Truth-in-Advertising Laws and Pharmaceutical Promotion

40 Pages Posted: 12 Nov 2009

Date Written: February 2009

Abstract

Direct-to-consumer advertising of prescription drugs (DTCA) is heavily regulated. Nelson (1974) provides an informal argument that improved regulation of advertising increases its credibility and therefore the incentives to advertise. He concludes that tighter regulation will stimulate advertising of true claims and that "moderately enforced" regulation will encourage false advertising. We show formally how Nelson's intuition applies to DTCA, even though a "learned intermediary" - the physician - stands between the consumer and the drug company.

Suggested Citation

Vaithianathan, Rhema and Ryan, Matthew J., Truth-in-Advertising Laws and Pharmaceutical Promotion (February 2009). Available at SSRN: https://ssrn.com/abstract=1504402 or http://dx.doi.org/10.2139/ssrn.1504402

Rhema Vaithianathan

University of Auckland ( email )

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Matthew J. Ryan (Contact Author)

University of Auckland ( email )

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64-9-373-7599 extn: 7193 (Phone)

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