Could Drug Ads Have Positive Side Effects?

By and ·February 20, 2018
Yale University and Northwestern University

The Issue:

The United States is one of only two countries in the world where it is legal for pharmaceutical companies to advertise their products directly to consumers. Critics of the practice say that it can lead to unnecessary demand for more expensive products and could be a contributing factor to rising medical costs. The American Medical Association called for a ban on such ads in 2015 and the National Academies of Science recommended ways to discourage the practice in a 2017 report. But advertising drugs to consumers can potentially help inform the public about treatments for health conditions and, in this way, raise awareness and prevent illness and disease.

By expanding treatment of particular diseases, drug advertising could have broader social benefits.

The Facts:

  • Spending by pharmaceutical companies on direct-to-consumer advertising has been on the rise, representing over $5 billion in 2016, up from around $3 billion in 2012 and $1 billion in 1998. Television advertising of prescription drugs was uncommon in the United States until 1997, when the Food and Drug Administration (FDA) relaxed the rules regarding the provision of risk information for the products and the budgets for consumer drug advertising more than tripled to over $1 billion in 1998 (see here and here for a history of regulation of drug ads in the United States).  The FDA still regulates the content of drug advertisements, aiming to ensure that the ads are not false or misleading, and that they present both the risks and the benefits of the drugs.  Pharmaceuticals were the 7th largest ad category in the United States in 2016 as ranked by total spending, according to Kantar Media. Direct-to-consumer advertising is only one component of marketing expenditures by pharmaceutical companies, with substantial expenditures going to promoting products directly to doctors.
  • Advertising can serve a positive informational role, giving potential consumers a new awareness of medical conditions and available treatments. It can inform people with a previously undiagnosed or untreated condition and lead them to seek help. Of course, patients who see the ads must first obtain a prescription from a doctor. And, when it comes to purchasing the drug, the patient's choice may be impacted by their specific prescription coverage. Because of this, it is possible that advertising for a branded drug can lead people to seek medical advice and, if recommended, obtain treatment through a less-expensive generic drug that treats the same condition. Furthermore, advertising can expand the market for a new drug, making pharmaceutical research more profitable.
  • Yet advertising might instead serve to persuade existing customers to switch from one drug to another brand: drug advertising can be a type of  "arms race" between competing pharmaceutical companies, which end up paying for TV ads just to defend the market share for their branded product. When drug ads serve the purpose of convincing patients to switch from one brand to another, they don't necessarily contribute to major health benefits for the patient. In the most extreme case where drugs are perfect substitutes, such advertising has little value and even the pharmaceutical companies involved might have been better off if all agreed not to advertise. (If advertising led consumers to switch to a drug that was a better match for the patient, ads could still be beneficial.).
  • Thus, the social benefits of drug advertising depend, in part, on the balance between making information available to new patients and inducing existing ones to switch brands. But, determining whether drug ads cause changes in prescribing practices is difficult. Pharmaceutical companies only advertise certain drugs and they choose specific markets to advertise them in. Since these choices are not random, it is difficult to disentangle to what extent any increase in prescriptions is due to the ads from other factors that drove the pharmaceutical company's advertising choices.
  • Our research finds some evidence that drug ads serve an informational role and can increase the sale of even generic versions to new patients. In our research, we used the variation induced by the political cycle to measure the effect of ads on drug consumption. If you are in Iowa in the November prior to the general elections, ads for the primary candidates proliferate and displace other types of advertising, including drug ads. Similar effects occur in Florida, Ohio, and other markets, with the timing determined by the political election cycle. In each market, we tracked ads for Crestor and Lipitor, two statin drugs used to lower cholesterol and prevent heart attacks. We also tracked drug sales for these products as well as sales of other non-advertised, branded statins and generic versions. We found that when political advertising went up, it reduced the number of ads for Crestor and Lipitor and, subsequently, the number of prescriptions sold for these drugs decreased in the markets impacted. Moreover, we found that while advertising for one drug can reduce the sales of its competitor, it can also lead to an increase of sales for non-advertised drugs in the same class: a 10 percent increase in advertising for the branded statins led to a 0.19 percent increase in sales of non-advertised drugs. Research on the market for antidepressants by Bradley Shapiro finds similar results: direct-to-consumer advertising for branded antidepressants drives consumers into the market and helps all products in the category, including low-cost generics.
  • By expanding treatment of particular diseases, drug advertising could have broader social benefits. In the case of statin drugs, the increase in consumption of non-advertised drugs has considerable medical benefits. On the basis of our measurements, we calculate that banning the advertisement of statins in 2008 would have led to 636,500 fewer consumers initiating a statin regime, with most of the decline driven by non-advertised drugs. According to estimates of the clinical effectiveness of statins, 636,500 new consumers initiating a statin regime would avert approximately 7500 heart attacks and their costly complications. Given how costly heart attacks are to treat, we estimate that the benefits of getting more people with heart disease on statin medication was large — so much so, in fact, that we estimate the benefits to be larger than the advertising costs for all direct-to-consumer drug ads in the year of our study.

What this Means:

Drug ads are expensive and pharmaceutical companies are spending hefty sums advertising certain drugs. Evidence indicates that such advertising does indeed lead to increases in drug sales, some of which happen at the expense of a competitor's product. But, by expanding the patient population, advertising can also lead to social benefits. A consumer that starts taking statins is much less likely to have a heart attack. And heart attacks are expensive to treat. We find that the benefits of getting these patients on statins far outweigh the costs of the statin ads themselves and were larger even than the costs of all direct-to-consumer drug advertising added together in the year of our study.


Public Health
Written by The EconoFact Network. To contact with any questions or comments, please email [email protected].
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