NCPA - National Center for Policy Analysis


February 24, 2005

Drug companies spent $2.5 billion advertising prescription drugs directly to consumers in 2000, according to a recent Kaiser study, with TV advertising cited as the largest and fastest-growing expenditure.

Advertising benefits drug companies, say researchers. Each additional dollar spent on direct-to-consumer adds yields $4.20 in sales. Advertising also benefits consumers by encouraging them to initiate a dialog with their physician about drugs they see on TV, leading to improved communication and even the discovery of conditions that were previously undiagnosed.

In a recent survey published in the New England Journal of Medicine:

  • Forty percent of physicians believe the ads have a positive effect on their patients and practice.
  • Patients' questions about an advertised drug lead to the diagnosis of a previously untreated condition about 25 percent of the time; the most common undiagnosed conditions are impotence, anxiety, arthritis and menopausal symptoms.
  • However, 30 percent of physicians feel the ads have a negative effect on their patients and practice, while the remaining 30 percent reported no change.

Some doctors see a down side -- for most of the brand-name drugs advertised, cheaper versions are available that are just as effective. Unfortunately, this puts doctors in an adversarial role by forcing them to explain why a patient may not need the latest, most expensive drug.

Furthermore, says economist Ernst Berndt, author of the NEJM study, there is no incentive to choose the cheaper drug, since most high-priced drugs are covered by insurance with relatively small out-of-pockets costs.

Source: Anita Manning, "Plugged into Prescription Drugs," USA Today, February 14, 2005; Adwatch, "Direct-to-Consumer Prescription Drug Advertising," Kaiser Family Foundation, 2003; and Ernst R. Berndt, "To Inform or Persuade? Direct-to-Consumer Advertising of Prescription Drugs," New England Journal of Medicine, Vol. 352, No. 4, January 27, 2005.

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