Deregulating Drug Advertising

October 6, 2003

Direct-to-consumer (DTC) advertising by the pharmaceutical industry helps inform patients and leads to increased research and development spending. Consequently, the European Union and Canada should follow the example of the United States in deregulating their own DTC advertising, says John R. Graham of the Fraser Institute.

Critics say that increased spending on drug advertising leads to less money for R&D, but data from 1997 to 2001 show a very positive relationship between spending on drug promotion and R&D:

  • In 1997 (right after DTC advertising was deregulated in the United States), promotional spending was $18 billion and R&D was $11.3 billion.
  • By 2001, about $30.5 billion was being spent on DTC advertising, and R&D spending was up to $19.3 billion.

DTC advertising often spurs patients to discuss under-diagnosed ailments and side effects with their doctors, resulting in more accurate drug prescribing and increased profits for pharmaceutical companies, which in turn leads to more R&D spending, says Graham.

If Canadian and European governments deregulated DTC advertising, the level of drug ad spending would increase by about half, and R&D investment would increase significantly, benefiting both drug companies and patients, explains Graham.

Source: John R. Graham, "Increased Drug R&D through Increased Promotion," Fraser Institute, March 2003.

 

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