Prescription Drug Advertising and Drug Utilization: The Role of Medicare Part D

Abby Alpert, Darius Lakdawalla and Neeraj Sood

No 21714, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Pharmaceutical firms currently spend over $4 billion on direct-to-consumer advertising (DTCA) of prescription drugs, a nearly 30-fold increase since 1993 that has led to much debate about its value to patients. We examine how DTCA influences drug utilization along the extensive and intensive margins by exploiting a large and plausibly exogenous shock to DTCA driven by the introduction of Medicare Part D in 2006. Using data on advertising for local media markets from Nielsen, we show that Part D led to large relative increases in DTCA in geographic areas with a high concentration of Medicare beneficiaries compared to areas with a low concentration. We examine the effects of this sudden differential increase in advertising on non-elderly individuals to isolate the effects of advertising on drug utilization from the direct effects of Part D. Using data from pharmacy claims, we find substantial differential increases in drug utilization that mirror the increases in DTCA after Part D. These effects are driven both by increased take-up of treatment and improved drug adherence. Our results imply significant spillovers from Medicare Part D onto the under-65 population and an important role for non-price factors in influencing prescription drug utilization.

JEL-codes: H51 I10 I18 (search for similar items in EconPapers)
Date: 2015-11
New Economics Papers: this item is included in nep-com, nep-hea, nep-ias and nep-mkt
Note: EH
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Published as Abby Alpert & Darius Lakdawalla & Neeraj Sood, 2023. "Prescription drug advertising and drug utilization: The role of Medicare Part D," Journal of Public Economics, vol 221.

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Journal Article: Prescription drug advertising and drug utilization: The role of Medicare Part D (2023)
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