REVISION: Promoting Wellness or Waste? Evidence from Antidepressant Advertising
Direct-to-Consumer Advertising (DTCA) of prescription drugs is controversial. Even if drugs are efficacious, advertising may inappropriately select patients into treatment. Leveraging advertising variation driven by the borders of television markets, this paper provides the first quasi-experimental measurement of the effect of DTCA on an ex-post measure of consumer well-being. In particular, DTCA of antidepressants significantly decreases missed days of work, a primary outcome associated with depression. Back-of-the-envelope calculations suggest that the wage benefit of a 10% increase in advertising is about $770 million per year while the total cost of the corresponding advertising-marginal prescriptions is about $32 million.
REVISION: Advertising in Health Insurance Markets
The effects of television advertising in the market for health insurance are of distinct interest to both firms and regulators. Regulators are concerned about firms potentially using ads to "cream skim," or attract an advantageous risk pool, as well as the potential for firms to use misinformation to take advantage of the elderly. Firms are interested in using advertising to acquire potentially highly profitable seniors. Meanwhile, health insurance is a useful setting to study the mechanisms through which advertising could work. Using the discontinuity in advertising exposure created by the borders of television markets, this study estimates the effects of advertising on consumer choice in health insurance. Television advertising has a small effect on brand enrollments, making advertising a relatively expensive means of acquiring customers. Heterogeneous effects point to advertising being more effective in less healthy counties, which runs opposite to the concern of cream skimming. ...
REVISION: Informational Shocks, Off-Label Prescribing and the Effects of Physician Detailing
The relationship between pharmaceutical detailing and prescriptions for non FDA-approved (off-label) use has been the subject of regulatory scrutiny, with more than $12 billion in regulatory settlements for off-label promotion since 2004. Using the case of AstraZeneca's anti-psychotic drug, Seroquel, I study the extent to which off-label prescriptions are caused by detailing. Using a physician panel that connects detailing exposure to medical charts, I exploit within-physician variation to identify detailing effects. I find the effect of detailing on off-label prescriptions is small in both absolute and relative terms. Detailing on net tilts the prescribing distribution toward on-label.
REVISION: Positive Spillovers and Free Riding in Advertising of Prescription Pharmaceuticals: The Case of Antidepressants
Exploiting the discontinuity in advertising along the borders of television markets, I estimate that television advertising of prescription antidepressants exhibits significant positive spillovers on rivals' demand. I apply this identification in a demand model, where estimated parameters indicate significant and persistent spillovers driven by market expansion. Using the demand estimates to calibrate a stylized supply model, I explore the consequences of the positive spillovers on firm advertising choice. Compared with a competitive benchmark in which firms optimally free ride, simulations suggest a category-wide advertising cooperative would produce a significant increase in total advertising.
REVISION: Estimating the Cost of Strategic Entry Delay in Pharmaceuticals: The Case of Ambien CR
With the Hatch-Waxman Act of 1984, the FDA included an unchallengeable exclusivity period for newly approved drugs, independent of patents. This potentially generates an incentive for firms to strategically delay the introduction of new versions (reformulations) of drugs until just before patent expiration of the original drug. This way the reformulated drug competes mainly with newly introduced generics of the original drug. If instead, the reformulated drug was to be introduced well before the original drug’s patent expires, the reformulated drug would compete only with the original drug. While the pattern of strategic delay is well documented in the literature, its effects on consumers and firms are not. Reformulations may increase utility through improved efficacy and through fewer doses per day or a more even molecule decay rate. However, as suggested in the press and literature, it is also possible that the adoption of reformulated products is mostly the result of advertising ...