Sara Calabro looks at the trend toward amalgamation of healthcare sectors.Last year's roundup of the healthcare PR sector concluded with predictions that the coming year would bring increased consolidation in the pharmaceutical industry, and in turn, a call for the agencies pining to represent them to raise their standards. It's not that this has proven untrue - after all, just last month Pfizer completed the $57 billion acquisition of Pharmacia, leaving many of the agencies working with both companies doing all they can to ensure the future of those accounts. But more than anything else, the past 12 months have seen a broadened perspective and a trend toward amalgamation of all sectors of the healthcare industry. Fierce competition and the continued scrutiny of drug companies have led to increasingly stringent procurement processes in pharmaceuticals, resulting in fewer accounts - and leaving some agencies to pursue new avenues. At the same time, the biotechnology and medical-device sectors continue to progress in a fruitful direction, which means an enhanced need for effective communications about reimbursement from managed-care experts. This intermingling of sectors has presented opportunities for PR professionals, but it has also raised the bar on what clients expect from their agencies in terms of knowledge and creativity. Albeit under a microscope, drug companies remained profitable in 2002. Based on data from IMS Health, The Wall Street Journal reported in February that despite complaints of a difficult year from the industry, US prescription-drug sales for 2002 were $192.2 billion. That represents a 12% increase from the $172 billion reported for 2001. The headline for the WSJ story - "Drug firms' 'bad' year wasn't so bad" - was written with more than a little sarcasm, illustrating that until Congress passes a Medicare bill for prescription-drug coverage, the multibillion-dollar pharmaceutical industry will continue to be criticized for its pricing practices. Despite this, many PR agencies saw growth and expansion in their pharmaceutical business for 2002. Pharma still a winner Ame Wadler, chairman of US healthcare for Burson-Marsteller, says her practice grew a stellar 30%, which she describes as "significant" compared to most other practices at the agency. The most notable account win of the year, according to Wadler, was the Aventis global diabetes franchise, for which Burson will handle work in 20 markets around the world. Marybeth Belsito, president of Belsito & Company, calls 2002 a "disappointing year," which she attributes largely to Pfizer's acquisition of Pharmacia stalling a lot of the work her agency was expecting from Pharmacia. Even still, the agency finished 2002 up 5%. Edelman's healthcare group ended the year down close to 7%, but still managed to win new business and expand existing accounts. Possibly indicative of a better 2003, the department is now adding staff, and was selected this March to handle US communications for four of AstraZeneca's brands. The win ended AstraZeneca's nine-year relationship with Ketchum, but that agency "held its own," says its director of global healthcare David Catlett. This year, Ketchum won new business from Wyeth, Solvay, and TAP Pharmaceuticals. Porter Novelli "kept all major clients, and grew existing business," reports Michael Durand, director of global healthcare. The agency won new accounts with Shire Pharmaceuticals and Watson Pharmaceuticals. Procurement Despite relative success within their agencies, healthcare practices felt the effects of more scrupulous purchasing processes from their pharmaceutical clients. "In the past, pitches used to take about two months," explains Nancy Turett, global director of healthcare for Edelman. "Now, before you even get an RFP, you get a call from a company letting you know that you'll be receiving a letter from their procurement department. It is a request for information (RFI) that asks detailed questions about how you do business." Similarly, Belsito refers to a recent examination of her agency by a potential client as "financially intimate." On the same note, Sherry Pudloski, managing director of healthcare for Ogilvy, says she's gotten to know her CFO a lot better. So why the change to such meticulous analyses of agencies? According to Belsito, "The dynamic between clients and agencies is changing because companies are realizing that if they really want to drive their business through PR, they are going to have to share a lot of confidential information with us." Durand attributes the "ferocious desire for accountability" to the fact that more is expected from agencies than in the past. The shift to clients working with a limited number of select firms has resulted in increased responsibilities. "When you've got a company considering giving an agency such a tremendous amount of business," Durand explains, "assignments become more complex, and a deeper understanding of the client's issues is demanded." New opportunities Turett says that the extensive amount of time that pitching for new business now requires has made the healthcare practice at Edelman "think more carefully about what we choose to participate in." Edelman's healthcare department is adjusting to the change, in part, by dedicating a significant amount of time to the growth of its biotechnology-focused life-sciences practice. Formalized in February of this year, the group is currently being run out of New York and Los Angeles, but Turett says she is looking to open an office in San Francisco, and even hints about making a "tiny acquisition" in this sector. "Biotechnology may not be where the money comes from right away, but we recognize that it is the source of many products that eventually become pharmaceuticals," explains Turett. And R&D is not the only area where the biotechnology and pharmaceutical sectors are crossing paths. Mergers between major pharmaceutical corporations have resulted in laid-off marketing executives finding work at smaller biotech companies. Traditionally, the founder of the organization - often a scientist who lacked marketing knowledge or corporate savvy - handled PR for these companies. "As biotechs have become increasingly sophisticated, they've started to move toward communications tactics that are reminiscent of the ones used in the pharmaceutical industry," explains Gianfranco Chicco, principal of Chandler Chicco Agency (CCA). "[Communications in biotech] used to be all about investor relations and getting funding for your projects, but these are not start-ups anymore. As products appear more promising than they used to be, it is about ensuring that they deliver on their response." In July 2002, CCA launched BioSector2, an agency dedicated to biotechnology and specialty pharmaceutical companies. In less than one year, the agency has picked up a dozen clients. Chicco predicts BioSector2 will report close to $3 million in revenues at the one-year mark this summer. Another area of healthcare starting to see a more formalized PR structure is that of medical devices. Traditionally promoted only to physicians and hospital administrations, medical devices are starting to emerge in front of consumer audiences as the companies that manufacture them realize the value of presenting patients with choices. FischerHealth, a device-focused agency that has worked for industry giants Boston Scientific and Guidant, saw an increase in revenue in 2002 over the previous year. And so far in 2003, CEO Roger Fischer says the firm is "slightly ahead of where it was in 2000 - a year that was generally thought of as very profitable." Although Fischer attributes much of his agency's success to its refusal to stray from the device niche, he admits that his sector has started looking at bringing in consumer-product PR people. "As minimally invasive devices become increasingly available," explains Fischer, "we have to let patients know directly that having heart surgery does not necessarily mean having a doctor crack your ribs open." Paying the bill As consumer-product PR becomes a more popular element of marketing mixes, it brings with it a heightened need for communicating payment solutions. And in the medical-device sector, especially, the pricey nature of the products makes reimbursement expertise imperative. Approved last month, for example, Johnson & Johnson's long-awaited drug-eluding stents will hit the market for $3,195 each. Ken Ferber, staff VP of corporate communications for WellPoint, says that having comprehensive knowledge about the entire healthcare sector is necessary for effectively communicating with constituencies about managed care. "We've been able to talk to reporters about coverage for Johnson & Johnson's new stent because we're abreast of what is happening with the distribution of other funds for prescription and OTC medications," Ferber explains. Eve Dryer, president of Philadelphia-based agency Signova, agrees with Ferber's philosophy about integrating industry knowledge. "The work we've done with managed-care companies prepared us for what the challenges would be in managed care at a pharmaceutical company," she says. Signova, which grew a whopping 47% in 2002, is the agency of record for AstraZeneca's managed-care business. Predictions Formalized targeting to women is likely to be a trend of increased prevalence in the coming year. As coheads of households, mothers, professionals, purchasers, and patients, women are an essential audience. "Reaching out to women is not a new concept, but it is finally going to take hold," predicts Turett. Charlotte Wray, EVP of healthcare for PR21, agrees. "The media needs to be paying more attention to this audience because women are the ones purchasing healthcare products, and they're the ones who need them." Additionally, while the media explosion over severe acute respiratory syndrome (SARS) has obviously presented the tourism PR sector with huge challenges, healthcare communicators have been given an opportunity to help. Desperate for answers, the Chinese marketplace is going to be widely receptive to whomever can provide them. David Guy, VP of strategic marketing and business development for Schering-Plough, believes, "SARS could be a real chance for the industry to come in and position itself as the white knight." ----- Biotechnology Client Gene Logic Agency Makovsky & Co. In preparation for its acquisition of research contract company TherImmune, Gene Logic, a genetic-data supplier, appointed Makovsky & Co. as its AOR in December of last year. Within days, Gil Bashe, EVP of Makovsky's health practice , arrived onsite at Gene Logic's Gaithersburg, MD headquarters. Robert Burrows, director of corporate communications for Gene Logic, and the sole in-house PR person, recalls, "I needed the extra arms and legs of someone with M&A experience." Bashe has handled PR for several clients during M&As. Initially, Makovsky formulated messages explaining why TherImmune was acquired. "Now we're in the phase of determining what the combined company's message is," explains Burrows. "I look to Makovsky to determine what the spine of those messages should be." Burrows and Bashe talk every day, and often call each other at home. "Biotech is a fluid area of healthcare that does not happen between nine and five," says Bashe. "We know Bob is going to tax us to the max, so you have to really love the work." Despite the demands, Bashe says it is a rewarding opportunity for an agency to enhance its craft. "We can really see our impact when Bob and his colleagues give a quarterly report. The inclusive and collaborative culture in biotech gives us vicarious pride in Gene Logic's work." Burrows agrees. "There is a real sense of shared value in the biotech industry, and Gil's team is truly an extension of our company." Burrows and Bashe insist their success is indicative of the other's strengths. Bashe says, "We're able to produce good results because of Bob's powerful leadership. An agency is able to perform well if the client leader wants them to excel." Similarly, Burrows claims, "I previously had a negative sentiment about PR, but working with Makovsky has changed that. Gil and his team are the ones pushing me for more work." ----- Hospitals Client The New York Foundling Hospital Agency Belsito & Co. Dr. Vincent Fontana, medical director and pediatrician-in-chief at the New York Foundling Hospital, called on Mary Belsito, president of Belsito & Co., close to seven years ago when he came up with the idea for opening a center dedicated to helping victims of child abuse. His center would perform training and research, and build public awareness on preventing and treating child abuse. "I needed external PR support to carry out my mission on a national level," recalls Fontana. "What drew me to Marybeth was her compassion about the issue. There needs to be an emotional connection when you're dealing with something like child abuse." Belsito and her agency have assisted with everything from developing a business plan, fundraising, creating collateral materials, and garnering media attention. Belsito, whose agency handles PR for clients in several healthcare sectors, contends, "Hospital work, particularly in the area of child abuse, is emotionally charged in a way that drug therapies, for example, are not." She says communicating with the public about child abuse is very different because of its uncomfortable and secretive nature. Dr. Fontana's stature - he is a published author and has served as a physician to Presidents Eisenhower and Nixon - made getting media coverage easy, but Belsito admits, "Getting in-depth coverage on the ugliness of child abuse is challenging because there is a general hesitation to go down that road." This October, the Vincent J. Fontana Center for Child Protection, affiliated with the Foundling Hospital, will open to the public. Belsito will handle publicity for the launch, and will also work alongside an in-house team of four after the center opens. Belsito reports plans for reaching out to nurses, social workers, religious leaders, politicians, and government agencies. There will also be separate and extensive outreach to teachers and schools, and parents and guardians. ----- Medical Devices Client Thoratec Agency FischerHealth Medical-device company Thoratec called upon FischerHealth to help promote the clinical trial results for its heart-assist device, HeartMate, in June 2001. Previously, Thoratec had no formal relationship with a PR agency, but knew it was necessary for preparing the market for when its product got FDA approval. "There was a lot of technical information that reporters really had to be educated on," recalls Julie Tracey, director of marketing for Thoratec at the time (she is now VP of marketing for Kyphon, also a FischerHealth client). "We had no in-house communications team and very little experience with reporters. Fischer has a staff that thoroughly understands devices and knows how to present difficult information to reporters in an accessible way." Maureen Mazzatenta, VP of medical devices and diagnostics for the agency, says that developing consistent messages was a priority. Fischer placed emphasis on creating synergy with other external companies Thoratec works with, such as its IR and design firms. According to Mazzatenta, "Having consistent messages is especially important in the medical-device sector because they are often start-up companies that are trying to establish an identity." Additionally, Tracey believes the legwork done by Thoratec helped create a successful agency-client dynamic. "It is up to the client to know how they want their product to appear in the market. You are doing your agency a disservice if you can't articulate the correct messages you want conveyed." The value placed on communications at Thoratec is another contributing factor, according to Aimee Corso, SVP for the agency. "Having someone on the client side who really understands PR is key, but rare in our sector. It is only recently that the medical-device industry has started to embrace the need for PR." Tracey credits the support from executive management that raised the profile of the work being done with FischerHealth. ----- Pharmaceuticals Client Abbott Laboratories Agency Fleishman-Hillard Abbott Laboratories and Fleishman-Hillard began their extensive relationship in the summer of 1999, when the pharmaceutical company appointed the agency to handle PR for its HIV treatment, Kaletra. The two expanded their relationship in 2001, when Abbott acquired Knoll Pharmaceuticals. Fleishman, which was the agency handling PR for Knoll's thyroid medication (Synthroid) and its obesity drug (Meridia), held onto the business when Abbott adopted both products. Fleishman is also the agency Abbott turns to for help with its corporate reputation. In total, approximately 40 people at Fleishman work on Abbott business in some capacity. Fleishman's ability to work as a team with Abbott's 20-person in-house staff is the key to its long-standing relationship, according to Melissa Brotz, director of media relations for Abbott. "You really need a cast of characters that can work well together on all levels," she says. "To begin with, Abbott and Fleishman have similar cultures, but I think our relationship has also worked so well because everyone is so direct. We don't always do what the team at Fleishman might recommend, and they respect that." Michael Rinaldo, SVP of healthcare for Fleishman, agrees. "Whenever you make a suggestion to a client, you open yourself up for criticism. But it's about coming together and marrying the right perspectives at the table each day." Community outreach and speaking engagements are typically handled internally, while the agency spends most of its time developing and offering strategic counsel. Brotz says the agency and client do a lot of scenario playing, based on the industry issues of the day. "The pharmaceutical industry is so regulatory in nature. We spend a great deal of time paying attention to the latest updates internally, but the constant changes require our agency to always be fully abreast," expects Brotz. Despite the fruitful relationship, Brotz confirms that Fleishman is kept on its toes by having to continually compete for all of its business each year. "We enjoy working with an agency that knows our company so well, but we reassess our relationships each year and hire programmatically, based on whatever our needs are," reports Brotz. "The flip side of this type of good relationship is that the agency has a lot of the client's business, and they start taking it for granted. The value being added needs to be continually reinforced." Rinaldo also knows, "It is imperative that we maintain our energy and enthusiasm for getting the job done right." ----- Managed Care Client WellPoint Agency Powell Tate "Health insurance is such a complicated industry that it is impossible for one person to know everything there is to know," concedes Joe Wise, SVP for Powell Tate - Weber Shandwick's public affairs arm, and WellPoint's agency of record. Three years ago, Ken Ferber, staff VP of corporate communications for WellPoint, brought Powell Tate on board to help the managed-care organization navigate its challenging industry. Ferber felt it was imperative for the Thousand Oaks, CA-based company to work with a firm that has roots in Washington, DC. "Healthcare policy changes constantly in this country," explains Ferber, "and having a regulatory background is imperative." Wise, who leads the account, has a regulatory and political background, and the agency also has several staffers who formerly worked for the Department of Health and Human Services. Powell Tate never serves as spokespeople for its client, but it is an essential behind-the-scenes engine for message development. Because various sectors of healthcare so often converge, it is not enough for WellPoint's in-house team of 13 to only know about health insurance. "It just doesn't work unless you understand the big picture," says Ferber. "Powell Tate connects the dots by continually briefing us on what is going on across the entire healthcare industry. Any regulated sector needs this comprehensive perspective." Powell Tate does have a core team that specializes in managed care, but it also brings knowledge of other areas of healthcare to the table. Approximately three to five people from the agency are always working on the WellPoint account at any given time. Ferber and Wise talk on the phone several times a day, as well as at night and during weekends. Citing the tarnished reputation the managed-care industry has had for more than a decade, Ferber acknowledges, "Considering how long we've been battered and bruised, I don't assume that Joe and I are going to figure out the world overnight." Both, however, are proud of how integral Powell Tate has become to WellPoint's communications efforts. WellPoint employees are often found directing their questions about the industry to the team at Powell Tate. Ferber calls this a "great achievement," as it exemplifies the effective synergy the organizations have created between agency and client.