Study: drug advertising drives prescriptions – and saves us money
By Dylan Walsh
In Iowa, it happens every four years: presidential candidates storm up and down the state, meet, meet, and deliver speech after speech, all in support of a population that is disproportionately white, retired, and rural. This year’s chaos has revived the eternal question of how well Iowa’s caucus serves the institution of American democracy. Less often asked is how it could benefit microeconomics.
For Michael Sinkinson, assistant professor of economics at Yale SOM, the return of the recurring madness in Iowa and other states provided an opportunity to examine the effectiveness of drug advertising on television.
“Of course, I’d like to call Pfizer and ask them to experiment with their millions of dollars in advertising budgets to try to understand the impact that advertising is having,” says Sinkinson. “But Since Pfizer is unlikely to allow me to randomly determine the placement and timing of their ads, I looked for a natural experiment instead. ”
Political advertising is given media priority over other advertising, and because area codes are staggered chronologically and geographically, national media markets are flooded with political advertising in a predictable cycle. For example, Iowa ran 5,120 political ads in January 2008, compared to an average of 19 political ads in other areas. This Iowa flood drove out other types of advertising.
Together with Amanda Starc, a colleague at Northwestern University, Sinkinson used this predatory plan to study the effectiveness of drug advertising directly to consumers. They specifically looked at a class of anti-cholesterol drugs known as statins and collected data on pharmaceutical advertising, political advertising, and statin prescriptions from 210 media markets in several primary states.
“The logic was that if everything else stayed the same, if the caucuses were in certain swing states, the number of people prescribed statins shouldn’t change – the primaries should really have nothing to do with the drug market “Says Sinkinson. “But if we saw a decrease in the number of people taking statins in the weeks following the Iowa and New Hampshire primary and then saw the same thing the following month in Nevada and South Carolina, it would indicate something was on Politics lies. The event affected the market. ”The stranglehold of political advertising seemed a likely cause.
That result – Displaced Ads followed by a reduced prescription of statins – is exactly what they found. Political advertising during the primaries drove an average of 16% of ads for Lipitor and 12% of ads for Crestor, two popular statins. In some markets, 30% or more of Lipitor ads were displaced. As a result of this “political shock,” as Sinkinson and Starc describe it, statin prescriptions declined. Ultimately, the researchers linked a 10% increase in advertising to a 1.4% increase in a company’s revenue, showing that Lipitor’s advertising was effective in convincing people in the target audience to “talk to your doctor,” as the advertisements invariably put it, about the drug.
The monetary value of heart attacks avoided has been found to be substantial enough to justify any direct mailing to consumers throughout the pharmaceutical industry.
This finding provides rare empirical insights into the value of drug advertising, but Sinkinson and Starc also looked at deeper implications of this finding. “There is huge political debate about whether we should allow drug ads on television,” says Sinkinson. Many people argue that the money companies put into marketing is partly responsible for US healthcare costs. (New Zealand is the only other developed country that allows direct marketing of pharmaceuticals.) “Most people have the gut reaction that this is wasteful spending and that the money should go into research and development instead. But could the spending actually be good for society? “
As it turns out, statins do their job wonderfully: They prevent heart attacks with very few side effects. Doctors strongly recommend them for people with high cholesterol. Sinkinson and Starc looked at how well statins reduce heart attack risk in clinical trials, then made a rough estimate of the cost of a heart attack, and finally used those numbers to “back up” the savings from the effectiveness of statin advertisements.
The benefits were overwhelming. Not only did the monetary value of the heart attacks avoided outweighed the amount drug companies spent on statin advertisements during the study period, but the profits also turned out to be substantial enough to justify all direct mail advertising across the pharmaceutical industry during that time. Getting people to talk to their doctors about statins created great value for society at large.
Critically, these results only hold true when studying statins. The value of heart attack avoided is relatively clear and well documented. The potential side effects of statins are negligible, and so “we’ve taken them away,” says Sinkinson. Had the researchers chosen another class of drugs with less clear benefits or complicated side effects, such as antidepressants, the math would be much more difficult and the conclusion uncertain.
These findings represent an important new consideration for both pharmaceutical companies and policy makers when it comes to drug advertising. Corporations spend billions of dollars on media commercials every year; “If there is a drug like these statins in the mix, all the advertising could be worth it,” says Sinkinson.