The Economics of Pharmaceutical Advertising and Consumer Information
The promotion and advertising for prescription pharmaceuticals is a controversial practice. Advertising may increase welfare by informing consumers of product efficacy or existence, thus improving the health of otherwise untreated patients. Conversely, advertising may decrease welfare by persuading consumers to purchase products with little or no value. Physician-targeted marketing, such as detailing and sampling may have similar consequences. This controversy mirrors a broader debate regarding the economic consequences of advertising. This session features three papers that explore the consequences of pharmaceutical marketing activities. First, Sinkinson and Starc explore the effects of direct-to-consumer advertising on pharmaceutical demand and find large business stealing effects for new consumers. Second, Shapiro examines the consequences of physician detailing on pharmaceutical use. He finds that detailing causes a modest increase in utilization, but that these increases are predominantly for on-label usage. Finally, Bairoliya et al. examine consumer heterogeneity and learning in the valuation of prescription drugs. They find that consumers have little initial knowledge regarding their match values with products, but that experiential learning occurs rapidly. They are now exploring how advertising affects initial perceptions and learning.