Downward Economy, Downward Healthcare Industry

Mike Kurland, GP and Compliance Specialist
mikekurland@cis-partners.com

Before I begin, let’s review the economy as of late. To put it bluntly, it’s not good. As of October 16th, the DOW has dropped 32.9% year to date[1], housing foreclosures are at an all time high, and the latest unemployment rate is 6.1%[2] with 760,000 jobs lost year-to-date2. This has impacted the retail sector, leading to declining retail sales three months in a row for the first time since 1992, according to government data. So what does this mean to the healthcare industry?

One big impact is being felt directly by patients and their families. The loss of jobs obviously lowers a family’s income and spending ability, it also brings with it a loss of healthcare insurance. So how are patients and families affected by the economy battling rising healthcare costs? One way patients cope is by not following their recommended dosing of prescription medicines, in an attempt to stretch their current supply. This is especially true with cholesterol and blood pressure medicine. “In July, a poll by the National Association of Insurance Commissioners found that 11 percent of Americans had cut back on their dosages to make meds last longer”[3]. While this strategy may help a family get through tough times, the impact of missed doses on the patient’s overall health, especially in regards to health issues like high cholesterol and blood pressure, is unknown and may prove to be far more costly to the patient’s family in the long run.

But patients and families are not the only ones affected. If the consumer, a phrase I don’t feel comfortable using in place of “patient,” has less spending power, it follows that pharmaceutical companies will have to adapt their sales and marketing practices as well. Among the hardest hit are direct-to-consumer advertising and sales forces. According to research performed by BrandWeek, pharmaceutical advertising spending is down compared to the previous year for the first time ever. Specifically hit are image and education ads, designed to market a company or educate the public on a specific health care issue. Spending on these ads has fallen from $660 million in 2006 to $138 million year-to-date in 2008[4].

In addition, more and more pharmaceutical companies are cutting back their sales forces or turning to companies like inVentiv Health, a sales-and-marketing firm, to outsource pieces of their sales force. According to inVentiv, “[R]ather than recruit, hire, or keep full-time representatives on the books, we're creating a more flexible approach,” so companies can shrink or grow their sales forces at will.[5]

One interesting side-effect of this problem, however, is that new opportunities for sales reps affected by layoffs could be created via the pharmaceutical industry’s continued growth in emerging markets. Of course, this would require relocation outside the U.S. But given the current state of the economy, a change of scenery might not be so bad…

Sources:

[1] CNN (2008, October 16). Citing electronic sources retrieved October 17, 2008 from http://money.cnn.com/data/markets/dow/?
[2] CNN (2008, October 3). Citing electronic sources retrieved October 17, 2008 from http://money.cnn.com/2008/10/03/news/economy/jobs_september/index.htm
[3] Wall Street Journal (2008, September 4) citing electronic sources retrieved October 17, 2008 from http://blogs.wsj.com/health/2008/09/05/walgreen-ceo-bad-economy-hurts-prescriptions/
[4] FiercePharma (2008, September 30). Citing electronic sources retrieved October 17, 2008 from http://www.fiercepharma.com/story/pharma-cuts-2008-ad-budgets/2008-09-30
[5] FiercePharma (2008, September 22). Citing electronic sources retrieved October 17, 2008 from http://www.fiercepharma.com/story/merck-outsources-sales-force/2008-09-22