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Demand Effects of Recent Changes in Prescription Drug Promotion


The rapid increase in DTC advertising for prescription drugs has focused attention on its role in drug spending and prescribing. A new study by researchers at Harvard University and the Massachusetts Institute of Technology looks at the effect of direct-to-consumer (DTC) advertising on spending for prescription drugs. The study found that, on average, a 10% increase in DTC advertising of drugs within a therapeutic drug class resulted in a 1% increase in sales of the drugs in that class.

Applying this result to the 25 largest drug classes in 2000, the study found that every $1 the pharmaceutical industry spent on DTC advertising in that year yielded an additional $4.20 in drug sales. DTC advertising was responsible for 12% of the increase in prescription drugs sales, or an additional $2.6 billion, in 2000. DTC advertising did not appear to affect the relative market share of individual drugs within their drug class. A summary of the research and the full report are provided below.


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