Promoting Wellness or Waste? Evidence from Antidepressant Advertising
60 Pages Posted: 6 Mar 2018 Last revised: 10 May 2019
Date Written: May 9, 2019
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: Suggested Citation