Direct to consumer advertising in pharmaceutical markets
AbstractWe study effects of direct-to-consumer advertising (DTCA) in a mar- ket with two pharmaceutical firms providing horizontally dierentiated (branded) drugs. Patients varying in their susceptability to medication are a prioriuninformed of available medication. Physicians making the prescription choice perfectly identify a patient's most suitable drug. Firms promote drugs to physicians (detailing) to influence prescription decisions and, if allowed, to consumers (DTCA) to increase the awareness of the drug. The main Ãndings are: Firstly, Ãrms beneÃt fromDTCAonlyif prices are regulated. On the one hand, DTCA reduces the physiciansâ¢ market power and thus detailing expenses, while, on the other, it triggers price competition as a larger share of patients are aware of the alternatives. Secondly, under price regulation DTCA is welfare improving as long as the regulated price is not too high. Under price competition, DTCA lowers welfare unless detailing is wasteful and the drugs are poor substitutes.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Health Economics.
Volume (Year): 25 (2006)
Issue (Month): 1 (January)
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Web page: http://www.elsevier.com/locate/inca/505560
Other versions of this item:
- Brekke, Kurt R. & Kuhn, Michael, 2003. "Direct-to-Consumer Advertising in Pharmaceutical Markets," Working Papers in Economics 05/03, University of Bergen, Department of Economics.
- Kurt R Brekke & Michael Kuhn, . "Direct-to-Consumer Advertising in Pharmaceutical Markets," Discussion Papers 03/11, Department of Economics, University of York.
- Kurt R. Brekke & Michael Kuhn, 2005. "Direct to Consumer Advertising in Pharmaceutical Markets," CESifo Working Paper Series 1493, CESifo Group Munich.
- I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology
- M37 - Business Administration and Business Economics; Marketing; Accounting - - Marketing and Advertising - - - Advertising
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