Should Product-Specific Advertisement be Regulated in Pharmaceutical Markets?

Junichiro Ishida and Tsuyoshi Takahara

ISER Discussion Paper from Institute of Social and Economic Research, The University of Osaka

Abstract: This paper examines the optimal content regulation of DTCA by comparing two forms of DTCA---product-specific and category-specific---and identifies a key tradeoff which underlies this policy debate. Our analysis suggests that the optimal form of DTCA depends crucially on the cost effectiveness of DTCA and the market-size distortion induced by DTCA. When the cost of advertisement is high, there often exists a Pareto-improving policy choice: category-specific DTCA is preferred when the market-size distortion is more severe while produce DTCA is preferred when it is less so. As the cost decreases, however, a conflict emerges between pharmaceutical firms and patients: firms are worse off under product-specific DTCA while patients are better off. We also find that the physician's reluctance to persuade misinformed patients can actually alleviate the market-size distortion and hence be welfare-enhancing.

Date: 2022-07
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Journal Article: Should product‐specific advertisement be regulated in pharmaceutical markets? (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:dpr:wpaper:1182

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