Promoting Wellness or Waste? Evidence from Antidepressant Advertising

Promoting Depression

Brad Shapiro

The literature studying the effects of Direct-to-Consumer Advertising (DTCA) of prescription drugs has largely shown category expansive effects of DTCA. Whether or not such category expansion is socially desirable depends on the nature of the advertising marginal prescriptions. In this paper, I take a first step in assessing the desirability of these marginal prescriptions. Using individual health insurance claims and HR data, I estimate the effect of DTCA on demand, prices and labor supply in the context of antidepressant drugs. First, I replicate the effects found in the literature that advertising is category expansive, particularly causing new prescriptions of antidepressants. While there is a significant effect on category prescriptions, there is no detectable effect of advertising on the prices or co-pays of the drugs prescribed. Next, I show that advertising significantly decreases missed days of work, with the effect concentrated on workers who tend to have more absences. Finally, back-of-the-envelope calculations suggest that the dollar benefit of the advertising marginal increased work days in wages is about an order of magnitude larger than the total cost of the advertising marginal prescriptions.

Discussant: Courtney Yarbrough (Emory)

(Alt discussant: Colleen Carey (Cornell))