Healthcare Marketing Emerges as Key Growth Driver in Omnicom’s IPG Deal

In the historic alliance that would merge two of the world’s largest advertising holding companies, Acquisition of Interpublic Group (IPG) by Omnicom Group brings together more than 50 medical marketing agencies under one roof.

Discussing the multibillion-dollar deal, Omnicom CEO John Wren distinguished healthcare marketing category as a major potential growth driver for the combined entities.

“If I were a pharmaceutical company, I would pause and look at what the combined portfolio of that company will have in six or nine months,” Wren said Monday during an investor call with IPG’s CEO. Philippe Krakowsky.

The data confirms his optimism on the segment: overall ad spending in the healthcare and pharmaceutical industries is expected to exceed $30 billion in the United States in 2024, a 5% year-over-year increase. ‘other, according to the report. eMarketer. Americans spent $574 billion on medicines in 2023, according to Research on Grand Viewand this number is expected to increase by 5% per year until 2030.

The combined Omnicom-IPG would house medical marketing companies specializing in creative, communications, media, patient advocacy, clinical trials, data intelligence, and more. Among the holding companies’ long list of agencies are Biolumina, Patients & Purpose, McCann Health, Area 23, Rise & Run, Wildtype, FCB Health and Humancare.

Reducing Costs Through Scale

Whether all agencies will survive and how their management teams will be structured remain open questions. Layoffs and consolidations loom as Wren and Krakowsky announced plans to downsize. $750 million in costs in the first 24 months following the conclusion of the transaction. Add to that the challenge of mixing two advertising giants with competing brands in a segment like healthcare, which is particularly sensitive about its trade secrets.

The healthcare category would be one of the key revenue drivers for the new entity. Both holding companies currently work with major players in the industry: IPG’s Mediabrands manages media planning and buying for direct-to-consumer brands under the Bristol Myers Squibb banner, while that of Omnicom MDG has ties to pharmaceutical giant Boehringer Ingelheim.

In a recent setback, IPG lost Pfizerlast March at Publicis Groupe, thus laying off 5% of its American employees. This week, ADWEEK revealed that IPG Mediabrands plans to lay off 103 people in January, according to a WARN notice filed in California (an IPG spokesperson said the layoffs were the result of a customer loss and not the Omnicom deal).

However, Omnicom and IPG are touting combined efficiency and scale that the deal would offer its customers across all consumer goods categories, including healthcare.

There are pros and cons on a broad scale, according to Chris Beland, vice president analyst at Gartner.

“Omnicom and IPG are going to have new offerings and new tools: the larger organization has more resources,” Beland told ADWEEK. “The downside for brands is that it reduces competition: there won’t be as many agencies to invite for tenders.”

Although the health care category consumes a lot of advertising, there has been some belt-tightening, Béland said. According to a Gartner study, pharmaceutical marketing budgets as a percentage of overall revenue fell from 9.6% to 7% in 2024, and paid media budgets remained stable, Beland said.

Bucking the current trend across all categories, pharmaceutical advertisers are leaning heavily on traditional media such as television as they target a lucrative 65+ demographic that still watches networks such as Fox News, CBS, ABC and MSNBC, according to eMarketer. Pharmaceutical brands spent $3.4 billion on linear TV in the first eight months of 2024, an increase of 8.1% from the previous year.

Live better thanks to AI

Even in a very sensitive area like health, artificial intelligence (AI) is a hot topic, with analysts saying how the technology reshapes the industry will be at the forefront of the new Omnicom.

“The merger is a proactive step aimed at anticipating the changes that will be required of [Omnicom-IPG]which means increasing the quantity, quality and variety of content, but doing so in a way that fits within the pharmaceutical industry’s regulatory and approval process,” Beland said. “There are really high expectations for brands to see the benefits of advancements in AI technology. »

The deal, on the face of it, is “a play for more revenue streams,” according to Gil Bashéan old one WPP who is now President of Global Health and Purpose at Finn Partners. “But it’s not about the elephant in the room: how technology could make their large-scale use obsolete. Their real concern is the potential of AI to speed up everything.”

The unique life cycle of the pharmaceutical industry

While pharmaceutical marketers face the same battles as other industries, their product life cycles are unique, Beland said. New drugs are developed, approved, and labeled by the Federal Drug Administration, then launched through often aggressive (and short-lived) advertising campaigns.

“They go out of the gate and run really hard until they lose their patent, and once they hit ‘loss of exclusivity,’ they pull out and eventually stop active promotions,” said Beland. “There’s a very specific window of time that they operate against, and then agencies move on to the next product.”

As a result, holding companies are “in a constant race to curry favor with big pharma,” Bashe said.

Because it’s a specialized field of communications, with strict regulation, creatives with institutional knowledge and backgrounds are “the lifeline for game-changing work,” Bashe said. A merger on the scale of Omnicom-IPG, with potential workforce reductionscould negatively impact the creative process and “could even drive away top talent,” he said.

“Will this potential giant of 100,000 people spark the best ideas from our account and creative leaders? I’m skeptical,” Bashe said. “Even if medical ad agencies don’t merge immediately, staff will be looking over their shoulders, waiting for the other shoe to drop – that’s human nature – and that’s not exactly a recipe for breakthrough work .”