The effects of pharmaceutical promotion

by on February 26, 2013 at 7:34 am in Economics, Medicine | Permalink

Here is a new paper by Dhaval M. Dave:

This review discusses the role of consumer-directed and physician-directed promotion in the pharmaceutical market, based on the classic conceptual framework of whether such promotion is “persuasive” and/or “informative”. Implications for public health and welfare partly depend on whether, and to what extent, advertising: 1) raises “selective” or brand-specific demand versus “primary” or industry-wide demand; 2) impacts drug costs; and 3) impacts competition. Empirical evidence from the literature bearing on these effects is surveyed. These studies show that pharmaceutical promotion has both informative and persuasive elements. Consumer advertising is more effective at enlarging the market, educating consumers, inducing physician contact, expanding drug treatment, and promoting adherence among existing users. Physician advertising is primarily persuasive in nature, effectively increasing selective brand demand. There is no strong evidence the drug promotion deters entry, and there is some suggestive evidence that it may even be mildly pro-competitive. There is also no strong evidence that either consumer- or provider-directed promotion substantially raises retail-level prices. While all of these effects point to welfare improvements as a result of pharmaceutical promotion, there is also evidence that consumer ads may induce overuse and overtreatment in certain cases. Market expansion, overtreatment and shifting brands for non-therapeutic reasons further raise the concern of a sub-optimal patient-drug match at least for some marginal patients. A comprehensive evaluation of the welfare effects of pharmaceutical promotion requires a balanced assessment of these benefits and costs.

You may recall my requesting a more balanced approach from Ben Goldacre.  In terms of measuring and comparing actual costs and benefits, this goes well beyond the more negative (and I would say one-sided, though often quite on the mark)  evidence in his book, entitled Bad Pharma: How Drug Companies Mislead Doctors and Harm Patients.  And you will notice that this paper is a survey, based upon a fairly broad published literature.

1 Jonathan February 26, 2013 at 7:45 am

Well if we are talking about costs and benefits there is one paper on it by Block (2007). Unfortunately there are some questionable assumptions made. But he ultimately finds that the benefits outweigh the costs (at least in the antidepressants market where non depressed individuals being prescribed a drug is less problematic).

Of course this doesn’t translate across all pharma categories. Also the DTCA you are concerned is less likely for an RX drug (dtca regulated by FDA) and more likely for an OTC drug (dtca regulated by FTC).

2 Anon. February 26, 2013 at 8:34 am

>There is also no strong evidence that either consumer- or provider-directed promotion substantially raises retail-level prices.

How can that possibly be true with such gigantic marketing costs? According to this paper, the marketing:R&D budget ratio is 19:1. How could that not substantially raise prices?

3 sam February 26, 2013 at 9:25 am

more marketing, more revenues?

4 Dick King February 26, 2013 at 10:13 am

That “paper” looks more like a rant than like scholarship.

It’s hard to tell; do they get to 19:1 by counting as a marketing expense the retail price of all the free samples they give to physicians to give to patients who would otherwise have trouble affording the medications? I have seen that trick before.

Clinical trials for new indications is counted by this “paper” as a waste of money. Hytrin is a blood pressure medication that was anecdotally discovered to relieve the symptoms of prostate enlargement in middle-aged men. Would the world be better off if no clinical trials had been done to accurately determine whether and by how much hytrin reduces the symptoms of prostate enlargement?


5 Yancey Ward February 26, 2013 at 11:12 am

Almost certainly, that rant conflates marketing and administration. It isn’t a “trick”, but more an ignorance of accounting.

6 JWatts February 26, 2013 at 11:13 am

“>There is also no strong evidence that either consumer- or provider-directed promotion substantially raises retail-level prices.

How can that possibly be true with such gigantic marketing costs? ”

One potential explanation is it shifted market share.

Toyota spending a lot more money on advertising in a given year won’t significantly affect retail-level prices (all else being equal) but it will probably result in their market share rising.

7 Joe Torben February 26, 2013 at 8:36 am

Goldacre’s “Bad Pharma” was, by far, the best book I read in 2012. However, it should be noted that while he brings up many problems with big pharma, advertising being one of them, it seems to me that the problem of “disappearing” trials is by far the largest one.

Right now, so many trials are never reported that for a large part of all available medication, we simply don’t know enough about its effects. This means that even in the theoretical world where a doctor has infinite time to read every paper and infinite wisdom to interpret each paper correctly, he can’t make an informed choice in many cases. Needless to say, it’s even worse for patients. It then follows that if it isn’t even theoretically possible to know about the effects on medication, advertising could persuade people to take some drugs that are not optimal for them.

This isn’t good, but don’t (primarily) blame the advertising. Blame the hidden data.

8 Ray Lopez February 26, 2013 at 12:30 pm

If Goldacre’s book was the best you’ve read in 2012, you need to read more. As for “hidden data”, that’s a strawman. How do you know (or why do you presume) the “hidden data” has anything of value? It could be ‘never reported’ because the trials were faulty. Obviously you have limited experience with clinical trials, or perhaps some idealized, stylized version of reality.

9 Joe Torben February 26, 2013 at 1:00 pm

If the trials were faulty, that would also be information worthwhile to know. But in practice, of course, the trials are not published not because the trials are faulty, but because they failed to show the desired effect.

I certainly wouldn’t mind a lot freer pharma business. The upside would far outweigh the downside. However, we still have a situation where most pills (or at least most new pills) are subsidized by the government, i.e. the taxpayers. Isn’t it then reasonable to require that the taxpayers know about the effects of what they are paying for? There is just no excuse for getting approval from an ethics committee, running a trial and then burying the result. And yes, the biggest part of the blame should go to the ethics committees. If they can’t make sure that the results are published, what value are they really providing?

10 Steve February 26, 2013 at 9:31 am

Regardelss of all that, as the father of two young boys, I would still be happier if I didn’t have to see an erectile disfunction drug commercial every 20 minutes.

11 mavery February 26, 2013 at 9:46 am

I did my undergraduate thesis on this seven years ago. My conclusions were similar. ^_^

12 Yancey Ward February 26, 2013 at 11:13 am

One may as well ask whether marketing for automobiles is good or bad.

13 Ray Lopez February 26, 2013 at 12:36 pm

You may as well ask whether comparative advertising for anything in the USA or UK or EU, which is highly regulated, is bad, as the bureaucrats presume it is. Dr. Goldacre is another brick in that regulatory wall. Truth is, Japan has recently shown that speeding up drug approvals has no downside–ergo, the slow way of doing things was faulty or unnecessary. Let the free market work–be it in medicine (no regulation needed, it did not help Pistorius) or banking (ditto, and no FDIC/FSCS insurance needed). Spoken as a market fundamentalist.

14 Jonathan February 26, 2013 at 2:58 pm

You clearly have never watched any of the ads that are banned by the FTC or FDA (I have considering I do work in the area). In fact I have watched every advertisement for a subset of the field that is “regulated” by the FTC. The FDA does a good job of not allowing false claims. The FTC does a poor job. If you DID understand the regulatory framework you could explain to me why the the FTC does such a poor job. Really this has to do with the designation of the actual products.

Next time you see an advertisement for Gel-a-Thin (an OTC so regulated by the FTC) and don’t think it is a complete fraud, you tell me what the benefit it is for anyone who purchases it besides being swindled…

15 Yancey Ward February 26, 2013 at 5:29 pm

Sounds like a GM and Chrysler customer.

16 Jonathan February 26, 2013 at 8:53 pm

Well said (though I don’t own a car)!

17 Engineer February 26, 2013 at 2:39 pm
18 Dr. Nick February 28, 2013 at 5:03 am

Forget the marketing costs, this is the major problem. This is the cost that needs to be measured.
“However, this is not to imply that potential promotion-driven substitution from non-advertised to advertised drugs cannot have effects on total drug costs. While most of these effects point to potential welfare improvements as a result of pharmaceutical promotion, there is also evidence that consumer ads may induce overuse and overtreatment in certain cases.”

When Crestor advertising drives people from off patent atorvastatin or simvastatin and on to on-patent Crestor, the costs have just increased by a huge multiplier. When advertising gets someone on Dexilant instead of off patent pantoprazole, drug costs have just increased. These new, on-patent me too drugs are not particularly, if at all, more effective than the old drugs. They have drug sales and consumer ads behind them- using a brand name for anything a generic could have done is terribly wasteful.

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