Modeling the Effects of Promotional Efforts on Aggregate Pharmaceutical Demand: What We Know and Challenges for the Future - Innovation and Marketing in the Pharmaceutical Industry - page 582

taxed because of the allegedly adverse effects on welfare (see, e.g., The Pharma
Letter 1994 ). The distinction between the informative and persuasive functions of
promotion is especially relevant in the pharmaceutical market and highly relevant
for policy makers as it touches upon the ethical question as to whether marketing
efforts in this context can be justifi ed.
Thirdly, it can be argued that demand elasticities of marketing instruments such
as detailing or advertising might be very different in the pharmaceutical market
compared to other markets. This can be explained by the fact that (in comparison to
other markets) physicians rely more on information sources such as (medical)
journal advertising due to the high-risk decisions that they sometimes have to make
with regard to the optimal treatment of a patient when there is a signifi cant level of
diagnostic uncertainty (Joseph and Mantrala 2009 ).
Several papers have appeared in the literature specifi cally reviewing research on
pharmaceutical marketing. The fi rst two were Manchanda and Honka ( 2005 ) and
Manchanda et al. ( 2005 ). More recently, Stremersch and van Dyck ( 2009 ) provided
a broad overview of developments in the research stream on marketing for the life
sciences, while another overview by Shankar et al. ( 2008 ) examined strategic ques-
tions surrounding new product development and market entry. Kremer et al. ( 2008 )
presented the fi rst meta-analysis of pharmaceutical promotional expenditures.
The scope of this chapter is broader than Manchanda and Honka's ( 2005 ) integrative
review of the literature on detailing: we focus on all marketing instruments. Compared
to the other three overview papers, we take a narrower, but deeper perspective. Unlike
Manchanda et al. ( 2005 ) we confi ne our analysis to aggregate demand. We acknowl-
edge the fact that there are many studies on a more disaggregate demand level (nota-
bly on the physician level) that are important and answer very relevant research
questions, but they are beyond the scope of the present chapter, as we explain below.
Stremersch and van Dyck ( 2009 ) look at the wider healthcare market, whereas we
examine only prescription drugs. Rather than Shankar et al. ( 2008 ) examination of
strategic decisions regarding new product development and the earlier stages of the
product life cycle, we provide an overview of pharmaceutical marketing effectiveness
on different levels of aggregate demand. We therefore complement Kremer et al.
( 2008 ), by discussing the empirical studies on pharmaceutical promotion in greater
detail.
We choose to focus on aggregate demand rather than individual level models for
the following reasons. Aggregate models provide a comprehensive coverage of the
relevant promotional variables and their relationship to demand, whereas studies
which look at individual demand normally look at only one brand in a category as
the individual level data on promotion is only available for that brand. This means
that even where individual level prescribing data is available competitive individual
level detailing data is usually absent and therefore subsequent analysis does not
account for inter- and intra-individual competitive effects. Moreover, most pharma-
ceutical fi rms have access to aggregate demand data, but not necessarily to indi-
vidual demand data. Finally, we observe that the body of literature on aggregate
demand studies has grown large enough to provide empirical generalizations.
We organize this chapter according to the framework of Fig. 20.1 . In the next
section we present an overview of papers that investigate the effectiveness of