IDEAS home Printed from https://ideas.repec.org/a/ucp/jlawec/doi10.1086-368004.html
   My bibliography  Save this article

Deregulating Direct-to-Consumer Marketing of Prescription Drugs: Effects on Prescription and Over-the-Counter Product Sales

Author

Listed:
  • Davina C. Ling
  • Ernst R. Berndt
  • Margaret K. Kyle

Abstract

This paper examines the impact and interrelationships between direct-to-consumer (DTC) and physician-oriented marketing on the sales composition of the prescription (Rx) and over-the-counter (OTC) versions of antiulcer and heartburn medications. To understand better the implications for competition of the 1997 Food and Drug Administration's policies regarding DTC marketing, as well as recent Rx-to-OTC switch approvals, we also examine the relationship between order-of-entry effects and marketing intensities. We find spillover effects of marketing for Rx drugs on same-brand OTC versions of the drugs. We also find that the ratio of cumulative marketing intensity (cumulative marketing efforts divided by cumulative sales) in the OTC segment increases monotonically with order of entry. Our regression results show that various marketing demand elasticities depend on order of entry. Our findings document the importance of nonprice competition in the OTC drug market and suggest that the recent deregulation of Rx DTC marketing enhances rivalry and facilitates competition.

Suggested Citation

  • Davina C. Ling & Ernst R. Berndt & Margaret K. Kyle, 2002. "Deregulating Direct-to-Consumer Marketing of Prescription Drugs: Effects on Prescription and Over-the-Counter Product Sales," Journal of Law and Economics, University of Chicago Press, vol. 45(S2), pages 691-723.
    • Handle: RePEc:ucp:jlawec:doi:10.1086/368004
    DOI: 10.1086/368004
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1086/368004
    Download Restriction: Access to the online full text or PDF requires a subscription.
    File URL: http://dx.doi.org/10.1086/368004
    Download Restriction: Access to the online full text or PDF requires a subscription.
    File URL: https://libkey.io/10.1086/368004?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Hurwitz, Mark A & Caves, Richard E, 1988. "Persuasion or Information? Promotion and the Shares of Brand Name and Generic Pharmaceuticals," Journal of Law and Economics, University of Chicago Press, vol. 31(2), pages 299-320, October.
    2. Leffler, Keith B, 1981. "Persuasion or Information? The Economics of Prescription Drug Advertising," Journal of Law and Economics, University of Chicago Press, vol. 24(1), pages 45-74, April.
    3. Grabowski, Henry G & Vernon, John M, 1992. "Brand Loyalty, Entry, and Price Competition in Pharmaceuticals after the 1984 Drug Act," Journal of Law and Economics, University of Chicago Press, vol. 35(2), pages 331-350, October.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Roger Feldman & Félix Lobo, 2013. "Competition in prescription drug markets: the roles of trademarks, advertising, and generic names," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 14(4), pages 667-675, August.
    2. Patricia M. Danzon & Eric L. Keuffel, 2014. "Regulation of the Pharmaceutical-Biotechnology Industry," NBER Chapters, in: Economic Regulation and Its Reform: What Have We Learned?, pages 407-484, National Bureau of Economic Research, Inc.
    3. Brekke, Kurt R. & Kuhn, Michael, 2006. "Direct to consumer advertising in pharmaceutical markets," Journal of Health Economics, Elsevier, vol. 25(1), pages 102-130, January.
    4. Rizzo, John A, 1999. "Advertising and Competition in the Ethical Pharmaceutical Industry: The Case of Antihypertensive Drugs," Journal of Law and Economics, University of Chicago Press, vol. 42(1), pages 89-116, April.
    5. Glenn Ellison & Sara Fisher Ellison, 2011. "Strategic Entry Deterrence and the Behavior of Pharmaceutical Incumbents Prior to Patent Expiration," American Economic Journal: Microeconomics, American Economic Association, vol. 3(1), pages 1-36, February.
    6. Dhaval M. Dave, 2013. "Effects of Pharmaceutical Promotion: A Review and Assessment," NBER Working Papers 18830, National Bureau of Economic Research, Inc.
    7. Yunyun Wan, 2018. "Brand Loyalty and Generic Entry: Why Do Brand-Name Drug Companies Launch Their Own Generics?," The Japanese Economic Review, Springer, vol. 69(3), pages 340-346, September.
    8. Allen N. Berger & Astrid A. Dick, 2007. "Entry into Banking Markets and the Early‐Mover Advantage," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(4), pages 775-807, June.
    9. Ruiz-Conde, Enar & Wieringa, Jaap E. & Leeflang, Peter S.H., 2014. "Competitive diffusion of new prescription drugs: The role of pharmaceutical marketing investment," Technological Forecasting and Social Change, Elsevier, vol. 88(C), pages 49-63.
    10. Joan Costa-i-Font & Alistair McGuire & Nebibe Varol, 2011. "Does Pharmaceutical Price Regulation Affect the Adoption of Generic Competition? Evidence from the OECD, 1999-2008," CESifo Working Paper Series 3441, CESifo.
    11. Laura Magazzini & Fabio Pammolli & Gianluca Papa & Nicola Carmine Salerno, 2005. "Generici vs. Branded: confronto internazionale su prodotti off-patent rimborsati dal SSN," Working Papers CERM 01-2005, Competitività, Regole, Mercati (CERM).
    12. W. David Bradford & Andrew N. Kleit & Paul J. Nietert & Steven Ornstein, 2010. "The Effect Of Direct To Consumer Television Advertising On The Timing Of Treatment," Economic Inquiry, Western Economic Association International, vol. 48(2), pages 306-322, April.
    13. Pierre Azoulay, 2002. "Do Pharmaceutical Sales Respond to Scientific Evidence?," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 11(4), pages 551-594, December.
    14. Königbauer, Ingrid, 2006. "Dealing with Rising Health Care Costs: The Case of Pharmaceuticals," Munich Dissertations in Economics 5640, University of Munich, Department of Economics.
    15. Kurt R. Brekke & Odd Rune Straume, 2008. "Pharmaceutical Patents: Incentives for R&D or Marketing?," CESifo Working Paper Series 2433, CESifo.
    16. Appelt, Silvia, 2010. "Authorized Generic Entry prior to Patent Expiry: Reassessing Incentives for Independent Generic Entry," Discussion Papers in Economics 11476, University of Munich, Department of Economics.
    17. Anderson, Simon P. & Ciliberto, Federico & Liaukonyte, Jura, 2013. "Information content of advertising: Empirical evidence from the OTC analgesic industry," International Journal of Industrial Organization, Elsevier, vol. 31(5), pages 355-367.
    18. W. David Bradford & Andrew N. Kleit, 2012. "Direct to Consumer Advertising for Pharmaceuticals: Research Amid the Controversy," Chapters, in: Andrew M. Jones (ed.), The Elgar Companion to Health Economics, Second Edition, chapter 31, Edward Elgar Publishing.
    19. Mueller, Dennis C., 1997. "First-mover advantages and path dependence," International Journal of Industrial Organization, Elsevier, vol. 15(6), pages 827-850, October.
    20. Lundin, Douglas, 2000. "Moral hazard in physician prescription behavior," Journal of Health Economics, Elsevier, vol. 19(5), pages 639-662, September.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ucp:jlawec:doi:10.1086/368004. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Journals Division (email available below). General contact details of provider: https://www.journals.uchicago.edu/JLE .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.