The Congressional Budget Office recently published a study on the cost of prescription drug advertising showing that drug companies spend more on promotion than they do on research and development. Does this advertising raise or lower the cost of drugs?
The CBO study, entitled "Promotional Spending for Prescription Drugs," was released December 2, 2009, and it confirms that a substantial portion of the budget of drug manufacturers is spent on advertising and free samples – in fact, they spend almost as much on these promotional activities as they do on research and development.
On page 2 of the report, the CBO cites these figures:
Domestic Sales of Pharmaceuticals and Medicines for 2008 = $189 billion
Domestic Spending on Research and Development = $38 billion
Promotional Expenditures = $38.5 billion, including the following elements:
Detailing to Physicians, Nurse Practicioners, and Physician's Assistants = $12 billion
Sponsoring Professional Meetings = $3.4 billion
Advertisements in Professional Journals = $0.4 billion
Direct Advertising to Consumers = $4.7 billion
Free Samples Distributed to Physicians = $18 billion (2005 estimate)
Nearly half of the promotional budget is for free samples, and you wouldn't think that there could be a problem with that, but unfortunately, some drug companies were distributing samples of drugs that had not been approved by the F.D.A. (See this news release from the Justice Department entitled "Justice Department Announces Largest Health Care Fraud Settlement in its History," September 2, 2009). But even if we set aside the cost of free samples, drug manufacturers are still spending in excess of $20 billion annually to promote specific products.
On page 6 of the report the CBO identifies which types of drugs are promoted the most. Leading the pack in DTC (Direct to Consumer) advertising was – ta da! – Erectile Dysfunction medications. However, these "male enhancement" drugs scored a measly seventh place among advertising to physicians, among whom the leading categories of drugs were statins, antidepressants, and antipsychotics. Are physicians less prone to erectile dysfunction but more depressed? We'll never tell!
The serious question is, of course, does all this advertising for prescription drugs benefit society? More specifically, does it encourage the development of new medications and/or reduce the cost of drugs? I can imagine arguments on both sides of that question. As the cost of health care rises, and particularly in light of the prescription drug benefit under Medicare Part D, it becomes rather important to determine the effect of advertising on the cost of drugs.
According to a study recently published in the journal Archives of Internal Medicine and summarized here by PhysOrg.com, advertising for the drug Plavix did not increase sales of the drug, but it did coincide with a dramatic increase in the price of the drug. According to this same report, the price increase for this single drug added $240 million to government spending on Medicaid. The posting in PhysOrg.com quotes one of researchers:
"The key issue is whether advertising to consumers, which has risen 330 per cent in the last 10 years in the US, contributes to the significant cost increases in publicly funded health insurance programs such as Medicaid," says Stephen Soumerai, co-author of the study and professor of Population Medicine at Harvard Medical School and the Harvard Pilgrim Health Care Institute.
Visit Professor Huhn's website on health care financing reform for links to information about proposed legislation, studies and reports, public agencies, and private organizations concerned with this issue.
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This study clearly shows the major underlying problems our country faces with a for-profit approach to healthcare. No matter how you spin the story, the bottom line purpose of medical providers, insurers, and suppliers is to make a profit for their 'owners'.
In arenas of broad ranging options, massive ad campaigns are common and reasonable. How else would I know that my favorite athlete now prefers a new flavored energy drink or drives a pickup truck that could pull my house off it's foundation? That is totally free enterprise at work. I generally have no other reasonable method of learning about those products unless they are promoted by paid advertising. And, in most cases, tax dollars are not paying for the products or their advertising campaigns.
Prescription drugs are another matter altogether. In my opinion, they are a product of a monopoly that targets sales to consumers who have very limited choices available to them. In addition, many of those prescription medications are targeted at consumers whose medical bills are mainly paid by tax dollars.
Therefore, if certain 'families' of prescription drugs are generally paid for by tax dollars, they should be subject to more restrictive advertising practices. I'm sure the $4.7billion mentioned as "Direct Advertising to Consumers" would be a welcome addition to either R&D or used to provide more 'samples' for consumers who are unable to pay out-of-pocket for prescribed medications they need to remain alive and functional.
Why is it necessary to 'ask your doctor about *****'? If I have a condition that could be best treated with that medication, I would expect my doctor to tell me about it.