Promoting Wellness or Waste? Evidence from Antidepressant Advertising

60 Pages Posted: 6 Mar 2018 Last revised: 10 May 2019

See all articles by Bradley Shapiro

Bradley Shapiro

University of Chicago - Marketing Management

Date Written: May 9, 2019

Abstract

Direct-to-Consumer Advertising (DTCA) of prescription drugs is controversial. It is taken as given by many policy makers that DTCA wastefully drives inappropriate patients to treatment, distorts patients to expensive brands over generics and therefore wastefully increases health care costs. Alternatively, advertising has the potential to fill an information gap that causes treatably unwell patients to go untreated. I study this dynamic in the context of antidepressant advertising. Depression has large documented economic costs in terms of labor outcomes. If DTCA fills a legitimate information gap, it will lead to improved labor outcomes. Leveraging plausibly exogenous variation in advertising driven by the borders of television markets, I find that antidepressant advertising leads to new initiations of treatment followed by reductions in absenteeism. The wage benefit of a 10% increase in advertising is about $770 million. This labor supply effect co-occurs at the individual level with an incremental $32 million in new initiations of antidepressant treatment. Further, I find evidence of no effect of advertising on: the price of drugs chosen, the generic penetration rate, the likelihood of switching to a different antidepressant, the rate of adverse effects, the likelihood of failing to refill the prescription or the rate of visits to a therapist.

Keywords: Advertising, DTCA, Labor Supply, Health, Selection

JEL Classification: M31, M37, M38, H23, I11, I12, I18, L51, J22, J24, M54

Suggested Citation

Shapiro, Bradley, Promoting Wellness or Waste? Evidence from Antidepressant Advertising (May 9, 2019). Becker Friedman Institute for Research in Economics Working Paper No. 2018-14. Available at SSRN: https://ssrn.com/abstract=3130327 or http://dx.doi.org/10.2139/ssrn.3130327

Bradley Shapiro (Contact Author)

University of Chicago - Marketing Management ( email )

Chicago, IL 60637
United States

HOME PAGE: http://www.chicagobooth.edu/faculty/directory/s/bradley-shapiro

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