Is Advertising Effective or Not? Evidence from the Pharmaceutical Market

In this paper, we study the effect of direct advertising to consumers in pharmaceutical drugs. This is an empirical study. We conclude that DTCA has a greater effect on market expansion, whereas the use of contacts and detailing could lead to "business stealing." That is, an increase in the number of contacts that a pharmaceutical company's representative has will create an increase in the market share for that company's drug, to the detriment of other drugs in the same therapeutic class. Our results also support the conclusions of the theoretical models and of the other empirical research that these two types of advertising have different effects on a drug's performance on the market: Direct-to-consumer advertising serves an informative role, and the use of contacts serves a persuasive role.