Ask Your Doctor? Direct-to-Consumer Advertising of Pharmaceuticals

55 Pages Posted: 30 Mar 2015

Date Written: March 2015

Abstract

We measure the impact of direct-to-consumer television advertising (DTCA) by drug manufacturers. Our identification strategy exploits shocks to local advertising markets generated by idiosyncrasies of the political advertising cycle as well as a regulatory intervention affecting a single product. We find that a 10% increase in the number of a firm's ads leads to a 0.76% increase in revenue, while the same increase in rival advertising leads to a 0.55% decrease in firm revenue. Results also indicate that a 10% increase in category advertising produces a 0.2% revenue increase for non-advertised drugs. Both the business-stealing and spillover effects would not be detected through OLS. Decomposition using micro data confirms that the effect is due mostly to new customers as opposed to switching among current customers. Simulations show that an outright ban on DTCA would have modest effects on the sales of advertised drugs as well as on non-advertised drugs.

Suggested Citation

Sinkinson, Michael and Starc, Amanda, Ask Your Doctor? Direct-to-Consumer Advertising of Pharmaceuticals (March 2015). NBER Working Paper No. w21045. Available at SSRN: https://ssrn.com/abstract=2586898

Michael Sinkinson (Contact Author)

Yale SOM ( email )

127 Wall Street
New Haven, CT 06511
United States

Amanda Starc

Kellogg School of Management, Northweste ( email )

2001 Sheridan Road
Evanston, IL 60208
United States
3303382067 (Phone)

Register to save articles to
your library

Register

Paper statistics

Downloads
7
Abstract Views
247
PlumX Metrics