Those who fear the unchecked power of big, rich corporations might have taken some comfort yesterday as top executives in one of the most profitable and politically potent global industries -- the pharmaceutical sector -- acknowledged that they had gone overboard in advertising some products and laid out a set of voluntary guidelines for doing better in the future.
As one drug executive put it recently, offending large numbers of customers, or the public, isn't a particularly good business strategy -- which is apparently what the industry did with all those ads for little blue pills and lasting erections.
One reason for regulating drug-company advertising is that the market for prescription drugs is highly imperfect. Each product, in effect, is a little monopoly protected from competition by a government patent. And in most cases, the party paying for the product (an insurer or the government) is not the party deciding whether or how much to buy (the patient). From an economic perspective, these market "imperfections" are serious enough to justify some regulation.
That said, the courts have been pretty clear that even big corporations have free-speech rights and that any curbs on them need to be carefully tailored to achieve a compelling public purpose.
Industry critics claim that consumer advertising drives up the cost of drugs. But the Federal Trade Commission concluded that there is very little connection between what drug companies charge for a drug and the costs directly associated with it. What is true, however, is that advertising has been effective in driving up the sales of certain drugs, almost irrespective of price. A study by the Kaiser Family Foundation found that each $1 invested in advertising yields an extra $4.20 in sales. Those extra sales are now reflected in soaring budgets for Medicaid and Medicare, runaway health insurance premiums and the continued rise in the number of Americans without health insurance.
No doubt some of that extra spending has improved the health and quality of life of some Americans. But most independent studies find advertising also induces many patients to ask for prescriptions that they really don't need or that offer low health benefits relative to cost. In theory, doctors should be knowledgeable and hard-nosed enough to turn aside these advertising-induced requests. In practice, they aren't, which is why even physician groups complain that drug advertising is now "interfering with the doctor-patient relationship."
The voluntary guidelines announced by the industry yesterday represent a credible first step in solving some of these problems. They require companies to provide doctors with more timely information about a drug before touting it on the evening news. They should result in ads that give consumers more useful information and present a better balance between medical risks and benefits. And they may even reduce the risk that you'd have to interrupt the Super Bowl to explain erectile dysfunction to your inquiring 8-year-old.
What they probably won't do, however, is curb the growth in unnecessary spending. Giving more factual information to irrational consumers and conflicted physicians operating in a imperfectly competitive marketplace only gets you so far.
What's needed, in addition, is some sort of test that would limit or eliminate advertising for drugs such as Nexium, the acid-reflux medicine that offers little or no advantage over cheaper generics. Or Procrit, a fabulously expensive drug suitable only for a limited number of patients who suffer from anemia as a result of cancer treatments. Or Lovenox, a blood thinner originally designed for people recovering from surgery, which is now peddled as a preventative cure for "Economy Class Syndrome" -- blood clots that develop (rarely, it turns out) after sitting for long periods in cramped spaces.
The reason that these drugs are so aggressively advertised is not because they represent a solution to some widespread, unmet medical need. The purpose, in fact, is to artificially create the impression in the minds of consumers that such a need exists. And that ruse would quickly be exposed if drug companies had to put their products through a reasonable and independently administered cost-benefit analysis before marketing them directly to the public.
Steven Pearlstein will host an online discussion at 11 a.m. today at washingtonpost.com. He can be reached at firstname.lastname@example.org.