public policy issues in direct-to-consumer advertising of...

Vol. 21 (2)Fall 2002, 174–193174 Journal of Public Policy & Marketing

Public Policy Issues in Direct-to-Consumer Advertising ofPrescription Drugs

John E. Calfee

In August 1997, the Food and Drug Administration (FDA) announced a reinterpretation ofits rules on direct-to-consumer (DTC) advertising, the effect of which was to permitbranded broadcast advertisements and therefore to increase the volume of DTC advertisingseveral-fold. A substantial body of research, consisting primarily of consumer surveys,provides the basis for a preliminary assessment of the effects of DTC advertisements. TheFDA’s own assessment, that DTC advertisements can provide substantial benefits and donot appear to cause substantial harm, is consistent with survey and other data. Direct-to-consumer advertisements appear to provide valuable information (including riskinformation); induce information-seeking (mainly from physicians); prompt patients todiscuss conditions not previously discussed; and generate significant, positive externalitiesincluding the possibility of improved patient compliance with drug therapy. The effects ofDTC advertisements on drug consumption and on health care have yet to be assessed. Theauthor suggests that a further relaxation of FDA rules would accelerate the disseminationof valuable information, with favorable consequences for drug development and consumerhealth.

JOHN E. CALFEE is a Resident Scholar, American Enterprise Insti-tute. The author thanks Ed Slaughter of Prevention Magazine forproviding data and comments on earlier, related drafts and Ran-dolph Stempski for data analysis. Comments by Pauline Ippolitoand two anonymous JPP&M reviewers benefited the author enor-mously. He also gratefully acknowledges partial financial supportfrom the Coalition for Health Care Communication, whose mem-bers are the American Association of Advertising Agencies, theAmerican Advertising Federation, the American Medical Publish-ers Association, the Association of Medical Publications, the Asso-ciation of National Advertisers, the Healthcare Businesswomen’sAssociation, the Healthcare Marketing & Communications Coun-cil, the Medical Marketing Association, the Midwest HealthcareMarketing Association, and the Public Relations Society ofAmerica.

1See Pines (1999), on which much of the history in this section draws.

The 1962 amendments to the Food, Drug, and Cos-metic Act, which charged the Food and Drug Admin-istration (FDA) with regulating pharmaceutical effec-

tiveness in addition to regulating safety, also transferredresponsibility for prescription drug advertising from theFederal Trade Commission (FTC) (which still regulatesadvertising for over-the-counter [OTC] drugs) to the FDA.In the early 1980s, a few pharmaceutical manufacturersexperimented with prescription drug advertisementsdirected at consumers.1 In September 1982, having previ-ously announced that direct-to-consumer (DTC) advertisingwas not inherently in violation of FDA law and regulations,the FDA declared a “moratorium” on DTC advertising, withwhich the industry complied.

In 1985, the FDA lifted its moratorium but emphasizedthat DTC advertisements must meet the same standards asthose aimed at professionals. Print advertisements were

required to include a detailed “brief summary” of risk andother information. Broadcast advertisements required amuch shorter but nonetheless lengthy “major statement” ofrisks, while also making “adequate provision” for viewers toobtain full FDA-approved prescribing information. Becausemeeting the broadcast requirements was impractical, adver-tisers were forced to take one of two approaches. “Help-seeking” advertisements could discuss that a treatmentexisted for a condition, but they could neither mention adrug by name nor make suggestions and representationsabout drug treatments. “Reminder” advertisements couldemphasize drug brands but could not mention what condi-tions the drugs could treat. Under these constraints, DTCadvertising gradually increased from $12 million in 1989 to$55 million in 1991, $164 million in 1993, $340 million in1995, and $579 million in 1996 (Pines 1999).

In August 1997, the FDA (1997) issued a preliminary“Guidance for Industry” that reinterpreted FDA regulationswithout actually changing any regulations. Reiterating tradi-tional requirements, the Guidance stated that in addition tobeing nondeceptive, prescription drug advertising must

(1) Present a fair balance between information about effective-ness and information about risk,

(2) Include a “major statement” conveying all of the product’smost important risk information in consumer-friendly lan-guage, and

(3) Communicate all information relevant to the product’s indi-cation (including limitations to use) in consumer-friendlylanguage.

The new interpretation made clear, however, that the“major statement” in radio and television advertisementscould be far simpler than what had previously been required.Adequate provision of required information could beachieved by including a concise summary of risks andrelated information (often through voice-over), while identi-

Journal of Public Policy & Marketing 175

2On the obscure origins of the prescription requirement, see Temin(1979) and Marks (1995).

fying sources for more complete information: a toll-freenumber; an Internet Web site address; either concurrentprint advertisements or information about specific, publiclyaccessible locations such as pharmacies; and a statementthat information is available from all physicians and phar-macists. The FDA stated that it would review its policy aftertwo years and invited interested parties to provide informa-tion and research on the effects of DTC advertisements.

In 1999, the FDA commissioned a consumer survey onDTC advertisements. In August 1999, with preliminary sur-vey results in hand, the FDA (1999a, b) issued a final Guid-ance on DTC advertising. The requirements remainedessentially unchanged from August 1997. The FDA alsostated that it had not seen compelling evidence that DTCadvertising had tended to cause any of the harms of which ithad been accused. Reiterating its 1997 plan, the FDA(1999b) planned to evaluate the effects of DTC advertisingduring the next two years. In March 2001, the FDAannounced plans for another consumer survey and a surveyof physicians. It invited comments on survey design and onthe effects of DTC advertising (FDA 2001a). Partial resultsfrom the consumer survey (the results of which have notbeen completely released) are discussed subsequently. Thephysician survey has progressed more slowly because oflow response rates.

In the wake of the August 1997 policy change, DTCadvertising continued to accelerate, reaching $1.3 billion in1998, $1.9 billion in 1999, $2.5 billion in 2000, and $2.7 bil-lion in 2001 (for years 1998–2000, see Peterson 2002; foryear 2001, see IMS Health 2002). A pharmaceutical firm(Pfizer) was Advertising Age Magazine’s choice as 2001marketer of the year, and was the ninth-largest advertiserduring the first three quarters of 2001 (Goetzl 2001).

These events have been accompanied by vigorous debateon the effects of DTC advertisements. However, before con-sidering that debate, it will be useful to review the context inwhich DTC advertising occurs.

The Market Context of DTCAdvertisingDirect-to-consumer advertising of prescription drugs differsfrom almost all other advertising in two respects. The first isthe requirement for consumers to obtain a physician’s pre-scription before purchase, a requirement that (significantlyfor an understanding of FDA regulation) was not originallydictated by legislation.2 This requirement has severaleffects. It alters consumer costs, in partially offsetting ways.The necessity of visiting or communicating with a physicianincreases costs in terms of time, inconvenience, and out-of-pocket expenditures for a visit. Marginal costs are minimal,however, when a prescription is obtained in an appointmentthat would have occurred anyway (as is almost always thecase according to surveys). Out-of-pocket drug expendi-tures, in contrast, are reduced because health insurance typ-ically covers most of the cost of prescription drugs (but notOTC drugs): The proportion of out-patient prescription drugcosts paid by third parties has increased from 31% to 68%

3A contrast with medical device marketing is worth noting. Direct-to-consumer advertising for devices is regulated by the FTC, not the FDA, andtypically includes far less risk information. Most devices also require aphysician’s prescription, but that requirement is often subordinate to thesimple fact that a physician’s oversight is necessary to administer treatmentusing the device.

4The FTC and FDA actually share responsibility for prescription drugDTC advertising, but the more expansive FTC approach to advertising reg-ulation ensures that FDA regulations are usually the constraining ones. TheFDA does not have responsibility for regulating medical device advertis-ing, even for such sophisticated devices as magnetic resonance imaging, inwhich a physician’s intervention is required. The FTC regulates deviceadvertising, albeit with obvious deference to the views of the FDA.

between 1980 and 2000 (Berndt 2001; U.S. Department ofHealth & Human Services [USDHHS] 2002a). The pre-scription requirement also insures (with few exceptions) thatthe buyer receives the benefit of a physician’s expert knowl-edge of the product, often with the addition of explicit infor-mation on product risks and benefits.3 Finally, the prescrip-tion requirement delays the effects of advertising. In somecases, the delay can be substantial. An example is advertis-ing for the statin class of cholesterol-reducing drugs, a drugcategory in which a prescription (if any) is typically writtenonly after laboratory testing followed by an attempt atlifestyle changes.

A second unique aspect of DTC advertising is its regula-tory environment. The FDA regulation of prescription drugadvertising is exceptionally stringent.4 The FDA staff mem-bers do not always review advertisements before publication(but they often accede to manufacturers’ requests to do so),but the most important advertising claims are essentiallysubject to preclearance, because FDA regulations prohibittherapeutic claims that have not been approved for listing indrug labeling. That labeling is usually extremely detailed,specifying such matters as the precise illness or condition tobe treated (e.g., certain outdoor allergies but not indoorallergies), dosage, and even relationships with other or priortherapy. Therefore, the bulk of FDA advertising regulationhas traditionally consisted of comparing ad claims to labelcontents (Fisherow 1987; Kessler and Pines 1990). TheFDA also routinely challenges implied claims, and it sys-tematically reviews advertising materials when voluntarilysubmitted either before or after they become public (Adams2002; Ostrove 2001).

Perhaps the most important aspect of FDA advertisingregulation is that it is essentially never challenged in courtby pharmaceutical firms, which (often after negotiation withFDA staff) invariably accede to FDA demands to modify ordrop challenged claims and advertisements. As Fisherow(1987, p. 230), a member of the FDA advertising regulationstaff, notes, “This capacity to resolve difficulties to its satis-faction before they reach the courts has delivered what FDAwants most, the prompt cessation or transformation of aquestioned advertising claim or campaign, with a relativelymodest expenditure of resources.” This extraordinary levelof cooperation arises because manufacturers know that inaddition to regulating their advertising, the FDA approvesall of their new products, manufacturing methods and facil-ities, and other essential operations including clinical trials.Therefore, firms believe it is to their great interest to main-tain amicable relations with the FDA staff (Calfee 1996;

176 Public Policy Issues in DTC Advertising

5In their article on current FDA effects to raise manufacturing standardsthrough enforcement actions, Petersen and Abelson (2002) note, “Theagency has also begun holding up approval of new drugs until the compa-nies can convince it that they have fixed manufacturing problems—anaction that gets investor attention quickly and can send the price of a com-pany’s stock down.”

Hutt 1993). These forces are clearly described by Fisherow(1987, pp. 231–32):

One may speculate about why the Agency has been so success-ful. It may be that it is always correct in its analysis and persua-sive enough in its communication to deter an advertiser fromcontinuing to disseminate a questioned message. The morelikely case is that the Agency is not always right, but that it suc-ceeds anyway because of the nature of its relationship withpharmaceutical advertisers.

The author continues (pp. 231–32), comparing this situa-tion with that surrounding FTC regulation,

[T]he FDA licenses the prescription drug products subject to itsregulation and approves labeling which effectively sets the lim-its on what may be communicated about product performance.This pervasive involvement in the industry’s current and futurebusiness means that a corporate decisionmaker needs to con-sider more than just the merits of the company’s position in theparticular advertising dispute at hand. The executive must alsoweigh how much disagreement with the FDA staff in a currentmatter might affect future treatment. No such continuing rela-tionship exists between the FTC and any industry.

The willingness of FDA staff to link enforcement actionsin one area, such as manufacturing facilities, with regulationin another area, such as new drug approvals, is well knownand has been widely reported in the news media.5 Firmshave recently paid fines of as much as $500 million becauseof FDA dissatisfaction with manufacturing facilities, evenwhen neither the FDA nor the medical community hasdeemed any of the products from the factories in questionunsafe or worthy of recall (Anand 2002)

Notwithstanding industry forbearance from challengingthe FDA in court, the First Amendment’s protections forcommercial speech also play a role. The Washington LegalFoundation, an independent public interest group, haslaunched several First Amendment challenges to FDA regu-lation of advertising and promotion directed at physicians(Washington Legal Foundation 1995; Washington LegalFoundation v. Kessler 1994). Other litigation has challengedFDA regulations for the advertising of supplements (Pear-son v. Shalala 1999). These cases have proceeded slowlybut with considerable success, forcing the FDA to loosen itspolicies about manufacturers’ dissemination of “off-label”information (i.e., information not listed in the FDA-approved materials about a prescription drug; see Oliphant2000).

Even critics who vigorously advocate even stronger FDAregulation have stated that nondeceptive DTC advertise-ments (the only kind that FDA regulations permit) are pro-tected by the First Amendment (Wolfe 2002). A return tothe years before any DTC advertisements took place or tothe regulatory regime that existed before 1997 would beconstitutionally suspect. Reflecting these circumstances, theFDA recently published a Federal Register notice asking forpublic comments on how it can ensure that its regulatory

6The New Zealand experience is of interest not just because DTC adver-tisements are permitted but also because they are regulated by the Adver-tising Standards Authority, a self-regulatory body. See Hoek and Gendall(2002a, b). The pharmaceutical industry view of DTC in New Zealand isprovided in Researched Medicines Industry Association of New Zealand(n.d.).

7Meek (2002) provides a thorough review of DTC regulatory issues inthe EU, New Zealand, and Canada. On the Canadian situation, see alsoCalfee (2001a). A recent debate in the pages of the British Medical Journalconsists of Mintzes (2002) and Bonaccorso and Sturchio (2002).

8Leading reviews are Wilkes, Bell, and Kravitz (2000); Lyles (2002);Rosenthal and colleagues (2002); plus a May 2001 conference, completewith papers, convened by the office of the Assistant Secretary for Planningand Evaluation in Health and Human Services (see Bero and Lipton 2001;Frank et al. 2001; Schommer and Hansen 2001). Other useful reviewsinclude Meek (2001) and National Health Council (2002b).

activities conform to recent Supreme Court rulings on FirstAmendment protections for commercial speech (FDA2002a, which also briefly summarizes the related litigation).

The Debate over DTC AdvertisingThe United States and New Zealand are the only developednations that permit DTC advertising of prescription drugs.6Canada and the European Union (EU) nations have contin-ually debated whether to follow the United States’ exam-ple.7 The EU recently began a limited experiment in whichmanufacturers would be permitted to provide consumerswith information on treatments for three therapeutic cate-gories (diabetes, AIDS, and asthma) through pamphlets andother materials (but only in response to consumer requests)and in Web sites (European Commission 2001; Meek 2001).There is little reason, however, for Canada or the EU to sub-stantially alter their policies in the near future (Meek 2001).

In the meantime, DTC advertising has prompted consid-erable discussion and analysis in the United States.8 Most ofthe criticism has come from the physician community (Hol-lon 1999) and health insurance organizations. A late 1997poll of physicians found a strong majority desiring tighterregulation or a ban on DTC advertising (IMS Health 1997;McGinley 1999). Managed care organizations and largeemployers have complained that DTC advertising causesexcess prescribing or shapes consumer preferences towardmore expensive branded drugs (Blue Cross Blue ShieldAssociation 2002; Burton 2002; National Institute forHealth Care Management [NIHCM] 2001).

The medical community’s opposition to DTC advertisinghas greatly moderated in the past few years. In 1998, Lancet,a leading British medical journal, published an unsignededitorial arguing that DTC advertising would benefit Euro-pean consumers. Hoek and Gendall (2002b) note that boththe New Zealand Medical Association and the Royal Col-lege of New Zealand General Practitioners have issuedstatements that endorse the continuation of DTC advertisingin New Zealand under the current self-regulatory regime. In2000, the American Medical Association (AMA; 2000)issued a statement that concluded, “If used appropriately,direct-to-consumer (DTC) advertising has the potential toincrease patient awareness about treatment options andenhance patient–physician communication. Advertisingdirectly to the public educates patients, enabling them tobetter understand and participate in medical care.” Thestatement emphasized that this observation applied only to


9See Allison-Ottey, Ruffin, and Allison (2002) and National MedicalAssociation (2002). The USDHHS (2002b) recently launched a campaignto encourage African-Americans to see physicians to learn of possible pre-ventive care.

advertisements that “do not distort information and misleadpatients.”

Especially significant is a January 2002 report on DTCadvertising, with an accompanying statement from theNational Health Council, an organization of approximately50 voluntary health associations (e.g., American HeartAssociation), 35 professional and membership organiza-tions (including the AMA, medical specialty associations,and the main pharmaceutical trade association), other non-profit associations (including AARP and the RosalynnCarter Institute), and large businesses (mainly pharmaceuti-cal firms). The National Health Council report was reviewedby all member organizations and approved unanimously.The accompanying statement concluded, “After completinga thorough review of Direct-to-Consumer (DTC) prescrip-tion drug advertising, the National Health Council believesthat DTC advertising is an effective tool for educating con-sumers and patients about health conditions and possibletreatments” (National Health Council 2002a, b). At aboutthe same time, the National Medical Association (an organi-zation of African American physicians) published theresults of a member survey, in which attitudes toward DTCadvertising were largely (but by no means universally)favorable. It also published a policy statement that noted theexistence of an “educational benefit” in DTC advertising,sought an increase in DTC advertisements in African Amer-ican media, and urged physicians to be open to such adver-tisements as a communication device so long as the adver-tisements are balanced.9 This policy is consistent withresearch that shows that African Americans are dispropor-tionately likely to have undetected and untreated elevatedcholesterol and with an earlier appeal by the Association ofBlack Cardiologists to the FDA to support petitions (whichfailed) from Merck and Bristol-Myers Squibb to move thetwo oldest statin drugs (Mevachor and Pravachol) to OTCstatus. The research reached the same conclusions aboutHispanics, and the leading organization of Hispanic physi-cians also supported switching those two drugs to OTC sta-tus (Elliott 2000; Lueck 2000).

In July 2001, the FDA official in charge of DTC adver-tising regulation and research stated in congressional hear-ings that “At present, FDA is not aware of any evidence thatthe risks of DTC promotion outweigh its benefits” (Ostrove2001), a view that reinforced what the agency had said in1999. Speaking at an April 2002 conference, former FDACommissioner David Kessler, who had vigorously opposedopening up DTC advertising during his tenure from 1990 to1997, said that he had changed his mind and now supportsthe expanded role of DTC advertising (Mishra 2002). TheFTC, which shares jurisdiction with the FDA, argued in a1996 comment to the FDA that DTC advertising can bevaluable for consumers, and it reiterated its support for DTCadvertising in a 2001 comment to the Office of Managementand Budget (FTC 2001).

Nonetheless, debate continues, with both congressionaland state legislators considering legislation to restrict DTC

advertising (Pallarito 2001; Pear 2002; Senate CommerceCommittee Subcommittee 2001). An overarching issue isthe impact of DTC advertisements on total health care costs,on the financial costs of impaired health, and on consumerwelfare including nonfinancial benefits. An assessment ofthis impact would require extensive use of the medical andhealth economics literature to determine the net impact ofincreased drug usage, assuming that DTC advertisingincreases pharmaceutical demand. These topics are not dealtwith in this article beyond noting the following points: Theliterature yields clear evidence that for some therapeutic cat-egories (but by no means all), increased pharmaceutical useis associated with reduced health care costs (e.g., AIDStreatments and anti-ulcer drugs; see Neumann et al. 2000).Reductions in workplace and personal costs have also beendocumented (Kleinke 2001; Lichtenberg 2001). Some ana-lysts have concluded that pharmaceutical advances, similarto technological progress in general, tend to reduce overallhealth care costs (see Kleinke 2001; Lichtenberg 2001).Beyond the matter of health care costs lie the benefits real-ized primarily by consumers, as when heart disease drugsprolong life even though they increase the probability of aperson eventually suffering other illnesses, such as cancer,and when antidepressants reduce the very large perceiveddegradations in quality of life caused by depression (see,e.g., Bennett et al. 2002 on the disutility of depression).

The concern, however, is with DTC as an advertisingphenomenon. Obvious issues include DTC’s impact onpharmaceutical prices and expenditures, its impact on con-sumer information, and the extent to which DTC advertisingis deceptive. Also important are the questions whether DTCadvertising affects physician’s prescribing behavior and thepatient–physician relationship. Finally, there is the questionwhether DTC advertising confers positive externalities onthe marketplace, such as by increasing drug therapy compli-ance and conveying useful information about nonbrandeddrug therapy or lifestyle changes. One interesting topic notaddressed here is the impact of DTC advertising on productliability litigation, in which the New Jersey Supreme Courtruled that DTC advertising can abrogate the “learned inter-mediary” defense that normally requires patients to suephysicians, rather than manufacturers, in cases regardingprescription drug safety and appropriateness (see Berger2000; Gemperli 2000).

The Potential Role of DTC AdvertisingA preponderance of research shows that advertisingimproves markets by providing consumers with essentialinformation that they would otherwise ignore, fail toreceive, or receive too late. The FTC, which regulates mostadvertising (but not prescription drug advertising), hasemphasized that advertising plays an essential role inimproving consumer information and otherwise improvingmarkets (Calfee 1997; Calfee and Pappalardo 1989; Pitof-sky 1996).

There are compelling reasons to expect similar effectsfrom DTC advertising for the prescription drug market.Recent decades have seen a rapidly expanding role for drugtherapy in medical practice (Altman and Parks-Thomas2002). These years have also seen a powerful trend towardgreater consumer involvement in health care. The FDA pol-


10On depression, see Glick and colleagues (2001) and the 1999 SurgeonGeneral’s report (U.S. Public Health Service 1999). See Fleming and col-leagues (2002) on AIDS; Leape (1995) on diabetes; and Allen (1999) onosteoporosis (describing the findings of the National Osteoporosis RiskAssessment study).

icy reflects these trends. In the past two decades, the FDAhas moved more than 600 drugs from prescription to OTCstatus, including such potent drugs as nicotine patches, theanti-inflammatory drug Naproxen, and treatments for vagi-nal yeast infections (FDA 1999d; Lueck 2000). The FDAhas also stated that “It [DTC advertising] is consistent withthe whole trend toward consumer empowerment. Webelieve there is a certain public health benefit associatedwith letting people know what’s available” (Stolberg 2000).

The medical literature provides strong evidence that someof the most important pharmaceutical information—espe-cially relatively new information—often fails to reachphysicians or patients in a timely manner. This situation isreflected in the proliferation of practice guidelines for physi-cians as well as in published findings that medical practiceoften falls short of what can be achieved by following eventhe least controversial aspects of consensus guidelines (e.g.,Ayanian et al. 1994; Felch and Scanlon 1997; Kane andGarrard 1994).

Consumers and patients tend to be less well informedthan their doctors. Many of the most valuable new drugsinvolve conditions or illnesses that require consumers totake the initiative in seeking medical advice for dealing withdepression, for example, or to learn whether they are at riskfor heart disease, and if so, what can be done to reduce thatrisk. Many studies and consensus statements from the med-ical community have documented the existence of largenumbers of underdiagnosed and undertreated consumerswho suffer from serious, yet treatable, medical conditions,such as depression, AIDS, diabetes, and osteoporosis.10

A 2001 report from the National Cholesterol EducationProgram at the National Institutes of Health illustrates thesetrends. The report concluded that elevated cholesterolshould be treated much more aggressively than in the past,even as earlier studies have found that most people whoshould have been treated under the previous guidelines werenot treated and, often, not even identified (Expert Panel2001; see also Cleeman and Lenfant 1998). Recent researchhas also found that African Americans and Mexican Amer-icans are less likely than others to undergo cholesterolscreening or to be treated after being identified as requiringmedication (Nelson, Norris, and Mangione 2002).

These circumstances dictate that patients and consumersmust play an active role in their own health care. In particu-lar, consumers need to acquire information about medicaltherapies, talk to their physicians about medical symptomsand conditions, and decide with their doctors how to dealwith illnesses and conditions. The FTC and FDA statementscited previously are consistent with this view.

Direct-to-consumer advertising can confer substantialbenefits because it provides firms with incentives to attachmissing information to their brands and to disseminate thatinformation to increase brand demand. The consumer bene-fits would come partly from consumption of the advertised

11See the discussion in Calfee (2000a, pp. 30–31), which relies partly onLangreth (1998). For more recent developments, see Kranhold (1999; onthe acquisition of a clinical trials research firm by an advertising group),Harris (2001; on the growing role of marketing executives in drug devel-opment at Merck), and O’Connell (2002; “‘What you’re seeing is anemerging convergence between the clinical development and the commer-cialization of drugs,’ said Thomas Harrison, chief executive officer of theDiversified Agency Services division of Omnicom Group Inc.”). On theimportance of conceptual connections between pharmaceutical researchand development and marketing considerations, see Calfee (2000b, 2001c,2002) and Galambos (2001).

brand (yielding consumer surplus in the economic sense)and partly through positive externalities or spillover, such asproviding information that can lead to improved healthwithout using the advertised brand.

It is worth noting here that the increasing role of pharma-ceutical marketing extends well beyond the escalation ofDTC advertising and even beyond the continuing impor-tance of promotion to physicians (through detailers, spon-sored seminars, and other techniques). Drug research anddevelopment has become more marketing driven in recentyears, sometimes with clinical trials being designed with aneye toward specific marketing claims. A striking examplefrom the early 1990s was the launching of large clinical tri-als on statin cholesterol-reducing drugs for preventing heartattacks in people with only moderately elevated cholesteroland no history of heart disease. This research, which wasundertaken in search of superior marketing claims, providedthe first persuasive scientific evidence that reducing choles-terol would prevent heart attacks. The blend of marketingwith pharmaceutical research and development continues toevolve.11

Empirical Research on the Effects ofDTC AdvertisingEmpirical research on the effects of DTC advertising isscarce (at least in the public domain), befitting a phenome-non that became of interest to the public policy communityonly in 1997. Thus, a May 2001 conference convened by theUSDHHS to examine DTC advertising focused almostexclusively on how to perform research on DTC advertising,rather than on the results of prior research (Bero and Lipton2001; Frank et al. 2001; Schommer and Hansen 2001; USD-HHS 2001).

Most research to date has consisted of consumer surveys.In this section, I address the few topics in which research notbased on surveys has been of value and then briefly describethe most important consumer survey work. Succeeding sec-tions address major topics for which surveys have beenessentially the sole research tool.

DTC Advertising and Drug PricesExpenditures for outpatient prescription drugs have beenincreasing approximately 15% annually (Berndt 2001;NIHCM 2002). Several studies have found that approxi-mately three-fourths of these increases have been caused byexpanded usage and switching to newer and more effectivedrugs, whereas price increases have accounted for only


12The most rigorous study is Dubois and colleagues (2000). A usefulwide-ranging survey of the factors causing expenditure increases in the pasttwo decades is Berndt (2001). The NIHCM (2002) finds that priceincreases accounted for 37% of expenditure increases in 2001. That study,however, uses Scott-Levin price data that do not reflect individual drug dis-counts or rebates to pharmaceutical benefit managers or managed care andthat ignore dosage size and prescription length (30-day versus 90-day).

13Total outpatient pharmaceutical expenditures were $122 billion in2000 and were predicted to be $142 billion in 2001 (USDHHS 2002a). Asnoted, DTC advertising in 2001 was $2.7 billion.

14See Sandercock (2001) on strokes, Elliott (2002) on osteoporosis, Lan-greth (1998) on statin drugs, and Landers (2001) on Alzheimers and otherillnesses. More examples are available in Wertheimer, O’Connor, and Levy(2001).

about one-fourth.12 Even this modest role for price increasesis overstated, because standard measures of pharmaceuticalprices fail to take into account improvements in the qualityand value of new drugs or drugs that have found expandeduses (Triplett 1999).

These facts suggest that even if DTC advertisingincreases prices, such an effect has been quite limited sim-ply because overall price increases have been small and theamount of DTC advertising is only about 2% of total phar-maceutical expenditures.13 Research has found that adver-tising tends to reduce prices, rather than increase them, pri-marily because advertising makes markets more competitive(Calfee 1997, pp. 10–11).

However, there are scenarios in which pharmaceuticaladvertising would be an exception. For pharmaceuticals,whose value lies exclusively in information about a rela-tively simple product and in broad dissemination of thatinformation, it is possible for advertising to be positivelyassociated with prices. Firms sometimes conduct expensiveresearch on a drug after it has been approved for marketing.For example, clinical trials and more fundamental researchon the statin class of cholesterol-reducing drugs have beenexploring several topics, including the benefits of treatinglower cholesterol levels and the prevention or cure of osteo-porosis, stroke, and Alzheimers, at a cost of hundreds ofmillions of dollars so far.14 This is typical of research on theclosely targeted drugs developed using modern pharmaceu-tical research methods, because the targeted proteins andother entities often turn out to be important for other ill-nesses. Another example is research on cox-2 inhibitors(Celebrex, Vioxx, and emerging competitors), which appearpromising in treating colon cancer (Chau and Cunningham2001). A logical consequence of this kind of research couldbe both higher prices and additional marketing to inform themarket of the new information. However, there is little evi-dence of this actually taking place.

There appears to be no econometric research on DTCadvertising and prices. Considerable data suggest, however,that there is little relationship between DTC advertising andprescription drug prices. Manning and Keith (2001, Fig. 7)reexamine the NIHCM (2001) data and note that a rankordering of brands according to DTC spending bears essen-tially no relationship with percentage increases in cost perprescription. Detailed data are available for the statin classof cholesterol-reducing drugs such as Pravachol, Zocor, andLipitor. Total expenditures for statin drugs have increasedrapidly, making this one of the three largest therapeutic cat-

15Table 1 of NIHCM (2002) shows “cholesterol reducer” as the third-ranking therapeutic category in 2001. The bulk of those sales are for statindrugs, which are the dominant cholesterol-reducing therapies and were stillon patent in 2001, in contrast to older cholesterol-reducing drugs. Two ofthe three best-selling brands were statin drugs.

16Proprietary price data were provided by IMS Health and are summa-rized in Calfee, Winston, and Stempski (2002). The IMS price series takesinto account discounts but not rebates.

egories in total sales.15 Statin drugs have also been amongthe leaders in DTC advertising (NIHCM 2001). Yet averagestatin drug prices increased only 7% in real terms between1995 and 2000.16 That the original statin drug, Mevachor,has gone off-patent and competes with generics will exertnew downward pressure on statin drug prices.

DTC Advertising and PharmaceuticalConsumptionLittle research seems to have been performed on the effectsof DTC advertising on pharmaceutical consumption. This ishardly surprising for such a new phenomenon, given thatsuch research is rare even in long-established markets (theexceptions are markets for controversial products such astobacco and alcohol).

Findlay (2002, drawing on NIHCM 2001) and othershave described an association between rapidly growing ther-apeutic categories and DTC advertising. Neither Findlay northe NIHCM report attempts to assess causality, nor do theytake into account confounding variables in a systematicway. The authors of the NIHCM report conclude (p. 15) thattheir calculations “add to the growing circumstantial evi-dence that such ads are one element—and perhaps anincreasingly important one—in the recent trend to theexpanded use of newer prescription drugs and the resultantincreased overall spending on pharmaceuticals.” Nonethe-less, some observers have assumed that the tables presentedin NIHCM (2001) amount to a demonstration of causation(Families USA 2002, p. 15; U.S. General Accounting Office2002, p. 6).

Again, Manning and Keith (2001, Fig. 6) reexamined theNIHCM (2001) data. They show that a rank ordering ofbrands according to DTC spending bears no discerniblerelationship with percentage increases in sales. One unpub-lished paper has examined DTC advertising for a singletherapeutic category, the statin class of cholesterol-reducingdrugs (Lipitor, Zocor, Pravachol, and competitors). Usingdata from 1995–2000 and exploring many dependent vari-ables and lagged structures, Calfee, Winston, and Stempski(2002) find no relationship between DTC advertising andeither prescriptions or sales. Indeed, statin prescriptionsincreased at a steady rate both before and after the August1997 change in FDA policy toward DTC advertising.

This limited body of research is inconclusive. A problemin this line of research is the length and complexity of therelationship between DTC advertising and the consumptionof pharmaceuticals for chronic conditions. In the case ofstatin drugs, one reason for the apparent lack of a short-termconnection between advertising and prescriptions is thatseveral steps of varying length must take place between thetime a consumer reacts to an advertisement and receives aprescription (initial physician visit, cholesterol test, advice


17Three examples are Knopp (1999) on cholesterol, Kohlmeier (1999) onosteoporosis, and Yanovski and Yanovski (2002) on obesity.

for lifestyle changes, and so forth), if a prescription is writ-ten at all.

Given the inexperience of pharmaceutical firms in the artof broadcast advertising (the dominant DTC media), it ispossible, if not likely, that major DTC advertisers havesometimes met with disappointment. Economic intuitionsuggests, however, that DTC advertising, on average, helpsthe brand being advertised. That does not imply that DTCadvertising in aggregate increases overall pharmaceuticaldemand (see the discussion of the “fallacy of composition”by Calfee [2000c]). Nonetheless, it is likely that DTC adver-tising, which is a new tool for promoting products that arethemselves quite new and are also strongly dependent on thedissemination of information, tends or will tend to increaseconsumption of Therapeutic categories being promoted.

The extent of consumption increases induced by DTCadvertising must be very small, thus far. Pharmaceuticalconsumption has been increasing rapidly in all developedeconomies, in some cases achieving much greater per capitausage than in the United States (Calfee 2000a, pp. 6–7).Price controls in EU nations and Canada are probably themain reason pharmaceutical expenditures in these nationshave increased less rapidly than in the United States. Direct-to-consumer advertising in the United States equals onlyabout 2% of outpatient pharmaceutical expenditures (notedpreviously), and advertising expenditures in 2001 increasedonly slightly over those in the year before. This is contraryto what would be expected if firms had discovered that verylarge consumption increases followed increases in advertis-ing for major therapeutic categories. Moreover, experiencehas shown that formerly advertised brands rapidly lose mar-ket share in the face of new generic competition. For exam-ple, Prozac, an extremely well-known brand that went off-patent in 2001 lost most of its market share to genericswithin a few months because of the aggressive actions ofpharmaceutical benefit managers determined to reduce costs(Mantz 2001).

DTC Advertising and Inappropriate PrescribingBeyond the matter of whether DTC advertising increasesusage lies the question whether it induces inappropriate pre-scribing. The proposition that newer drugs tend to be med-ically inferior or just expensive variants of older drugs isdifficult to defend. Scholarly reviews of drug therapy (e.g.,Yanovski and Yanovski [2002] and other articles in the drugtherapy series in the New England Journal of Medicine) typ-ically focus on newer drugs and their superiority to oldertreatments.17 This also holds true in major consensus reportson treating important chronic conditions such as depression,osteoporosis, diabetes, and elevated cholesterol. Rare sideeffects from new drugs tend to appear more rapidly than inearlier decades because of the growth of managed care andother changes in health care that accelerate the dissemina-tion of newer treatments. This trend does not support a find-ing that newer drugs are more dangerous (Friedman et al.1999). Thus, little direct evidence seems to have emergedthat recent increases in drug expenditures have dispropor-

18An interesting exchange is Lasser and colleagues (2002) and Templeand Himmel (2002) in the same issue of the Journal of the American Med-ical Association. Lasser and colleagues argue that recently approved drugshave proved unusually dangerous and that physicians should be reluctant toprescribe them. The opposing view, an editorial, is from two members ofthe FDA division responsible for approving new drugs.

19Mintzes and colleagues (2002) reported the results of a survey of 78physicians (38 in Sacramento, Calif., the rest in Vancouver, Canada).Physicians felt “ambivalent” about granting a patient’s request for a pre-scription for an advertised drug more often (50%) than they did whenacceding to a request for a nonadvertised drug (39%), but the differencewas not statistically significant. No other information on the appropriate-ness of these prescriptions was provided.

20A recent advertising campaign by AARP has focused on encouragingthe use of generics rather than brand names, but AARP has apparently notargued that a significant proportion of pharmaceutical prescribing is med-ically inappropriate as opposed to being unnecessarily expensive (Greene2002). The organization strongly advocates comprehensive drug coveragefor Medicare patients.

21Thus, the battle between older generics and the newer generation ofbranded allergy and anti-ulcer drugs is becoming moot. Claritin, the lead-ing nonsedating antihistamine, is losing patent protection in late 2002 or2003 and is likely to be converted to OTC status. The same is true ofPrilosec, the pioneering proton pump inhibitor for gastric distress, which in2001 was the second best-selling brand in the United States at $4.0 billion.Generic Prilosec will probably also greatly reduce sales of Prevacid,another proton pump inhibitor, which ranked third in 2001 with $3.2 billionin sales (NIHCM 2002, Table 3).

tionately involved medically unwise prescriptions18 or thatDTC advertising in particular has caused medically inap-propriate prescribing.19 More targeted research supports thesame conclusion. A study of the rapidly growing and heav-ily advertised statin drugs finds no tendency toward lessappropriate prescribing (Dubois et al. 2001). Calfee, Win-ston, and Stempski (2002) similarly find no significantdecline in the initial cholesterol levels of patients receivingnew statin prescriptions in recent years, even though themedical literature and federal government recommendationshave urged more aggressive treatment of elevatedcholesterol.

Increases in drug utilization seem to be driven primarily byhealth care organizations, physicians, and patients findingmany of the newer drugs to be extremely valuable. A largebody of evidence indicates that many of the most effectivedrugs are underused, rather than overused. Therefore, theintense public debate over prescription costs for Medicarepatients has focused almost exclusively on how to pay forbroader and more aggressive drug therapy, rather than onhow to curtail the inappropriate use of pharmaceuticals.20

Nonetheless, anecdotal evidence suggests that DTCadvertising may drive consumption away from generics andtoward expensive branded antihistamines, anti-ulcer treat-ments, and arthritis analgesics, for example. For the first twocategories, this has not raised safety or efficacy problems, asthe leading brands have received the endorsement of FDAexpert panels to move to OTC status as patents for thosebrands expire and low-cost generics emerge.21 Whetherthese and other popular branded prescription drugs are inap-propriate from an economic standpoint is largely a matter ofwhether third-party payments for prescription drugs under-mine reasonable consumer diligence in balancing costs andbenefits.

In general, the FDA seems satisfied that DTC advertise-ments are not the cause of substantial medically inappropri-


22The 2000 AARP survey is available on the AARP Web site (accessedSeptember 28, 2000), [executive summary: http://research.aarp.org/health/2000_04_advertising_1.html]. A link to the full report (pdf file) is http://research.aarp.org/health/2000_04_advertising.html. A search for “direct-to-consumer” should find these links.

23The California survey, in addition to being smaller and restricted toCalifornia residents, was not nearly as comprehensive as the FDA or Pre-vention Magazine surveys. The content analyses were used to support theargument that DTC advertisements fail to provide some useful information,such as mechanism of action, success rate, supportive behaviors, and alter-natives to the brand being advertised.

ate prescribing. This is evident from the July 24, 2001, Sen-ate testimony of FDA official, Nancy Ostrove, who men-tioned the possibility that DTC advertising could causeinappropriate prescribing and concluded (regarding that andother issues), “At present, FDA is not aware of any evidencethat the risks of DTC promotion outweigh its benefits.”

Consumer SurveysThe bulk of research on DTC advertising consists of severalnationally representative consumer surveys. The mostnotable examples include two surveys commissioned by theFDA itself (FDA 1999b, c, 2002b, c), a series of surveyscommissioned by Prevention Magazine (Rodale Publica-tions 1999, 2000), and an unusual online Web-TV survey bythe Kaiser Family Foundation (KFF; 2001). The 2002 FDAproject includes both consumer and physician surveys,fielded in early 2002. The consumer survey was completedby early April, when FDA staff began presenting partialresults in public meetings (Aikin 2002; FDA 2002b, c). TheFDA and Prevention surveys were large nationally repre-sentative telephone surveys using random digit dialing. TheKFF survey involved drawing a random sample from anationally representative panel (subject to the usual con-straints on the representativeness of panels) and having eachrespondent view three different advertisements by Web-TV.Respondents were randomized into two groups, one ofwhich saw no DTC advertisements and the other group sawone of three different DTC advertisements.

Other more limited, but nonetheless useful, researchincludes national consumer surveys by AARP,22 theNational Consumers League (1998), and NewsHour withJim Lehrer (2000a, b, with the KFF and the Harvard Schoolof Public Health). A more limited survey of only Californiaconsumers (Bell, Kravitz, and Wilkes 1999) and two contentanalyses of individual DTC advertisements (Bell, Wilkes,and Kravitz 2000a, b; Woloshin et al. 2001) are not consid-ered here.23

These surveys shed light on many of the central topics inpublic policy toward DTC advertising. This article focuseson the FDA and Prevention Magazine surveys, with cita-tions to KFF and others where they are of interest.

Advertising and InformationAwareness of DTC AdvertisingAll the surveys found high levels of awareness of DTCadvertisements. Of FDA respondents in 2002, 81% (up from72% in 1999) recalled seeing a prescription drug advertise-ment in the past three months (mostly on television), andmost recalled seeing several advertisements. This is compa-rable to the 85% recall level in the 2000 Prevention survey,

which represents a modest increase from previous years:63%, 70%, 81%, and 80% in 1997 through 2000, respec-tively. In the Prevention survey, follow-up questions aboutindividual brands revealed virtually universal aided recalllevels. Other surveys, all asking for unaided recall of DTCadvertisements, also found very high awareness levels: 91%in the PBS NewsHour–Kaiser–Harvard, 80% in theNational Consumers League, and 65% in the AARP survey(which was restricted to print advertisements).

Information-Seeking Triggered by DTCAdvertisingHalf of the FDA respondents in 1999 who recalled seeingDTC advertisements indicated that the advertisements hadsometimes caused them to seek additional information.They sought information from a variety of sources, includ-ing books, friends, the Internet, and the news media, but themost common sources were physicians (81% talked to theirown doctor and 22% talked to another doctor), followed bypharmacists (52%) (totaling more than 100%, becauserespondents could indicate more than one source).

In the 2002 FDA survey, 18% of those recalling adver-tisements said that DTC advertisements had at some timecaused them to talk to their doctor about a specific medicalcondition or illness for the first time. This is a remarkableresult, suggesting that approximately 17% of the adult pop-ulation that has seen doctors in the past three months hasbeen motivated by advertising to discuss a new topic. (Thenumber in the 1999 survey was higher, 27%, whereas the1999 Prevention survey, which unlike the FDA survey didnot oversample people who had recently seen a doctor,found 14%.) The 1999 FDA survey also asked whetherrespondents were likely to ask their doctor about a drug thatwas advertised to treat a condition that was “bothering you.”A large proportion (80%) said they were somewhat or verylikely to ask.

Risk InformationThe FDA survey addressed readership of the detailed riskinformation in print advertisements. Forty percent said theyread half or more of that information, and another 26% saidthey read a little of it. This may reflect a modest degree ofsocially responsible yea-saying by respondents. More sig-nificant, however, is that 85% said they would read all oralmost all of the information if they were especially inter-ested in the drug (see Table 1).

The 2000 Prevention Magazine surveys also found highreadership of risk information. Of those recalling printadvertisements, 54% recalled that the advertisements con-tained technical information, and 37% recalled skimmingthe brief summary, looking for key information, or readingmost of the summary. Several questions explored this topicfurther, revealing that readership of the fine print was higherfor those taking a prescription drug and highest for thosetaking the advertised drug. Only 35% thought the technicalinformation was “very clear,” however, documenting along-standing situation of which the FDA is well aware(Pines 1999). Finally, 86% of those who at least skimmedthe fine print said it provided sufficient information for themto ask their doctors about risks associated with the drug. Of


Table 1. Readership of Print Risk Information

Question 11: “How much, if any,of the small-print

information wouldyou say you usually

read?”

Question 12: “ Ifyou were especially

interested in theadvertised drug forsome reason, how

much, if any, of thesmall print infor-mation would you

read?”

All 15% 73%Almost all 11% 12%About half 14% 8%Only a little 26% 3%None 30% 4%Did not notice

fine print 3% 0%Have never seen

newspaper/magazine advertisements 1% 0%

Don’t know/refused 1% .2%

Sample size 688 682

Adapted from FDA 1999c.

special interest is that those who gave higher ratings to theadequacy of risk information in advertisements were morelikely to have discussed an advertised drug with their doc-tor, and the same relationship held for those who hadbrought up a new medical condition with the physician(based on cross-tabulations).

These results are of great interest because a considerablebody of research shows that patients receive surprisingly lit-tle risk information from either physicians or pharmacists,and often they tend to ignore the information they do receive(Lyles 2002, pp. 82–83). The 2000 Prevention survey askedhow often physicians provided various kinds of risk infor-mation about the drugs they prescribed (a topic notaddressed in the FDA survey). Patients who had spokenwith their doctor about an advertised drug were more likelyto receive information about side effects than were patientswho had not (64% versus 54% for serious side effects; 56%versus 47% for annoying, nonserious side effects).

The AARP also asked a series of questions about receiv-ing risk-benefit information from physicians. A total of 54%said their doctor “usually” talks to them about the risks andpotential side effects of drugs being prescribed, 18% saiddoctors “sometimes” did this, 18% said “rarely,” and 9%said “never.” Physicians talked less frequently about alter-native prescription drugs (43% usually and 27% rarely ornever) and nonprescription drugs (35% usually, 35% rarelyor never).

A Note on Advertising DeceptionSection 502(n) of the Food, Drug, and Cosmetic Actrequires drug advertisements to include the drug’s name,ingredients, and “such other information in brief summary

24The recipient was David Willman of the Los Angeles Times [http://www.pulitzer.org/year/2001/investigative-reporting]. Also see Lasser andcolleagues (2002), for an article in the Journal of the American MedicalAssociation critical of the FDA’s safety standards in new drug approval.

25This reasoning gave rise to a rich, empirically robust literature, begin-ning with Peltzman’s (1973) analysis of the drug approval slowdown in thewake of the 1962 amendments to the Food, Drug, and Cosmetic Act. Sub-sequent analyses include Wardell and Lasagna (1975), DiMasi (1996), andTabarrock (2000; who reviews much of the drug lag literature).

relating to side effects, contraindications, and effectivenessas shall be required in regulations” to be issued by the FDA.Those regulations, set forth in the Code of Federal Regula-tions (21 CFR Part 202.1), contain requirements that adver-tisements must meet in order not to be judged “misleading.”The FDA’s focus on the concept of “misleading” is parallelto the FTC’s mandate to policy “deceptive” acts or prac-tices. Therefore, the benefits of DTC advertisements dependpartly on whether the FDA has established reasonable stan-dards for deception.

Clearly, it is possible to set standards too high. Advertis-ing regulation involves a trade-off because regulators cannotbe certain which claims will turn out to be deceptive andwhich will prove truthful and nonmisleading (Calfee andPappalardo 1989, 1991). If the rules are too tight, the loss toconsumers from the suppression of useful information willexceed the gains from eliminating deceptive information.The attempt to strike a reasonable balance provides the con-ceptual foundations for FTC regulation of deceptive adver-tising (Craswell 1991; Ford and Calfee 1986; FTC 1983).

Two factors strongly suggest that FDA advertising regula-tion is almost certainly too strict. The first pertains to regula-tory incentives. The problem is most easily shown by exam-ining new drug approvals, not advertising regulation.Regulators of the FDA face pressure to avoid making Type Ierrors, permitting harmful new drugs into the market, in favorof making Type II errors, prohibiting or delaying useful newdrugs. This is because Type I errors are severely penalized, asthey arouse adverse publicity and provoke criticism of theFDA approval authorities. A recent example is the awardingof a Pulitzer Prize for a series of newspaper stories on theFDA approval process for several drugs that encounteredsafety problems.24 In contrast, relatively few people areaware of the potential value of drugs that have been kept fromthe market. The tendency for these distorted incentives tounduly delay new drug approvals is well documented.25

Similar forces apply to the regulation of advertising, thatis, to decisions about what advertising claims to permit.Although the FDA deserves credit for expanding DTCadvertising to broadcasting in 1997, it still faces powerfulincentives to tightly circumscribe the content of advertisingclaims. Since the FDA’s 1997 initiative, DTC advertisinghas been much criticized (and little praised) in the medicaland popular press. Much of that criticism has been directedat the FDA either directly or by implication (because mostadvertising passes unchallenged by the FDA). In contrast,criticism of the FDA’s near-ban on broadcast DTC advertis-ing before 1997 emanated from a narrow group of acade-mics and industry spokesmen, and it attracted little publicattention. The FDA’s bias against making Type I errors (i.e.,possibly allowing claims that turn out to be deceptive) at the


26See Aoki (2002) for an insightful view of the entire process fromapproval to withdrawal to reapproval. Latronex was one of the drugs ana-lyzed in the Los Angeles Times’ Pulitzer Prize–winning stories. See Will-man (2001).

27I am unaware of empirical research underpinning the FDA’s assertionsof what advertising claims are likely to mislead either consumers or physi-cians. Wazana (2000) reviews the research literature on the extent to whichphysician prescribing is influenced by pharmaceutical promotion (mainlydetailing rather than advertising). As Lexchin and Mintzes (2002) pointout, much of this research is critical of the influence of physician detailing.That research appears not to address deception directly, however. In con-trast, a recent survey of physicians (KFF 2002) found that 74% thought theinformation they received from industry detailers was very or somewhatuseful, and 81% thought the information was very or somewhat accurate.

expense of Type II errors (suppressing truthful claims) maybe even stronger than its bias against taking risks in approv-ing new drugs. This is because manufacturers usually havea bigger stake in new drug approvals than in advertisingclaims; therefore, they will fight harder behind the scenes toovercome regulatory resistance to new drug approvals thanthey will for innovative advertising claims. In addition,patient groups sometimes exert pressure for new drugs, butthey seldom press for new advertising claims.

Worth noting in this context is the change in regulatoryincentives that occur after a new product has been approved.When a group of grateful users has been created, the FDAmay face pressure to keep a useful drug on the market evenif it encounters problems. An example is the recent reintro-duction of Latronex, which the FDA had pulled from themarket in the wake of intense popular criticism of theapproval process only to be met with criticism from patientswho wanted to regain access to the drug.26 Again, parallelforces apply to DTC advertising, whose popularity withconsumers may help preserve its existence even as the FDAfaces pressure to curtail it.

The second factor suggesting excessively strict FDAadvertising regulation is the reinforcement of the incentivesto avoid public attacks and blame. Here, the contrastbetween how the FTC and the FDA deal with advertisingdeception is illuminating. Both agencies enforce a vaguemandate against false or misleading advertising. However,the FTC has for decades been forced to articulate pre-dictable, empirically based standards that can withstandscrutiny in the courts, including First Amendment chal-lenges (see Ford and Calfee 1986; FTC 1983, 1984). TheFDA, in contrast, has never had to defend its policies incourt.

This leaves the FDA free to establish broad per se stan-dards for advertising content. These standards are not basedon empirical findings on how physicians or consumers per-ceive or act on specific advertising claims.27 A salientexample is the FDA’s prohibition on off-label therapeuticclaims. The FDA policy assumes that even a sophisticatedaudience (physicians) requires protection from all therapeu-tic claims that have not been formally approved by theagency. This is almost certainly unnecessary. For decades, asteady flow of off-label therapeutic information has beenwidely accepted and fruitfully used by the medical commu-nity, which often finds off-label information to be essentialto good practice (Calfee 1996; Tabarrock 2000; Thakkar1997 [summarizing Calfee and McGinniss 1997]; USGAO

28See FDA (1999a) for an assessment of DTC advertising since it began.Ostrove (2001) reviews the limited FDA legal actions against DTC adver-tising in recent years.

1991; Yanovski and Yanovski 2002). Off-label information(such as practice guidelines) has been disseminated byauthoritative sources including agencies other than the FDAwithin the USDHHS, such as the National Cancer Instituteand the National Cholesterol Education Program. Yet theFDA prohibits manufacturers from disseminating that sameinformation, even if its off-label status is explicitly noted.

The FDA has brought no litigation against DTC adver-tisements. Instead, it has issued a series of warning lettersand other reprimands (summarized in Ostrove 2001; Wolfe2002). These have rapidly declined in frequency by morethan half since 1998, when the industry was still discoveringthe contours of the FDA’s new DTC policy. Given thatpharmaceutical firms invariably accede to FDA requests toalter or halt advertising claims, the likelihood of sustaineddeception, even based on the FDA’s own views of what ismisleading, is very small. The remarkably even balancebetween risk and benefit information in DTC advertise-ments (reviewed in the next section) also indicates a lack ofdeception (although a disproportionate emphasis on benefitswould not necessarily be deceptive). In addition, the FDAhas itself concluded that it is unaware of any evidence thatDTC advertisements are harming public health throughdeception or other means.28

These circumstances, considered in combination, stronglysuggest that deception in DTC advertising is rare. An impor-tant additional factor is the prescription requirement forobtaining advertised drugs. It provides a potent check onadverse consequences of consumer deception, if it shouldoccur.

The Balance of Risk and BenefitInformationRisk and Benefit InformationOf central importance from the FDA’s perspective is evi-dence on the balance of risk and benefit information con-veyed by DTC advertisements. Doubts about the ability ofDTC advertisements to convey reasonably balanced risk andbenefit information were arguably the chief reason for theFDA’s DTC moratorium in the 1980s and its suppression ofbroadcast advertisements before 1997 (Morris and Millstein1984; Morris, Ruffner, and Klimberg 1985; Pines 1999).The FDA surveys devoted considerable attention to risk andbenefit information, as did the series of surveys by Preven-tion Magazine and, to a lesser extent, the 2001 KFF survey.

The FDA was interested in learning whether DTC adver-tisements tend to emphasize the benefits of prescriptiondrugs while downplaying the risks. A series of detailedquestions revealed a remarkably balanced assessment.When asked what kinds of information respondents saw intelevision advertisements, 90% (87% in 1999) said, “thebenefits of the drug;” 90% (82% in 1999) said, “risks or sideeffects;” and 89% (81% in 1999) said, “who should not takethe drug.” (These high levels were not caused by yea-saying, as only 10% said they had seen information on over-


dosage, which is not covered in DTC advertisements.)Respondents in the 1999 surveys were also asked whatkinds of information the advertisements did not provideenough of: 59% said advertisements do not give enoughinformation about risks and related matters, and 49% saidadvertisements do not give enough information on the ben-efits of drugs.

The FDA surveys asked several broad questions about therelationship between DTC advertising and the nature of pre-scription drugs. One question asked whether advertisementsmake drugs seem better than they really are, and 58% (in1999) agreed that they did. This is a rather low level ofagreement. For decades, consumer surveys on advertisinghave found that roughly 70% of consumers expect adver-tisements to be strongly biased in favor of the product beingadvertised. Consumers are routinely skeptical of advertising(Calfee and Ringold 1994). The FDA survey revealed thatthe nearly universal assumption that advertising exaggeratesbenefits applies to DTC advertisements, though with some-what less force.

Relevant here is that these advertisements are for prod-ucts that can be obtained only after getting a physician’sprescription. In one 1999 FDA question, 70% of respon-dents agreed that advertisements provided sufficient infor-mation for them to talk to their doctor about the drug (par-allelling responses to similar questions in the 1999Prevention survey). When asked in the same survey whetherDTC advertisements “make it seem like a doctor is notneeded to decide whether a drug is right for me,” 70% dis-agreed. Finally, in responding to a question that is particu-larly relevant to debates over DTC advertising, just 29%agreed that advertisements are allowed only for the “safest”prescription drugs.

The Prevention surveys also addressed consumer percep-tions of risk information in advertising. The most compre-hensive question was asked in 1999:

Does the information in these advertisements about the possiblerisks of taking the prescription medicine make you MORE con-fident or LESS confident about the overall safety of the medi-cine—or doesn’t it make a difference in the way you feel aboutthe overall safety of the medicine?

Thirty-six percent said the advertisements made them“less confident,” as opposed to 24% who said “more confi-dent” and 34% who found “no difference.” This strikingresult suggests that in the course of providing a mix of pos-itive and negative aspects of drugs, DTC advertisementsraise awareness of risk even as they raise awareness of med-ical conditions and treatments. It is consistent with findingsfrom consumer research conducted in the mid-1980s by theFDA that paved the way to the lifting of the FDA’s morato-rium on DTC advertising (Morris et al. 1984, 1985, 1986).

Additional questions addressed more specific aspects ofrisk and benefit communication. Respondents in the 2001survey thought that advertisements were moderately betterat providing information about benefits (60% said excellentor good) than they were at providing information aboutannoying side effects (50%) or serious warnings (51%). Sig-nificantly, these numbers were almost constant regardless ofwhether respondents were asked about television or printadvertisements (an example of how brief risk informationcan be as salient as detailed information, something that was

29The combined totals for advertising and news media are not limited to100% because respondents could choose more than one subcategory inboth the advertising and news media categories.

also found in the FDA’s research) (Morris et al. 1984, 1985,1986). In the 2001 survey, a large majority of respondentsthought that the information in advertisements was suffi-cient to prepare patients to ask a physician about risks andbenefits (62% and 68%, respectively). In the 1999 survey,virtually all respondents (90%) remembered that televisionadvertisements included advice to see a physician, and 70%recalled that advertisements contained a toll-free number foradditional information.

The 2002 KFF survey also provided information aboutconsumer perceptions of risk information. The nature of theexercise generated primarily brand-level data. The mostinteresting information pertained to Lipitor (a statin-classcholesterol-reducing drug). When asked about side effects,70% of those who saw an advertisement for Lipitor said theside effects were potentially very or somewhat serious.Between 74% and 83% of Lipitor ad viewers correctly saidthe drug should not be taken by people in three specific cat-egories, but viewers tended to exaggerate risks by agreeingto the mistaken statements that Lipitor should not be takenby those with high blood pressure (29%) or heart problems(34%).

Patient–Physician DiscussionsIn the 2000 Prevention survey, 32% of those recallingadvertisements said that they had talked with a physicianabout an advertised drug as a result of seeing an advertise-ment. This figure has been amazingly stable: 31%, 33%,31%, and 32% in 1997 through 2000, respectively. Thegreat majority (84% in 2000) said they talked to their physi-cians during a regularly scheduled appointment. Among1999 FDA survey respondents (total respondents, not justthose recalling advertisements), only 21% said they hadseen or heard anything that made them want to ask a specificquestion in their last visit to a doctor. Among the sourcesthat inspired questions, advertisements (46%) rankedequally with news media (45%) and somewhat higher thanfriends (28%) and other doctors (23%).29 In the 2002 sur-vey, only 4% said their more recent physician visit wasmotivated by a prescription drug advertisement. Thus, sur-veys provide little reason, so far, to believe that DTC adver-tisements play a major role in generating new appointments.

Several 1999 FDA questions (total respondents, not justthose recalling advertisements) focused on what transpiredin the doctor’s office. Two-thirds of respondents werealready on prescription medications. Of those, 54%expected no change in prescriptions, whereas most of therest expected either to switch to another drug or to get a newdrug for a different condition. When asked in various wayswhy they thought they might receive a new prescription,respondents generally ranked advertisements well belowpast prescription history, information from friends or rela-tives, and previous discussion with physicians. A substantialproportion were prepared to ask about a specific prescrip-tion drug. Of those who did not expect simply to continuetheir medication, about one-third said they asked their doc-tor whether there was a prescription drug for their condition.


Of these, 13% asked about a specific brand (amounting toapproximately 9% of the entire group who had seen physi-cians in the past three months), 8% mentioned a specificadvertisement, and 4% brought some kind of informationwith them (not necessarily an advertisement).

A crucial segment of the FDA surveys asked patientsabout physicians’ reactions to their questions. Large majori-ties said their doctor welcomed their questions (93%; 81%in 1999), reacted as if those questions were an ordinary partof a visit (83%; 71% in 1999), and proceeded to discuss thedrugs with the patient (86%; 79% in 1999). Only 3% (4% in1999) said their physician “seemed angry or upset.” Whenasked whether their relationship with their physician hadgotten better or worse in the visit in which they had askedabout an advertised drug, 20% said it got better and only 2%said it got worse. In the 1999 survey, 85% of respondentswere satisfied or very satisfied with their discussions withphysicians about advertised drugs, and only 7% were unsat-isfied or very unsatisfied. Sixty-two percent agreed orstrongly agreed that DTC advertisements helped them havebetter discussions with their physicians.

The 1998 National Consumers League survey providedresults similar to those in the FDA surveys. When asked tochoose among eight statements to describe the results of ad-motivated conversations with their physician, 30% ofrespondents said it “helped us talk about the drug/disease,”and only 5% said the conversation “caused tension” with thephysician, the doctor was unwilling to talk about the adver-tised drug, or the doctor “did not like the information Igave.”

The FDA surveys did not ask whether a patient hadrequested a specific prescription. For those who had broughtup a specific advertisement or had asked about a specificbrand, the FDA asked what the physician did. In both the1999 and 2002 surveys, about half prescribed the brand thepatient asked about, and about one-third prescribed a differ-ent brand. Roughly 15% recommended an OTC drug, andabout the same recommended no drug therapy at all. Mostimportant, approximately 40% recommended changes inlifestyle or behavior (it was 29% in 1999, when the surveyasked only those who did not receive the prescription theyasked about).

The Prevention survey asked whether those who hadtalked to physicians (or someone in the physician’s office)had also asked their doctor to prescribe the advertised med-icine. Seventy-two percent did not request a prescription.For the 26% who did, physicians prescribed the requestedmedicine 69% of the time and did not prescribe any drug19% of the time. The FDA survey, in which respondentssaid what happened when they asked about a drug, ratherthan for one, found physicians providing a prescription forthe brand in question only 50% of the time.

The imprecision of both the FDA and Prevention ques-tions should be considered. Those questions could compre-hend a variety of circumstances. Patients may start out ask-ing about one brand, receive a prescription for a differentbrand after a friendly discussion, feel satisfied with the out-come, and then, when responding to a survey, recall theevent as something other than a refusal by their doctors toprescribe what they had requested. Another possibility isthat physicians had already made clear their own views ofwhether a particular drug was appropriate, and patients

30A separate debate addresses a larger and more philosophical question,which is whether DTC advertising tends to “medicalize” conditions thatshould not be addressed through medical interventions at all (Bonaccorsoand Sturchio 2002; Mintzes 2002).

chose to make an explicit request mainly in situations inwhich the physician had either encouraged the request ormade clear that it was purely a matter of choice for thepatient. These comments are consistent with the fact that71% did not request a specific prescription, despite havingdiscussed a drug because of an advertisement, and that boththe Prevention and FDA surveys found little evidence ofany conflict or tension between patients and physicians indiscussions about advertised drugs. Only 5% of respondentsin the 1999 Prevention survey said that physicians were “nottoo willing” or “not willing at all” to talk to them about thedrugs they had requested.

Externalities from DTC AdvertisingEconomic theory, supported by empirical evidence, indi-cates that advertising can improve consumer markets byproviding useful information beyond what is strictly associ-ated with the advertised brand. The best documented exam-ple is health claims for foods, which buttressed consumerinformation about diet and health, improved consumer diets,and motivated competitive improvements in products(Calfee 1997; Calfee and Pappalardo 1989, 1991).

Direct-to-consumer advertising could impose harm aswell as benefits. Frequent false or misleading claims couldreduce the credibility of true claims or cause consumers toexaggerate the safety or appropriateness of drug therapy. Asnoted previously, however, there is little reason to expectsubstantial deception from DTC advertisements and little, ifany, evidence of deception. If new drugs cause more harmthan good, DTC advertising could increase or acceleratethose adverse effects, but again, there is scant evidence thatnewer drugs in aggregate fail to provide large net benefits topatients.30

However, the consumer surveys described here stronglysuggest that DTC advertisements have conferred substantialpositive externalities or spillovers that have little to do withthe specific brands being advertised. These externalities fallroughly into four categories.

Risk AwarenessDTC advertisements apparently increase the salience that

virtually all prescription drugs are risky and have sideeffects. The survey findings showing high awareness of riskinformation clearly apply to pharmaceuticals, rather thanjust to specific brands. This is not surprising, given theprominence of the “brief summaries” in print advertise-ments and the staccato list of warnings in television adver-tisement voice-overs. In addition, as noted previously, the2000 Prevention Magazine survey found that physicianstend to provide more risk information to those patients whoask about advertised drugs.

The dynamics of competitive advertising are also rele-vant. Firms will sometimes emphasize safety in ways thatcall attention or spring from consumers’ prior attention tothe riskiness or downsides of competing brands. Examplesinclude advertising for cigarettes, food, insurance, politi-


31Calfee (1997, pp. 46–57), drawing on Musto (1991), quotes from anadvertisement for cough drops containing heroin. The advertisementclaimed that the brand in question was less likely than other heroin prod-ucts to be addictive.

cians, and many other products, including cough drops con-taining heroin when it was legal around the turn of the twen-tieth century.31 The FDA rules inhibit this strategy for pre-scription drugs by imposing extremely high standards forcomparative claims. In addition, DTC advertisements oftenemphasize reduced side effects, but do so without makingdirect comparisons with competing brands. This tends tocall attention to the problem of side effects in general.

Nondrug Ways to Improved HealthAnother spillover benefit from DTC advertisements

involves calling consumers’ attention to nondrugapproaches to improved health. This appears to beinevitable. When DTC advertisements prompt consumers totalk to their doctors about obesity, diabetes, depression, andcholesterol levels, the patients almost certainly learn thatbehavioral and lifestyle changes are the first line of treat-ment. Many DTC advertisements (e.g., for cholesterol-reducing drugs) begin by mentioning the value of dietarychanges and exercise, thus focusing viewers’ attention onalternatives to getting a prescription. In response to a 2000Prevention survey question asked of respondents who saidthat advertisements had caused them to talk to their physi-cian, 53% said their doctor had mentioned a nondrug ther-apy for their condition. The proportions were much higherfor certain conditions: diabetes (77%), high cholesterol(92%), and obesity (84%) (Rodale Publications 2000, p. 58).

Information on Conditions Not PreviouslyDiscussed with Physicians

In both the FDA and Prevention surveys, substantialnumbers of respondents said advertisements had causedthem to ask physicians about problems they had not dis-cussed previously. New discussions about elevated choles-terol, diabetes, obesity, and other chronic conditions do notinvariably lead to prescriptions for the advertised drugs. Onthe contrary, when advertisements induced patients to talk totheir doctor, most patients did not actually ask for or aboutthe brand whose advertising sparked the discussion, andwhen they did, the result was a prescription for the adver-tised drug, a prescription for a competing drug, recommen-dations for an OTC drug, and/or advice to change lifestyleor behavior. In general, advertisements can raise awarenessof the possible need for a particular type of drug to treat aparticular condition, but the benefits of raising that con-sciousness may go to competitors rather than to the adver-tiser, as well as to the patient.

Drug Therapy ComplianceResearch has shown that inadequate compliance with

physician instructions when taking prescription drugs isextremely common, often causing serious danger to patientsand others (Ellickson, Stern, and Trajtenberg 1999; Reissman1998). Because consumers tend to pay disproportionateattention to advertising for brands they use, DTC advertise-ments could prove to be an excellent vehicle for inducing bet-

32Worth noting is that competitive forces tend to yield new drugs thathave fewer side effects or are easier to take, partly because new therapeu-tic regimens often involve fewer drugs or less frequent administration. SeeSimon (2001) on the history of antidepressants and Knopp (1999) on thesuperiority of the modern generation of cholesterol-reducing drugs.Because compliance is adversely affected by side effects, DTC advertise-ments tend to improve compliance when they induce switching to newerdrugs. However, this would usually not be an externality, as the benefits aretypically captured by the advertised brand and the recipient patient.

ter compliance. The FDA and Prevention surveys found thatconsumers pay special attention to advertisements for drugsthey are taking or in which they have a special interest.32

The Prevention surveys contained a highly relevant seriesof questions that produced consistent results. Of respon-dents, 50% were taking one or more drugs, up slightly from46%, 47%, and 46% in the three preceding years. More thanhalf (57%) of those taking drugs recalled seeing an adver-tisement for a drug they were using. When asked whetheradvertisements made them feel better or worse about thesafety of their prescriptions, 34% said the advertisementsmade them feel better, and only 4% said the advertisementsmade them feel worse (in 1999 and 1998 it was 36% better,3% worse and 46% better, 1% worse, respectively). A par-allel question about benefits yielded similar responses: 40%felt better, and 1% felt worse (52% versus 1% in 1999). Inresponse to the question, “Do ads make you more or lesslikely to take your medicine regularly?” “more likely”outscored “less likely” by 17% to 2% (22% to 3% and 31%to 2% in 2000 and 1999, respectively). In addition, 33% inthe 1999 survey said that prescription drug advertisementsreminded them to refill their prescription.

There seems little reason to expect the reminder effects ofDTC advertising to be restricted to the advertised brand.Although no research appears to have been conducted on thetopic, these survey results strongly suggest that by remind-ing patients to take their medicine and refill their prescrip-tions, DTC advertisements tend to encourage patients to per-sist in their drug therapy. The National Health Council(2002 p. 6, citing the Prevention survey results) statementexplicitly endorsed the ability of DTC advertisements toincrease patient compliance.

Global Attitudes Toward DTCAdvertisingSurvey questions about global attitudes are of some value.When asked in the 1999 FDA survey whether respondentsliked seeing DTC advertisements, those who did outnum-bered those who did not by nearly two to one. Eighty-sixpercent said the advertisements “help make me aware ofnew drugs.” Consumers did not react unthinkingly butresponded in ways that reflected the unique nature of pre-scription drugs and the necessity of making decisions in col-laboration with their physicians. Thus, whereas only 47%agreed that advertisements help them make better decisionsabout their health, 62% said DTC advertisements help themhave better discussions with their physician about theirhealth. These percentages were higher for those who hadasked their physicians about a new condition as a result ofseeing advertisements: 59% said advertisements led to bet-ter decisions, and 75% said advertisements helped themhave better discussions with their doctors.


The 1999 and 2000 Prevention surveys provided roughlysimilar results. In the 1999 survey, 76% thought that adver-tisements “allow people to be more involved with theirhealth care.” Comparable majorities agreed that DTC adver-tisements “help people make their own decisions about pre-scription medicines” (64% in 2001, 63% in 1999) and “edu-cate people about the risks and benefits of prescriptionmedicines” (72% in 1999). Much smaller proportionsagreed with negative assessments, such as advertisements“cause tension between patients and their doctors” (37% in2001) and “make prescription medicines seem harmless”(49% in 2001). The entire series of questions may haveinduced yea-saying, however, partly because they asked foropinions about how advertising works for everyone ratherthan asking about respondents’ own experiences (unlike theFDA survey, which found little tension between patients andphysicians).

The National Consumers League survey asked two ques-tions on global attitudes toward DTC advertisements.Seventy-six percent agreed that prescription drug advertise-ments “increase consumer knowledge about medicines,”and 78% agreed that prescription drug advertisements“increase consumer knowledge about disease.”

The PBS NewsHour–Kaiser–Harvard survey took a dif-ferent approach, asking respondents about their level of trustin six sources of information about prescription drugs: theirdoctor, their pharmacist, family and friends, the FDA andother government agencies, advertising, and product pack-aging. Advertising was the least trusted, with only 48% say-ing they trusted advertisements “somewhat” or “a lot.” Fam-ily and friends were the second lowest, at 61%. The othersranged between 80% (government agencies) and 95%(physicians). The low global ratings for advertising arehardly surprising, because consumer surveys generallyshow that roughly 70% of consumers distrust advertisingclaims in general (Calfee and Ringold 1994). Those resultsdo not apply, however, to attitudes toward advertisements atthe brand level, which explains why consumers find adver-tising in general (Calfee and Ringold 1994), and DTCadvertising in particular, to be useful tools.

A Preliminary Assessment of DTCAdvertisingIn 1999, when the FDA reaffirmed its August 1997 policyof permitting broadcast DTC advertising, it stated, “FDA isunaware of any data supporting the assertion that the publichealth or animal health is being harmed, or is likely to beharmed, by the Agency’s actions in facilitatingconsumer-directed broadcast advertising” (FDA 1999b, p.4). The available evidence supports that conclusion. Over-all, DTC advertising appears to convey substantial benefitswith little obvious cost. However, this is a preliminaryassessment. Little is known yet about such basic matters asthe effects of advertising on consumption. New evidencecould either contradict or reinforce the conclusions offeredhere or even illuminate new benefits yet to be identified.

Six tentative conclusions can be inferred from leadingconsumer surveys and other evidence on DTC advertising.In essentially every case, the survey results are consistentfrom 1999 through 2001. First, the possibility that DTCadvertising is causing systematic consumer deception,

including the inappropriate downplaying of risks and sideeffects, can be ruled out. Advertising regulation by the FDAis inherently biased toward prohibiting nondeceptive claimsrather than risking permitting possibly deceptive claims.Survey results bear this out. The FDA and Prevention sur-veys address the FDA’s central concern—the balance of riskand benefit information—in many ways. The surveys con-tained questions that could easily have revealed a strong ten-dency for DTC advertising to downplay the risks of pre-scription drugs. The results, however, strongly indicate theabsence of a bias against risk information. It is unlikely thatwidespread consumer deception has escaped detection bythe FDA regulators.

Second, surveys supply direct and indirect evidence thatDTC advertising provides valuable information to con-sumers, not just on topics such as potential treatments anddosages but also on risks and side effects. In general, DTCadvertising appears to increase the salience of both risks andbenefits from drug therapy. This provides a valuable addi-tion to the market in view of the proven difficulties of com-municating risk information to patients (reflected in AARPsurvey results) and the pervasive consumer informationdeficits about treatable medical conditions. The high levelsof awareness about and attention to DTC advertisementsalso strongly suggest that consumers gained informationabout the core topics of those advertisements—the symp-toms of medical conditions, potential therapies, alternativedosages, and related topics—as a by-product of competitiveadvertising.

Third, the information in DTC advertising motivates con-sumers to seek additional information from many sources,especially from physicians and pharmacists. Many of theseconsumers ask about conditions they had not previously dis-cussed with their doctors. They usually do so, however, inregularly scheduled appointments. Given the overwhelmingnumber of consumers who are aware of DTC advertise-ments, it is notable that 14% and 27% of them (1999 Pre-vention and 1999 FDA surveys, respectively, with the 2002FDA survey at 18%) said DTC advertisements caused themto ask their doctors about a medical condition they had notpreviously discussed.

Fourth, from the patient’s perspective, DTC advertisingcauses almost no tension in the doctor’s office. A consistentfinding is that few respondents—usually under 5%—encountered resentment or resistance when they brought upwhat they had seen in advertising or asked about specificdrugs, and overwhelming majorities said their physicianstreated their questions as an ordinary part of officediscussions.

Fifth, consumers like DTC advertising. Large majorities(on the order of 60% to 80%) believe DTC advertisementsprovide them with useful information and help them in talk-ing to their doctors.

Sixth, DTC advertising appears to yield significantspillover benefits that go to consumers rather than to adver-tisers. Such benefits range from heightened awareness of theinherently risky nature of prescription drugs to better com-pliance with drug therapies and even motivation to pursuelifestyle and behavioral changes that may obviate the needto use pharmaceuticals. In particular, advertisementsreminded consumers to take their medications and refilltheir prescriptions. In addition, DTC advertisements appear


to make patients more comfortable with the risks and bene-fits of the medicines they take and may improve compliancewith drug therapy.

Overall, these survey results are strongly supportive of asituation in which consumers are motivated by advertisingfirst to seek additional information—especially from physi-cians and particularly for previously untreated or inade-quately treated conditions—and, second, to work with theirdoctor to reach a decision about what, if any, prescriptiondrug to use.

Policy RecommendationsThe range of feasible policy options for DTC advertisingappears narrow. An outright ban on DTC advertising,including broadcast advertising as conducted since August1997, is probably ruled out by the First Amendment. TheSupreme Court has long based its commercial free speechdecisions on practical matters. Faced with a growing bodyof evidence showing substantial benefits and modest costs,the Court would probably provide First Amendment protec-tion to DTC advertisements. However, the comprehensivenature of the FDA’s regulatory mandate (which extends farbeyond advertising and promotion) rules out a drastic relax-ation of DTC advertising rules. This assumes that the FDAcontinues to have primary responsibility for regulating DTCadvertisements, a topic that is addressed subsequently.

Aside from First Amendment considerations, there is lit-tle reason for the FDA to roll back its expansion in the scopeof DTC advertising in the late 1990s. Advertising deceptionand consequent medically inappropriate prescribing appearto be minimal, whereas the benefits of DTC advertisementsappear substantial. The possibility that DTC advertisingincreases drug expenditures and usage is not a chargeagainst the advertising itself. To use restrictions on DTCadvertising as a method to improve physician prescribingwould be to employ an extremely blunt tool with no assur-ance that the result would be to improve consumer health.Proposals to tighten regulation (e.g., mandatory preclear-ance as recommended by Lyles [2002, p. 81]) are unlikelyto increase consumer welfare, because they would increasecosts and reduce the scope of DTC advertising and thereforelimit its benefits.

Conversely, the FDA should consider relaxing some of itsrules. The context of FDA regulation virtually ensures thatits advertising standards are too stringent and thus deprivethe market of useful information. An obvious problem is thequantity of warning information required in broadcastadvertisements. This information, which is already modu-lated according to risks, could be further simplified andshortened, partly by replacing simpler advice to the effectthat physicians will have opinions about whether and how touse the drug. One effect would be greater relative promi-nence for strong warnings in advertisements for the fewdrugs for which dangers are substantial and consumer vigi-lance is especially useful. In addition, the FDA could accel-erate (with help from manufacturers) its ongoing effort tosimplify consumer risk and dosage information, whichwould allow the substantial proportion of consumers wholook at this material in advertisements to make more senseof it (see FDA 2001b).

More generally, the FDA should reconsider the notionthat all DTC advertisements need to balance informationabout risks and benefits. Advertising works best as adynamic medium, filling the most important relevant holesin consumer awareness and emphasizing different productfeatures as dictated by circumstances. This makes informa-tion dissemination more efficient, an essential virtue ininformation-intensive markets such as pharmaceuticals.(Consumers assume that information in advertisements isbiased in favor of the advertiser and have recourse to moreobjective sources.) In addition, advertising is necessarilypoorly targeted, and the vast majority of viewers areunlikely to use the advertised product. It makes more sensefor detailed risk information to be targeted precisely atusers, which would be the natural result of focusing risk dis-semination in physician offices and pharmacies. Despite theabsence of detailed risk information in advertisements, theability of consumer advertising to work well in medicalmarkets is apparent for products such as hospitals, clinics,physicians, and dentists.

The FDA has shown considerable energy and courage inopening up DTC advertising, which is prohibited by allother advanced economies except New Zealand. It has alsocommissioned surveys that could have easily demonstratedharm from its DTC ad policy, a level of self-scrutiny that israre among regulatory agencies. Nonetheless, there are rea-sons to believe that the FDA is not the best agency for reg-ulating DTC advertising.

Congress should consider returning responsibility for pre-scription drug advertising (at least when directed to con-sumers) to the FTC, which had jurisdiction before the 1962amendments to the Food, Drug, and Cosmetic Act (seeCalfee 1996). This would permit regulation to focus onadvertising and communication, unencumbered by perva-sive regulatory linkages to other matters such as new drugapprovals and manufacturing oversight. Regulation wouldalso be conducted by an agency with superior experienceand expertise in assessing advertising. Most important isthat the FTC must defend its actions in court against adver-tisers that are not afraid to challenge the agency and possi-bly offend its staff. This provides an essential system ofchecks and balances, which is the only way to ensure thatthe regulating agency strikes a reasonable balance betweenthe dangers of deceptive advertising and the consumer ben-efits of a free flow of commercial information. Fortunately,there is little reason to fear that FTC regulation wouldengender damaging advertising claims for inherently riskyproducts. This is clear from the FTC’s record in regulatingadvertising for such diverse products as hospitals, clinics,physicians, medical devices, and even automobiles andmotorcycles. The FTC could easily augment its staff with asmall group of pharmacology experts and consult with out-side experts, as it already does on other matters involvinghealth and safety.

In the absence of legislation, the FDA should make adver-tising regulation more independent from drug approvals andmanufacturing regulation. The Division of Drug Marketing,Advertising, and Communications, which regulates DTCadvertising, should be transferred out of the Center for DrugEvaluation and Research (CDER), to report directly to theFDA Commissioner. The new division should add staff with


33To assess the brand-level effects of statin drug advertising, see Wosin-ska (2001) for a recent analysis of panel data.

expertise in advertising and its effects and should operateindependently from CDER. These changes would substan-tially reduce manufacturers’ qualms about challengingadvertising regulations, which could lead to litigation inwhich FDA advertising rules would be subject to judicialscrutiny and First Amendment protections for commercialspeech.

Finally, the United States should take advantage of theNew Zealand experience, described in Hoek and Gendall’s(2002b) article. New Zealand has demonstrated thatself-regulation for DTC advertising can work well, provid-ing substantial information to patients with little apparentharm, while also achieving support from the medical com-munity. This is of great significance precisely because theNew Zealand experience departs so strongly from both theAmerican system and those in Europe and other developednations. This experience strongly suggests that many of theprotections in the tightly regulated pharmaceutical informa-tion regimes of Europe and Canada are both unnecessaryand costly to consumers.

Toward New ResearchLittle is known about the effects of DTC advertising, espe-cially its impact on consumer behavior (as opposed to atti-tudes and knowledge) and, ultimately, on consumer health.Even elementary knowledge of the nature of the marketforces unleashed by the FDA in its August 1997 policychange is lacking. Experience in other markets, such as air-lines, has shown that short-term effects of deregulation oftendiffer strongly from long-term effects, which may be verydifferent from those expected by both supporters and oppo-nents of regulatory change (Morrison and Winston 1995).Second-order effects from DTC advertising, such asenhanced consumer participation in health care decisions,improved patient compliance, faster research and develop-ment, swifter development and adoption of new uses forolder drugs, smaller distribution margins (a typical result ofnational brand advertising), and increased awareness ofnondrug therapies, could dominate short-term effects.

The papers in the USDHHS (2001) conference (Bero andLipton 2001; Frank et al. 2001; Schommer and Hansen2001) provide useful suggestions, with considerable atten-tion to consumer research methods. Econometric research ispromising, though little has been performed to date. Paneldata may prove especially useful for both consumer researchand econometric methods. Large sample sizes, rich demo-graphic data, and the ability to employ longitudinal methodsto assess the impact of waves of DTC advertising, withlagged effects, offer exceptional opportunities to test manyhypotheses regarding compliance, for example, as well asphysician visits and prescriptions.33

Finally, physician surveys, with all their expense and dif-ficulty, could also be useful. Two major efforts, one by theFDA and the other by a group at Harvard School of PublicHealth (with industry funding), should be forthcoming soon.

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