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Pharmaceutical advertising and Medicare Part D
Darius Lakdawalla1, Neeraj Sood, Qian Gu
1University of Southern California, United States.
Journal of Health Economics
|December 7, 2013
Summary
Prescription drug insurance expansions increase pharmaceutical advertising, especially in less competitive markets. This boosts drug use among those not covered by the insurance, showing significant spillover effects.
Area of Science:
- Health Economics
- Pharmaceutical Policy
- Marketing Science
Background:
- Prescription drug insurance expansions can alter pharmaceutical market dynamics.
- Increased market profitability may incentivize pharmaceutical firms to increase advertising.
- Market competition influences how firms benefit from advertising.
Purpose of the Study:
- To examine the impact of prescription drug insurance expansions on pharmaceutical advertising.
- To determine if this effect is concentrated in less competitive drug markets.
- To quantify spillover effects on non-insured populations.
Main Methods:
- Empirical analysis of pharmaceutical advertising expenditures before and after insurance expansion.
- Examination of advertising trends across different levels of market competition.
- Assessment of utilization changes in both insured and non-insured patient groups.
Main Results:
- The implementation of Medicare Part D correlated with a 14-19% rise in total pharmaceutical advertising.
- This advertising increase was most pronounced in the least competitive drug classes.
- Advertising led to a 3.6% increase in drug utilization among non-elderly patients outside Part D.
Conclusions:
- Prescription drug insurance expansions significantly increase pharmaceutical advertising.
- Less competitive markets experience magnified advertising responses.
- Publicly subsidized insurance creates substantial spillover effects on non-beneficiary drug utilization and welfare.
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