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 607

period whereas the persuasive (direct) effect of detailing dominates subsequently.
Total marketing effectiveness declines with the brand's age.
Osinga et al. ( 2010 ) analyze marketing effectiveness for 89 US prescription
drugs from 39 categories and confi rm the fi ndings of Narayanan et al. ( 2005 ).
Osinga et al. ( 2010 ) distinguish between persistent marketing effects, for those
efforts that permanently affect the sales level, and transient marketing effects, for
those efforts that only temporarily affect the sales level, and show that both perma-
nent and transient marketing effects decline in size as the brand matures. In fact,
their results indicate that persistent effects may only be obtained within the fi rst 2
years following the introduction of the brand.
Both Narayanan et al. ( 2005 ) and Osinga et al. ( 2010 ) focus on temporal differ-
ences in physician-oriented marketing expenditures. Kolsarici and Vakratsas ( 2010 )
complement these fi ndings by paying attention to the dynamics in the effectiveness
of pharmaceutical DTCA, where they make the interesting distinction between cat-
egory advertisements, those advertisements that communicate information about
the disease without promoting any brand, and brand advertisements which may not
contain any therapeutic information. Kolsarici and Vakratsas analyze the effects for
a single non-disclosed brand which is fi rst advertised from the 25th month after its
introduction. The results indicate that category advertising effectiveness declines
over time due to the market becoming educated about the disease, whereas brand
advertising effectiveness increases, possibly because it requires an already educated
market.
A very interesting situation arises when a brand faces generic competition after
patent expiration, i.e., competition from drugs that have the same active ingredient
but that are sold without a brand name at lower prices. In many countries including
the United States, pharmacists are allowed or required by law to substitute a generic
equivalent unless the physician indicates that the patient can only receive the brand
name drug (Hellerstein 1998 ). In these countries the brand name drug will lose
ground once generics enter the category. Using US data, Osinga et al. ( 2011 ) fi nd
that sales of generic products derive from the equivalent branded drug, implying
that physicians do not switch from other branded drugs in the category to the
generic. Gonzalez et al. ( 2008 ) analyze UK data and arrive at a similar conclusion:
only a small segment of price-sensitive physicians adopts the generic at the expense
of nonequivalent brand name drugs in the same category. These results imply that
the marketing effectiveness for the brand name drug signifi cantly declines after pat-
ent expiration because positive effects on sales will be largely captured by generics.
However, physicians and patients can show strong habit persistence (Coscelli 2000 ),
and so a positive signifi cant marketing effect before patent expiration will partly
transfer to the period after patent expiration, i.e., even some time before patent expi-
ration the brand name drug partly “supports” generic equivalents with its marketing
expenditures. This implies that marketing effectiveness declines as the moment of
patent expiration approaches (Osinga et al. 2011 ; also see Berndt et al. 2003a ).
It must be noted that in less regulated markets marketing effectiveness may actually
increase after patent expiration as shown by Keller and Pauwels ( 2009 ) using data
from Switzerland.