Healthy Skepticism Library item: 2868

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

Cady J.
An estimate of the price effects of restrictions on drug price advertising
Economic Inquiry 1976; 14:493-510

Abstract:

This paper examines the relationship between restrictions on price advertising in the retail market for prescription drugs and the retail price of prescription drugs. Utilizing data on state retail advertising restrictions and data from a national survey of pharmacies, the study estimates the effect of advertising restrictions on the retail price of prescription drugs, and the cost to consumers resulting from these restrictions. Restrictions on prescription drug advertising result in monopoly returns estimated at between $135 and $152 million at best estimates, or almost 4% of total prescription sales, in 1970. These returns take the form of an income transfer, in the form of higher prices, from drug purchasers to retail sellers. These costs are not insignificant. Unless it can be demonstrated that benefits of health or safety accrue to prescription drug purchasers (or society in general) as a result of price advertising restrictions, there appears to be no reason for their maintenance.

Keywords:
*mathematical modeling/United States/consumer drug prices/pharmacies and pharmacists/general public and consumers/awareness of price/INFLUENCE OF PROMOTION: CONSUMER DRUG COSTS