The latest from DTC Perspectives

Another Dubious Study

The parade of anti-DTC studies continues. This one says prices of Plavix were raised just before DTC started. The study is one of the many done by academics who are implying DTC is bad for the public because it raises prices for consumers. Here, the Harvard researchers looked at Plavix sales pre and post DTC for Medicaid patients. They found that despite heavy DTC spending, no increase in sales was noticed. They seemed quite concerned that Plavix took a 12% price increase just before the DTC started and feel the motivation for the price increase could have been to fund the DTC.

It is too bad the authors are so off base. It is too bad so many media outlets jump on a study like this to imply DTC causes price increases. Nothing could be more incorrect. First, drugs take price increases and charge the maximum price they can whether or not DTC is done. All businesses price to maximize profit. They charge what the market will allow. Price increases were common before the DTC explosion in the late 1990’s.

Second, Medicaid patients are not the target of DTC. People with private plans who can afford co-pays are their target. Drug companies do not target people who have very little influence in prescribing decisions as in Medicaid. It is no surprise sales did not increase in that group.

Third, Plavix has been running DTC for years. I am sure they are seeing incremental sales for their DTC investment or else it would have been discontinued years ago. The fact that Medicaid sales were flat is no test of DTC success.

Here we have a case where the authors, without any real relevant facts, are raising a concern that has never been proven. DTC creates competition. Competition usually lowers prices. Of course drug companies need to price to cover all their expenses and DTC is one of those expenses. That does not mean they can automatically take price increases to cover DTC. What they expect is that incremental sales will cover the cost of advertising and they can recover that investment without price increases.

Most large drugs that use DTC are in categories with at least 2-3 major competitors. Their pricing power is weak and they can take price increases only if the market forces allow it. Most provide large discounts to volume buyers. I am quite confident consumers pay less because of DTC but we need a wide scale multi-brand study to prove it. Single brand studies done with an impoverished audience is not particularly relevant. Of course, the main media will jump on this study as an example of nefarious drug company marketing practices. That is the danger of this one study. I am sure we will hear anti-industry forces quote this study as proof that consumers are paying high prices to fund television campaigns. I hope the drug industry will provide the facts about the link between pricing and DTC. If not, I fear ending the DTC tax deduction will gain traction.