NCPA - National Center for Policy Analysis

Direct-To-Consumer Drug Advertising

August 30, 2001

Pharmaceutical companies spend a lot on prescription drug marketing -- $13.8 billion in 1999 alone. But most of it is spent promoting their products to physicians, not advertising to consumers. However, in less than a decade, direct-to-consumer (DTC) advertising of prescription drugs increased from $55 million (1991) to $1.8 billion (1999). As a result, patients are more informed about their medical conditions and the treatment options available.

Many health policy experts believe DTC advertising drives up drug prices by increasing consumer demand. However, there is no discernible link between increased DTC spending and drug prices. In the case of prescription oral antihistamines, for instance:

  • Among the three leading antihistamines, the amount spent on DTC advertising varies widely, from $42.8 million for Allegra to $57.1 million for Zyrtec and $137.1 million for Claritin.
  • However, there is not a wide difference in costs between the drugs -- Claritin costs $76.69 a month, compared to $69.69 a month for Allegra and $60.69 a month for Zyrtec.
  • If there were a direct correlation between advertising expenditures and price, Claritin should be significantly higher than the other two and Zyrtec to be more expensive than Allegra. That is not the case.

Advertising actually lowers prices by giving consumers information about product availability, quality and cost that allow them to make comparisons. Also, by increasing sales, advertising allows development costs to be spread over a larger number of patients, resulting in a lower average price to each. And the increased demand encourages other manufacturers to enter the market -- where they compete on price and quality. For example, beginning with the release of the first antidepressant drug in 1988, all new antidepressants have been launched at a lower price, indicating an attempt to gain market share.

Source: Merrill Matthews Jr., "Who's Afraid of Pharmaceutical Advertising? A Response to a Changing Health Care System," IPI Policy Report #155, May 16, 2001, Institute for Policy Innovation, 250 S. Stemmons Freeway, Suite 215, Lewisville, Texas 75067, (972) 874-5139.


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