Healthcare Advertising and the Prisoner’s Dilemma

By Jessica Ehrhardt, Managing Drector of Rx&O

In 1999, an unusual meeting took place. Michael Mudd, then an executive at Kraft Foods, invited leaders from America’s largest food companies into the same room to discuss a problem they all understood but none of them could solve alone. 

Their products were contributing to an emerging obesity epidemic. Lawsuits against food companies were being discussed. Public opinion was turning. Regulators were paying attention. Mudd wanted to become a part of the solution before they were forced to change. 

The obvious answer seemed almost laughably simple. What if everyone agreed to make food just a little healthier? A little less salt. A little less sugar. A little less fat. Not because it would win headlines. Because it would create a healthier market for everyone over the long term. 

It never happened. 

Not because the executives were incapable of seeing the problem. Because they were trapped inside one. If Kraft changed but competitors didn’t, Kraft might lose shelf space. If General Mills moved first, Kraft might benefit. If one company invested in healthier products while another continued optimizing for taste and margin, Wall Street would reward the second one—at least for a while. 

Everyone could see the cliff. No one wanted to be first to turn the wheel. Economists have a name for this. The Prisoner’s Dilemma. Individually rational decisions that produce collectively irrational outcomes. 

Twenty-seven years later, advertising finds itself in a remarkably similar place. Every agency leader privately acknowledges that the economics of our business have changed. AI is collapsing production timelines. Execution is becoming abundant. Judgment is becoming scarce. Yet we continue to price, procure and pitch as though production remains the most valuable thing we sell. 

We routinely ask our most senior strategists, creatives, medical experts and commercial thinkers to spend weeks solving complex business problems before a commercial relationship even exists. Not because anyone believes this is the best system. Because everyone believes someone else will keep doing it. 

If one agency refuses speculative work, another may accept it. If one network starts charging for senior strategic thinking, another may absorb the cost. If one shop protects its highest-value capability, procurement may simply move down the list. So everyone continues. Not because it’s working. Because no one wants to move first. That’s the Prisoner’s Dilemma. And the consequences extend well beyond agency balance sheets. 

Every hour spent giving away senior judgment is an hour that can’t be invested in clients already paying for it. Every speculative pitch quietly taxes every existing client. Every hour your best strategist spends solving problems for free is an hour they can’t spend helping paying clients grow. Every million dollars absorbed in speculative pitches is capital that never gets invested in better talent, stronger capabilities, better systems, or new products. 

Every quarter, agencies search for efficiencies to offset work they were never compensated to perform in the first place. Then we wonder why the industry struggles to invest in its future. It’s not an AI problem. It’s an incentive problem. 

Meanwhile, healthcare companies are undergoing the most significant operational transformation in decades. They’re rebuilding technology stacks. Standing up AI governance. Rethinking commercialization. Creating new digital capabilities. Compressing launch timelines. They’re redesigning almost every part of how work gets done. Except, in many cases, how they buy strategic expertise. That’s the contradiction. We’ve modernized the technology stack far faster than we’ve modernized the strategic capacity stack. 

The answer isn’t eliminating Agencies of Record. Nor is it replacing every incumbent with a boutique. Healthcare organizations need continuity. They need institutional knowledge. They need enterprise-scale partners. They also need different operating models for different kinds of problems. Some commercial challenges demand long-term stewardship. Others require concentrated bursts of senior judgment over weeks rather than months. Some require deep scientific specialization. Others demand commercialization expertise, organizational design, or executive decision acceleration. 

Expecting one commercial model to solve every one of those problems makes about as much sense as expecting one medicine to treat every disease. Healthcare would never accept that logic in clinical development. Perhaps it’s time we stopped accepting it in commercialization. 

The irony is difficult to ignore. The industry has become extraordinarily sophisticated at evaluating technology. But we’re becoming much less sophisticated at evaluating how strategic capacity creates value. The future doesn’t feel constrained by technology–it feels constrained by procurement. 

Maybe that’s the next conversation our industry needs to have. Not whether AI will change marketing. It already has. But whether we’re willing to redesign the commercial models that surround it—or whether, like those food executives in 1999, we’ll continue making individually rational decisions that quietly undermine the long-term health of the entire system.