Pharma Advertising Reform Problematic for Media Companies, Rights Owners

Pharma Advertising Reform Problematic for Media Companies, Rights Owners

The Department of Health and Human Services (HHS) and U.S. Food and Drug Administration (FDA) recently announced they will close an FDA loophole that has allowed pharmaceutical manufacturers to abbreviate safety disclosures in broadcast ads and digital media for much of the last 30 years. The relaxed guidelines —premised on consumers having easy access to the full information online— ignited a boom in TV drug advertising in the late 1990s that still exists today. 

The reform will not put an end to big pharma spending on national television ads (as some feared). However, the rule changes will extend the length of commercials and make them more expensive, and that could lead to a reduction in the category’s TV footprint.

“You can’t just reduce the number of pharmaceutical ads shown on television and expect everybody to shrug their shoulders,” JohnWallStreet media consigliere Patrick Crakes said.

These drug companies are an important part of the advertising mix.

For context, they collectively spent $3bn on linear TV ads in H1 ’25 (+12.2% YoY). One can assume their digital expenditure was at least twice as much, and that 70%-80% of the total spent went towards sports programming.

“Replacing any of those lost dollars will be an issue for the media business,” Crakes said.

And by proxy that could impact sports rights owners in their next round of rights negotiations.

Of course, all of this assumes the proposed changes stick. Previous efforts to restrict DTC pharmaceutical ads were overturned. The court ruled they violated First Amendment rights.

Big pharma advertises in sports because that’s where mass-market viewers can be found.

There have always been ethical questions about marketing drugs (or vaccines) directly to consumers. Top spenders often replicate common brand marketing tactics (think: celebrity spokesmen), and detractors, like HHS Secretary Robert F. Kennedy Jr., are concerned the adverts may mislead uneducated consumers. 

The U.S. is just one of two countries that allows DTC pharmaceutical advertising on television. New Zealand is the other.

But for those suffering, these commercials can serve as a valuable awareness vehicle.

“People do want to know about fully approved drugs available in the marketplace,” Crakes said. “And outside of mass media events, I don't know how else you reach them; other than doctors who are usually only seen when there is a major problem.”

It’s worth pointing out that heart attack rates in the U.S. are down meaningfully since drug manufacturers began marketing cholesterol meds on television in the late 1990s. According to the American College of Cardiology, the age-adjusted death rate from heart attacks fell from ~87 deaths per 100,000 people in 1999 to about 38 per 100,000 in 2020.

Healthcare and pharmaceutical companies have become increasingly important to the television advertising ecosystem over the last three decades. For perspective, premium drug brands have accounted for 13% of all ad dollars spent across linear TV this year.

A retreat by the vertical would intensify pressure on media businesses already under duress. 

“All of the big media companies have to be concerned about this,” Crakes said. 

While it would be logical to assume that if big pharma pulled back another category would step in, as was the case with tobacco in both 1970 and 1997.

But “we already have a problem with advertising spend today,” Crakes said. “Take a look at how expensive 30-second broadcast units are in some of these Tier 1 properties. How many mass marketers are there in the United States capable of backfilling the drug companies?”

The answer is not many.

That’s not to say the spots will go unsold. They’ll be offered to current clients or sold to companies unable to pay as much for them, and the rights holder will most likely eat the difference.

The linear networks wouldn’t be the only broadcasters impacted if television’s number two advertising category experienced a setback.

“The streamers care about reform too because they need advertising to improve their operating margins,” Crakes said. “At present, they’re adding ads to everything, and losing 10% of the marketplace makes [selling those spots] harder.”

Tier-one rights owners expecting to double rights fees again during the next round of negotiations should be aware of the evolving advertising marketplace place too. It’s not moving in a direction that directly supports increases for expensive content with limited space for ad placements.

“It's not like a broadcaster of any type is going to ignore this when they place their bid together,” said Crakes. 

For some potential distribution partners, the industry’s latest headwind could make putting a competitive bid together challenging.

No league has more exposure to pharmaceutical ads than the National Football League.

Carriage and retransmission “fees are 70-80% of paid freight, but the other 20%, even though it’s only 20%, when it comes to something like the NFL is in the tens of billions of dollars over the term of a rights fee deal,” Crakes said.

The NBA, NHL, MLB, and major college conferences would all be at-risk the next time their rights come up too.

A major pullback will “impact the biggest properties the most,” Crakes said. The drug companies are “trying to reach the most Americans as possible and thus advertising most heavily across the leagues drawing the biggest audiences.”

But it’s not as if emerging leagues are insulated from reform.

“Nobody wants to lose this pool of money,” Crakes said. “This would make accelerating rights fees growth to max levels harder.”

Properties with rights negotiations on the near-term horizon might want to take that into consideration and accelerate their upcoming discussions. 

“If I’m a typical sports league or property, I would seriously consider locking in attractive offers today,” Crakes said. “No one truly knows what the future looks like given the rapid developments in consolidation, advertising spend, and audience fragmentation that are increasing marketplace opacity. If you can get a max deal today, it may make sense to take it rather than waiting.”