TY - JOUR
T1 - How Direct-to-Consumer Advertising for Prescription Drugs Affects Consumers' Welfare
T2 - A Natural Experiment Tests The Impact of FDA Legislation
AU - Mukherji, Prokriti
AU - Janakiraman, Ramkumar
AU - Dutta, Shantanu
AU - Rajiv, Surendra
PY - 2017/3/1
Y1 - 2017/3/1
N2 - 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.
AB - 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.
U2 - 10.2501/JAR-2016-050
DO - 10.2501/JAR-2016-050
M3 - Article
SN - 0021-8499
VL - 57
SP - 94
EP - 108
JO - JOURNAL OF ADVERTISING RESEARCH
JF - JOURNAL OF ADVERTISING RESEARCH
IS - 1
ER -