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Abstract:
This paper examines the effect of direct-to-consumer advertising (DTCA) of prescription drugs on doctors' choice of drug brands. Using antihistamines as an example, we show that DTCA has little effect on the choice of brand despite the massive DTCA expenditure incurred in this class. In contrast, promotional activities directed toward physicians have larger and longer lasting effects. These results, together with the market-expanding results shown in Iizuka and Jin (2005), suggest that DTCA is effective in increasing the aggregate demand per therapeutic class but does not affect doctor choice of prescription within a class. Therefore, DTCA may be viewed as a public good for all drugs in the same class.

Abstract:
This paper examines the effects of direct-to-consumer advertising (DTCA) of prescription drugs on doctor choice of drug brands. Using antihistamines as an example, we show that DTCA has little effect on the choice of brand despite the massive DTCA expenditure incurred in this class. In contrast, directed-to-physician advertising (i.e., detailing and medical journal advertising) has positive, significant, and long-lasting effects on the prescription choice of allergy drugs. These results, together with the market expanding results shown in Iizuka and Jin (forthcoming), suggest that DTCA is effective in increasing the aggregate demand per therapeutic class but does not affect doctor choice of prescription within a class. Therefore, DTCA may be viewed as a public good for all drugs in the same class.

Prescription drug, advertising, direct-to-consumer, market expanding, business stealing, information

Abstract:
The dramatic increase of direct-to-consumer advertising (DTCA) of prescription drugs created intensive debates on its effects on patient and doctor behaviors. Combining 1994-2000 DTCA data with the 1995-2000 National Ambulatory Medical Care Surveys, we examine the effect of DTCA on doctor visits. Consistent with the proponents' claim, we find that higher DTCA expenditures are associated with increased doctor visits, especially after the Food and Drug Administration clarified DTCA rules in August 1997. After 1997, every $28 increase in DTCA leads to one drug visit within 12 months. We also find that the market-expanding effect is similar across demographic groups.

Prescription drug, advertising, direct-to-consumer, market expanding

Abstract:
This paper examines the physician-patient agency relationship in the context of the prescription drug market in Japan. In this market, physicians often both prescribe and dispense drugs and can pocket profits in so doing. A concern is that, due to the incentive created by the markup, physicians' prescription decisions may be distorted. Empirical results using anti-hypertensive drugs suggest that physicians' prescription choices are influenced by the markup. However, physicians are also sensitive to the patient's out-of-pocket costs. Overall, although the markup affects prescription choices, physicians appear more responsive to the patient's out-of-pocket costs than their own profits from the markup.

principal agent problem, pharmaceutical, physician induced demand

Abstract:
We develop a model of the monopoly pricing of a durable good when there are heterogeneous buyers. Our durable good has the features of a textbook: each period new consumers enter the market and the introduction of a new edition kills off used goods. We show that, unlike the traditional Swan-type models, durable good prices could go up over the life of an edition if consumers are heterogeneous. Our empirical analysis using textbook pricing data supports our model: textbook prices increase as the share of used textbooks increases and the last period of the current edition arrives. In contrast, we find no evidence that textbook prices fall over the life of an edition.

Durable goods, markets for new and used goods

Abstract:
A country's pharmaceutical policy is unique, just like its culture. Japan is no exception. Japan has employed a unique dynamic price-control rule that updates regulated retail prices based on the previous period's transaction prices. At the same time, separation of prescribing and dispensing has historically been weak, and the doctor can both purchase and sell a drug to his patient. These policies allowed the physician to earn the price-cost markup, and this appears to have affected physician prescribing. After discussing these features in more detail, I review two recent studies that empirically investigated their impacts on physician prescribing. Ongoing changes in pharmaceutical policy and their expected impacts are also discussed.

pharmaceutical policy, agency problem, drug pricing

Abstract:
This paper examines the decision to introduce new products by durable goods producers. Conventional wisdom suggests that durable goods producers introduce new products to kill off used products. However, used units may not compete with new units if initial price can capture the present value of all future transactions. Using new data from the textbook market, I find that publishers revise editions more frequently when competition from used textbooks increases. This suggests the presence of planned obsolescence. However, the time since the previous revision also significantly affects revision decisions, indicating that publishers' frequent revision cannot be attributed to planned obsolescence alone.

Abstract:
This paper examines the decision to introduce new products by durable goods producers. Conventional wisdom suggests durable goods producers introduce new products to kill-off used products. However, used units may not compete with new units if initial price can capture the present value of all future transactions. Using new data from the textbook market, I find that publishers revise editions more frequently when competition from used textbooks increases. This suggests the presence of planned obsolescence. However, the time since the previous revision also significantly affects revision decisions, indicating that publishers' frequent revision cannot be attributed to planned obsolescence alone.

kill-off used durables, durable goods, market for used and new goods, secondhand

Abstract:
This paper examines the relationship between malpractice pressure and preventable medical errors. An important objective of medical liability law is to deter medical errors by punishing negligent mistakes. However, little evidence exists on the deterrence effect. Using newly-constructed measures for preventable medical errors and region-level malpractice premiums between 1993-2001, I find that higher liability pressure reduce medical errors in two out of four obstetrics and gynecology procedures examined. These errors are, however, relatively minor, and the resulting cost savings are very modest. Thus, I conclude that the deterrence effect of medical liability do exist, but its marginal effect is small at the current level of malpractice liability.

medical liability, patient safety, PSI, defensive medicine, tort reform, health outcomes, malpractice risks

Abstract:
This paper examines generic entry into the Japanese pharmaceutical market. Relatively little is known about generic entry in regulated markets. Using micro data between 2003 and 2005, I find that generic entry is sensitive to the prescription pattern driven by the price regulation and healthcare system. Fewer generics enter if the drug is more frequently prescribed at large hospitals, and at medical institutions where prescribing and dispensing are separated. Economies of scope in entering multiple markets also affect entry decisions. Brand revenues, which are an important determinant in unregulated markets, also explain generic entry in the regulated market.

generic entry, prescription drug, entry regulation, price control

Abstract:
Following the clarification of advertising regulation in 1997, direct-to-consumer advertising (DTCA) of prescription drugs has skyrocketed in the U.S., creating a controversy over the role of DTCA. Little is known, however, regarding what affects firms' advertising decisions and which drugs have been advertised to consumers. Using brand-level advertising data, I examine the determinants of DTCA of prescription drugs. I find that drugs that are new, of high quality, and for under-treated diseases are more frequently advertised. Furthermore, advertising outlays decrease with competition. These results complement the demand-side evidence that DTCA has a market-expanding effect but little business-stealing effect.

Abstract:
We examine the effect of direct-to-consumer advertising (DTCA) of drug treatment on an important health habit, physical exercise. By learning the existence of a new drug treatment via DTCA, rational consumers may become careless about maintaining healthy lifestyles. Using the National Health Insurance Survey (NHIS) and MSA-level DTCA data, we find that the DTCA related to four chronic conditions -- diabetes, high cholesterol, over weight, and hypertension -- reduce the likelihood of engaging in moderate exercise. This suggests the possibility that DTCA does not only affect pharmaceutical demand in the short-run, but also have long-run impacts on people`s health by affecting their daily routines.

Abstract:
This paper examines generic entry into the Japanese pharmaceutical market. Relatively little is known about generic entry in regulated markets. Using micro data between 2003 and 2005, I find that generic entry is sensitive to the prescription pattern driven by the price regulation and healthcare system. Fewer generics enter if the drug is more frequently prescribed at large hospitals and at medical institutions where prescribing and dispensing are separated. Economies of scope in entering multiple markets also affect entry decisions. Brand revenues, which are an important determinant in unregulated markets, also explain generic entry in the regulated market.

Abstract:
The year of 1997 witnessed an important change in direct-to-consumer (DTC) advertising of prescription drugs. For the first time, the Food and Drug Administration (FDA) permitted brand-specific DTC ads on TV without a "brief summary" of comprehensive risk information. This led to a three-fold growth of DTC advertising expenditure in four years, followed by an intensive debate about the effects of DTC advertising on patient and doctor behaviors. This paper empirically examines the effects of DTC ads on ethical drugs by combining 1996-1999 DTC advertising data with the annual National Ambulatory Medical Care Survey (NAMCS).

We find that DTC advertising leads to a large increase in the number of outpatient drug visits, a moderate increase in the time spent with doctors, but no effect on doctors' specific choice among prescription drugs within a therapeutic class. Consistent with the proponents' claim, this finding suggests that DTC ads encourage patient visits but do not challenge doctors' authority in the specific choice of prescription drugs. We cannot rule out the possibilities, however, that DTC ads may induce doctors to use prescription drugs over alternative treatments and doctors may spend extra time clarifying DTC ads if they do not prescribe the most advertised drug(s). Our results suggest that the effect of DTC advertising is primarily market-expanding rather than business-stealing, and therefore DTC advertising is a public good for all drugs in the same therapeutic class.

direct-to-consumer, advertising, prescription drugs, market expanding, business stealing