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Do Pharmaceutical Sales Respond to Scientific Evidence?

Do Pharmaceutical Sales Respond to Scientific Evidence? I investigate how different sources of information influence the diffusion of pharmaceutical innovations. In prescription‐drug markets, both advertising and scientific information stemming from clinical trials can affect physicians' prescription choices. Using novel indices of clinical‐research output, I find that both marketing and scientific evidence directly influence the diffusion process in the antiulcer‐drug market, with marketing having a more pronounced influence. I also find evidence that clinical outputs are important drivers of firms' marketing efforts, affecting sales indirectly. Taken together, the direct and indirect effects of science on demand imply strong private incentives for clinical research. I conclude that product‐market competition in the pharmaceutical industry is shaped by both advertising rivalries and scientific rivalries. Moreover, drug advertising may perform an important informative function. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Economics & Management Strategy Wiley

Do Pharmaceutical Sales Respond to Scientific Evidence?

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References (48)

Publisher
Wiley
Copyright
Copyright © 2002 Wiley Subscription Services, Inc., A Wiley Company
ISSN
1058-6407
eISSN
1530-9134
DOI
10.1111/j.1430-9134.2002.00551.x
Publisher site
See Article on Publisher Site

Abstract

I investigate how different sources of information influence the diffusion of pharmaceutical innovations. In prescription‐drug markets, both advertising and scientific information stemming from clinical trials can affect physicians' prescription choices. Using novel indices of clinical‐research output, I find that both marketing and scientific evidence directly influence the diffusion process in the antiulcer‐drug market, with marketing having a more pronounced influence. I also find evidence that clinical outputs are important drivers of firms' marketing efforts, affecting sales indirectly. Taken together, the direct and indirect effects of science on demand imply strong private incentives for clinical research. I conclude that product‐market competition in the pharmaceutical industry is shaped by both advertising rivalries and scientific rivalries. Moreover, drug advertising may perform an important informative function.

Journal

Journal of Economics & Management Strategy – Wiley

Published: Dec 1, 2002

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