Equation Proves that Broadcast DTCA Only a Minor Contributor to Growth in Rx Drug Expenditures

In an equation that Einstein would be proud of, researchers at the National Bureau of Economic Research (NBER) supported by a grant from the Agency for Healthcare Research and Quality have "proved" that "the expansion in broadcast DTCA may be responsible for about 19 percent of the overall growth in prescription drug expenditures over the [period between 1994 and 2005], with over two-thirds of this impact being driven by an increase in demand as a result of the DTCA expansion and the remainder due to higher prices." The researchers based this on an analysis data supplied by IMS fed into this equation:

The equation denotes that the market price (P) is a function of promotion, time until patent expiration and the number of drugs in the therapeutic class. Hey, I'm not going to get into an analysis! Ed Silverman over at Pharmalot already did a great job explaining the research (see here).

I'm just in awe of this equation, which to me looks suspiciously similar to an equation used by Villanova scientists that proved that DTC spending does not impact Rx prices (see here, where you can see a T-shirt with the equation on it).

The authors of the Villanova study concluded that "DTC advertising has no effect on the price of drugs" whereas the authors of the NBER study conclude that "while DTCA is significant, it has not been the primary force driving the growth in overall prescription drug expenditures."


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