Promoting Wellness or Waste? Evidence from Antidepressant Advertising

March 2018
Bradley Shapiro

Direct-to-Consumer Advertising (DTCA) of prescription drugs is controversial and has ambiguous potential welfare effects. In this paper, I estimate costs and benefits of DTCA in the market for antidepressant drugs. In particular, using individual health insurance claims and human resources data, I estimate the effects of DTCA on outcomes relevant to societal costs: new prescriptions, prices and adherence. Addtionally I estimate the effect of DTCA on labor supply, the economic outcome most associated with depression. First, category expansive effects of DTCA found in past literature are replicated, with DTCA particularly causing new prescriptions of antidepressants. Additionally, I find evidence of no advertising effect on either the prices or co-pays of the drugs prescribed. Next, lagged advertising is associated with higher first refill rates, indicating that the advertising marginal are not more likely to end treatment prematurely due to initial adverse effects. Despite first refill rates being higher for those that are more likely advertising-marginal, concurrent advertising drives slightly lower refill rates overall, particularly among individuals who stand to gain least from treatment. Finally, advertising significantly decreases missed days of work, with the effect concentrated on workers who tend to have more absences. Back-of-the-envelope calculations suggest that the wage benefits of the advertising marginal work days are more than an order of magnitude larger than the total cost of the advertising marginal prescriptions.