Does pharma spending on direct-to-consumer advertising (DCTA) of prescription drugs benefit patients? Yes, according to an analysis of statins that found increased expenditure in advertising helped to bring undiagnosed consumers into physician offices.
Jayani Jayawardhana, PhD, a health economist in the University of Georgia College of Public Health, developed a structural model to explore public policy issues raised by deregulation of promotional advertising of drugs that led to a plethora of broadcast advertising campaigns. She focused on statins to estimate the change in consumer welfare that resulted from changes in demand fueled by increased spending on drug ads. The analysis spanned 1997 to 2000, a time period before generics entered the marketplace, and included the brands lovastatin (Mevacor, Merck), Fluvastatin (Lescol, Novartis), Pravastatin Sodium (Pravachol, Bristol-Myers Squibb), atorvastatin calcium, simvastatin (Zocor, Merck) and cerivastatin.
She reasoned that DTCA could improve welfare of a consumer if it increased the probability that he or she would proceed to get needed healthcare and medication. On the other hand, DTCA could be harmful if consumer demand led to inappropriate care or overtreatment. Her model accounted for advertising directed toward both consumers and physicians.
“Since the consumer cannot make the purchase decision of prescription drugs himself, it is difficult to assume that DTCA could influence the consumer to purchase specific drugs, and hence have any persuasive effects,” she wrote. “However, DTCA could play an informative role since the consumer could learn about the existence of a product for a specific medical condition through the information provided by the advertisement, and as a result seek care.”
Most pharmaceutical advertising is directed toward physicians, but that has been changing since 1997, when the FDA eliminated the requirement that prescription drug ads on broadcast media include a brief summary. Direct-to-consumer efforts have taken an increasing proportion of total expenditures, increasing from 8 percent in 1996 to 15 percent in 2000, according to Jayawardhana’s analysis.
For her study, she used four data sets: data from the annual Medical Expenditure Panel Survey to assess individual-level healthcare use; advertising and sales data from IMS Health to assess brand-level advertising; Survey of Media and Markets data to gauge consumer exposure; and Atlantic Information Services data to track statins and copay rates for the drugs. The study was designed to estimate the effects of DTCA on consumer welfare compared with no such marketing by modeling consumer- and physician-directed advertising and their impact on consumer decisions.
Jayawardhana found that the presence of DTCA appeared to improve the welfare of consumers as a whole, with an average welfare gain of $12.88 per person. Consumers who ranged between 50 and 60 years old benefited the most, with a welfare gain of approximately $22 and those 60 to 70 years old gained the second most, at $20. The informative aspect of DTCA was seen as positive by increasing the probability that consumers would seek healthcare.
“This implies that DTCA helps bring the marginal or the under-diagnosed consumers to the physician office and as a result helps improve the welfare of consumers as a whole if these marginal consumers get treated for the condition,” she wrote.
The study is in press at the International Journal of Industrial Organization.