that starts in the late nineteenth century. These two histories initially have little in common but in recent years, as we shall show, medicine seems to have become the home of the most sophisticated marketing on earth. The transformation is undeniable but if we wish to change things it is not sufficient to simply assert there has been a transformation—we need to pinpoint the mechanisms driving the change.
FROM MEDICINE TO MARKETING
In a 1951 ad featuring American soldiers at war, the pharmaceutical company Eli Lilly outlined the contribution it and other companies were making to the United States:
A record of American Achievement. Thousands of Americans and of our allies too, are alive today because of the lifesaving gains made in World War II. The mortality rate of our own wounded dropped to the lowest level in the history of any army in the world. This was accomplished through better methods and techniques of medical care and especially through the use of new and improved pharmaceuticals. Tremendous quantities of penicillin, anesthetic agents, sulfonamides and processed blood were quickly supplied by such manufacturers as Eli Lilly and Company. The rewards of free enterprise had built an American industry large enough to do the job.5
Ironically, most of the treatments mentioned in this ad were produced not through free enterprise but through government funding or by the prewar German pharmaceutical industry cartel IG Farben. During the 1950s and 1960s, Czechoslovakia, then part of the Soviet bloc, produced more new drugs per capita than any other country. Nevertheless, capitalism and free markets at some level “work.” Everyone now recognizes this. And, given a choice between a system that produces the best hi-tech healthcare in the world and contributes to the development of breakthrough drugs but is run as a business or a system that isn't run as a business, puts a premium more on caring than on breakthrough drugs, and takes social factors into account in considering appropriate care, the average person will opt for breakthroughs every day of the week.
The problem with this free market view of the world, nowhere more so than in the pharmaceutical industry, is that the free markets that supposedly lead to better mousetraps were cannibalized in the twentieth century by what became a few large firms, one of them being Eli Lilly, that were then in a position to favor marketing over innovation as the ultimate key to their profits. Where the research and development budgets of large pharmaceutical companies like Lilly and Pfizer were once much greater than their marketing budgets, the reverse is now true. The pharmaceutical industry, for example, now spends $30 billion annually on marketing in the United States alone. In 2002, Pfizer devoted roughly $1.2 billion to marketing the statin Lipitor as a treatment for raised cholesterol levels, an amount equivalent to the US National Institutes of Health budget for research on Alzheimer's disease, arthritis, autism, epilepsy, influenza, multiple sclerosis, sickle cell disease, and spinal cord injury combined.6 Given that Lipitor was only one of six statins on the market at the time, anyone trying to get out a competing medical message—that statins have a very limited role in healthcare or that there are alternate ways to lower cholesterol through diet and other approaches—faces a daunting challenge. With money like this behind them, twenty-first-century corporate marketers are supremely confident they can sell anything. Bottled water, oxygen, and with the right packaging, even inferior mousetraps. And if they can do this, why not homeopathic or relatively worthless medicines?
Pharmaceutical companies have perhaps done more to undermine traditional markets than any other industrial companies. Not coincidentally, from Lilly's 1951 ad to a 2005 book by Hank McKinnell,7 then CEO of Pfizer, they are also the corporations most active in spreading the message that there is no alternative to a free enterprise system. But while in fact many industrial corporations came to the conclusion a century ago that the capitalism of cutthroat competition and free markets didn't work as well as it might—at least not for them—no other branch of industry has been able to pursue this agenda in quite the way pharmaceutical companies have.
To begin to see how pharmaceutical companies have engineered what they have, we need to return to the mid-nineteenth century when the first science-based companies began producing goods made possible by the new physical and chemical sciences. These sciences formed the basis of electrical manufacturing as well as the chemical and metal industries, leading to a string of new goods from automobiles to plastics, explosives, dyes, rubber products, artificial fibers, and, later, pharmaceuticals. In all these cases, competition between companies should in theory drive prices down in an open market, especially when increasing automation reduced the cost of production. Faced with the risk of falling profits, the new manufacturing companies commonly banded together in cartels to keep prices artificially high. A cartel presents the world with apparent competition between companies when in fact the companies have agreed among themselves to coordinate prices and market arrangements, allowing them to enjoy the advantages of de facto monopolies.8 But government resistance to cartels mounted in the United States and Europe at the end of the nineteenth century.
Companies needed to find another way to maintain or increase their profits. It was this that led to a turn to marketing. For manufacturers the problem was that as the genuine need for automobiles, plastics, dyes, nuts and bolts as well as mousetraps were increasingly met with capacity to spare, ever more production could only drive prices down. If prices could not be rigged by cartels, could demand be maintained or increased by tapping into what people might be persuaded they wanted or needed?9
An appreciation of the opportunities that marketing opened up led to the emergence of marketing departments within companies and the first university courses on marketing in the 1920s.10 In a supreme irony, much of the raw material for these courses came from a brilliant set of ad hoc developments that underpinned the marketing of proprietary, over-the-counter medicines in the nineteenth century. The early exponents of the new science of marketing realized that the true experts on understanding what people might be persuaded they needed were quacks pushing worthless medical remedies. It was these who more than anyone else created advertising and shaped modern marketing.11
One of the first lessons that proprietary medicines taught later marketers came in the 1830s, when a war broke out in the newspapers between Samuel Lee, Jr. of Connecticut who produced “Bilious Pills” and another Samuel Lee from Connecticut who also produced a Bilious Pills remedy. Far from leading to market collapse, this dispute spurred demand for Bilious Pills, and soon other proprietors across the country were joining in with their own preparations. In contrast to the producers of dyes and metal goods, these businessmen found competition among producers led to increase in sales for their commodities, without prices falling. In the drug domain this phenomenon has been demonstrated again and again from the marketing of Aspirin as a brand name product in the nineteenth century to that of Lipitor and Vioxx in this century.12
In 1804, there were some ninety over-the-counter proprietary medicines listed in New York. By 1857, this had swollen to more than fifteen hundred countrywide. The growth in business paralleled the growth of the press and literacy. Where there were two hundred newspapers in 1800, there were four thousand by 1860. The proprietors of these remedies took advantage of this explosive growth and were among the first to market nationally. They also marketed heavily: the proprietary medicines industry spent more than any other industry on advertising in the second half of the nineteenth century. By the end of that century up to $i million was being spent on telling the American people about the benefits of Scott's Emulsion, just one of an estimated fifty thousand compounds in a trade that had a retail value of several hundred million
dollars.13
The proprietary medicines industry was the first to market lifestyles rather than the compounds per se—this was marketing before the modern term had come into being. There was a simple reason for this: there was little if any value in these substances. The key ingredients were on the bottle rather than in it—the branding. It was no accident that one of the leading early lights in advertising, Claude Hopkins, would say that “the greatest advertising men of my day were schooled in the medicine field”14—schooled,
