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Direct-to-Consumer Advertising of Prescription Drugs: A Strategic Analysis

  • Wilfred Amaldoss


    (Fuqua School of Business, Duke University, Durham, North Carolina 27708)

  • Chuan He


    (Leeds School of Business, University of Colorado, Boulder, Colorado 80309)

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Consumers cannot purchase a prescription drug without a prescription from a physician, yet many prescription drugs are promoted to consumers with the help of direct-to-consumer (DTC) advertising. In this paper, we propose and test a competitive model of DTC advertising. We find that the brand specificity of DTC advertising can have an inverted U-shaped relationship with detailing, DTC advertising, and profits. Furthermore, an increase in the cross-price sensitivity between competing prescription drugs is not always detrimental to firm profits. A laboratory test lends qualitative support to some of our model predictions. We also discuss potential implications of DTC advertising for generic drugs and over-the-counter drugs.

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Article provided by INFORMS in its journal Marketing Science.

Volume (Year): 28 (2009)
Issue (Month): 3 (05-06)
Pages: 472-487

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Handle: RePEc:inm:ormksc:v:28:y:2009:i:3:p:472-487
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