Venue: The Fuqua School of Business, Duke University, 1 Towerview Drive, Durham, NC 27708-0120
Presentation
The Effects of Pharmaceutical Marketing and Promotion on Adverse Drug Events and Regulation
A key challenge of the Food and Drug Administration's (FDA) regulatory mission is monitoring the safety and effectiveness of drugs on the market. Problems accomplishing this goal stem from the poor information about the success and failures of drugs in the patient population. As the population of users expands beyond the types evaluated in pre- approval clinical trials, this uncertainty grows. In particular, there is debate over whether drugs may be inappropriately matched with patients as a result of direct-to-consumer advertising and promotional activities directed at health service professionals. This paper examines the incidence of adverse drug events associated with such promotion. To do so, we present a newly developed theoretical framework of the firm's decision to advertise and promote pharmaceuticals, along with an empirical analysis of adverse events.
Our theoretical framework considers the interaction between the FDA and a representative pharmaceutical firm regarding the market size for an individual drug and its benefits or harm for the patient population. As a profit maximizer, the firm wishes to expand demand for its product through promotion, but an increase in the population of users may also decrease the average match quality of the drug and increase the risk of regulatory intervention resulting in restrictions or even drug recalls. The FDA's regulatory action will be affected by the amount of adverse drug reactions reported to its system. This conceptual framework generates testable predictions about a firm's decisions on advertising or other promotion.
The empirical analysis examines two parts of the interaction between pharmaceutical activities and the FDA. The first seeks to answer the question of whether increased levels of promotional activity lead to a worsening match of drugs with patients and lead to increased reporting of adverse medical events. The second seeks to answer the question of whether increased promotional activities leads to FDA actions including safety-related labeling changes. The results of this paper will be the first to shed light on the relationship between pharmaceutical promotion activity, adverse events and the reaction by the FDA.