Advertising and Optimal Consumption Path: The Case of Prescription Drugs
Posted: 24 Oct 2003
Date Written: July 2003
This paper empirically tests whether direct-to-consumer advertising induces patients to follow their prescribed therapies more closely. The analysis confirms that patients who start on anti-hyperlipidemic drug therapy following high total category advertising tend to be more compliant possibly because they initiate the process and thus are more motivated. There is an informational spillover across brands - advertising of one brand reminds users of other brands in the category to take their medication. This effect is significant statistically but perhaps not so economically - a $1 million increase in advertising decreases average number of missed therapy days by only a small fraction of a day. The effect of own-advertising, of similar economic magnitude, varies across brands. While it increases compliance for two major brands, it decreases compliance for a third major brand. This is consistent with an argument that patients pay particular attention to side-effect warnings for the drug they are taking. Tests suggest that this phenomenon applies to television advertising only and affects patients for whom side-effect warnings are new information.
Keywords: Advertising, pharmaceutical, prescription drugs, therapy compliance
JEL Classification: M3, I1
Suggested Citation: Suggested Citation