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International Journal of Health Economics and Management
Published in: International Journal of Health Economics and Management 3/2018

01-09-2018 | Short Paper

Do coverage mandates affect direct-to-consumer advertising for pharmaceuticals? Evidence from parity laws

Authors: Robert Nathenson, Michael R. Richards

Published in: International Journal of Health Economics and Management | Issue 3/2018

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Abstract

Direct-to-consumer advertising (DTCA) for prescription drugs is a relatively unique feature of the US health care system and a source of tens of billions of dollars in annual spending. It has also garnered the attention of researchers and policymakers interested in its implications for firm and consumer behavior. However, few economic studies have explored the DTCA response to public policies, especially those mandating coverage of these products. We use detailed advertising expenditure data to assess if pharmaceutical firms increase their marketing efforts after the implementation of relevant state and federal health insurance laws. We focus on mental health parity statutes and related drug therapies—a potentially ripe setting for inducing stronger consumer demand. We find no clear indication that firms expect greater value from DTCA after these regulatory changes. DTCA appears driven by other considerations (e.g., product debut); however, it remains a possibility that firms respond to these laws through other, unobserved channels (e.g., provider detailing).
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Footnotes
1
Parity laws (at least those considered to be “strong”) require equivalent levels of coverage and cost-sharing of physical and mental health. They prohibit insurers from discriminating against mental health care by having higher copays or co-insurance levels or imposing tighter benefit maximums than they do for physical health services.
 
2
While we conducted our analyses in the aggregate (i.e., pooling the expenditures for all drugs within these two classes), we did exclude a few individual products that were only briefly advertised in select markets (e.g., one market in a single year).
 
3
Delaware, New Hampshire, and New Jersey are not included in the analytic sample because their local advertising is from media markets predominantly serving several neighboring states. Our data also do not capture provider detailing (i.e., direct marketing to providers), which could increase after parity to build brand loyalty among providers and/or encourage brand switching.
 
4
For the event study style estimation, we also include a variable equal to one for two years or more after a parity law change within a given state. Adding this variable to our vector of time-varying state characteristics (X) ensures that our ‘policy shock’ coefficient (as well as the lead and lag) is relative to the pre-policy change expenditures levels.
 
5
Specifically, the two products were \(\hbox {Cymbalta}^{\mathrm{TM}}\) and \(\hbox {Seroquel}^{\mathrm{TM}}\)—both receiving their approval for mental health treatment around 2009.
 
6
Note, the designation of “full” parity legislation is provided by the previously referenced national organizations that report on the presence and details of state parity laws (e.g., NCSL and SAMHSA). We have not constructed the classification for parity policy strength.
 
7
While we do see a marginal effect at the media market level when we restrict our time period to 2000-2006 or 2000-2004, the effect is quite small, not replicated in the event study analyses, and/or disappears with the inclusion of state level controls.
 
8
The Employee Retirement Income Security Act (ERISA) is a federal law that exempts all self-insured health plans from state-level regulations, including parity laws. Fully-insured plans remain subject to state-level regulations.
 
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Metadata
Title
Do coverage mandates affect direct-to-consumer advertising for pharmaceuticals? Evidence from parity laws
Authors
Robert Nathenson
Michael R. Richards
Publication date
01-09-2018
Publisher
Springer US
Published in
International Journal of Health Economics and Management / Issue 3/2018
Print ISSN: 2199-9023
Electronic ISSN: 2199-9031
DOI
https://doi.org/10.1007/s10754-018-9234-3