Do radio and TV ads for new prescription drugs steer consumers toward newer, high-priced products? Bentley professor Dhaval Dave says “yes,” according to a recent study of the implications of both broadcast and non-broadcast direct-to-consumer advertising on rising prescription drug costs and demand. The research, “Impact of Direct-to-Consumer Advertising on Pharmaceutical Prices and Demand,” received the 2013 Georgescu-Roegen Prize from the Southern Economic Association (SEA). 

“Ad expenditures are beneficial if they raise a consumer’s awareness of drug options and improve patient-physician contact,” says Dave, associate professor of economics. “What comes into question is whether advertising would lead consumers to request and physicians to prescribe a more expensive drug in place of equally effective lower-priced options.”

Questions stemmed from the Food and Drug Administration’s approval of increased (DCTA) spending in broadcast in the U.S. in 1997. Dave’s findings indicate that broadcast DTCA is responsible for 19 percent of the overall growth in drug expenditures, with more than two-thirds of this due to higher demand and the rest due to higher prices. The caveat, warns Dave, is that higher drug and health care expenditures in general could also raise insurance premiums and may lead to a larger prevalence of uninsured.

Dave and co-author Henry Saffer received the award at the SEA Conference in Tampa in November.

Dhaval Dave's research focuses on the analysis of public policy and on the economics of health outcomes and behaviors, health insurance and human capital. His work has been published in leading academic journals such as the Journal of Health Economics, Journal of Urban Economics, Health Economics, and Economic Inquiry, and featured in The Washington Post, The New York Times, Wall Street Journal, Time Magazine, and U.S. News and World Report, and on FOX Network News, National Public Radio and CBS TV News. His current work includes studies on pharmaceutical promotion, welfare reform in the U.S., tobacco control policy, juvenile justice and the economics of obesity and mental health.