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Detailing vs. Direct-to-Consumer Advertising in the Prescription Pharmaceutical Industry

Author

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  • Ram Bala

    (Indian School of Business, Hyderabad 50032, India)

  • Pradeep Bhardwaj

    (Sauder School of Business, University of British Columbia, Vancouver, British Columbia V6T 1Z2, Canada)

Abstract

The pharmaceutical industry has always used sales representatives to target physicians (detailing), who are a key link in sales and market share for prescription pharmaceuticals. Since August of 1997, when the Food and Drug Administration eased the restrictions on direct-to-consumer advertising (DTCA), there has been a dramatic increase in the use of DTCA by pharmaceutical firms to target end customers (patients). DTCA seems to have two different effects on pharmaceutical markets. The first is to inform patients about the availability of drugs for some ailments, thus expanding the market (constructive). The second is to persuade patients to talk about specific brands when they meet physicians, with the objective of influencing market share (combative). We consider both effects of DTCA in the presence of a detailing program in a competitive environment. We incorporate the dynamics of physician-patient interaction in a game-theoretic model where firms decide on the form of DTCA to adopt (constructive or combative) and then compete in the marketplace by choosing detailing and DTCA levels. We answer four questions: What is the impact of adopting DTCA on competitive intensity? How do optimal detailing levels for a firm change with the adoption of DTCA? How should the DTCA strategy for a firm vary depending on whether it is stronger or weaker in its degree of influence in the physician's office? Finally, under what conditions would competing firms voluntarily decide to pursue constructive DTCA?

Suggested Citation

  • Ram Bala & Pradeep Bhardwaj, 2010. "Detailing vs. Direct-to-Consumer Advertising in the Prescription Pharmaceutical Industry," Management Science, INFORMS, vol. 56(1), pages 148-160, January.
    • Handle: RePEc:inm:ormnsc:v:56:y:2010:i:1:p:148-160
    DOI: 10.1287/mnsc.1090.1074
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    References listed on IDEAS

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    Cited by:

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    2. Mahabubur Rahman & M. Ángeles Rodríguez-Serrano & Mary Lambkin, 2019. "Advertising efficiency and profitability: Evidence from the pharmaceutical industry," Post-Print hal-02096913, HAL.
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    8. Hui Zhang & Gregory Zaric, 2015. "Using price–volume agreements to manage pharmaceutical leakage and off-label promotion," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 16(7), pages 747-761, September.
    9. Jesse R. Catlin & Cornelia (Connie) Pechmann, 2016. "An Investigation of Consumer and Doctor Regulatory Beliefs and Regulatory Knowledge about Pharmaceutical Drug Promotions," Journal of the Association for Consumer Research, University of Chicago Press, vol. 1(3), pages 392-410.
    10. Ram Bala & Pradeep Bhardwaj & Pradeep K. Chintagunta, 2017. "Pharmaceutical Product Recalls: Category Effects and Competitor Response," Marketing Science, INFORMS, vol. 36(6), pages 931-943, November.

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