Side Effects of Competition: The Role of Advertising and Promotion in Pharmaceutical Markets

42 Pages Posted: 25 Jun 2011 Last revised: 25 May 2023

See all articles by Guy David

Guy David

The Wharton School, University of Pennsylvania - Health Care Management

Sara Markowitz

Emory University; National Bureau of Economic Research (NBER)

Date Written: June 2011

Abstract

The extent of pharmaceutical advertising and promotion can be characterized by a balancing act between profitable demand expansions and potentially unfavorable subsequent regulatory actions. However, this balance also depends on the nature of competition (e.g. monopoly versus oligopoly). In this paper we model the firm's behavior under different competitive scenarios and test the model's predictions using a novel combination of sales, promotion, advertising, and adverse event reports data. We focus on the market for erectile dysfunction drugs as the basis for estimation. This market is ideal for analysis as it is characterized by an abrupt shift in structure, all drugs are branded, the drugs are associated with adverse health events, and have extensive advertising and promotion. We find that advertising and promotion expenditures increase own market share but also increase the share of adverse drug reactions. Competitors' spending decreases market share, while also having an influence on adverse drug reactions.

Suggested Citation

David, Guy and Markowitz, Sara, Side Effects of Competition: The Role of Advertising and Promotion in Pharmaceutical Markets (June 2011). NBER Working Paper No. w17162, Available at SSRN: https://ssrn.com/abstract=1872281

Guy David (Contact Author)

The Wharton School, University of Pennsylvania - Health Care Management ( email )

3641 Locust Walk
Colonial Penn Center
Philadelphia, PA 19104-6358
United States

HOME PAGE: http://www.wharton.upenn.edu/faculty/david.html

Sara Markowitz

Emory University ( email )

Atlanta, GA 30322
United States

National Bureau of Economic Research (NBER)

365 Fifth Avenue, 5th Floor
New York, NY 10016-4309
United States
(212) 817-7968 (Phone)

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
52
Abstract Views
662
Rank
687,751
PlumX Metrics