PPI SSRI/SNRI Antihistamines Cox 2 Beta blockers Oral contraceptives ACE Inhibitors Calcium Channel Blockers Cholesterol drugs Diabetes Meds Source: Knight Ridder analysis of Rx data from Verispan s Physician Drug and Dispensing Audit St. Paul Pioneer Press 11/2/03

74 Continuing Medical Education (CME) $1.6 Billion and Growing Revenue in $ Millions by Source (ACCME Annual Reports) 1600 Commercial Support User Revenue and Other $ % $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $1, $1, $1, $1, % +31%

75 Physician use of Enduring Materials is Growing Faster Than Live CME Events Activities 43,848 42,445 43,217 43,218 Hours Source:ACCME 46, , , , , ,785 9,548 4,684 6,233 7,831 9,648 75,865 36,343 45,074 44,142 76, Live +6% Enduring +1% Live +5% Enduring 0% Non-MD Participants 1,726,889 1,580,567 1,876,764 2,127,035 MD Participants 2,958,679 3,468,707 4,018,948 3,946,932 4,018,693 1,339, , , , , , , ,491 1,074,587 1,231,924 1,397, Live +59% Enduring +42% % +48% Live Enduring

76 All that data so well organized Terrific Information Jim! Now What am I supposed to do with all this? How can I use it to do my job better?

77 The U.S. Pharmaceutical Industry is facing new pressures 1.8% 1.4% 0.6% 0.9% 0.6% 0.2% Source: Company data Rx Gross Margin Rate of Change -1.2%-1.2% -1.6% -2.4%-2.5% -2.8% Margin pressure 2Q00 3Q00 4Q00 1Q01 2Q01 3Q01 4Q01 1Q02 2Q02 3Q02 4Q02 1Q03 18% 16% Industry earnings growth (Source: Thomson s First Call) Profit pressure YTY Growth Rate 14% 12% 10% 8% 6% 4% 2% 17% 16% 18% 16% 8% 0%

78 Cost Containment measures are everywhere Range of Containment Measures Outright Price Controls Fixed Reference Price Mandatory Molecule Substitution (Generic/PI) Enforcement of Prescribing Guidelines Growth & Spending Caps/ Penalties Therapeutic Substitution (under discussion) Intellectual Property Germany Italy Poland Germany Spain Austria Canada Denmark Finland Germany Portugal Spain Sweden UK Austria Belgium Germany Sweden France (emerging) France Spain Italy Portugal Denmark Germany Czech Republic Poland Hungary Slovakia CEER Germany

79 Manufacturer s rebates to Medicaid Rebates in Millions of Dollars $5,400 $4,700 $3,700 $2,900 $1,500 $1,600 $1,800 $1,900 $2,200 $2,300 $550 $ Source: Muse & Associates, May 2002 based on CMS State Medicaid Data

80 Rx Drug Coverage under Medicare In 2002, government = 32% Medigap, 7% Medicaid, 10% No Coverage, 38% Medicare HMO 15% Employer sponsor, 28% Other, 2% Government could soon control 70% or more If U.S. seniors were concerned about how much drugs used to cost, Just wait till they see how much they cost when they are free!

81 Demands for greater efficiency in marketing and sales. Eli Lilly Aventis Bristol Myers Squibb Johnson & Johnson TAP And so on.

82 MEDICAL TRIBUNE GROUP So, who are the most efficient U.S. companies? 25,000 20,000 Total Sales and Promotional Spending 2002 Sales $000 Promotion $000 3,500 3,000 Total U.S. Sales $Mil 15,000 10,000 5,000 2,500 2,000 1,500 1, Promotion $ Mil 0 0 Pfizer GlaxoSmithKline Merck & Co. AstraZeneca J&J Novartis Pharmacia Schering-Plough Wyeth Aventis Source: IMS Health Integrated Promotional Services and CMR 2/ Months ending 9/02

83 Higher spending doesn t guarantee higher return $6.76 $7.50 $9.09 $6.87 $9.27 $9.21 $8.48 $7.64 $8.14 $6.07 Pfizer GlaxoSmithKline Johnson & Johnson Merck & Co. AstraZeneca Novartis Wyeth Pharmacia Source: IMS Health Integrated Promotional Services and CMR 2/ Months ending 9/02 Schering -Plough Aventis

84 How do you improve return on investment? 1,400,000 Promotional Spending by tactic ,200,000 1,000, , , , ,000 0 Pfizer +14% GSK +0% Source: Verispan Merck -2% J&J +11% A-Z +16% Pharmacia -8% Aventis +11% Novartis +22% Wyeth +6% Schering -3% Lilly -16% Detail Sample $$ Journals DTC Events BMS -35% Abbott +2%

85 Allocation of Promotional Spending 2002 Allocation of promotional resources varies significantly 15% 13% 13% 13% 18% 12% 14% 21% 20% 9% 26% 15% 11% 3% 0% 8% 30% 3% 10% 38% 1% 7% 31% 1% 11% 32% 3% 7% 28% 2% 7% 30% 1% 9% 31% 4% 3% 9% 3% 7% 16% 5% 10% 32% 1% 4% 2% 1% 14% 28% 1% 6% 78% 43% 40% 44% 45% 45% 47% 47% 60% 49% 53% 57% 51% Pfizer GSK Source: Verispan Merck J&J A-Z Pharmacia Aventis Novartis Wyeth Schering Detail Sample $$ Journals DTC Events Lilly BMS Abbott

86 SSRI/SNRI Market Retail Total Rx Volume/ Growth SSRI/SNRI Retail TRx 92, ,273 % Increase +13% Total Sales 10,375,313 10,239,404 % Increase -1% 24,550 27,634 27,305 25, ,609 20,361 19,502 15,050 17,945 12,524 6,968 5,368 1,333 1,212 Paxil Family Zoloft Celexa & Lexapro Generic Prozac Effexor Family Prozac Family Others Source: Verispan

87 The ROI on SSRI (Paxil and Paxil CR) YTY YTY % Growth 2002 % Growth Total Sales 22,995 24,550 7% 27,634 13% Total Sales $ 2,227,568 $2,384,810 7% $2,757,980 16% % of % of % Change % of % Change $ Spend Spend $ Spend Spend YTY $ Spend Spend YTY Detail 65,093 33% 75,557 40% 16% 88,444 32% 17% Sample 20,747 10% 24,426 13% 18% 26,802 10% 10% Journals 2,370 1% 2,284 1% -4% 2,831 1% 24% DTC 91,572 46% 65,207 34% -29% 137,602 50% 111% Meet/Events 18,178 9% 22,160 12% 22% 17,456 6% -21% Total Promo 197, ,634-4% 273,135 44% ROI $ 0.12 $ % $ % Source: Verispan

88 The ROI on SSRI Effexor YTY YTY % Growth 2002 % Growth Retail Trx 10,251 12,524 22% 15,050 20% Total Sales $1,040,433 $1,478,584 42% $1,878,307 27% % of % of % Change % of % Change $ Spend Spend $ Spend Spend YTY $ Spend Spend YTY Detail 44,651 60% 49,207 51% 10% 60,427 48% 23% Sample 11,437 15% 20,610 21% 80% 24,194 19% 17% Journals 4,881 7% 5,292 5% 8% 9,257 7% 75% DTC 230 0% 28 0% -88% - 0% -100% Meet/Events 13,762 18% 21,538 22% 57% 31,828 25% 48% Total Promo 74,961 96,675 29% 125,706 30% ROI $ 0.14 $ % $ % Source: Verispan

89 PPI Market Retail Total Rx Volume/ Growth PPI Retail TRx 56,269 66,151 % Increase +18% Total Sales 12,345,688 13,659,237 % Increase +11% 27, ,530 23,209 20,608 12,792 9,967 3,848 5,694 5,784 6,889 Prevacid Prilosec Nexium Protonix Aciphex Source: Verispan

90 The ROI on PPI (Prevacid) YTY YTY % Growth 2002 % Growth Total Sales $ 3,940,603 $ 4,157,308 5% $ 4,073,553-2% Retail Trx 22,485 23,530 5% 23,209-1% % of % of % Change % of % Change $ Spend Spend $ Spend Spend YTY $ Spend Spend YTY Detail 69,942 45% 76,578 46% 9% 81,436 45% 6% Sample 34,968 23% 38,685 23% 11% 35,786 20% -7% Journals 7,510 5% 5,856 4% -22% 5,893 3% 1% DTC 34,384 22% 36,859 22% 7% 48,983 27% 33% Meet/Events 7,883 5% 7,262 4% -8% 10,900 6% 50% Total Promo 154, ,240 7% 182,998 11% ROI $ $ % $ % Source: Verispan

91 The ROI on PPI (Prilosec +Nexium) YTY YTY % Growth 2002 % Growth Total Sales $ 4,642,811 $ 5,202,655 12% $ 5,409,568 4% Retail Trx 29,603 31,142 5% 33,400 7% % of % of % Change % of % Change $ Spend Spend $ Spend Spend YTY $ Spend Spend YTY Detail 60,915 28% 112,908 36% 85% 116,565 29% 3% Sample 23,987 11% 32,465 10% 35% 35,800 9% 10% Journals 9,318 4% 10,828 3% 16% 5,943 1% -45% DTC 106,087 49% 128,215 41% 21% 204,882 52% 60% Meet/Events 15,006 7% 28,909 9% 93% 34,042 9% 18% Total Promo 215, ,325 46% 397,232 27% ROI $ $ % $ % Source: Verispan

92 How can you use this information to adjust the allocation of promotional resources and improve the Return On Investment on your brand?

93 Herman Ebbinghaus ( ) conducted the first research to isolate the factors that influence memory The Ebbinghaus memory curve 70% % of information retained 60% 50% 40% 30% 20% 10% 0% 5 Minutes 1 Hour 8 Hours 24 Hours 2 Days 5 Days 31 Days Time interval

94 The Ebbinghaus Curve Creating awareness is not an instantaneous occurrence. Multiple appeals are needed before a message will be noticed and remembered. The communication task involves continuous reminders about a product using various media promotional tactics. % of Message Recall 100% 50% 0% 1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th 11th 12th Months

95 6 Steps required to win a prescription Marketing Logic Step #1 Based in part on the age of the product Build Basic Awareness Demonstrate Competitive Advantages Overcome Objections Make Specific Recommendations Generate the prescription Follow-Up and Service Total

96 Marketing Logic Step #1 Based in part on the age of the product 6 Steps required to win a prescription % of Marketing Effort % of Marketing Responsibility % of Marketing Responsibility PERSONAL NON-PERSONAL Build Basic Awareness 20 % Demonstrate Competitive Advantages 30 % Overcome Objections 15% Make Specific Recommendations 10 % Generate the prescription 15 % Follow-Up and Service 10 % Total 100%

97 Steps needed to win share Allocation varies based in part on the age of the product 6 Steps required to win a prescription % Of Marketing Effort % Of Marketing Effort % Of Marketing Effort Build Basic Awareness (Professional/DTC) 40 % 10 % 15 % Demonstrate Competitive Advantages 25 % 15 % 25 % Overcome Objections (Price, efficacy, safety) 20 % 25 % 20 % Make Specific Recommendations 10 % 10 % 10 % Generate the prescription 5 % 10 % 15 % Follow-Up and Service 5 % 15 % 15 % Total 100 % 100 % 100 % Don t use a tactic simply because your competitor does Your objectives are different!

98 Marketing Logic Step #1 Based in part on the age of the product 6 Steps required to win a prescription % of Marketing Effort % of Marketing Responsibility % of Marketing Responsibility PERSONAL NON-PERSONAL Build Basic Awareness 20 % 20% 80% Demonstrate Competitive Advantages 30 % 70% 30% Overcome Objections 15% 60% 40% Make Specific Recommendations 10 % 30% 70% Generate the prescription 15 % 75% 25% Follow-Up and Service 10 % 25% 75% Total 100%

99 Marketing Logic Step #2 Non-Personal Communication Objectives Total Effort Ad Space CME P.R. Trade Shows Sales Aids Other Build Basic Awareness 100% 50 % 10% 20 % 10 % 10% Demonstrate Competitive Advantages 100% 25 % 25 % 10 % 5 % 15 % 20% Overcome Objections 100% 40% 20% Make Specific Recommendations 100% 5 % 50 % 20 % 5 % 20 % Customer Follow-Up and Service 100% 80 % 15 % 5 % Allocation Matters!

100 Everyone company wants to be able to measure the Return On Investment (ROI) of their promotion This is a measure of Total ROI

101 The Concept of Average Marginal Return On Investment Hypothetical Example Market Share 15% 20% 20% 20% 10% 5% 1x Year 2x Year 4x Year 12x Year 26x Year 52x Year Number of sales visits per year. If your salespeople are trying to grow market share, how many sales calls would it take before their efforts ceased to increase return? At what point would their efforts be better used elsewhere?

102 Monthly Sales Marginal Return on Investment v. Total Return on Investment 1,080,000 1,070,000 1,060,000 1,050,000 1,040,000 1,030,000 1,020,000 E D C B A 1,010,000 1,000, , , Time in Months Total / Average ROI v. Marginal ROI A. Base Campaign B. Base Campaign + $0.5MM C. Base Campaign + $1 MM D. Base Campaign + $1.5 MM E. Base Campaign + $2 MM Total Avg ROI $ 8.82 $ $ $ 9.22 $ 7.64 Marginal ROI $ 8.82 $ 8.65 $ 6.86 $ 2.93 $ Source: R.Anderson, Mattson Jack ROI Inc. 2003

103 Wouldn t you love to determine the Average Marginal ROI The ROI on the Last Dollar Spent for each promotional tactic? The point where the next dollar spent will only generate that ROI or less Dollars Spent Hypothetical Example ROI L A S T $$ S P E N T >

104 You need to do a regression analysis Average Marginal ROI Regression analysis examines multiple variables and analyzes how changes in those variables correlate with the results over time.

105 Two Comprehensive Reviews of AMROI ROI Analysis of Pharmaceutical Promotion (RAPP): Dr. Scott Neslin Albert Wesley Fry Professor of Marketing Amos Tuck School of Business, Dartmouth College May, 2001 Analysis of ROI for Pharmaceutical Promotion (ARPP) Dick R. Wittink, Ph.D. General George Rogers Clark Professor of Management and Marketing Yale School Of Management September, 2002 Bill Friedrich Assoc. Dir., Global Mkt. Research Wyeth-Ayerst Global Pharmaceuticals ARPP Steering Committee Paul Rabideau Director, Marketing Science Novartis Pharmaceuticals Dean Slack Director, Strategic Analysis Bayer Corporation President, Pharmaceutical Marketing Research Group (PMRG) Past-President, Pharmaceutical Management Science Association Treasurer, PMRG

106 RAPP and ARPP Objectives: Estimate the Average Marginal Return On Investment AMROI of marketing investments Detailing DTC Advertising Journal Advertising Meetings and Events (ARPP only) Data: All brands with $25,000,000 or more in revenue Almost 400 branded drugs Over 100 generic drugs Data from Over 20,000 monthly observations For more detail visit

107 ARPP and RAPP did determine Average Marginal ROI for detailing, meetings & events, DTC and journals Dollars Spent Hypothetical Example ROI L A S T $$ S P E N T > You can use ARPP and RAPP findings to determine: Overspending/overutilization of a tactic Underspending/underutilization of a tactic AARP/RAPP Does Not Indicate that one tactic is better than another Indicate that a tactic works or doesn t work Measure any particular brand Incorporate non-roi strategies

108 RAPP Brands - Revenue/Launch Year Cells Median Brand Profile by Cell Launch Year Annual Revenue? $25-$50MM Number of Brands (n=104) PCP Fraction 39.3% 49.7% 22.3% Median Price/script $46 $55 $66 Scripts / month 68,000 38,000 22,000 Revenues/year $38MM $25MM $17MM $50MM-$200MM Number of Brands (n=181) PCP Fraction 39.6% 37.3% 41.9% Price/script $45 $53 $78 Scripts / month 156,000 94,000 59,000 Revenues/year $84MM $60MM $55MM $200MM+ Number of Brands (n=106) PCP Fraction 61.8% 54.6% 54.3% Median Price/script $57 $62 $76 Scripts /month 674, , ,000 Revenues/year $461MM $247MM $209MM

109 ARPP - Revenue/Launch Year Cells Launch Year Annual Revenue < $25-$100MM Number of Brands (n=137) PCP Fraction 43% 37% 38% Scripts 1,000/mo Revenues/Year $43MM $34MM $46MM $100-$500MM Number of Brands (n=192) PCP Fraction 50% 43% 53% Scripts 1,000/mo Revenues/Year $144MM $134MM $143MM $500MM+ Number of Brands (n=63) PCP Fraction 52% 53% 58% Scripts 1,000/mo 1, Revenues/Year $692MM $585MM $627MM

110 ARPP Brands in $500MM+, Launch Year Cell Range of Monthly Expenditures ($000) Brand $ Detailing $ DTC $ Journals $ Meetings Actos $ 658-7,593 $0-2,741 $0-1,244 $609-3,065 Avandia 5,118-10, , , ,912 Celebrex 10,965-28, , , ,545 Celexa 3,840-11, , ,642 Enbrel 88-1, , Plavix 176-6, ,939 Singulair 1,926-7, , , ,619 Viagra , , , ,325 Vioxx 4,293-19, , , ,038

111 Key Variables DET detailing dollars includes 1-to-1 physician visits, but excludes samples (Scott-Levin) may include some small sales driven meetings and events DTC direct-to-consumer dollars: includes television, print, radio, and outdoor (Scott-Levin) JAD medical journal advertising dollars (PERQ/HCI) PME physician meetings & events dollars (Scott-Levin)* Scripts number of scripts filled at retail (Scott-Levin) Price retail pharmacy price per script (Scott-Levin) Meetings and Events ROI has a large margin of error (Plus or Minus $1.92). It is highly correlated with other marketing variables (especially Detailing), making it particularly difficult to determine Meetings and Events ROI by size/launch date

112 Methodology - Computing ROI ROI (Return On Investment) = Increase in revenues per additional dollar spent ROI is calculated by estimating how unit sales (prescriptions) depends on expenditures for each promotional tactic, and multiplying this unit sales change for an investment of $1 by the script price. The multiple regression result shows how unit sales depends on the individual expenditures, holding other things constant. So, ROI is the estimated increase in revenues for a $1 increase in each variable, DET, DTC, JAD, PME, one at a time. ROI = change in unit sales (for a $1 increase in a promotion tactic) x average unit price per script

113 Regression Analysis Regression analysis examines every brand in every month. Regression analyzes how changes in spending correlate with changes in Rx levels. Regression concludes that a marketing variable has a high ROI if that variable can consistently explain changes in Rx levels Regression analysis controls for causes of sales not attributed to a brand s marketing (eg, generics, external trends affecting brand growth, competitive spending, price)

114 ARPP ROI Results 2002 Average Marginal ROI by Revenue/Launch Date < Detailing $25-$100MM $0.90 $1.00 $ 1.00 $100-$500MM $1.20 $1.60 $ 2.10 $500MM+ $3.10 $5.90 $11.60 Direct to Consumer $25-$100MM $0.00 $0.00 $ 0.00 $100-$500MM $0.10 $0.20 $ 0.20 $500MM+ $0.40 $0.70 $ 1.30 Journal Advertising $25-$100MM $6.20 $6.70 $ 7.20 $100-$500MM $2.30 $3.10 $ 4.20 $500MM+ $3.10 $6.20 $12.20 Meetings and Events $25-$100MM $0.10 $0.10 $ 0.10 $100-$500MM $2.00 $2.70 $ 3.60 $500MM+ $3.10 $6.00 $11.70

115 ARPP ROI Results 2002 Average Marginal ROI by Revenue/Launch Date < Detailing $25-$100MM $0.90 $1.00 $ 1.00 $100-$500MM $1.20 $1.60 $ 2.10 $500MM+ $3.10 $5.90 $11.60 Direct to Consumer $25-$100MM $0.00 $0.00 $ 0.00 $100-$500MM $0.10 $0.20 $ 0.20 $500MM+ $0.40 $0.70 $ 1.30 Journal Advertising $25-$100MM $6.20 $6.70 $ 7.20 $100-$500MM $2.30 $3.10 $ 4.20 $500MM+ $3.10 $6.20 $12.20 Meetings and Events $25-$100MM $0.10 $0.10 $ 0.10 $100-$500MM $2.00 $2.70 $ 3.60 $500MM+ $3.10 $6.00 $11.70

116 These Findings Can Be Used to Predict Revenue Changes Based on Changes in Allocation For example: Add a $300,000 budget increase to a $250 Million brand launched in : Tactic DTC Journals Meetings Average Marginal ROI $0.20 $3.10 $2.70 Budget Change +$100,000 +$100,000 +$100,000 X = Predicted Revenue +$ 20,000 +$310,000 +$270,000 =$600,000 The resulting revenue increase would be $600,000.

117 RAPP Allocating New Marketing Funds Detailing vs Direct to Consumer (DTC) Median Brand Profile: $50-200MM, Launched % Estimate the Average Marginal ROI for various allocations of a 15% increase ($.788MM) Annual Annual Total Annual ROI on Budget Detail*($2.68) DTC*($0.43) Budget* Revenues* Increase $5,256 $ 0 $5,256 $59,784 - $6,044 $ 0 $6,044 $61,922 $2.71 $5,650 $394 $6,044 $60,998 $1.54 $5,256 $788 $6,044 $60,090 $0.39 Allocating additional funds to DTC, in this case is less productive *Numbers are in $000

118 RAPP Allocating New Marketing Funds Detailing vs Journal Advertising Median Brand Profile: $200MM+, Launched?1993 Estimated Average Marginal ROI for various allocations of a 15% increase ($2.513MM) Annual Annual Total Annual ROI on Budget Detailing($2.34) Journals($6.79) Budget* Revenues* Increase $16,128 $ 624 $16,752 $461,139 - $18,641 $ 624 $19,265 $467,253 $2.43 $17,384 $1,880 $19,265 $472,443 $4.50 $16,128 $3,137 $19,265 $478,870 $ % Allocating additional funds to Journal Advertising enhances the Average Marginal ROI

119 RAPP Reallocating Budget Detailing vs Journal Advertising Median Brand Profile: $200MM+, Launched?1993 Increase Estimated Average Marginal ROI when you reallocate the current $16.752MM Detailing and Journal budget? Annual Annual Total Annual ROI on DET* ($2.34) JAD*($6.79) Budget* Revenues* Budget Change $16,128 $ 624 $16,752 $461,139 $2.66 $15,504 $1,248 (2X) $16,752 $464,101 $2.84 $14,136 $2,496 (2X) $16,752 $470,728 $3.26 $11,640 $4,992 (2X) $16,752 $488,372 $4.32 Reallocating more toward JAD, which in this case is more productive than DET, enhances ROI *Numbers are in $000

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127 Thank you A pdf file of the slides can be obtained at The ROI calculator can be accessed at: For a powerpoint version of this presentation, please contact Brigitte Niederberger [email protected]

128 Physician s Use of the Internet Eighty percent of physicians surveyed reported using the Internet daily for general purposes, but 16% use it daily for health research or product information. Internet Use for any Purpose 6% 2% 0% 12% 28% Internet Use for Health Research/Information 3% 16% 17% n=1,004 80% n=1,004 36% Daily 4-6 times/wk. 1-3 times/wk. < once /wk. Never Source: Verispan epromotion Annual Study. Daily 4-6 times/wk. 1-3 times/wk. < once /wk. Never 128

129 Invitations/Participation in epromotion Over half of physicians surveyed reported receiving one to three invitations per month to participate in epromotion activities. Over one-quarter responded that they accept 20% or fewer of the invitations. 4 to 6 14% 7 to 9 5% 10 or more 3% None 19% % of respondents 30% 25% 20% 15% 10% 12% 28% 12% 10% 9% 10% 5% n=1,004 1 to 3 59% 0% None 1-20% 21-40% 41-60% 61-80% % n=815 Source: Verispan epromotion Annual Study. 129

130 Time Spent Participating in epromotion Activities Two-fifths of respondents indicated they spend between 11 and 20 minutes on average for each epromotion activity in which they participate. This is significantly longer than reported for detailing activity min. 11% More than 60 min. 0% 1-10 min. 12% n= min. 34% min. 43% Source: Verispan epromotion Annual Study. 130

131 Industry Trends: epromotion 4Q02 1Q03 2Q03 3Q03 Therapeutic Classes Corporations Products Activities 494, , , ,721 Expenditures $46 million $55 million $61 million $48 million Source: Verispan's epromotion Audit 131