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

Robert Nathenson, Michael R. Richards

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).