Economic and commercial impact of DTC advertising

Part 2 of a series. Please read part 1, DTC advertising, and its history with the FDA.

In the first installment, we looked at the history behind consumer advertising of prescription drugs. We also explored the concept of commercial free speech and why this form of advertising is legal. To fully appreciate the controversy about direct-to-consumer (DTC) advertising, we must now examine the commercial effects of these ad campaigns. Do these ads really increase prescription volume and drug costs? Are both physicians and patients affected by the commercials they see on television? In this installment, we will delve into the economics and commercial impact of DTC advertising.

The economic motive behind pharmaceutical advertising

Prescription drugs are a big business in America. There will always be sick patients and doctors ready to treat them. This inevitability has not been lost on the pharmaceutical industry. Like any other business, drug manufacturers seek to minimize costs and maximize profits. One proven way to ensure that your product is more likely to be bought is through advertising. By sidestepping healthcare professionals and advertising directly to consumers, though, some critics argue that drug companies are creating demand for prescription drugs that may not be appropriate. Regardless of whether the increased prescription writing is appropriate, one cannot deny the fact that advertising works. Shannon Brownlee, senior fellow at the New America Foundation, in her book Overtreated: Why Too Much Medicine Is Making Us Sicker and Poorer, quoted a statistic that shockingly showed that every dollar the pharmaceutical industry spends on advertising generates $4.20 in increased sales.

One only has to look at marketing and sales data to see how profitable advertising can be. In 2000, the top ten most heavily advertised drugs (including blockbusters like Vioxx, Paxil, and Claritin) cost $926 million to promote to consumers. In a market where there were 9,880 other drugs also advertised, these ten drugs took up 37% of the advertising dollars. The drug companies were handsomely rewarded for their investment in ads; sales of these ten drugs alone topped $16 billion.

Effects of DTC advertising

The central question behind the DTC ad controversy is what effects (if any) do these ads have on physician prescribing behavior and drug costs? As noted above, advertising plays a tremendous role in increasing the number of prescriptions written. But is this increase appropriate?

Regarding the growth in prescriptions, Pharmaceutical Research and Manufacturers of America (PhRMA), the industry lobby, argues that a positive effect of DTC advertising is that more patients are seeking medical care and are consequently being screened for common conditions. Although this argument has an element of truth, it does not match reality. Yes, better primary care and preventive screening will catch more patients with hypertension, depression, diabetes, and dyslipidemia. And yes, these newly diagnosed patients will require medications, sometimes indefinitely. PhRMA would have more credibility, though, if the DTC ads actually focused on medications used to manage chronic diseases, especially with hopes of reducing long term complications. When the top twenty advertised drugs in 2005 include Cialis ($110 million), Lamisil ($110 million), and Lunesta ($224 million), it becomes clear that drug companies are spending considerable resources to promote lifestyle drugs rather than public health.

One considerable concern about DTC advertising is its potential effects on prescribing behavior. To better study this, Kravitz et al. performed a randomized control trial to see if patients’ requests for an advertised antidepressant, Paxil, affected which antidepressant, if any, the physician prescribed. In their study, they used standardized patients exhibiting symptoms of either major depression or adjustment disorder. These SPs presented to primary care physicians in New York and California. To determine if a patient’s request for a specific advertised medication effected which antidepressant the physician prescribed, the SPs were told to either ask for Paxil by name, ask for a general antidepressant, or neither. Paxil was chosen because, at the time of the data collection, it was heavily advertised ($92 million spent in 2000), priced higher than fluoxetine (which had become generic at that time), and was on the formulary of the large health insurance plans in these two states. Focusing on the major depression group, of those that asked for Paxil by name, 27% received it, while 25% received another antidepressant (and 47% received nothing). By comparison, of those that asked for any antidepressant, only 1% received Paxil and 74% received another drug.

Their results showed that for those patients with symptoms of major depressive disorder and who asked for Paxil, they were more likely to receive it. They also showed that even those patients who made only a general request were more likely to be started on treatment with any antidepressant, not just Paxil. The study authors did not examine whether Paxil was a legitimate first-line agent to use, but their results highlight the fact that patient requests do increase prescriptions for that particular drug, even when there are other (potentially cheaper) options available.

Admittedly, the pressure to prescribe an advertised medication that a patient asks for by name can be great. Physicians may feel compelled to comply with the patient’s wishes. In an FDA survey published in 2004, the agency posed this question to both primary care physicians and specialists: “To what extent did the patient’s expectation influence your decision to prescribe or not prescribe?” For the primary care physicians, only a third felt that the patient’s expectations had no influence over them at all (34%). However, a majority thought that there was some pressure (a little bit to somewhat) to prescribe (52%). On the other hand, the specialty physicians felt that they were less influenced by patient requests (51% for no influence and 49% for some degree of influence); they also felt less pressured than the primary care physicians (58% felt no pressure to prescribe at all).

The Kravitz study gives more credence to the idea that DTC advertising increases prescription volume. Who ultimately pays for this advertising? The costs of drug marketing—along with research and development costs—are passed on to consumers. PhRMA counters, however, the popular belief that DTC advertising significantly increases drug costs.

The rise in prescription drug costs and spending is multifactorial. As the American population ages, the prevalence of chronic conditions also increases. Treating chronic diseases, like depression, hypertension, and diabetes, is costly in the long term. Also, as professional organizations like the American Diabetes Association or the American College of Cardiology recommend tighter glycemic control or more stringent post-myocardial infarction goals, more medications will have to be prescribed to adhere to these ever-changing guidelines. Finally, as newer, more efficacious medications come to the market, the shift towards these better drugs will unfortunately increase the amount of healthcare dollars spent on prescription drugs. Better disease management, although good for the patient, will result in higher drug spending, be it through more prescriptions written per patient or price increases for individual drugs.

Advertising, as expected, does play a profound role in increasing prescription volume, especially for newer medications. Drug manufacturers would hardly waste the money on multimillion dollar campaigns if this were not true. Furthermore, physicians, as stalwart as they may try to be, are not immune to the effects of advertising. The data do show that physicians are more likely to prescribe a medication (even though it may not be the one advertised) than not if a patient requests one. This is not necessarily bad. In the Kravitz study, those symptomatic patients that asked for any antidepressant were much more likely to receive adequate depression care than those that asked for nothing at all. As PhRMA points out, better medical care may actually be more costly and the increase in prescription drug costs may not be due solely to advertising. Regardless of the actual numbers, PhRMA still must counteract the public’s often negative perceptions about DTC advertising. In the final installment, we will examine how the public and physicians feel about advertising, the Vioxx debacle and its impact on the industry, and propose a potential solution to this controversy.