Feds turn antitrust focus to digital pharma ads

The Federal Trade Commission is currently investigating a merger in an obscure but lucrative part of the pharmaceutical industry: The $8 billion digital advertising market.

IQVIA is buying Propel Media, which owns DeepIntent, one of the main advertising technology companies used by drugmakers to market their products to doctors and patients. FTC staff have been investigating the deal for months, according to four people with direct knowledge of the matter and confirmed by IQVIA.

The deal, which has not been previously disclosed, was first inked last year, three of the people said. IQVIA is believed to have paid in the range of $700 million to $800 million for the purchase, according to two of the people. The FTC investigation has also not been previously reported.

At issue in the FTC probe is whether the deal would help IQVIA, a $35 billion pharmaceutical data and analytics company, lock up the bulk of the market for digital advertising of pharmaceuticals aimed at doctors and patients, thereby harming rivals and potentially increasing costs for drugmakers, said three of the people, who were granted anonymity to discuss a confidential investigation. IQVIA is already the largest player in health data and analytics.

The FTC is nearing the end of its investigation, and staff lawyers reviewing the deal are leaning toward filing a lawsuit to block it, according to two of the people. No final decision has been made, and the agency could ultimately choose to not bring a case.

“There are many companies — from very large, well-known companies (e.g., Google, Microsoft/Xandr, WebMD) to smaller recent entrants — providing technology, data, and services to support digital advertising from life science companies to doctors and patients,” IQVIA spokesperson Trent Brown said. “IQVIA began providing some of these services only in the past few years, and the DeepIntent business will fill a gap in IQVIA’s offerings by adding a demand-side platform.”

Brown said the company will continue working with the FTC to clear the deal.

A DeepIntent spokesperson did not respond to a request for comment. A FTC spokesperson declined to comment.

IQVIA is the leading provider of pharmaceutical sales and reference data, and also sells software for analyzing that information. Drug companies use IQVIA’s trove of information — which includes over 800 million de-identified patient records and petabytes of sales, promotional and prescription data — to gauge the likely demand for the drugs they’re developing and accurately compensate their sales forces. Generic drug companies, for example, can use the data to determine if it is financially feasible to introduce a competitor to a branded drug.

DeepIntent is a privately held advertising technology company that works with pharmaceutical companies to market drugs to doctors and patients. It also helps client companies measure and improve the success of those ad campaigns.

IQVIA made multiple moves in 2022 to build out an advertising business, including the separate purchase of Lasso Marketing, another health care ad tech company.

The FTC is investigating both the combination of the two direct competitors — Lasso and DeepIntent — as well as so-called “vertical” concerns of whether IQVIA would be able to leverage its mountain of pharmaceutical sales data to monopolize the pharmaceutical advertising market, three of the people said.

In its most recent annual report, IQVIA said the scope of its data covers more than 85 percent of the world’s pharmaceuticals. That includes “more than 1.2 billion comprehensive, longitudinal, non-identified patient records spanning sales, prescription and promotional data, medical claims, electronic medical records, genomics, and social media” from around 150,000 data suppliers.

Pharmaceutical advertising is big business. The total U.S. market for pharma ads is at least $11.5 billion, based on data collected by advertising analytics company Standard Media Index. Darrick Li, SMI’s vice president of sales in North America said anecdotal evidence could put that number as high as $15 billion. Of that, he said, around 53 percent (roughly $8 billion at the high estimate) is digital, which is growing at a rapid 17 percent clip, in the first quarter of 2023 compared to the year-earlier period, Li said.

And while the pharmaceutical industry has been slow to evolve from traditional television ads, the digital shift is happening, and that’s where companies like DeepIntent come in. According to industry participants, it is one of a handful of companies helping drugmakers target ads at both doctors and patients. Last year the company said it could offer guarantees on the number of verified patients reached.

In targeting ads at doctors, IQVIA is already a key supplier of data to DeepIntent.

Part of the FTC investigation is focused on how the deal could pose a threat to competing ad platforms serving the pharmaceutical industry including The Trade Desk, which uses IQVIA data, as well as Pulse Point, according to three of the people with knowledge of the investigation. Those companies help advertisers, including drugmakers, place ads around the internet. The latter is owned by Internet Brands, which also owns WebMD and Medscape, an informational service for health care providers.

The FTC is concerned that with both DeepIntent and Lasso, the bulk of these ads will run through IQVIA, those people said. Those ads show up on health care-focused websites used by doctors, and general websites across the internet.

Spokespeople for The Trade Desk and Pulse Point did not respond for comment.

The FTC is also focused on IQVIA’s ability to control the market for services that measure the success of digital advertising campaigns. IQVIA offers this service, as do companies including Veeva Systems and PurpleLab. Those companies can currently measure the success of advertising campaigns run by DeepIntent, but if the merger goes through, the FTC is concerned IQVIA would make it more difficult for them to do so, according to three of the people.

Spokespeople for Veeva and PurpleLab did not respond for comment.

“Does this give IQVIA the incentive and ability to withhold the data or raise prices to people who access it today? If the answer to that is ‘yes,’ then maybe there's an antitrust issue here,” a health care lawyer said on the condition of anonymity, due to client conflicts.

The FTC is concerned with exactly that scenario, the people said.

However, at least one ad tech expert disagrees.

“IQVIA in this case is just buying a revenue stream,” said Augustine Fou, a digital advertising consultant who advises companies including drugmakers. “They are unlikely to turn away revenue from selling data if other companies are willing to pay for it. While it’s possible that IQVIA could favor its own platform, for example by only selling outdated data to competitors, that would be difficult to prove before it happened.”

When a company controls a key input used by its competitors — in this case pharmaceutical sales data — it only works to withhold that data from rivals if it facilitates a price increase that would justify the lost revenue.

In this case, Fou said IQVIA would be unlikely to recoup its losses by raising prices for its advertising services. And even though DeepIntent’s lower data costs post-merger would allow it to theoretically undercut its rivals on price, it would take years to get advertisers and agencies to switch to DeepIntent, even with prolonged, deeply discounted pricing, because of long-term contracts, Fou said.

IQVIA is no stranger to antitrust scrutiny or the FTC. The company was previously investigated by the agency’s lawyers for how it bundles various products, and its unwillingness to allow competing software companies to access its data. The related FTC investigation, first reported by The Capitol Forum, did not result in an enforcement action.

Antitrust enforcers in recent years have been wading deeply into the complex world of digital advertising, primarily targeting Google, which was sued by the Justice Department in January over allegations it has illegally monopolized the market.

Within the greater world of programmatic advertising, DeepIntent is a relatively small player. However, specializing in health care gives it an edge in its specific niche over larger players. For example, Google allows pharmaceutical companies to run search ads and place ads in health care-focused websites. However, the platform does not allow advertisers to target consumers based on health information and also cannot target doctors directly.

A Google spokesperson declined to comment.

Google’s leading position in the overall digital ad market is not a factor in the FTC’s investigation, according to three of the people with knowledge of the probe.