The Cost Effectiveness of Direct to Consumer Advertising for Prescription Drugs

Abstract

In this paper we use published information to provide analyze the economic value of Direct to Consumer (DTC) advertising. We use information on: the effect of DTC in generating patient visits; the effect of patient visits and mentions of a drug in generating prescriptions; and the effect of advertising on the cost effectiveness for specific advertised drugs. In all cases, we find that DTC advertising does not alter the cost effectiveness of the medications, all of which remain below conventional thresholds for efficiency. This suggests that DTC advertising is a cost effective way of generating patient benefits. Our estimates are conservative. Our methodology leads to underestimates of the benefits of DTC advertising, and overestimates of the costs. We conclude that critics of DTC and calls for moratoria or bans on such advertising are misguided, and that increased, rather than decreased, advertising would be appropriate.