People who attack the pharmaceutical industry like to cite the prevalence of medical advertising as a big, deadweight loss.
They’re frustrated by the fact that part of what they’re paying for when they buy a pill is the extensive magazine & TV push behind that pill.
That’s seen as a big deadweight loss, and potentially a more regulated environment could reduce costs simply by going back to the time before advertising.
There are a few problems with this, however. For one, as Megan McArdle recently pointed out, the ads can serve a legitimate informational purpose — she cites her own discovery of Ambien CR, via ads, prompting her to push her doctor for a much life-enhancing prescreption.
Not arguing by anecdote, Eric Falkenstein cites a paper from 1972 analysing eyeglasses prices in states where ads were either allowed or not allowed. The answer: in states where optometrists could advertise, the price of eyeglasses was meaningfully lower.
That isn’t too surprising, when you think about it. Cheap, low-margin goods and services are frequently heavy advertisers, since branding and promotion may be the only way to escape from the pack.
That being said, we’re not convinced this particular example of optometrists is robust enough to defend extensive marketing campaigns by big pharma. Optometrists are basically a commodity. Companies with pills under patent by definition have a monopoly, and all the pricing power that comes with it. Plus, pill companies have even more pricing power, since the patient and doctor rarely have much of an incentive to care about price.
But even still, attacking pharma advertising would seem to be going after a symptom of the healthcare problem, rather than the heart of it. How about figuring out why incentives aren’t aligned to push for lower prices? Then we’ll talk about ads.
See also: 12 Alternatives to Obamacare — >
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