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

In the history-making alliance that would meld two of the world’s largest ad holding companies, Omnicom Group’s takeover of Interpublic Group (IPG) brings under one roof more than 50 medical marketing agencies.

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

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

Data backs up his bullishness on the segment—overall ad spending in healthcare and pharma is expected to top $30 billion in the U.S. in 2024, a 5% year-over-year increase, per eMarketer. Americans spent $574 billion on medicine in 2023, according to Grand View Research, with that number anticipated to climb 5% annually through 2030.

The combined Omnicom-IPG would house medical marketing firms with specialties across creative, communications, media, patient advocacy, clinical trials, data intelligence, and more. Among the holding companies’ lengthy agency roster are Biolumina, Patients & Purpose, McCann Health, Area 23, Rise & Run, Wildtype, FCB Health, and Humancare.

Reducing costs through scale

Whether all the agencies will survive and how their leadership teams will be structured are open questions. Layoffs and consolidation loom as Wren and Krakowsky have said they plan to trim $750 million in costs within the first 24 months of the deal closing. Add to that the challenge of intertwining two ad behemoths with competing brands in a segment like healthcare that’s especially sensitive about its trade secrets.

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

In a recent setback, IPG lost Pfizer‘s creative account to Publicis Groupe in March, laying off 5% of its U.S. employees as a result. 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 client loss, and not due to the Omnicom deal).

Yet Omnicom and IPG are touting the combined efficiencies and scale that the deal would offer its clients across consumer product goods categories, including healthcare.

There are benefits and drawbacks to massive scale, according to Chris Beland, VP analyst at Gartner.

“Omnicom and IPG are going to bring new offerings and tools to the table—the bigger organization has more resources,” Beland told ADWEEK. “The flip side for brands is that it reduces competition—there won’t be as many agencies to invite for RFPs.”

Though the healthcare category is a hefty ad spender, there has been some belt tightening, Beland said. Per Gartner research, pharma marketing budgets as a percentage of overall revenue fell from 9.6% to 7% in 2024, and paid media budgets remained flat, Beland said.

Bucking the current trend across categories, pharmaceutical advertisers rely heavily on traditional media such as TV, since they target a lucrative 65-and-up demographic that still watches networks such as Fox News, CBS, ABC, and MSNBC, per eMarketer. Pharma brands spent $3.4 billion on linear TV in the first eight months of 2024, an 8.1% increase from the previous year.

Better living through AI

Even in a high-touch field like healthcare, artificial intelligence (AI) is a hot topic, with analysts saying how technology is reshaping the industry will be front and center at the new Omnicom.

“The merger is a proactive move to get ahead of the changes that are going to be demanded of [Omnicom-IPG], which involves increasing the amount, quality, and variety of content, but doing it in a way that fits within the regulatory and approval process of pharma,” Beland said. “There are really big expectations from brands that they should see the benefits of the advances in AI technology.”

The deal, on the surface, is “a play for more revenue streams,” according to Gil Bashe, a former WPP executive who’s now chair of global health and purpose at Finn Partners. “But it’s not addressing the elephant in the room: how tech might make their massive scale obsolete. Their real concern is AI’s potential to fast-track everything.”

Pharma’s unique lifecycle

While pharma marketers face many of the same battles as other sectors, their product lifecycles are unique, Beland said. New drugs are developed, approved, and labeled by the Federal Drug Administration, then launched with often aggressive (and short-lived) ad campaigns.

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

As a result, holding companies are “in a constant sprint to win big pharma’s favor,” Bashe said.

Because it’s a specialized field of communications, with stringent regulation, creatives with institutional knowledge and track records are “the lifeline to game-changing work,” Bashe said. A merger of Omnicom-IPG scale, with potential headcount cuts, could have a negative impact on the creative process and “might even drive away top talent,” he said.

“Will this potential 100,000-person behemoth spark the best ideas from our account and creative leaders? I’m skeptical,” Bashe said. “Even if the medical ad agencies aren’t merged immediately, staff will look over their shoulders, waiting for the other shoe to drop—it’s human nature—and it’s not exactly a recipe for groundbreaking work.”