AEI-Brookings Joint Center

Direct-to-Consumer Advertising and the Demand for Cholesterol-Reducing Drugs


Abstract


In August 1997, the Food and Drug Administration (FDA) reinterpreted its advertising regulations to ease limits on the use of broadcast media when advertising prescription drugs directly to consumers.We estimate the effect of direct-to-consumer advertising on demand, using 1995–2000 data from the market for the statin class of cholesterol-reducing drugs. We find no statistically significant effect from any form of advertising and promotion on new statin prescriptions or renewals and no evidence of adverse market effects from advertising or the FDA policy change. We did find evidence, however, that television advertising increased the proportion of cholesterol patients who had been successfully treated, which suggests that advertising reinforces compliance with drug therapy.

Introduction

The subject of advertising is marked by diverse and conflicting perspectives. Popular writers and social critics, for example, often portray advertising as wasteful and manipulative, while some academic economists argue that advertising can provide useful information for consumers and lower prices.As the nation's health care costs continue to rise, it is not surprising that the pharmaceutical industry’s multibillion-dollar direct-to-consumer (DTC) advertising expenditures are attracting their share of critics and defenders.

Some physicians, such as Matthew Holland, complain that DTC advertising encourages patients to ask physicians to write inappropriate prescriptions. Health care providers, such as managed care organizations, and health care payers, such as employers, charge that advertising is increasing health care costs. In fact, according to Reuters, several state legislatures are considering curbs on DTC advertising.