تبلیغات مستقیم به مصرف کنندگان و رفاه مصرف کننده

The welfare implications of direct-to-consumer advertising (DTCA) have garnered considerable attention and are complicated since the consumer delegates some decision-making authority to the physician, who is exposed to advertising as well. In this paper, I develop and estimate a structural model that explains the demand side behavior in the market for prescription drugs. I then use the estimated parameters of the model to compute the impact on consumer welfare that results from changes in demand for cholesterol-reducing drugs due to increased expenditure in DTCA. The results of the policy analysis indicate increased levels of consumer welfare due to presence of DTCA in comparison to the absence of DTCA. The results also support the argument that DTCA helps bring under-diagnosed patients to the physicians' offices. Furthermore, the results of the estimation support the informative role of DTCA on the decision to seek care, and both informative and persuasive roles of physician advertising on the choice of the drug.

Drug advertising is not a novel concept for consumers. However, before August 1997, consumers' exposure to prescription drug advertising was limited. Although prescription drug advertising was never prohibited, the Food and Drug Administration (FDA) required all print and broadcast prescription drug ads to include a detailed description of contraindications, side effects, effectiveness of the drug, and a detailed statement of risks, which is known as a brief summary. Due to this FDA regulation, the cost of advertising in broadcast media was high and the direct-to-consumer advertising (DTCA) of prescription drugs was limited mostly to magazines and newspapers. In August 1997, the FDA relaxed its regulation on prescription drug advertising in broadcast media, allowing manufacturers to advertise prescription drugs without a brief summary. Since this deregulation, DTCA of prescription drugs through broadcast media has increased resulting in total promotional spending by pharmaceutical companies on prescription drugs to rise over 200%. Along with the rise in pharmaceutical promotions in broadcast media, the public started questioning the pros and cons of DTCA. Opponents argue that DTCA could influence the consumer to demand specific drugs from the physician, which could lead to harmful results if the consumer were to receive a wrong treatment or an overdosage. On the other side, proponents argue that DTCA could be welfare improving if the information provided by DTCA on existing drugs could help bring the under-diagnosed consumers to physicians' offices while helping existing patients to make informed decisions on their health care consumption. The welfare implications of advertising in the market for prescription drugs are complicated since the consumer delegates some decision-making authority to the physician, who is exposed to advertising as well. Hence, it is important to take physician-directed advertising into consideration when analyzing the effects of DTCA in the market for prescription drugs.

The question of whether DTCA of prescription drugs is socially desirable has been an ongoing policy debate in recent years. To address this issue, this paper develops and estimates a structural model that explains the effects of DTCA and physician-directed advertising on the demand side behavior in the market for prescription drugs. It explicitly models consumer and physician-directed advertising and their impact on three consumer choices: the decision to seek health care, the choice of the drug, and the quantity choice of the drug. The probability a consumer is informed about a drug is modeled as a function of DTCA expenditures, consumer attributes and consumer's exposure to television. This allows for consumers to be informed about drugs through word-of-mouth even in the absence of DTCA. The estimates of the model parameters are used to compute the change in consumer welfare that results from the changes in demand in the cholesterol reducing drug market due to the FDA deregulation of policy on DTCA of prescription drugs. To my knowledge this is the first empirical study to evaluate the effects of DTCA on consumer welfare. This is also the first study to model the decision to seek health care distinct from the drug choice, and to model the choice of the drug and the quantity separately. The findings of the paper suggest that the presence of DTCA results in an increase in consumer welfare in the cholesterol reducing drug market. The results also indicate the informative role of DTCA on the decision to seek health care which is consistent with previous findings in the literature. Furthermore, the results suggest that physician advertising could be both informative and persuasive on the choice of the drug, although the magnitude of the persuasive effects seems to be very small. Finally, results also supports informative effects of physician advertising on quantity choice of the drug.