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Drugmakers Could Lose Their Greatest Weapon

By Brian Orelli, PhD - Updated Apr 5, 2017 at 8:01PM

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Congress is thinking about putting limits on direct-to-consumer advertisements.

Pharmaceutical companies are so worried about losing their biggest weapon to increase sales -- direct-to-consumer (DTC) advertisements -- that the industry trade group made a preemptive strike yesterday.

The industry is worried about talk from Representative Henry Waxman, the new chairman of the House Energy and Commerce Committee, which oversees health care issues. Waxman's no friend to the industry -- he's most famous for the Hatch-Waxman Act, which allows generic drug companies like Mylan (NYSE:MYL) and Teva Pharmaceuticals (NASDAQ:TEVA) to bring drugs to the market more quickly. He's planning to resurrect a bill that would give the Food and Drug Administration the authority to ban DTC advertisements in the first few years after approval should the agency feel it would protect public health. Given how safety conscious the FDA has become, a ban seems like a near certainty.

The Pharmaceutical Research and Manufacturers of America's preemptive strike is a set of voluntary guidelines including things like identifying actors if they're not actually doctors, and requiring celebrity endorsers to fess up and say whether they've actually used the product. Wonder if that'll make it hard for companies to find celebrity endorsements for Pfizer's (NYSE:PFE) Viagra, Eli Lilly's (NYSE:LLY) Cialis, and Levitra, which is marketed by GlaxoSmithKline (NYSE:GSK), Schering-Plough (NYSE:SGP), and Bayer? Think Bob Dole's interested in going back to commercials?

Will the new voluntary guidelines keep Congress at bay? Probably not. But the industry hasn't really hindered itself much. For one thing, the guidelines suggest that companies should "consider individually setting specific periods of time for education [of doctors] before launching a branded DTC campaign." That's pretty weak language, guys.

The biggest problem with a moratorium is that it's the first step in complete removal of drug ads from the airwaves. Drugmakers need those ads to get patients into the doctor's office, and without them, sales will suffer.

More Foolishness:

Pfizer, Eli Lilly, and GlaxoSmithKline are Income Investor picks. To see how dividend-paying stocks can offer both secure income and the opportunity for growth, take a free look at this newsletter with a 30-day free trial.

Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. Pfizer is also an Inside Value recommendation, and the Fool owns shares of it. The Fool has a disclosure policy.

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Stocks Mentioned

Eli Lilly and Company Stock Quote
Eli Lilly and Company
LLY
$304.61 (0.53%) $1.59
Pfizer Inc. Stock Quote
Pfizer Inc.
PFE
$49.95 (0.34%) $0.17
Viatris Inc. Stock Quote
Viatris Inc.
MYL
Teva Pharmaceutical Industries Limited Stock Quote
Teva Pharmaceutical Industries Limited
TEVA
$11.20 (1.82%) $0.20
GSK Stock Quote
GSK
GSK
$38.30 (-4.32%) $-1.73

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