TY - JOUR AU - David,Guy AU - Markowitz,Sara AU - Richards,Seth TI - The Effects of Pharmaceutical Marketing and Promotion on Adverse Drug Events and Regulation JF - National Bureau of Economic Research Working Paper Series VL - No. 14634 PY - 2009 Y2 - January 2009 UR - http://www.nber.org/papers/w14634 L1 - http://www.nber.org/papers/w14634.pdf N1 - Author contact info: Guy David The Wharton School University of Pennsylvania 202 Colonial Penn Center 3641 Locust Walk Philadelphia, PA 19104-6218 Tel: 215/573-5780 Fax: 215/573-2157 E-Mail: gdavid2@wharton.upenn.edu Sara Markowitz Department of Economics Emory University 1602 Fishburne Dr. Atlanta, GA 30322 Tel: (404) 712-8167 E-Mail: sara.markowitz@emory.edu Seth Richards-Shubik H.John Heinz III College School of Public Policy and Management Carnegie Mellon University 5000 Forbes Avenue Pittsburgh, PA 15213 Tel: 412/268-4693 E-Mail: sethrs@andrew.cmu.edu AB - This paper analyzes the relationship between postmarketing promotional activity and reporting of adverse drug events by modeling the interaction between a welfare maximizing regulator (the FDA) and a profit maximizing firm. In our analysis demand is sensitive to both promotion and regulatory interventions. Promotion-driven market expansions enhance profitability yet may involve the risk that the drug would be prescribed inappropriately, leading to adverse regulatory actions against the firm. The model exposes the effects of the current regulatory system on consumer and producer welfare. Particularly, the emphasis on safety over benefits distorts the market allocation of drugs away from some of the most appropriate users. We then empirically test the relationship between drug promotion and reporting of adverse reactions using an innovative combination of commercial data on pharmaceutical promotion and FDA data on regulatory interventions and adverse drug reactions. We provide some evidence that increased levels of promotion and advertising lead to increased reporting of adverse medical events for certain conditions. ER -