In August of 1997, the Food and Drug Administration (FDA) relaxed the rules governing television advertising of prescription pharmaceutical products allowing pharmaceuticals to mention both the disease and drug brand name. Shortly thereafter, expenditures on direct to consumer advertising (DTCA) for prescription pharmaceuticals rapidly expanded. This has prompted a great deal of debate in the medical profession and among health care insurers and managed care organizations regarding the effect of these marketing efforts. However, very little is known about the effects of DTCA for the efficient allocation of prescription drugs. There are three components to the effect of DTCA: a """"""""public good"""""""" effect whereby the information is disseminated about a disease, a """"""""matching"""""""" effect whereby the information in DTCA assists patients and physicians in identifying optimal therapeutic pathways, and a """"""""brand"""""""" effect whereby the DCTA encourages patient loyalty to the advertised brand based on the aesthetic or persuasive characteristics of the advertisements. The principal goal of this research will be to estimate bounds on these three effects, and thereby identify the helpful and/or harmful effects of DTCA on social welfare. We will bound the welfare effects by measuring how DTCA affects the likelihood that selected diseases are diagnosed, physician prescribing patterns given that the diseases are diagnosed, and the duration of care, conditional on a prescription being written. To do this, we will use data from two representative diseases: osteoarthritis and hyperlipidemia. The data will be taken from a large, geographically dispersed multi-practice electronic medical record research network, local data on television and radio advertisements, and other sources of local and national data. Knowledge gained about the impact of DTCA on the pathways of care will be have policy implications for private payors, future Medicare pharmaceutical benefits and the continued stance of the FDA on DTCA marketing rules.
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