Does pharmaceutical advertising increase the cost of drugs?

Many health policy experts believe that direct-to-consumer (DTC) advertising by pharmaceutical companies is contributing to the high cost of many prescription drugs.

Critics contend that DTC advertising, by encouraging over-consumption by gullible consumers, undermines the doctor-patient relationship and, possibly, adversely affects the quality of patient care while increasing unnecessary medical spending. Although DTC advertising has increased in recent years, it is a small portion of drug company marketing.

  • In 1999 U.S. drug companies spent $1.8 billion dollars on DTC efforts.

  • During the same period they spent $12 billion on advertising to medical professionals.

    But a study by the Institute for Policy Innovation says putting information in the hands of consumers is a revolutionary idea. The increased availability of health care information, such as the Internet, is shifting the health care system away from physician-directed towards a patient-directed system. DTC advertising by drug companies is a response to this trend rather than a driving force. Furthermore, patients discussing drug therapies with their physician enhances physician-patient relations.

    Other benefits of advertising include:

  • Patients obtaining treatments for previously undiagnosed conditions.

  • Informing patients about alternative therapies.

  • Increasing competition as other drugs reduce price to maintain market share.

    As long as patients are insulated from the cost of medical care and doctors stand between patients and their prescriptions, the health care marketplace cannot work like a normal market. DTC advertising can stimulate competition by providing the latest and most accurate information about product quality and prices.

    Source: Merrill Matthews, Who's Afraid of Pharmaceutical Advertising?, Institute for Policy Innovation, May 17, 2001

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