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How Direct-to-Consumer Advertising for Prescription Drugs Affects Consumers' Welfare

A Natural Experiment Tests The Impact of FDA Legislation

Prokriti Mukherji, Ramkumar Janakiraman, Shantanu Dutta, Surendra Rajiv
DOI: 10.2501/JAR-2016-050 Published 23 November 2016
Prokriti Mukherji
School of Management and Business, King's College London,
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  • For correspondence: prokriti.mukherji@kcl.ac.uk
Ramkumar Janakiraman
Darla Moore School of Business, University of South Carolina,
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  • For correspondence: ram@moore.sc.edu
Shantanu Dutta
Marshall School of Business, University of Southern California,
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  • For correspondence: sdutta@marshall.usc.edu
Surendra Rajiv
NUS Business School, National University of Singapore,
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  • For correspondence: srajiv@nus.edu.sg
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ABSTRACT

In August 1997, the U.S. Food and Drug Administration (FDA) allowed brand-specific advertising on television. A simultaneous rise in direct-to-consumer advertising (DTCA) spending and prescription drug sales has resulted in a heated debate among pharmaceutical firms and medical practitioners, as well as in the U.S. Congress and the popular press. One side claims that DTCA creates demand and higher prices for the advertised brands; the other claims that DTCA increases consumer knowledge. The current study sheds light on the debate with a comparison of consumer welfare before and after the 1997 policy change, using a structural econometric model. The results suggest that DTCA seems to be increasing consumer welfare.

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Vol 63 Issue 1

Journal of Advertising Research: 63 (1)
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How Direct-to-Consumer Advertising for Prescription Drugs Affects Consumers' Welfare
Prokriti Mukherji, Ramkumar Janakiraman, Shantanu Dutta, Surendra Rajiv
Journal of Advertising Research Nov 2016, JAR-2016-050; DOI: 10.2501/JAR-2016-050

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How Direct-to-Consumer Advertising for Prescription Drugs Affects Consumers' Welfare
Prokriti Mukherji, Ramkumar Janakiraman, Shantanu Dutta, Surendra Rajiv
Journal of Advertising Research Nov 2016, JAR-2016-050; DOI: 10.2501/JAR-2016-050
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