Detailing vs. Direct-to-Consumer Advertising in the Prescription Pharmaceutical Industry

Management Science Vol. 56, No. 1, January 2010, pp. 148-160

13 Pages Posted: 11 Nov 2013

See all articles by Ram Bala

Ram Bala

Santa Clara University - Leavey School of Business

Pradeep Bhardwaj

University of California, Los Angeles (UCLA) - Marketing Area

Date Written: November 11, 2013

Abstract

The pharmaceutical industry has always used sales representatives to target physicians (detailing), who are a key link in sales and market share for prescription pharmaceuticals. Since August of 1997, when the Food and Drug Administration eased the restrictions on direct-to-consumer advertising (DTCA), there has been a dramatic increase in the use of DTCA by pharmaceutical firms to target end customers (patients). DTCA seems to have two different effects on pharmaceutical markets. The first is to inform patients about the availability of drugs for some ailments, thus expanding the market (constructive). The second is to persuade patients to talk about specific brands when they meet physicians, with the objective of influencing market share (combative). We consider both effects of DTCA in the presence of a detailing program in a competitive environment. We incorporate the dynamics of physician-patient interaction in a game-theoretic model where firms decide on the form of DTCA to adopt (constructive or combative) and then compete in the marketplace by choosing detailing and DTCA levels. We answer four questions: What is the impact of adopting DTCA on competitive intensity? How do optimal detailing levels for a firm change with the adoption of DTCA? How should the DTCA strategy for a firm vary depending on whether it is stronger or weaker in its degree of influence in the physician’s office? Finally, under what conditions would competing firms voluntarily decide to pursue constructive DTCA?

Keywords: pharmaceutical marketing, detailing, game theory

JEL Classification: D43, M31

Suggested Citation

Bala, Ram and Bhardwaj, Pradeep, Detailing vs. Direct-to-Consumer Advertising in the Prescription Pharmaceutical Industry (November 11, 2013). Management Science Vol. 56, No. 1, January 2010, pp. 148-160. Available at SSRN: https://ssrn.com/abstract=2352933

Ram Bala (Contact Author)

Santa Clara University - Leavey School of Business ( email )

500 El Camino Real
Santa Clara, CA California 95053
United States

Pradeep Bhardwaj

University of California, Los Angeles (UCLA) - Marketing Area ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

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