Pharmaceutical Detailing Elasticities: A Meta-Analysis - Innovation and Marketing in the Pharmaceutical Industry - page 538

Table 18.4 Adjusted elasticity and optimal detailing spend

Geographic setting
Europe USA

Panel A: Detailing elasticity means adjusted for biases (grand mean = 0.178)
Stage in product life cycle Late 0.155 0.101
Early 0.403 0.188
Panel B: Optimal detailing spend as percentage of sales for different values of detailing elasticity
Stage in product life cycle Late 11.2 % 7.2 %

Early 29.0 % 13.5 %

Towards this end, we separated the bias-corrected elasticities estimated in an early
stage of the PLC from those estimated in the late stage of the PLC and also separated
elasticities estimated based on data in the USA vs. Europe. Panel A of Table 18.4
lists some key descriptive data of the subsamples. For the 32 elasticities from the late
stage of the PLC from Europe, and the 206 elasticities from the late stage of the PLC
from USA, we fi nd bias-corrected mean elasticities of 0.155 and 0.101 respectively.
Also, for the 74 elasticities from the early stages of the PLC from Europe and 61
from the early stage of the PLC from USA, we fi nd bias-corrected mean elasticities
of 0.403 and 0.188 respectively. Thus, the drop in detailing elasticity as a drug ages is
signifi cantly larger in Europe than in the USA (even though the magnitude of this elas-
ticity remains higher than in the USA over both stages of the drug's patent-protected
life.) It appears that European physicians are more responsive to information pro-
vided by detailing in the drug's introductory phase than US physicians—perhaps due
to more onerous regulations on other forms of new product promotion and the ban on
DTC advertising. From this relatively higher level, the falloff in detailing elasticity
as the product matures appears much sharper in Europe than in the USA as the per-
ceived information value of continued detailing declines in both regions.

18.5 Discussion and Conclusions

18.5.1 Normative Implications of Meta-analysis

In this section, we illustrate and discuss the implications of our meta-analytic fi nd-
ings for optimal detailing to sales ratios on average, by PLC stage and geographic
region, and relative to other elements of the pharma promotion mix. For this pur-
pose, we recall the Dorfman-Steiner (D-S) ( 1954 ) theorem that states the profi t-
maximizing level of detailing effort (assuming other marketing efforts such as
advertising are held constant) for a monopoly is that at which the marginal revenue
product of personal selling spending is equal to the price elasticity. The D-S theo-
rem also establishes the condition that when price and detailing are set optimally,
the absolute value of the demand elasticity is equal to the inverse of the monopoly
markup (see, e.g., Leefl ang et al. 2000 , p. 154). Thus, the D-S theorem implies the
following conditions hold at optimality: