The Role of Information in Pharmaceutical Advertising: Theory and Evidence

Abstract

This paper theoretically and empirically examines the role of information in pharmaceutical detailing (promotional interactions between drug representatives and physicians). We start with a theoretical framework in which pharmaceutical firms target detailing visits to physicians who learn about drug quality and prescribe accordingly. We derive several predictions about the role of information in these visits, which we then test empirically using prescriptions and pharmaceutical detailing visit data. We find limited empirical support of learning as the dominant mechanism, though cannot rule it out completely. We conclude with discussing alternative models that may be more consistent with the observed empirical patterns.