Drug Ads Should Be Left Alone

House Republicans led by California's Bill Thomas, the powerful chairman of the Ways and Means Committee, are preparing an assault on direct-to-consumer advertising of prescription drugs.

Their argument is that direct-to-consumer (DTC) ads raise drug prices and induce patients to take drugs they should avoid.

Their solution is to penalize DTC ads by requiring patients to pay higher prices for advertised drugs. The problem with these ideas is that direct advertising does a lot of good, and practically none of the harm that opponents charge.

Take the matter of advertising and prices. Studies show that drug advertising actually saves consumers money by alerting them to the benefits of new medicines that prolong and enhance life and reduce hospital stays.

The cost of DTC ads are less than 3 percent of the total drug costs, so it is hard to see how ads can do much to prices.

In fact, almost all economists think advertising makes markets more competitive, not less. Of course, some people think prescription drugs are different. They're right, but the difference is that advertising is even more important.

That's because there is so much that consumers don't know about drug treatments. A new report from the Centers for Disease Control finds that less than half of HIV-positive people are using the drugs necessary to prevent HIV infection from progressing to AIDS and, eventually, death. DTC ads for HIV-suppressing drugs help to get the word to those missing patients.

A series of reports from the National Institutes of Health and other organizations have shown that many millions of people suffer needlessly from depression--burdening themselves, their families, and their coworkers and employers.

The list goes on. Last year, the federal National Cholesterol Education Program reported that millions of middle-age and elderly people have dangerously high cholesterol levels, yet far less than half are receiving treatment that would cut their risk of a heart attack by one-third or more.

With so much to be gained from drug ads, it is odd to see Congress focusing myopically on the downsides. Fortunately, the FDA itself has repeatedly pointed out that the most significant risk from DTC ads--dangerous or unnecessary prescribing--is extremely rare.

John E. Calfee is a resident scholar at AEI.

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About the Author

 

John E.
Calfee
  • Economist John E. Calfee (1941-2011) studied the pharmaceutical industry and the Food and Drug Administration (FDA), along with the economics of tobacco, tort liability, and patents. He previously worked at the Federal Trade Commission's Bureau of Economics. He had also taught marketing and consumer behavior at the business schools of the University of Maryland at College Park and Boston University. While Mr. Calfee's writings are mostly on pharmaceutical markets and FDA regulation, his academic articles and opinion pieces covered a variety of topics, from patent law and tort liability to advertising and consumer information. His books include Prices, Markets, and the Pharmaceutical Revolution (AEI Press, 2000) and Biotechnology and the Patent System (AEI Press, 2007). Mr. Calfee wrote regularly for AEI's Health Policy Outlook series. He testified before Congress and federal agencies on various topics, including alcohol advertising; biodefense vaccine research; international drug prices; and FDA oversight of drug safety.

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