Panel:
Policy Determinants of Prescription Drug Use
(Health)
*Names in bold indicate Presenter
Prescription drug spending, increasing pharmaceutical prices, and pharmaceutical marketing have taken a pivotal role in health care policy debates. The National Health Expenditures Data estimates that over $325 billion is spent on prescription drugs in the United States each year. At the same time, spending on prescription drug direct-to-consumer advertising has increased from $555 million in 1996 to over $5.63 billion in 2015 – a more than 10-fold increase over the span of two decades, with some estimates suggesting that pharmaceutical companies spend more on marketing than research and development.
The use of generic drugs is seen as a key decision that could aid in bringing down costs and spending on prescription drugs.. Despite their overwhelming market share, the use of generic drugs may be impeded by physician awareness of generic equivalents and uncertainty or risk-aversion towards generics. As drugs are an experience good, physicians and their patients may be uncertain about the quality of new generic drugs. While generic drugs have the identical active ingredients as their brand-name counterparts, the generic drugs may vary in inactive ingredients that can result in differential reactions for different patients.
In light of high prices, policymakers also continue to debate the appropriateness of pharmaceutical marketing. Those in favor of drug advertising argue that it provides important information to consumers, promotes improved adherence to drug regimens, and encourages consumers to engage in healthy behaviors. Critics argue that drug advertising leads consumers to choose brand named prescription drugs over lower cost generics, discourages use of non-pharmacologic treatments, and promotes inappropriate drug prescribing behavior. Given these dueling mechanism, the welfare implications of drug advertising is unclear.
Our proposed session examined these issues in prescription drug policy through three papers. In Paper 1, we explore physician prescribing behavior and drug choice in the face of generic entry into the market. In Paper 2, we examine how pharmaceutical advertising affects use to and adherence to prescription drugs. In Paper 3, we identify and quantify spillover effects of pharmaceutical advertising in the outpatient market. As Congressional Committees and the President examine potential policy solutions to prescription drug utilization and prices, this session will provide conference attendees rigorous empirical evidence in three important domains of prescription drug policy.
