Healthy Skepticism Library item: 2547

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

Morgan S.
2001 Aug;
http://www.chspr.ubc.ca//hpru/pdf/dtca-v5-econ.pdf

Abstract:

A major trend is sweeping over the pharmaceutical industryright before the eyes and ears of ordinary citizens. It is the trend toward the direct to consumer advertising of prescription-only drugs. It is a major change in business practice for the corporations engaged in it because, for almost a century, prescription drug manufacturers have been referred to as “ethical” pharmaceutical manufacturers because they did not advertise their products directly to patients. Rather than target patients directly, these manufacturers have traditionally targeted their marketing activities at medical professionals. In recent years, however, the profitability of this traditional marketing strategy has waned. Increased intervention by government and third-party drug benefits
providers has provoked manufactures to seek audience with the end users of their products. The watershed point for direct to consumer advertising came in 1997, when American regulators relaxed restrictions on television and radio drug advertisements. Since then, spending on the consumer-directed advertising for prescription drugs in the US has exploded to nearly US$3 billion per year, making prescription drugs one of the most heavily promoted classes of consumer product in the United States. The sheer magnitude consumer-directed prescription drug advertising in the US, compounded by the fact that American advertising often reaches Canadian audiences, has made this a health policy issue of major significance in Canada. Should the Canadian government adopt regulations as lenient as those in the US? Hard evidence regarding the benefits and the costs of direct to consumer advertising of prescription drugs is lacking. Lack of such evidence, however, should not be taken as reason to engage in a trial and error approach to policy making. This report investigates economic theories that may be used to predict the consumer welfare and cost consequences of drug advertising. This is done in two parts. The first chapter contains a discussion of how the economic theory of consumer demand might be used to inform policymaking. The basis for supporting advertising using standard economic theories of consumer demand and revealed preferences is weak. In a standard welfare-economic analysis, advertising reduces the welfare of consumers in most feasible scenarios. However, economic analyses based on standard analytical tools are ill suited to measuring the costs and benefits of advertised prescription drugs. Because the average consumer of prescription drugs lacks the capacity to make rational and informed decisions regarding appropriate drug use, and because both patients and physicians have nonstandard financial incentives, the results of a standard welfare economic analyses should not be used to justify policy action. It is simply unclear what, if any, welfarerelevant information is “revealed” by free-market consumption patterns and price levels in a pharmaceutical market. The second chapter contains a discussion of how the economic theory of the firm may be used to describe the likely impacts of direct to consumer advertising for prescription drugs. When placed in a historical context, the industry’s push toward consumer-directed advertising is clearly not a response to consumer demands for information, but rather as a response to the changing competitive environment for drug manufacturers. Specifically, recent increases in the level and sophistication of drug benefits management by third-party payers have made consumer-directed advertising virtually essential for many firms to achieve sales growth on new, patented products. A recent paper commissioned by Pfizer Inc. testifies to this, portraying consumer directed advertising as a means of countering restrictions imposed by managed care providers. Canadian regulations have always permitted firms to educate patients about medical conditions and to inform the public about the availability of treatments for such conditions. What manufacturers seek is the ability to mention particular brand names and to make claims about their particular products so that product selection will favour particular brands. Without this, advertising is not viable for them. With it, advertising is only viable for manufactures whose products are relatively new, typically high-cost, and patented. The conflict of interest that drug manufacturers are in when “educating” patients about therapeutic alternatives is unmistakable. The incentives for exaggeration and persuasion are great and patients’ ability to verify promotional claims is limited. Economic theory and historical experience indicates that the marketplace for ideas created by consumer directed drug advertisements would be imbalanced and biased. What is truly needed is investment in independent sources of evidence based educational
programs that help consumers (not to mention medical professionals) to better understand the risks and benefits of treating disease with alternative drug and non-drug therapies.

Keywords:
*analysis Canada United States direct-to-consumer advertising DTCA marketing strategies source of information regulation of promotion quality of information EVALUATION OF PROMOTION: DIRECT-TO-CONSUMER ADVERTISING INFLUENCE OF PROMOTION: CONSUMER DRUG COSTS INFLUENCE OF PROMOTION: CONSUMERS AND PATIENTS PROMOTION AS A SOURCE OF INFORMATION: CONSUMERS AND PATIENTS VOLUME OF AND EXPENDITURE ON PROMOTION