Assignment Six

Justifying Advertising Expense

Much of the advertising on television these days is for prescription drugs, and many people ask me (and others) how the Pharma manufacturers justify buying advertising aimed at people who are suffering from diseases that only a very small percentage of consumers suffer from. These range from severe eczema, which affects 3% of the population, to metastatic breast cancer, which affects .1%, to Non-24 disease which affects .001% of the population. So how does this work? And how do marketers justify these expenditures?

Lets look at metastatic breast cancer. This very serious disease affects about .1% of (the population), or three hundred thousand people in the U.S. Finding the right three hundred thousand is very hard, but yet you will often see ads on TV for Ibrance. Ibrance has developed a media plan which targets the ads effectively, so in reality about .5% of those viewing an ad have metastatic breast cancer, or five times the average but that is still pretty low. Pfizer, the manufacturer and marketer of Ibrance pays about $15/thousand impressions, or 1.5 cents per consumer reached, or $3 per targeted consumer reached, and they report that a significant number of consumers do respond to the ads, by calling the 800 number, by talking to their doctors and by buying Ibrance. And it does not hurt that Ibrance costs $12,000 for a typical course of treatment.

Question: But how does Pfizer justify spending an estimated $50 Million per year on Ibrance Advertising? What level of response does Pfizer need to generate in order to justify the advertising expense? How many prescriptions do they need to sell to cover the cost of generating them? Please answer in 700 words or less and show your math.