2022 Erwin Plein Nemmers Prize in Economics
Lecture & ConfERENCE - October 13-14, 2023
"Pharmaceutical Advertising in Dynamic Equilibrium"
Ariel Pakes
Yale University
Pharmaceutical companies promote prescription products by educating physicians and other healthcare professionals and providers about their products. This is commonly referred to as “detailing.” Direct-to-consumer (DTC) advertising of prescription drugs is controversial and quite rare. The United States and New Zealand are the only developed countries that allow it.
This paper analyzes four different drug classes in the United States. Advertising is analyzed as a function of profitability estimates, market conditions, and serially correlated unobservable variables representing both detailing and DTC activities. The implication of the models’ estimates for advertising expenditure are compared to both actual advertising data, and to the equilibria suggested by models of dynamic oligopolies with persistent sources of asymmetric information.
A number of counterfactual policies on direct-to-consumer advertising are then analyzed, including a ban and imposing a tax on sales with the associated revenues used for advertising the class of drugs without specifying brand names. In all scenarios, the amount of detailing activities are allowed to adjust to the new environment. The implications of the counterfactual policies on pharmaceutical company profits are of particular interest, as they are a major source of funds for research on new therapies.
Joint work with Pierre Dubois (Toulouse School of Economics)
Conference
| Friday October 13, 2023 | |
|---|---|
| Time | Title |
| 9:05 |
Richard Blundell (University College London): Durables and Lemons: Private Information and the Market for Cars (joint with Ran Gu - University of Essex, Soren Leth-Petersen - University of Copenhagen, Hamish Low - University of Oxford and Costas Meghir - Yale University) |
| 9:50 |
Myrto Kalouptsidi (Harvard University): Investment in Infrastructure and Trade: The Case of Ports (joint with Giulia Brancaccio - New York University and Theodore Papageorgiou -Boston College) |
| 11:00 |
Rebecca Diamond (Stanford University): A Contractarian CPI (joint with Ariel Pakes - Harvard University) |
| 11:45 |
Gastón Illanes (Northwestern University): Information Frictions in Mortgage Refinancing (joint with Vivek Bhattacharya - Northwestern University, Gabriela Covarrubias - Financial Markets Commission of Chile, José Ignacio Cuesta - Stanford University, Ana María Montoya - Universidad de Chile and Raimundo Undurraga - Universidad de Chile) |
| 2:00 |
Matthew Gentzkow (Stanford University): Causal Interpretation of Structural IV Estimands (joint with Isaiah Andrews - Massachusetts Institute of Technology, Nano Barahona - University of California, Berkeley, Ashesh Rambachan - Massachusetts Institute of Technology and Jesse Shapiro - Harvard University) |
| 2:45 |
Kate Ho (Princeton University): Contracting Over Rebates: Formulary Design and Pharmaceutical Spending (joint with Robin Lee - Harvard University) |
| 4:00 |
Nemmers Prize lecture Ariel Pakes (Harvard University): Pharmaceutical Advertising in Dynamic Equilibrium (joint with Pierre Dubois - Toulouse School of Economics) Introduced by Steven Berry (Yale University) |
| Saturday October 14, 2023 | |
|---|---|
| Time | Title |
| 9:00 |
Parag Pathak (Massachusetts Institute of Technology): Who Gets What May Not Matter: Understanding School Match Effects (joint with Atila Abdulkadiroglu - Duke University and Christopher Walters - University of California, Berkeley). |
| 9:45 |
Costas Meghir (Yale University): Labor Market Matching, Wages, and Amenities (joint with Thibaut Lamadon - University of Chicago, Jeremy Lise - University of Minnesota and Jean-Marc Robin - Sciences Po, Paris) |
| 11:00 |
Rachel Griffith (Institute for Fiscal Studies): The Effects of Sin Taxes and Advertising Restrictions in Dynamic Equilibrium (joint with Rossi Abi-Rafeh - Toulouse School of Economics, Pierre Dubois - Toulouse School of Economics and Martin O'Connell - University of Wisconsin, Madison) |
| 11:45 |
Liran Einav (Stanford University): Selling Subscriptions (joint with Ben Klopack - Texas A&M University and Neale Mahoney - Stanford University) |