Direct to Consumer Advertising

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By Elizabeth Kelly (NHS 2015)

Advertising in the pharmaceutical industry is atypical in comparison to almost every other facet of the economy in that they market the result of their product instead of the drug itself. In addition, efforts are directed at the physicians, or agents, prescribing the medicine as opposed to the patients consuming it. One of their primary strategies involves sending representatives, “detailers,” to various physicians’ offices with free samples, gifts and promotional information, which is supplemented by direct mail and advertisements in medical journals as well. Analysts have critiqued these practices, citing “questionable financial arrangements,” which may over-encourage physicians to prescribe medication that is more costly or not necessary at all (347-348). In 1997, the Food and Drug Administration loosened regulations on media advertising pertaining to drugs. From then on, the pharmaceutical industry dramatically increased their efforts on television, in newspapers and on the radio. Eventually, pharmaceuticals appeared on billboards along the highway. By means of diverse avenues to reach their consumers, the industry reached out to a broader clientele. This practice of “Direct to Consumer” (DTC) advertising is only legal in two developed countries, the United States and New Zealand (348). This can be explained by the fact that many medical professionals feel as though this unmediated contact with patients can result in the dissemination of misinformation and lead to unnecessary or harmful treatment. The industry pushes back, arguing that these advertisements are an effective way to create awareness of different options through informational empowerment. The 1990’s turned out to be the perfect environment for the drug companies to launch their new strategy.

In the past, they had closely followed the medical decision-making model, but they were beginning to realize the power of the patients themselves (348). The advent of Managed Care brought with it new restrictions on which drugs were and were not covered, a fact that was known to the medical professionals. Thus, in the age of rising consumerism, the pharmaceutical industry turned its attention to the patients, who would not have ready access to these fine details. Companies used their media marketing privileges to put their brand in the conscious and subconscious of their potential consumers so they would enter the doctors’ offices and ask for their drugs by name. Before the FDA’s new guidelines, DTC advertising amounted to a mere $363 million (1995), however afterwards it quickly jumped to $4.8 billion for research based pharmaceutical firms in 2006 (348).

Both sides of this debate are clear. Supporters of DTC advertising highlight the benefits of educated patients who become better informed about their condition and through increased solicitation of physicians’ services, the rates of underdiagnosis and undertreatment can decline. In the end, these patients are taking personal health into their own hands. At the other end of the spectrum, the opponents cite three arguments to support their negative perspective on this form of marketing. They believe that DTC advertising encourages patients to request drug treatments that are costly and often not necessary. In addition, these patients my be using these advertisements as their only source of information and thus initiating unwarranted discussions, eating some of their doctors’ valuable and scarce time. Finally, the billions of dollars spend on ads every year could be used to research and develop new, more effective, cheaper treatments- instead, spending these large sums of money on advertisements drives up the demand and prices of these drugs, which turns into an additional cost born by the patients, (Liu, Gupta 205). In order to determine which point of view is correct, it is important to use empirical data since both sides have put together plausible arguments.

One study wanted to look at the relationship between patient behavior and DTC advertising expenditure, and it did so through a Bayesian Negative Binomial Distribution for hyperlipidemia drugs. (Hyperlipidemia has been linked to cardiovascular disease, the leading cause of death and disability in the US and most developed countries). In other words, the study measured DTC spending, the number of visits to physicians by patients who had just received their diagnosis, and the quantity of drugs requested by the patient (Liu, Gupta 206).

Before we investigate the findings of this study, it is important to understand the different potential effects that DTC advertising can have on different types of patients at various stages. (See Fig 1). Stages 1 and 5 will be in play when a patient views an advertisement that encourages (1)/reminds (5) them to seek professional consultation for a chronic condition. The net effect of these steps is an increased demand in the entire drug category. Another scenario would be the advertisements’ acting as a reminder about the importance of following drug regimens to patients who already have the prescription. The results of this kind of intervention are viewed in steps 3 and 4 and usually add to categorical expansion. Finally, many advertisements are for specific drugs, and they urge patients to talk to their doctor about their particular brand. These results can be seen clearly at stages 2 and 6, and they lead to an increased proportion of that precise pharmaceutical within the drug/categorical class.(Liu, Gupta 206-207).

Before this hyperlipidemia study came to fruition, there were two competing studies that the researchers were aware of. Calfee et al. used aggregate national data for the time period between 1996 and 2000. They found no significant statistical relationship between the number of patients’ visits and dollars spent on DTC ads nor that between prescription renewals and advertising efforts. A rival study by Iizuka and Jin in 2005 found the opposite to be true. By pooling data across 151 drug classes, they were able to determine that every $28 spent on DTC advertisements led to an additional drug visit within a year. (Liu, Gupta 206).

 Who is correct?

In 2008, anti-hyperlipidemic drug (majority statins) sales passed $14.5 billion, making them the second largest selling drug in this country. Despite this exorbitant number, many experts believe that underdiagnosis and undertreatment still run rampant within this condition. It is said that 1 in 12 adults receives cholesterol screening annually and less than half of all people with hyperlipidemia are screened for high blood cholesterol levels (Liu, Gupta 208). This study focuses only on effects at stages 1, 2 and 6 since their scope is limited to newly diagnosed patients. The study concluded, after incorporating the long-term elasticity of 0.02, that a 1% increase in DTC advertising leads to an eventual increase of 0.021% in newly diagnosed patient visits. In dollar terms, approximately $221 dollars in DTC ads increase the amount of newly diagnosed patient visits by 1. (Note: hyperlipidemia drug regimens cost over $1000/year and patients are expected to stay on them for the rest of their lives. This high rate of return leads to a higher optimal output for advertisers. This could account for some of the discrepancy between this study and Iizuka and Jin’s in 2005). (Liu, Gupta 210-211).

Health disparities have become a hot topic in today’s health care landscape, and they are not exempt from relevancy in this discussion. Researchers noticed different elasticities across sub-groups in their study, indicating variation between the amount of money needed to generate 1% more visits for each population. DTC advertising is said to be least effective for Medicare patients, which is unsurprising since most of them have already been diagnosed with this particular condition if they have it, (only 2.3% of adults over 65 report never having their cholesterol tested) (Liu, Gupta 211). Moving towards the other end, the most statistically significant group consisted of those in Managed Care, who accounted for 68% of the new visits. One potentially key explanation for this phenomenon is the relatively younger and healthier population who opts for managed care will usually have a high self-perception of health that does not encourage many screenings or solicitations of care. The greatest magnitude, however, was seen in the Medicaid population. Hyperlipidemia diagnosis is less prevalent among lower socioeconomic status groups, and they are less likely to have received any testing at all. Furthermore, a study by Avery et al. in 2008 found that lower income groups often have greater access to advertisements as well (Liu, Gupta 212).

While underdiagnosis declined as a result of these ads, the amount of specific drug requests also increased, which has a “market share stealing effect” that increased the financial burden for consumers in the long run (Liu, Gupta 214). Thus, the study required a cost benefit analysis to determine which side of the equation was more correct. Translating data from earlier in the article into life years saved, they found the cost per year of ads to be $2,951. According to pharmacoeconomic literature, treatments that are below $100,000 are considered to be cost effective. Thus, this DTC advertising cost per LYS is relatively low and is unlikely to have a great impact, unless statins are already on the verge of becoming cost-ineffective (Liu, Gupta 215). This is not the case, as they found that even the most expensive statin treatment fell well below the $100,000/QALY threshold. The following summarizes the conclusions of the study:  “Given the fact that statins are cost effective” … “that the DTCA is effective in generating new patient visits, and that including the cost of DTCA does not substantially change statins’ classification as cost-effective treatments, we conclude that the economic benefits” … “are considerably larger than the costs of advertising” … “even though DTCA has a market stealing effect and firms possibly transfer DTCA costs to increased drug prices” (Liu, Gupta 215).

A Forbes Magazine article entitled “Maybe It’s Time for Drug Companies to Drop TV Ads” was published earlier this year and speaks to the controversy of DTC advertising for prescription drugs. Dr. Howard Brody stated that he thought there was “absolutely” a problem with how these products are marketed today in the US. However, the author of the article, John LaMattina, was the former president of Pfizer R&D, so he sympathizes with the side of drug companies, even though he understands both perspectives. He cites the success story of DTC advertising improving the lives of patients suffering from fibromyalgia. This painful condition had been around for many years, and for a long time there was no effective treatment. Once it was finally discovered, DTC ads were the means of disseminating this information to those who really needed the medicine. However, he feels as though times have changed. Many of today’s pharmaceutical commercials on TV are offensive in the eyes of patients and are beginning to reflect poorly on the entire industry. LaMattina believes all of the negative publicity surrounding these television advertisements undermines justification for their existence at all. Despite this sentiment, he feels important to note that the argument pertaining to R&D vs. DTC ad spending is not valid. In 2011, pharmaceutical companies spent at least thirty times as much on R&D than they did on marketing. In conclusion, he thinks that it will serve the industry well to “drop TV ads completely. However well-intended they are, the negatives outweighed the benefits.”

Before doing this research, I had always been a staunch opponent of DTC advertising because I believed the claims that it led to higher drug prices and overtreatment. However, the aforementioned analyses have led me to reconsider slightly. The cost effective analysis illustrated an efficacy of reaching patients who may go without treatment without realizing the grave consequences, which I had never considered before. Perhaps the issue is not the advertising itself, but the strategies being employed to do so. I agree with LaMattina’s claim that television advertisements are becoming poster children for many negative facets of the pharmaceutical industry; however, I believe that lower income sub-populations deserve the same information that those who can afford expensive magazine and newspaper subscriptions receive. There must be a manner to achieve an efficacious balance between these two extremes-no television advertising and the overload we currently view. Additionally, I believe that the content should be more closely monitored to ensure valid and unbiased presentation of information instead of pure social marketing in hopes of brainwashing unaware consumers.


Folland, S., Goodman, A., Stano, M. (2010).  The Economics of Health Care. New York: Pearson.

LaMattina, J. (February 15, 2012). Maybe It’s Time for Drug Companies to Drop TV Ads. In Forbes. Retrieved November 18, 2012, from

Liu, Q., Gupta, S. The Impact of Direct-to-Consumer Advertising of Prescription Drugs on Physician Visits and Drug Requests: Empirical Findings and Public Policy Implications, International Journal of Research in Marketing, Volume 28, Issue 3, September 2011, Pages 205-217

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