The Effects of Pharmaceutical Marketing and Promotion on Adverse Drug Events and Regulation

54 Pages Posted: 15 Jan 2009 Last revised: 2 Jun 2013

See all articles by Guy David

Guy David

The Wharton School, University of Pennsylvania - Health Care Management

Sara Markowitz

Emory University; National Bureau of Economic Research (NBER)

Seth Richards-Shubik

Lehigh University - Department of Economics; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: January 2009

Abstract

This paper analyzes the relationship between postmarketing promotional activity and reporting of adverse drug events by modeling the interaction between a welfare maximizing regulator (the FDA) and a profit maximizing firm. In our analysis demand is sensitive to both promotion and regulatory interventions. Promotion-driven market expansions enhance profitability yet may involve the risk that the drug would be prescribed inappropriately, leading to adverse regulatory actions against the firm. The model exposes the effects of the current regulatory system on consumer and producer welfare. Particularly, the emphasis on safety over benefits distorts the market allocation of drugs away from some of the most appropriate users. We then empirically test the relationship between drug promotion and reporting of adverse reactions using an innovative combination of commercial data on pharmaceutical promotion and FDA data on regulatory interventions and adverse drug reactions. We provide some evidence that increased levels of promotion and advertising lead to increased reporting of adverse medical events for certain conditions.

Suggested Citation

David, Guy and Markowitz, Sara and Richards-Shubik, Seth, The Effects of Pharmaceutical Marketing and Promotion on Adverse Drug Events and Regulation (January 2009). NBER Working Paper No. w14634, Available at SSRN: https://ssrn.com/abstract=1327255

Guy David

The Wharton School, University of Pennsylvania - Health Care Management ( email )

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HOME PAGE: http://www.wharton.upenn.edu/faculty/david.html

Sara Markowitz (Contact Author)

Emory University ( email )

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National Bureau of Economic Research (NBER)

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Seth Richards-Shubik

Lehigh University - Department of Economics ( email )

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United States

HOME PAGE: http://www.lehigh.edu/~ser315

National Bureau of Economic Research (NBER) ( email )

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