Is Drug Company Advertising the Key To Health Costs?

Late last week, Governor Pawlenty dispatched a letter to congressional leaders asking them to establish a moratorium on prescription drug advertising. In particular, he’s focused on the impact of drug advertising budgets on skyrocketing health care costs.

Pundits and detractors are panning the proposal as a campaign ploy, since Pawlenty will face a re-election campaign against one of several DFL candidates this fall (potentially endorsed candidate Attorney General Mike Hatch). The Star Tribune also referred to Pawlenty’s proposal to re-import prescription drugs from Canada, taking advantage of Canadian price controls.  This latter proposal hasn't become the drug cost panacea, with total purchases in the program just exceeding $30,000 last month, perhaps because many citizens are now eligible for Medicare prescription drug coverage.

On the latest proposal, there are some interesting highlights.  Attorney General Hatch’s office produced a report on pharmaceutical companies three years ago, and in a scathing analysis it provides illustrations such as this: “Between 35-37 percent of  industry revenue is allocated to administration and marketing, a figure which is almost three times larger than the 13-15 percent allocated for research and development…In 1996, prior to the relaxation of DTC standards by the FDA, the pharmaceutical industry spent $791 million on advertising.59 After the DTC standards were relaxed, it was estimated that DTC spending increased to $2.5 billion for 2001 -- an increase of 216 percent” ("Follow the Money," 16-17).  This figure rose to $4 billion by 2004, another 160% increase.

Clearly, spending on advertising is a substantial sum, but would that $4 billion necessarily go back into the health care system?  And even if it did, what is $4 billion in advertising compared to the $1.9 trillion spent on health care in 2004?  Not much.

Comments

[John Farrell]

The provision of free lunches also contributes to higher drug costs, as the NY Times reports on how drug companies buy lunch for entire clinics as part of their advertising budgets:
http://tinyurl.com/qzag7