BUSINESS
BEtil^O THE
MAHHEIS
H A R R Y S 7 E N E R S O N , Associate Editor
Third of a billion be (ing spent b y p h a r m a c e u t i c a l industry in development a n d m a r k e t i n g of its n e w products . . . Multiplicity of drugs a n d p a c k a g e s g r o w s "jvj" AHKKT development and sales costs in the pharmaceutical manufacturing industry have climbed to fantastic heights, but this does not appear to have discouraged the marketing of n e w products. O n e of the speakers before the p h a r m a c e u t ical symposium of the ACS Division of Chemical Marketing a n d Economics at Chicago said that for some companies promotion costs range anywhere from 20 to 4 5 % of the product price. For some manufacturers the costs have run so high that they d o not care to reveal it. This is an industry which has an annual sales volume of sonic S I . 5 hillion, and to achieve this they have to employ 15,000 salesmen at a cost of $ 125 million. That is only p a r t of the cost. T h e phrase, "from test tube to physician," aptly describes the joh of a l a r g e m a n u facturer in this field; but "William L. Arscott showed t h a t in addition to t h e $125 million paid to salesmen, the industry has to spend each year $60 million for research, $40 million for clinical investigation, and about $100 million for professional promotion. That brings t h e research, development, and marketing cost for t h e industry up to $325 million. Almost one third of a billion is spent each year to provide the drugs and chemicals to overcome illness a n d prolong life. Medicinal Chemicals
1941 1942 1943 1944 1946 1947 1948 1949 1950 1951 1952
( Pounds ) Production 34,199,000 41,181,000 55,695,000 38,751,000 40.747,000 49,656,000 43,635,000 41,497,000 49,330,000 73,543,000 66,815,000
Sales 29,024,000 36,739.000 51,803,000 36,212,000 40,402,000 41,587,000 38,240,000 35,522,000 37,011,000 59.000,000 50,783,000
Here is free enterprise at its very best. T h e medical profession has neither the time nor t h e facilities to engage in this work, hence it is not correct to allude to these products as miracles of medical science. They are miracles of hack-breaking research and trial on part of chemists, and many other scientific workers, laboring as teams in the pharmaceutical industry. T h o u s a n d s of I t e m s W h a t has resulted from this costly d e velopment? Some idea was supplied by Pvobert M. Prather, Merck and Co., w h o estimated that ethical products ( m a n u factured items prescrihed by a physician) 3926
alone have reached t h e large total of 8500. These reach the consumer through 50,000 d r u g store prescription counters, 6000 hospitals, and 165,000 physicians' offices a n d bags. They are in the form of tablets, ointments, or liquids, and it is not unusual for a single specialty to a p p e a r in 15 to 20 different packages. In addition, there must be thousands of proprietary d r u g items; that is, packaged products sold over the counter without prescription. Someone else b r o u g h t out the information that in the antibiotics alone some 110 products in one form or another are offered by 3 2 manufacturers. That there is keen competition among manufacturers in this business goes without saying. There w a s a d a y when competition in the d r u g industry was on a "poh'te" basis. It w a s the sporting thing not to attempt to duplicate a competitor's product, or improve upon it. But that situation does not exist today, w e learned from F. M. Hadley, E l i Lilly and Co., and the public is the beneficiary. Marketing activities of the manufacturer must be intensified if h e is t o maintain his position. I n Mr. Hadley's company, research expenditures h a v e more than tripled since the close of t h e last war, yet the sales force is no greater t h a n it was then. T h e addition of m o r e salesmen to the payroll is no assurance of more sales; anyw a y the number of d r u g stores and physicians has not increased during the past several years. Hole of Distributor Direct contact between the manufacturer and his physician and retail outlets is important in pharmaceuticals. Still, the role played by wholesaler a n d distributor can be very vital in holding clown costs. An interesting e x a m p l e was cited before t h e ACS division by L. Sticvater, Jr., of McKesson and R o b b i n s . A large chemical producer with a national market estimated that his over-all sales cost was about 29r, but t h e b i g surprise came when h e learned that less than 5r/r of their customers w e r e taking 6 5 r r of their production, and that 35 r /r went to 95r/r of their customers. An efficient distributor could service all of these small customers for the manufacturer, we were told. He could afford to have his salesmen call more frequently because h e is distributing for other customers as well. H e c a n solicit business actively from those w h o require many chemicals in small amounts. Hundreds of small shipments to many customers is costly, as Mr. Stievater r e m a r k e d , b u t t h e fact is C H E M I C A L
that there are many manufacturers w h o continue to d o so, probably t h r o u g h traditional policy. When N e w Ideas Fail Acres of publicity and advertising tell us ahout successful products, marketing failures are kept quiet. It is plain everyday psychology to shout about our winings in a poker game or in business, b u t to suppress our losses as if t h e y w e r e wartime secrets. To Harold Schafc r of t h e Cold Seal Co., Bismarck, N. D., t h e marketing fraternity in consumer p r o d u c t s is indebted for t h e story of an almost total failure. Not in their glass wax, which is highly successful as a w i n d o w cleaner, but in a simple shoe cleaner which is no more difficult to use than p a p e r tissues. The Gold Seal product, in fact, is just that—sheets of disposable tissue which apply t h e needed amount of shoe polish, and which are turned over and used to impart t h e shine. An excellent idea, b u t it fell flat on its face, and Mr. Sehafer would like to know why. In a large test campaign in Miami it just did not go, although they had used t h e self-same marketing formula which h a d proved so successful for other products. O n e error, h e thought, was that they h a d used money alone—their successful blueprint—instead of careful p l a n n i n g which calls for long hours a n d h a r d work. Narcotics for Emergency According to W a s h i n g t o n dispatches quoting the Munitions Board, there are no satisfactory substitutes for either codeine or for morphine, a n d t h a t as a result t h e Government will continue to acquire t h e r a w material for these items, opium, for the stockpile. T h e board concedes that a considerable a m o u n t of r e search h a s been devoted to substitute pain-relievers, and several of these a p peared promising. Of t h e opium derivatives, m o r p h i n e represents about 1 0 % . T h e important demand from physicians a n d d r u g distributors is for codeine. T h e contention is made that t h e substitutes or synthetics have not received general acceptance b y either t h e surgeon-general, the medical departments of the Armed Services, or b y the medical profession. T h e synthetics axe regarded as "drugs to b e specified w h e n pain relief of a lesser degree is indicated." W h e n comparisons are m a d e on a poundage basis, it is surprising to find how close streptomycin is to penicillin in point of production. R. D. Coghill, A b bott Laboratories, places antibiotic p r o duction in this cGuntiy last ycai al 1,320,000 pounds, valued at $150 million. Penicillin o u t p u t w a s estimated a t about 462,000 p o u n d s . Dr. Coghill figures the output of their three l e a d i n g wide-spectrum antibiotics at 400,000 p o u n d s . This figure p r o b a b l y includes aureomycin, terramycin, and Chloromycetin. Sulfa d r u g production in 1951 w a s 550,000, and aspirin 1,342,000 pounds. AND
ENGINEERING
NEWS
