Healthy Skepticism Library item: 19393

Warning: This library includes all items relevant to health product marketing that we are aware of regardless of quality. Often we do not agree with all or part of the contents.

Publication type: Journal Article

Rizzo JA
Advertising and competition in the ethical pharmaceutical industry: the case of antihypertensive drugs
J Law Econ 1999 Apr; 42:(1):89–116
http://ideas.repec.org/a/ucp/jlawec/v42y1999i1p89-116.html

Abstract:

This paper uses data on the majority of name-brand antihypertensive drugs marketed in the United States during 1988-93 to test the hypothesis that advertising decreases the price elasticity of demand in the pharmaceutical industry. This is the first study to directly estimate the effects of drug product promotion on the price elasticity of demand in this industry. We find strong evidence of an advertising effect. In particular, detailing efforts (the salient means for product promotion in this industry) systematically lower price sensitivity. Given the inverse relationship between elasticity of demand and price, it is likely that consumers pay higher prices as a result of the advertising that occurs in this industry. Our findings are thus consistent with Hurwitz and Caves, who find evidence that advertising inhibits entry into this market but in contrast to earlier research that found no anticompetitive effect.