NBER: DTC Ads Increase Treatment of the Undertreated and Undiagnosed, Improve Drug Adherence

Dec. 7, 2015 – While direct-to-consumer (DTC) advertising increases the number of drug prescriptions, it also boosts the number of people being treated for commonly undertreated conditions and improves drug adherence, according to a new study released by the National Bureau of Economic Research (NBER).

The NBER study, “Prescription Drug Advertising and Drug Utilization: The Role of Medicare Part D,” discusses “the dramatic rise in advertising that occurred over the last two decades” and states that “per-capita spending on prescription drugs increased five-fold between 1990 and 2010, following decades of little spending growth.”

However, the study also states that the number of blockbuster drugs marketed in the 1990s, as well as other variables, could have contributed to this growth, and asserts that “advertisements may also serve to remind patients to take their existing medications and influence their perception of the benefits of treatment, promoting better drug adherence.”

“This study underscores that there are tremendous health benefits of DTC advertising,” said Coalition for Healthcare Communication Executive Director John Kamp. “Reaching the underserved and encouraging drug adherence are powerful outcomes of DTC ads,” Kamp noted. Further, the Pharmaceutical Research and Manufacturers of America recently stated that DTC advertising encourages discussions between doctors and patients, another sound benefit (for more on PhRMA’s position, go to: http://catalyst.phrma.org/direct-to-consumer-advertising-makes-doctors-and-patients-stronger-partners).

The NBER study (NBER Working Paper), one of the first quasi-experimental studies on the effects of DTC advertising (DTCA) on drug utilization, focused on drugs that treat five chronic and often undertreated conditions: depression, diabetes, hyperlipidemia, hypertension and osteoporosis. According to the authors, the working paper makes four main contributions, as follows:

(1)    It exploits a major policy change (Medicare Part D) to identify the effects of DTCA on drug utilization. The use of policy shocks as natural experiments has been scarce in the existing advertising literature, although it is a promising approach for obtaining variation in advertising that is unrelated to individual demand and health status.

(2)    NBER uses this empirical framework to estimate the effects of DTCA not only on overall drug utilization but also separately on the extensive and intensive margins—i.e., higher take-up of drug treatments versus better drug adherence by existing patients. “We tease apart the contributions of these component effects to the total relationship between advertising and utilization to explore welfare implications of advertising. The prior literature has primarily focused on overall utilization.”

(3)    NBER uses data from two novel sources, measuring pharmaceutical advertising using data on Nielsen ratings in local media markets that it observes separately for the non-elderly (under 65) and the elderly (65+). While most of the DTCA literature uses advertising expenditures or the volume of ads to quantify advertising, ratings are a more direct measure of actual advertising exposure, NBER states. NBER also obtains measures of drug utilization using administrative pharmacy claims from a database of over 40 large national employers covering about 18 million person-years.

(4)    NBER quantifies spillover effects of Part D on the non-elderly population. One important mechanism through which Part D may have an effect on the non-elderly is through advertising, and NBER finds strong evidence of these spillovers.

Although NBER concludes that “drug utilization is highly responsive to advertising exposure,” it also confirms that advertising increases the take-up of drug treatments and improves compliance for existing patients. “Expanded take-up of prescription drugs accounts for about 70% of the total effect of advertising, while increased use among existing patients accounts for the remaining 30%. As an important component of this latter effect, we estimate that a 10-percent increase in advertising views increases adherence to a drug therapy by 1 to 2.5 percent.”

“Given that the Centers for Medicare & Medicaid Services considers adherence one of the great drivers of lower overall health costs, this finding is significant,” Kamp said.