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- Title
Impact of Direct-to-Consumer Advertising on Pharmaceutical Prices and Demand.
- Authors
Dave, Dhaval; Saffer, Henry
- Abstract
Prescription drug expenditures are the fastest growing component of health care spending, rising threefold over the 1995-2007 period. Coinciding with this growth has been a surge in direct-to-consumer advertising (DTCA), made feasible by the Food and Drug Adminis-trations's (FDA's) clarification of rules governing broadcast advertising in 1997 and 1999. We exploit this natural experiment to investigate the separate effects of broadcast and non-broadcast DTCA on price and demand utilizing an extended monthly time series for all advertised and non-advertised drugs in four therapeutic classes spanning 1994 through 2005, a period that enveloped the shifts in FDA guidelines and the consequent DTCA expansion. Controlling for physician-directed promotion, fixed-effects models indicate broadcast DTCA positively impacts own-sales and price (elasticities of 0.10 and 0.05), while non-broadcast DTCA has a relatively smaller impact. Expansions in broadcast DTCA account for 19% of the overall growth in drug expenditures, two-thirds of this impact being driven by higher demand and the remainder due to higher prices.
- Subjects
UNITED States; DRUGS; DIRECT-to-consumer prescription drug advertising; MEDICAL care costs; UNITED States. Food &; Drug Administration
- Publication
Southern Economic Journal, 2012, Vol 79, Issue 1, p97
- ISSN
0038-4038
- Publication type
Article
- DOI
10.4284/0038-4038-79.1.97