Novartis CEO: Here Are 3 Things Big Pharma Must Do To Survive

After years of relative stability and high profits, things aren't looking particularly rosy for the pharmaceutical industry. Blockbuster drugs are losing patent protection, R&D efforts haven't paid off as hoped, and prices will come under pressure from the Affordable Care Act.  

Novartis CEO Joseph Jimenez has consistently argued that the industry needs to make big changes in order to survive in the long run, like redefining blockbusters and getting paid for positive outcomes instead of just transactions. 

His own company just came face to face with one of the industry's big threats, weaker patents and generic competition. Gleevec, a flagship cancer drug, was denied patent protection in India by the country's Supreme Court. Those sorts of rulings are a huge risk when research and development costs can reach billions of dollars. 

In an interview with Fortune's Geoff Colvin, Jimenez outlined a long term vision for his company and industry:

DTC ad spending sinks 11.5%, a $2B slide from 2006 peak

The bad news for prime-time television and consumer magazines: Pharma's direct-to-consumer advertising dropped by 11.5% last year, to $3.47 billion. The even worse news for digital venues: DTC spend fell by 33%.

The biggest drop, percentage-wise, was in radio ads, which fell 34% to $23.1 million. Internet advertising came in a close second with a 33% drop, to $68.4 million. But compared with magazines and TV, those media are small potatoes for pharma ads, together accounting for just 3% of DTC spending.

TV advertising, of course, is where the lion's share of pharma ad spending goes; 62% to be exact, according to the blog. So when spending drops 10%, as it did last year, that amounts to more than a $200 million off the top. New total: $2.167 billion. Magazine spending, for 29% of the total, hit $1.015 billion.

As researchers notes, 2012's decline follows several years of shrinking ad buys. From a peak in 2006 of about $5.4 billion, spending has dropped and dropped as fewer new drugs hit the market and more old meds fell off patent.

After the recent spate of FDA approvals, DTC might expect a boost, particularly from primary-care drugs such as Eliquis, the blood thinner from Pfizer ($PFE) and Bristol-Myers Squibb ($BMY), and Invokana, the brand-new diabetes pill from Johnson & Johnson ($JNJ). Specialty meds aren't advertised as often to the consumer, however, and certainly not as heavily. Several of the most-anticipated approvals are cancer drugs, such as Roche's ($RHHBY) Perjeta and Kadcyla. We'll have to see how the balance tips as the year wears on.