Truth-in-Advertising Laws and Pharmaceutical Promotion
40 Pages Posted: 12 Nov 2009
Date Written: February 2009
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.
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