Do coverage mandates affect direct-to-consumer advertising for pharmaceuticals? Evidence from parity laws
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Direct-to-consumer advertising (DTCA) for prescription drugs is a relatively unique feature of the US health care system and a source of tens of billions of dollars in annual spending. It has also garnered the attention of researchers and policymakers interested in its implications for firm and consumer behavior. However, few economic studies have explored the DTCA response to public policies, especially those mandating coverage of these products. We use detailed advertising expenditure data to assess if pharmaceutical firms increase their marketing efforts after the implementation of relevant state and federal health insurance laws. We focus on mental health parity statutes and related drug therapies—a potentially ripe setting for inducing stronger consumer demand. We find no clear indication that firms expect greater value from DTCA after these regulatory changes. DTCA appears driven by other considerations (e.g., product debut); however, it remains a possibility that firms respond to these laws through other, unobserved channels (e.g., provider detailing).
KeywordsMental health parity Pharmaceutical advertising Insurance regulation Direct-to-consumer advertising
JEL ClassificationI11 I13 I18
The authors thank Kantar Media for providing excellent data resources. Kantar Media was not responsible for any analyses or interpretations of the data. The authors also thank the Leonard Davis Institute of Health Economics at the University of Pennsylvania Wharton School for generous financial support for this work. They are additionally grateful to the Editor and two anonymous reviewers for excellent insights and suggestions on an earlier version of this paper.
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