Effects of Pharmaceutical Promotion: A Review and Assessment
This review discusses the role of consumer-directed and physician-directed promotion in the pharmaceutical market, based on the classic conceptual framework of whether such promotion is "persuasive" and/or "informative". Implications for public health and welfare partly depend on whether, and to what extent, advertising: 1) raises "selective" or brand-specific demand versus "primary" or industry-wide demand; 2) impacts drug costs; and 3) impacts competition. Empirical evidence from the literature bearing on these effects is surveyed. These studies show that pharmaceutical promotion has both informative and persuasive elements. Consumer advertising is more effective at enlarging the market, educating consumers, inducing physician contact, expanding drug treatment, and promoting adherence among existing users. Physician advertising is primarily persuasive in nature, effectively increasing selective brand demand. Evidence bearing on the effects of promotion on competition and prices is more limited. However, there is no strong evidence that drug promotion deters entry, and there is some suggestive evidence that it may even be mildly pro-competitive. With respect to costs, some studies suggests that consumer advertising may weakly raise the average wholesale price, which is a manufacturer's list price, but there is no strong indication that either consumer- or provider-directed promotion substantially raises retail-level prices. However, this is not to imply that potential promotion-driven substitution from non-advertised to advertised drugs cannot have effects on total drug costs. While most of these effects point to potential welfare improvements as a result of pharmaceutical promotion, there is also evidence that consumer ads may induce overuse and overtreatment in certain cases. Market expansion, overtreatment and shifting brands for non-therapeutic reasons further raise the concern of a sub-optimal patient-drug match at least for some marginal patients. A comprehensive evaluation of the welfare effects of pharmaceutical promotion requires a balanced assessment of these benefits and costs.
|Date of creation:||Feb 2013|
|Note:||HC HE IO|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Gary S. Becker & Kevin M. Murphy, 1993. "A Simple Theory of Advertising as a Good or Bad," The Quarterly Journal of Economics, Oxford University Press, vol. 108(4), pages 941-964.
- Natsuko Iwasaki & Yasushi Kudo & Carol Horton Tremblay & Victor Tremblay, 2008. "The Advertising-price Relationship: Theory and Evidence," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 15(2), pages 149-167.
- Bhattacharya, Jayanta & Vogt, William B, 2003. "A Simple Model of Pharmaceutical Price Dynamics," Journal of Law and Economics, University of Chicago Press, vol. 46(2), pages 599-626, October.
- 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.
- S. A. Ozga, 1960. "Imperfect Markets Through Lack of Knowledge," The Quarterly Journal of Economics, Oxford University Press, vol. 74(1), pages 29-52.
- 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.
- 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.
- Kurt R Brekke & Michael Kuhn, "undated". "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.
- 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.
- Guy David & Sara Markowitz & Seth Richards-Shubik, 2010. "The Effects of Pharmaceutical Marketing and Promotion on Adverse Drug Events and Regulation," American Economic Journal: Economic Policy, American Economic Association, vol. 2(4), pages 1-25, November.
- Guy David & Sara Markowitz & Seth Richards, 2009. "The Effects of Pharmaceutical Marketing and Promotion on Adverse Drug Events and Regulation," NBER Working Papers 14634, National Bureau of Economic Research, Inc.
- Nelson, Phillip, 1970. "Information and Consumer Behavior," Journal of Political Economy, University of Chicago Press, vol. 78(2), pages 311-329, March-Apr.
- 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.
- Glenn Ellison & Sara Fisher Ellison, 2007. "Strategic Entry Deterrence and the Behavior of Pharmaceutical Incumbents Prior to Patent Expiration," NBER Working Papers 13069, National Bureau of Economic Research, Inc.
- John E. Calfee & Clifford Winston & Randolph Stempski, 2002. "Direct-to-Consumer Advertising and the Demand for Cholesterol-Reducing Drugs," Journal of Law and Economics, University of Chicago Press, vol. 45(S2), pages 673-690.
- 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.
- Darby, Michael R & Karni, Edi, 1973. "Free Competition and the Optimal Amount of Fraud," Journal of Law and Economics, University of Chicago Press, vol. 16(1), pages 67-88, April.
- Verma, Vinod K, 1980. "A Price Theoretic Approach to the Specification and Estimation of the Sales-Advertising Function," The Journal of Business, University of Chicago Press, vol. 53(3), pages 115-137, July.
- Toshiaki Iizuka, 2004. "What Explains the Use of Direct-to-Consumer Advertising of Prescription Drugs?," Journal of Industrial Economics, Wiley Blackwell, vol. 52(3), pages 349-379, 09.
- Nelson, Philip, 1974. "Advertising as Information," Journal of Political Economy, University of Chicago Press, vol. 82(4), pages 729-754, July/Aug..
- Ernst R. Berndt & Patricia M. Danzon & Gregory B. Kruse, 2007. "Dynamic competition in pharmaceuticals: cross-national evidence from new drug diffusion," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(4-5), pages 231-250.
- Dhaval Dave & Henry Saffer, 2012. "Impact of Direct-to-Consumer Advertising on Pharmaceutical Prices and Demand," Southern Economic Journal, Southern Economic Association, vol. 79(1), pages 97-126, July.
- Toshiaki Iizuka & Ginger Zhe Jin, 2005. "The Effect of Prescription Drug Advertising on Doctor Visits," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 14(3), pages 701-727, 09.
- Toshiaki Iizuka & Ginger Z. Jin, 2007. "Direct To Consumer Advertising And Prescription Choice," Journal of Industrial Economics, Wiley Blackwell, vol. 55(4), pages 771-771, December.
- W. David Bradford & Andrew N. Kleit, 2006. "Direct to Consumer Advertising," Chapters,in: The Elgar Companion to Health Economics, chapter 29 Edward Elgar Publishing.
- Stigler, George J & Becker, Gary S, 1977. "De Gustibus Non Est Disputandum," American Economic Review, American Economic Association, vol. 67(2), pages 76-90, March.
- George J. Stigler, 1961. "The Economics of Information," Journal of Political Economy, University of Chicago Press, vol. 69, pages 213-213.
- 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. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:18830. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.