Direct-to-Consumer (DTC) advertising of prescription drugs, especially new brand-named drugs, remains controversial. Some in Congress remain eager to prohibit advertising of brand-name prescription drugs to consumers in the first two years following a drug’s approval by the Food and Drug Administration (FDA). Is this a good idea or is it a flawed policy rife with legal, policy, public health, and economic problems?
DTC advertising of new prescription drugs (older Rx drugs, especially those with generic versions, are rarely advertised) increased substantially in 1997, following the FDA’s reinterpretation of federal rules on DTC advertising. The new FDA policies allowed branded broadcast ads. Prior to the late 1990’s, pharma companies focused their marketing effects on physicians. Today, about 25% of pharmaceutical marketing budgets go to direct-to-consumer advertising, with about 85% of DTC ad spending for new brand drugs.
A study by researchers at Harvard University and the Massachusetts Institute of Technology found that a 10% increase in DTC advertising of drugs within a therapeutic drug class resulted in about a 1% increase in sales of the drugs in that class. No surprise the advertising can affect sales, but, as noted below, that is not necessarily a bad thing (and isn’t always all that effective for the specific drug being advertised).
Like all drug industry marketing, DTC advertising of prescription drugs is regulated by the FDA. Drug ads must not be false or misleading, must contain facts, must only discuss FDA approved indications (that is, no mention of off-label use), and must show a fair and balanced view of a drug’s benefits and risks.
The Federal Trade Commission (FTC) regulates advertising of over-the-counter (OTC) drugs but the FTC’s powers are more limited. FTC rules focus on protecting consumers from false and misleading advertising of OTC drugs but no not require OTC drug ads to be “fair and balanced.”
Key Issues Raised by Banning Direct-to-Consumer Advertising of New Prescription Drugs:
Proposals to impose a federal moratorium on DTC advertising of prescription drugs raise many troubling issues. Most notably:
- Would a moratorium be Constitutional? In cases such as Virginia State Pharmacy Board v. Virginia Citizens Consumer Council, the U.S. Supreme Court has held that First Amendment protections of free speech also apply to commercial speech. Granting the FDA more authority to regulate drug advertising may be Constitutional, but an outright two-year moratorium on advertising of new brand drugs is likely unconstitutional. Regardless, it raises difficult legal issues. These are nicely explored in The Difficult Case of Direct-to-Consumer Drug Advertising, a paper by former Georgetown University law professor David C. Vladeck, who is now head of consumer protection at the Federal Trade Commission.
- Would restricting consumer access to information actually harm patients? Is it right to deliberately keep patients in the dark, especially in an era of health reforms that emphasize patient-centered care and consumer engagement? For all its limitations, advertising does raise awareness and often prompts patients to seek diagnosis and treatment. Patients may be particularly harmed if a moratorium on DTC advertising delays needed treatment or artificially lowers use of a truly innovative, cost effective new drug therapy. As the Congressional Budget Office points out: “Although such a moratorium would allow more time for safety concerns about a new drug to be revealed, it would entail health risks of its own, because some individuals who would benefit from a new drug might be unaware of its availability in the absence of consumer advertising.”
- How would a moratorium affect the marketplace, including physician prescribing practices, payor benefit designs, drug utilization, prices and rebates, and other forms of pharmaceutical marketing? For example, even if a moratorium resulted in lower drug utilization, it could easily drive up prices (the law of supply and demand still applies no matter what Congress intends) and could result in a net increase in medical costs as patient seek more expensive, less effective, and duplicative or risky treatment.
- A moratorium raises an array of important policy issues that deserve attention. These are carefully discussed in Public Policy Issues in Direct-to-Consumer Advertising of Prescription Drugs, an excellent paper for the FTC by the late John E. (Jack) Calfee of the American Enterprise Institute.
- With relatively fewer new brand drugs and fewer “me too” drugs entering the market, a much slower and more risk-adverse FDA review process, substantial increase in post-market surveillance, a growing industry focus on biologics, voluntary restrictions on use of DTC advertising in the first six months, increased use of social media (by consumers, companies, payors, and even physicians), use of more sophisticated and nuanced communications strategies and tactics by pharma firms, the highly fragmented market of inattentive television viewers, growing market power and sophistication of health plan and drug plan benefit designs, decreasing physician discretion as a result of government and payor policies, the radically different incentives of new provider payment models, massive new federal Comparative Effectiveness Research program, prospect of follow-on biologics, and an avalanche of generic versions entering the U.S. drug marketplace – is the idea of a federal moratorium now largely moot? (Political showboating aside, of course.)
Potential Effects of a Ban on Direct-to-Consumer Advertising of New Prescription Drugs:
A new brief by the Congressional Budget Office (CBO) examines some of the effects of a federal moratorium on direct-to-consumer (DTC) advertising of new brand-named prescription drugs. CBO reviewed data on DTC advertising and
other promotional activities used by pharmaceutical manufacturers and on recent academic analyses of how advertising has affected the prescription drug market.
To CBO, the expected effects of a moratorium include:
- Prescription drug manufacturers would probably expand their marketing to physicians to substitute for at least some of the banned advertising to consumers.
- The number of prescriptions filled would probably decrease for some drugs. For other drugs, the number of prescriptions might be little changed, owing both to the likely substitution of other types of promotions and to the various other factors that influence a drug’s reach in the prescription drug market.
- Any change in prescription drug prices would depend on changes in demand. To the extent that the effects on demand are likely to be limited, so too are the effects on drug prices. However, prices for new brand drugs that normally would be part of a DTC advertising campaign could increase since sales would be lower.
- A moratorium could affect public health. That impact is uncertain, depending on whether the benefits of fewer unexpected adverse health events were larger than the health costs of possibly reduced use of new and effective drugs.
The full CBO report – Potential Effects of a Ban on Direct-to-Consumer Advertising of New Prescription Drugs – is available here (PDF).