Advertising: the cause of high drug costs?

October 1, 1999

Pharmaceutical Representative

The National Institute for Health Care Management has released a report that cites DTC advertising as a major force behind rising prescription drug expenditures.

The National Institute for Health Care Management has released a report that cites direct-to-consumer advertising as a major force behind rising prescription drug expenditures.

According to the report titled "Factors Affecting the Growth of Prescription Drug Expenditures," spending on DTC advertising increased from $55.3 million in 1991 to more than $1.3 billion in 1998 and is projected to reach $2 billion in 1999. In addition, the report states that "the 10 most heavily promoted drugs in 1998 (measured by DTC advertising outlays) accounted for over a fifth - about 22% - of the total growth in prescription drug expenditures."

Though the report implies that DTC advertising is linked to rising drug costs, Ed Neuschler, senior director of policy and research for NIHCM, admits that the report does not demonstrate a direct cause-effect relationship. "In effect, what we've done is notice that there seems to be a big association here."

The Pharmaceutical Research and Manufacturers of America still contends that research and development is the greatest factor affecting drug costs. "If you put the [report] into proper perspective, $1.3 billion is [equal to] the cost of researching and developing not quite three drugs," said Jeff Trewhitt, spokesperson for PhRMA. "It costs an average of $500 million today to research and develop a new drug." Trewhitt added that pharmaceutical companies spent a total of $24 billion on research and development in 1998.

Critics of DTC advertising say the report shows that advertising dollars are being spent frivolously. "The majority of DTC advertising dollars has not been allocated for the marketing and education of patients who have a chronic disease burden or a life-threatening illness such as hypertension or diabetes or asthma," said Robert Seidman, vice president of pharmacy for Wellpoint Health Networks, a managed care company. "We've seen the predominance of DTC dollars go to symptom-relief drugs or lifestyle drugs. The pharmaceutical manufacturers have been very successful in creating demand for these non-life-essential pharmaceuticals and having them consume an ever-greater percentage of the pharmaceutical dollars that are covered through a managed care pharmacy benefit."

If managed care companies consider DTC advertising as a factor influencing drug costs, then consumers may eventually wind up bearing the burden. "We are looking at therapeutic class-specific deductibles and higher co-pays for certain symptom-relief or lifestyle-type drugs," said Seidman. "As the concept of three-tier co-pays expands, the drugs that you see aggressively advertised will move into the third highest co-pay tier." PR

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