In July 2018, UDG Healthcare announced the acquisition of Create NYC, a New York-based disruptive healthcare advertising agency, into its Ashfield division. Ashfield acquired Create NYC to support its strategy of expanding into areas of differentiated but aligned services to its core scientific communication capabilities. For Create NYC, Ashfield provides the opportunity to diversify its client base and expand internationally.
Merger and acquisitions (M&As) like this were seen throughout 2018 in the healthcare agency sector, including Huntsworth acquiring Giant Creative Strategy, Publicis Health getting Payer Sciences, and Fishawack adding Blue Latitude Health to its group of companies.
In this email interview, Natalie McDonald, President, CEO, and Founder of Create NYC, talks about how M&A activity is disrupting the healthcare agency model and what it all means for the industry.
PM360: What is fueling M&A activity in the sector?
Natalie McDonald: The healthcare industry as a whole is really craving a disruption from the norm. In the communications sector there hasn’t been a new agency model introduced for decades and the traditional agency has prevailed.
However, the rigid traditional model driven by time and materials has come up short in an environment where more flexible, efficient offerings are required. Today, drug manufacturers have less time to conceive and implement campaigns given the evolution of promotion across increasingly complex channels including digital that necessitates a continuous flow of content. Hinging on traditional agency timelines is no longer an option.
Many clients are also increasingly skeptical of the value they’re getting from some traditional agencies. Often, they pay huge bills for basic foundational and derivative tactics driven by the hourly model and scope increases that are commonplace. With some traditional agencies, there is little accountability and no transparency.
To date there’s been a void in in the healthcare industry and there’s a need for agencies to become more efficient and cost-effective to reflect these new challenges. Healthcare agencies can solve this challenge by further decoupling the creative and production process to introduce more innovative models that shift incentives to delivering high-quality deliverables that are on time and in budget.
Working with fixed-fee models that decouple strategy and campaign creation from the execution of tactics can help to guarantee in budget and on-time deliverables. Niche agencies that have introduced this model flex to complement traditional agency work by offering on-demand, efficient, and focused support to execute healthcare tactics.
Will M&A activity disrupt traditional agency models?
More traditional agencies will not be replaced—they will still play a vital role—however, the introduction of more modern approaches to healthcare agencies will break the traditional advertising mold. These new agency models will answer an unmet need in the ever-changing healthcare industry.
The challenge for merged agencies will be to figure out how they combine the capabilities and expertise of established organizations with more dynamic, disruptive agencies to create efficiency and make better use of client budgets.
Use of a conventional AOR partner for end-to-end creative development and production services is often done out of tradition or convenience. Rethinking the content supply chain allows for the introduction of more efficient model and partner options to execute derivative, adaptive, and translated content across customers and channels.
What will the shift to a more dynamic agency environment mean for the healthcare advertising industry generally?
It’s a game changer and we’ll see a lot of change over the next few years—clients will begin to hire in a different way and strategically merged agencies will gain competitive advantages by blending traditional with new.
More importantly, infusing disruptive agency models throughout a brand’s lifecycle will create additional value for businesses throughout the healthcare industry by delivering more tactics at cheaper pricing.
Clients are looking for more flexibility, on-demand, and seasonal projects. For agencies, being able to scale with a client over a brand’s lifecycle is as important as is being able to work at a department, campaign, or brand level.