How Does Direct-To-Consumer Advertising Influence the Demand for Mental Health Treatment?
- Presenter:
Chair: Avi Dor ; Discussant: David Bradford Mon June 5, 2006 13:45-15:15 Room 325
Pharmaceutical manufacturers continue to increase their spending on direct-to-consumer (DTC) advertising, with DTC expenditures jumping from $0.6 billion in 1996 to almost $4 billion in 2004 (TNS Media Intelligence). Rosenthal et al (2003) suggest that such advertising is an important driver of rising prescription drug expenditures. These expenditure increases have been especially rapid among several classes of drugs used to treat mental health problems. For example, Zuvekas (2005) found that spending on mental health related prescription drugs increased 20 percent a year in real terms between 1996 and 2001, more than doubling from $6 billion to almost $15 billion. In addition, one-third of the Top 25 drugs ranked by sales are either antidepressants or antipsychotics (NIHCM, 2002). It is unclear how much of the increase in the demand for mental health treatment is due to increased advertising by the pharmaceutical industry. DTC advertising may cause both a shift from traditional forms of treatment to pharmacotherapy, as well as an increase in the aggregate demand for mental health drugs. Indeed, research by Iizuka and Jin (2003) and Iizuka (2004) suggests that increased DTC expenditures have a market-expanding effect. We seek to better understand and quantify the extent to which DTC advertising explains increased demand for mental health treatment and changes in how it is delivered. We derive a model of the joint demand for mental health pharmacotherapy and behavioral therapy, which incorporates the relevant costs influencing consumption decisions, including outof-pocket payments (cost-sharing) for ambulatory services, out-of-pocket prescription drug costs, insurance premiums, and the out-of-pocket costs for non-mental health ambulatory treatment and drugs. We then merge quarterly data on direct-to-consumer advertising for the 100 largest markets obtained from TNS Media Intelligence to data from the 1996-2003 Medical Expenditure Panel Survey (MEPS), a nationally representative survey of the U.S. civilian, noninstitutionalized population. These 100 largest markets account for approximately 86 percent of the television-owning population (80-82 percent of the total population). By exploiting regional market-level variation in DTC advertising for local (spot) television, local (spot) radio, and newspaper media, as well as variation over time in national and local media spending, we are able to identify the effect of advertising levels on the demand for mental health treatment. This is done using two different measures of consumer demand: 1) The number of ambulatory mental health visits and prescription fills; and 2) The level of consumer expenditures on ambulatory treatment and prescription pharmaceuticals. The former is estimated via a Zero-Inflated Ordered Probit specification, and the latter using a two-part model of medical expenditures. Both models deviate from the conventional demand literature by making use of a correlated random effects specification (Chamberlain, 1982) to control for individual-level heterogeneity in preferences and the endogeneity of model regressors. Estimates from these empirical models are used to forecast future advertising-attributable demand in light of advertising trends in the pharmaceutical industry for both public and private payers.
