Healthy Skepticism Library item: 2784

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

Steele H.
Prices & proftis in the drug industry; an economist’s view.
New Physician 1971; 20:146-159

Abstract:

(Limited to parts of article dealing with promotion.) Research costs are about 1/15 of the sales price and about 1/4 of the total spent on promotion. Sales promotion is eventually paid for in the price charged to consumers. If doctors had to bear the costs of obtaining their own information they could still pass on the costs to consumer through higher fees, but the overall cost would be much less than what the drug companies spend. Criticisms of drug company promotion fall into five groups: 1) constant interference of commerical bias; 2) excessive communication minimizing the likelihood of the detection of the occasional communication of genuine value; 3) emphasis on persuasion rather than providing genuine information; 4) redundancy of communication because of rivalry among firms not competing on price; 5) the presence of a certain amount of outright misinformation. The main reason why, it seems, that companies spend so heavily on sales representatives is their ability to disparage, with relative impunity, the quality of the products of low-priced generic firms.

Keywords:
*analysis/United States/consumer drug prices/quality of information/sales representatives/generics/EVALUATION OF PROMOTION: DETAILING/EVALUATION OF PROMOTION: GENERAL QUALITY OF INFORMATION