How Direct-to-Consumer Advertising for Prescription Drugs Affects Consumers' Welfare: A Natural Experiment Tests The Impact of FDA Legislation

Prokriti Mukherji, Ramkumar Janakiraman, Shantanu Dutta, Surendra Rajiv

Research output: Contribution to journalArticlepeer-review

8 Citations (Scopus)
299 Downloads (Pure)

Abstract

In August 1997, the U.S. Food and Drug Administration (FDA) allowed brand-specific advertising on television. A simultaneous rise in direct-to-consumer advertising (DTCA) spending and prescription drug sales has resulted in a heated debate among pharmaceutical firms and medical practitioners, as well as in the U.S. Congress and the popular press. One side claims that DTCA creates demand and higher prices for the advertised brands; the other claims that DTCA increases consumer knowledge. The current study sheds light on the debate with a comparison of consumer welfare before and after the 1997 policy change, using a structural econometric model. The results suggest that DTCA seems to be increasing consumer welfare.
Original languageEnglish
Pages (from-to)94-108
JournalJOURNAL OF ADVERTISING RESEARCH
Volume57
Issue number1
Early online date23 Nov 2016
DOIs
Publication statusPublished - 1 Mar 2017

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