Pharmaceuticals are the hottest thing in TV ads

Does it feel like you’re seeing a lot more commercials for drugs these days? Well, there is a reason. Pharmaceutical companies are increasing TV ad spending faster than any other industry.

In a new research note, Morgan Stanley analyst Benjamin Swinburne showed that there is growing evidence that digital spending is shifting back to TV.  According to Swinburne, national TV ad growth accelerated to about 5% in the fourth quarter of 2015 and the first quarter of 2016, driven in particular by the strengthening economy.

And leading growth is the drug industry.

“We continue to see pharma spending as the fastest growing major ad vertical on TV,” said Swinburne.

TV ad spending by pharma companies increased 20% in 2015 and is up 20% year-to-date in 2016, according to the analysis.

 

Ad spending can represent a huge cost relative to sales.

Abbvie (ABBV) spent $357 million on ad spend in 2015 for rheumatoid arthritis drug Humira, 4% of the drugs’ sales last year. Pfizer (PFE) spent $133 million on ad spend last year for erectile dysfunction drug Viagra, 11% of the drug’s sales. Eli Lilly (LLY) spent $222 million for its competitor Cialis, 18% of the drug’s sales. Valeant (VRX), which has been under fire for its marketing focus relative to research and development, spent $117 million for its toenail fungus drug Jublia, an astounding 35% of the drug’s sales last year.

 

The top 10 drugs (by spending) spend two-thirds of their national TV ad dollars on broadcast TV, with older demos and the best reach. CBS (CBS) is the biggest beneficiary of pharma spending.

While many broadcast and cable companies including CBS, Disney (DIS), and Fox (FOXA)-- have been in the hot seat surrounding declining viewership and ad revenue, drug companies may be one of their saviors.