E C O N O M I C A N D B U D G E T I S S U E B R I E F
`A series of issue summaries from
`the Congressional Budget Office
`DECEMBER 2, 2009
`
`CBO
`
`Promotional Spending for Prescription Drugs
`
`Pharmaceutical companies’ efforts to promote prescrip-
`tion drugs have attracted the attention of policymakers
`because such activities may affect the rate at which differ-
`ent drugs are prescribed and consumed, the total amount
`spent on health care, and, ultimately, health outcomes.
`Those promotional activities—usually undertaken on
`behalf of brand-name, rather than generic, drugs—may
`influence consumers and health care professionals through
`a variety of channels. For example, advertisements for pre-
`scription drugs that are aimed at consumers may prompt
`individuals to seek medical treatment they might other-
`wise have delayed. Such advertisements may also influence
`individuals to request a specific drug that is higher or
`lower in price or that is more or less effective than one
`they had previously used. Promotional efforts aimed at
`physicians may help them keep abreast of the latest drug
`therapies and improve their ability to treat patients. Those
`efforts may also lead doctors to prescribe brand-name
`medications that are more expensive than alternatives.
`
`The way that pharmaceutical manufacturers promote
`prescription drugs has changed significantly in the past
`decade. Until the late 1990s, pharmaceutical manu-
`facturers confined their marketing efforts largely to
`physicians and other health care providers. In the late
`1990s, however, drugmakers began marketing directly to
`consumers—a practice known as direct-to-consumer
`(DTC) advertising. The Food and Drug Administration
`(FDA) issued draft regulatory guidance in 1997 (which
`was finalized two years later) that clarified the agency’s
`expectations about the way information in DTC adver-
`tisements should be presented in the broadcast media.
`Since then, the manufacturers of many prescription drugs
`have increased their purchases of air time on television
`and of advertising space in newspapers and magazines in
`an effort to make consumers aware of their products and
`to encourage them to visit their doctors to request a pre-
`scription. In 2008, spending on DTC advertising totaled
`$4.7 billion, nearly one-fourth of pharmaceutical manu-
`facturers’ expenditures for all promotional activities.
`Those developments may be having an impact on the
`functioning, cost, and effectiveness of the nation’s health
`care system.
`
`Marketing to Physicians and
`Consumers
`Drug companies use advertising and promotions in much
`the same way that producers of other goods do: to inform
`consumers about an advertised product’s existence and
`uses and, if alternatives are available, to persuade consum-
`ers that the advertised product is better than competing
`products. If successful, advertising can spur demand for
`the good and therefore boost its producer’s sales and prof-
`its. Pharmaceutical manufacturers incur most of the costs
`of producing a drug during the research and development
`phases and during the process of gaining the FDA’s
`approval to put the drug on the market. Any additional
`sales that advertising generates can be highly profitable
`because the prices that manufacturers receive for their
`products generally exceed the cost to manufacture and
`distribute those additional units.
`
`Drug companies face a different task in making sales than
`do the producers of most consumer goods, however,
`because several separate actors must be persuaded that a
`prescription drug merits purchasing. First, a consumer
`must perceive that visiting a doctor to seek diagnosis and
`treatment offers a benefit. Then, following an examina-
`tion to diagnose the patient’s condition, the doctor must
`determine an appropriate treatment and, when warranted,
`write a prescription. Finally, the consumer must fill that
`prescription for the manufacturer to make a sale. (In many
`cases, the individual’s insurer can also influence prescrip-
`tion drug purchases by determining whether or not to
`include a drug on the formulary of drugs it covers and by
`deciding how large a copayment to assign to it.1)
`
`Recognizing that both consumers and physicians take part
`in the decision to purchase a drug, pharmaceutical manu-
`facturers adopt different marketing strategies for reaching
`
`1. Pharmaceutical manufacturers promote their products to health
`insurers and pharmacy benefit managers (PBMs) to encourage
`them to include their products on plans’ formularies and to
`assign those products a low copayment. See, for example,
`SDI, “SDI Reports: Takeda Touts New Drugs to Managed
`Care” (press release, Plymouth Meeting, Pa., August 31, 2009).
`
`Eye Therapies Exhibit 2042, 1 of 8
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`E C O N O M I C A N D B U D G E T I S S U E B R I E F
`2 CONGRESSIONAL BUDGET OFFICE
`
`each group. Direct-to-consumer advertising appears in
`magazines and newspapers, on television and radio, on
`outdoor billboards, and increasingly online. Drug com-
`panies also promote their products to physicians in a vari-
`ety of ways. They send sales representatives to meet with
`physicians, nurse practitioners, and physicians’ assistants
`in a practice called detailing. During those sales calls, the
`representatives discuss drugs manufactured by their com-
`pany that are relevant to the physician’s specialties, and
`they may provide product samples and reprints of aca-
`demic literature that discuss their company’s products.
`In addition to detailing, pharmaceutical manufacturers
`purchase advertisements for their drugs in medical jour-
`nals. They also sponsor professional meetings and events,
`both in person and online, including some that offer phy-
`sicians credit for continuing medical education.2
`
`Overall Marketing Trends
`Pharmaceutical manufacturers spent at least $20.5 billion
`on promotional activities in 2008.3 Detailing to physi-
`cians, nurse practitioners, and physicians’ assistants cost
`$12 billion, accounting for more than half of that promo-
`tional spending (see Figure 1). Drug companies spent
`another $3.4 billion sponsoring professional meetings and
`events and about $0.4 billion placing advertisements in
`professional journals. Pharmaceutical manufacturers spent
`the rest of their promotional budgets, $4.7 billion in
`2008, on direct-to-consumer advertising. To place those
`figures in context, the Pharmaceutical Research and Man-
`ufacturers of America (PhRMA) estimated that, among its
`members, domestic sales of pharmaceuticals and medi-
`cines totaled $189 billion in 2008 and domestic spending
`on research and development totaled $38 billion.4 In
`2008, promotional expenditures equaled 10.8 percent of
`
`2.
`
`In several recent cases, the appropriateness of certain promotional
`activities undertaken by pharmaceutical companies has been
`called into question and some companies have come under
`scrutiny for promoting products for uses not approved by the
`FDA. See, for example, Department of Justice, “Justice Depart-
`ment Announces Largest Health Care Fraud Settlement in Its
`History” (press release, Washington, D.C., September 2, 2009).
`
`3. That amount (obtained from SDI Promotional Audits) does not
`include the expense of the free samples that pharmaceutical man-
`ufacturers distribute to physicians, which one study estimated to
`have a retail value of $18.4 billion in 2005. See Julie M.Donohue,
`Marisa Cevasco, and Meredith B. Rosenthal, “A Decade of
`Direct-to-Consumer Advertising of Prescription Drugs,” New
`England Journal of Medicine, vol. 357, no. 7 (August 16, 2007),
`pp. 673–681. It also excludes other activities that may have
`promotional value, such as efforts targeting PBMs and research
`grants that encourage studies and publications about products.
`
`the U.S. sales reported by PhRMA, in line with most years
`since the early 1990s, during which time that share has
`remained between 10 percent and 12 percent.
`
`The growth of pharmaceutical manufacturers’ overall
`promotional spending has slowed from a double-digit
`annual pace in 2003 and 2004 to a rate that is close to
`zero. That slowdown is probably related, at least in part,
`to the decline in the number of new drugs that have
`received FDA approval since 2000. In the second half of
`the 1990s, the FDA approved an unusually large number
`of drugs, some of which were the first on the market to
`treat certain conditions and a number of which treat wide-
`spread conditions. Not only are fewer new drugs being
`approved of late, but more drugs also face competition
`from generic versions. Those factors may be particularly
`important in explaining declining spending on DTC
`advertising, which peaked at $5.2 billion in 2006, because
`pharmaceutical manufacturers tend to use more DTC
`advertising for drugs that have especially broad potential
`markets, drugs with few or no substitutes, or drugs with
`some combination of those characteristics.
`
`To study the potential effects of promotional spending for
`prescription drugs, the Congressional Budget Office
`(CBO) analyzed data from SDI, a company that collects
`and sells information about the pharmaceutical industry.
`CBO examined data on promotional activities from
`1989 to 2008 for drugs in the classes of medications that
`include most outpatient drugs that were produced in
`tablets or capsules and were among the top-selling drugs
`in 2003.5
`
`Direct-to-Consumer Marketing
`Until the late 1990s, the use of DTC advertising was
`limited, consisting mainly of print advertisements that
`presented the required disclosure of the risks associated
`with the advertised product in a manner similar to the
`
`4. Pharmaceutical Research and Manufacturers of America, Pharma-
`ceutical Industry Profile 2009 (Washington, D.C.: PhRMA, April
`2009).
`
`5. CBO’s data set was constructed using information from SDI’s
`Promotional Audit Suite. The data set includes 111 drug classes as
`defined by the IMS Uniform System of Classification and covers a
`majority of the top 200 (in dollar sales) outpatient brand-name
`drugs sold in solid form (for oral administration) in 2003 and
`their closely related therapeutic substitutes. Other dosage forms
`are not included in the data set. The starting date for each type of
`promotional spending varies, as SDI has expanded its data collec-
`tion to include other types of promotional spending.
`
`Eye Therapies Exhibit 2042, 2 of 8
`Slayback v. Eye Therapies - IPR2022-00142
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`Eye Therapies Exhibit 2042, 3 of 8
`Slayback v. Eye Therapies - IPR2022-00142
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`E C O N O M I C A N D B U D G E T I S S U E B R I E F
`4 CONGRESSIONAL BUDGET OFFICE
`
`Figure 2.
`Promotional Activity for Prescription
`Drugs in CBO’s Data Set, 1989 to 2008
`(Number of drugs)
`
`800
`
`700
`
`600
`
`500
`
`400
`
`300
`
`200
`
`100
`
`0
`
`Detailing to Health Care Professionals
`
`Meetings and
`Events
`
`Journal
`Advertisements
`
`DTC Advertising
`
`1989
`
`1992
`
`1995
`
`1998
`
`2001
`
`2004
`
`2007
`
`Source: Congressional Budget Office based on data from SDI
`Promotional Audits.
`Notes: The starting date for each type of marketing reflects the date
`at which SDI began including the series in its collection of
`data.
`Detailing refers to the practice in which pharmaceutical
`representatives make sales calls to physicians and other
`health care professionals to discuss the uses of a particular
`prescription drug and its benefits for patients.
`DTC = direct to consumer.
`
`consumers. Others are heavily promoted to consumers
`and, in varying degrees, to physicians as well.
`
`That different marketing strategies are used for different
`drugs is not surprising because there is no consensus
`among experts about the effects of such strategies on the
`sales or prices of prescription drugs. For DTC advertising,
`studies that have analyzed the effects for a few specific
`drugs or classes of drugs have shown mixed results; the
`writing and filling of prescriptions increased for some
`advertised drugs but not for others.10 For detailing, some
`analyses have found positive effects on the number of
`
`10. See W. David Bradford and others, “How Direct-to-Consumer
`Television Advertising for Osteoarthritis Drugs Affects Physicians’
`Prescribing Behavior,” Health Affairs, vol. 25, no. 5 (September/
`October 2006); and Michael R. Law, Sumit R. Majumdar, and
`Stephen B. Soumerai, “Effect of Illicit Direct to Consumer
`Advertising on Use of Etanercept, Mometasone, and Tegaserod
`in Canada: Controlled Longitudinal Study,” BMJ, vol. 337
`(September 6, 2008).
`
`prescriptions written for the targeted drug, but others sug-
`gest that detailing’s effects are unclear.11
`
`Of the more than 2,000 drugs included in CBO’s data set,
`700 to 800 have some promotional spending reported in
`any given year. For nearly all of those drugs, some spend-
`ing on detailing was recorded. However, manufacturers
`purchased DTC advertisements for fewer than 100 of
`those drugs in each of the years since 1995, the year the
`data set begins to encompass DTC advertising, making
`DTC advertising the least frequently used form of drug
`promotion (see Figure 2). Journal ads and professional
`meetings are used to promote fewer drugs than detailing
`but more drugs than DTC advertising.
`
`Though pharmaceutical manufacturers use DTC advertis-
`ing for only a small set of drugs, they spend heavily on
`DTC advertising for those drugs. For those drugs in the
`data set that were promoted using DTC advertising, aver-
`age expenditures for such advertising peaked at $41.8 mil-
`lion in 2006. The average detailing expenditure for drugs
`promoted through detailing that year was $10.4 million.
`Drug companies spend far less per drug to promote drugs
`through advertisements in medical journals or by sponsor-
`ing professional meetings and events. In 2008, for the
`drugs in CBO’s data set with such expenditures, they
`spent about $1 million per drug on journal advertisements
`and $3.6 million per drug on meetings and events.
`
`Drugs promoted using DTC advertising are, on average,
`newer to the market than drugs promoted through detail-
`ing, but the difference in the average expenditures for
`DTC advertising and detailing seems largely a result of the
`distribution of the two types of spending. Drug compa-
`nies spend similarly large annual amounts on detailing
`and DTC advertising for a few drugs (in some cases, more
`than $200 million a year on each); but they spend small
`amounts on detailing for many more drugs. Among the
`
`11. Some studies suggest that detailing may have positive effects on
`the number of prescriptions written for a given drug. See Natalie
`Mizik and Robert Jacobson, “Are Physicians ‘Easy Marks’? Quan-
`tifying the Effects of Detailing and Sampling on New Prescrip-
`tions,” Management Science, vol. 50, no. 12 (December 2004),
`pp. 1704–1715; Puneet Manchanda and Pradeep K. Chintagunta,
`“Responsiveness of Physician Prescription Behavior to Salesforce
`Effort: An Individual Level Analysis,” Marketing Letters, vol. 15,
`no. 2-3 (2004), pp. 129–145; and Michael A. Steinman and oth-
`ers, “Characteristics and Impact of Drug Detailing for Gabapen-
`tin,” PLoS Medicine, vol. 4, no. 4 (April 2007). Other studies find
`no clear effects from detailing. See Meredith B. Rosenthal and
`others, Demand Effects of Recent Changes in Prescription Drug
`Promotion (Menlo Park, Calif.: Kaiser Family Foundation,
`June 2003).
`
`Eye Therapies Exhibit 2042, 4 of 8
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`E C O N O M I C A N D B U D G E T I S S U E B R I E F
`PROMOTIONAL SPENDING FOR PRESCRIPTION DRUGS
`
`5
`
`drugs in CBO’s data set, the 10 with the highest DTC
`expenditures in 2008 accounted for 30 percent of expen-
`ditures for DTC advertising industrywide. That concen-
`tration is nearly twice what was observed for detailing,
`where the 10 drugs with the highest expenditures totaled
`16 percent of the industry’s detailing expenditures. That
`difference may be explained, in part, by the fact that
`detailing visits can include discussions of more than one
`product while each DTC advertisement typically focuses
`on only one drug.
`
`According to CBO’s analysis, when pharmaceutical manu-
`facturers promoted drugs to consumers, they also spent
`more, on average, promoting those drugs to physicians.
`For those drugs in CBO’s data set with reported spending
`on DTC advertising, their manufacturers spent an average
`of $40.5 million per drug in 2008 on promotional activi-
`ties directed to physicians—14 times the average amount
`they spent when promoting drugs exclusively to physi-
`cians. That difference may indicate that manufacturers use
`promotional activities directed to physicians and DTC
`advertising to reinforce each other. Although DTC adver-
`tising might spur a consumer to visit his or her doctor, the
`physician must prescribe the drug; therefore, manufactur-
`ers would seek to ensure that physicians were also
`informed about the drugs they advertised to consumers.
`Alternatively, pharmaceutical manufacturers could have
`spent extensively to promote to physicians those drugs
`marketed with DTC advertising even if advertising to
`consumers was not permitted, perhaps because of the size
`of the potential market for those drugs.
`
`DTC advertising is almost never used in isolation. Detail-
`ing is far more likely to be the exclusive promotional out-
`let for a drug. Even if manufacturers find that it is not use-
`ful to promote certain drugs directly to consumers—for
`example, because the condition they treat is relatively
`rare—drug companies would still want to ensure that doc-
`tors know about their product and any advantages it has
`over its competitors.
`
`Market Characteristics That Influence
`Promotional Strategies
`A pharmaceutical manufacturer’s decision to use DTC
`advertising or other types of marketing tools depends on
`the potential size of the market for a given prescription
`drug, the current competition in that market, and the
`amount of time that has elapsed since the drug received
`FDA approval. Manufacturers may also choose to alter
`
`their marketing mix over time, especially as new competi-
`tors enter the market, the manufacturer faces the end of a
`drug’s patent protection and the entry of generic versions
`on the market, or the manufacturer introduces new dos-
`age forms, extended-release versions of a drug, or new
`combination drugs. The balance of this brief focuses on
`those issues for the two largest components of pharmaceu-
`tical manufacturers’ promotional expenditures—detailing
`and DTC advertising.
`
`Market Size
`Treatments for common conditions that affect a large por-
`tion of the population—such as high cholesterol, insom-
`nia, or reduced bone density—are a primary focus of
`direct-to-consumer advertising. Many top-selling drugs
`have some of the highest DTC advertising expenditures.
`Drugs that have large potential markets are likely candi-
`dates for direct-to-consumer advertising because a sub-
`stantial share of the intended audience may benefit from
`the treatment and may seek out and receive a prescription
`for the advertised drug. That effect may be even more
`important if that large potential market includes many
`individuals whose condition is undiagnosed or untreated.
`Drugs that treat rare illnesses are less likely to be the sub-
`ject of DTC advertising because manufacturers would
`have to spend considerable amounts to reach the few indi-
`viduals suffering from such illnesses.12
`
`If a drug has both a large potential market and is approved
`to treat chronic or long-term conditions, its manufacturer
`may be even more likely to embrace DTC advertising.13
`For those drugs, individuals who receive a prescription
`may continue with the advertised drug for a long time,
`producing a steady stream of sales for the pharmaceutical
`company if it succeeds in building brand loyalty. For
`patients already taking an advertised drug, DTC adver-
`tisements may serve as a reminder to refill the prescrip-
`tion. DTC advertising is less common for drugs (such as
`antibiotics) that address acute conditions (such as an
`infection)—perhaps because individuals are more likely to
`seek care for an acute condition without being prompted
`
`12. Internet advertising may offer a more targeted approach for man-
`ufacturers whose products treat rare conditions. To date, however,
`there are no apparent differences between drugs advertised online
`and those advertised in more traditional media.
`
`13. See General Accounting Office, Prescription Drugs: FDA Oversight
`of Direct-to-Consumer Advertising Has Limitations, GAO-03-177
`(October 2002), p. 13.
`
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`E C O N O M I C A N D B U D G E T I S S U E B R I E F
`6 CONGRESSIONAL BUDGET OFFICE
`
`Figure 3.
`Spending for DTC Advertising and Detailing to Health Care Professionals Among
`the 10 Drug Classes in CBO’s Data Set with the Highest DTC Spending, 2008
`(Millions of dollars)
`
`Erectile Dysfunction
`
`Bone Resorption Inhibitors
`
`Nonbarbiturate Sleep Aids
`
`Autoimmune Treatments
`
`Statins
`
`SNRI Antidepressants
`
`Antiplatelet Agents
`
`Seizure Disorders
`
`Atypical Antipsychotics
`
`Central Nervous System Stimulants
`
`0
`
`50
`
`100
`
`150
`
`200
`
`250
`
`300
`
`350
`
`400
`
`450
`
`DTC Advertising
`
`Detailing to Health Care Professionals
`
`Source: Congressional Budget Office based on data from SDI Promotional Audits.
`Notes: Detailing refers to the practice in which pharmaceutical representatives make sales calls to physicians and other health care profes-
`sionals to discuss the uses of a particular prescription drug and its benefits for patients.
`DTC = direct to consumer; SNRI = serotonin-norepinephrine reuptake inhibitors.
`
`by an advertisement or because such drugs are typically
`prescribed only for a short time.14
`
`Detailing expenditures are reported for nearly all the drugs
`in CBO’s data set, regardless of market size. The more
`extensive use of detailing and other promotions to physi-
`cians is not surprising because physicians must be pre-
`pared to treat patients with both long- and short-term
`illnesses and both rare and common complaints. None-
`theless, there is substantial overlap among the types of
`drugs that have sizable expenditures for both direct-to-
`consumer advertising and detailing (see Figure 3). Among
`the 10 drug classes in CBO’s data set with the highest
`spending for DTC advertising in 2008, 5 classes are
`also among the 10 classes with the highest detailing
`expenditures.
`
`14. Of the 260 antibiotics included in CBO’s data set, DTC advertis-
`ing is reported for only 13. Average annual DTC advertising
`expenditures for those antibiotics were smaller than for other
`drugs in the data set—$2.9 million compared with $32 million.
`
`Competing Drugs
`Direct-to-consumer advertising and detailing differ in the
`depth of the information they provide. DTC advertise-
`ments are more limited, generally informing patients only
`that a drug exists and naming or describing the conditions
`it is approved to treat. Detailing, like other promotions to
`physicians, may go beyond that to help doctors differen-
`tiate one drug from another. That difference helps explain
`the distinct patterns in DTC and detailing expenditures
`for drugs facing a different number of competitors within
`the same class of drugs.
`
`Pharmaceutical manufacturers tend to spend more, on
`average, on DTC advertising for drugs that have few or
`no direct competitors (meaning there are few other drugs
`that treat the same condition using the same mechanism)
`than on products with numerous alternatives. Excluding
`some classes of drugs with the highest-selling and most-
`advertised drugs—where a drug’s potential market size
`might overwhelm other factors in setting a marketing
`plan—the data analyzed by CBO show that average
`spending per drug on DTC advertising generally declines
`as the number of competitors in the same class increases
`
`Eye Therapies Exhibit 2042, 6 of 8
`Slayback v. Eye Therapies - IPR2022-00142
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`E C O N O M I C A N D B U D G E T I S S U E B R I E F
`PROMOTIONAL SPENDING FOR PRESCRIPTION DRUGS
`
`7
`
`Figure 4.
`Average Spending per Drug on DTC
`Advertising, by the Number of
`Competitors in a Given Class of Drugs,
`1995 to 2008
`(Millions of dollars)
`25
`
`20
`
`15
`
`10
`
`5
`
`0
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`Source: Congressional Budget Office based on data from SDI
`Promotional Audits.
`Notes: Drug classes are specified at the 5-digit level of the IMS
`Uniform System of Classification. To account for cases in
`which a drug’s potential market size might overwhelm other
`factors, four classes in CBO’s data set were excluded from
`this figure: nonbarbiturate sleep aids, statins, erectile
`dysfunction drugs, and proton-pump inhibitors. Drugs in
`those classes account for 35 percent of the expenditures
`for DTC advertising reported in CBO’s data set.
`DTC = direct to consumer.
`
`(see Figure 4). When a class includes more drugs, pharma-
`ceutical manufacturers tend to spend less, on average, on
`DTC advertising because the benefits of that advertising
`(higher sales) may be diffused among the other drugs in
`the class.
`
`Several factors may contribute to that outcome. Like any
`monopolist, a drug manufacturer whose product has no
`competition can turn a profit on an advertising-induced
`increase in demand because a monopolist can set the
`drug’s price above what it costs to satisfy that increased
`demand. In addition, companies that produce drugs with
`few or no competitors run little risk that advertising for
`those drugs will spur demand for competing products.
`That circumstance is particularly important for DTC
`advertising because, at most, an advertisement might
`
`motivate an individual to contact his or her doctor and
`ask to be prescribed the advertised drug. The physician
`would have to assess the patient’s condition and then
`judge the advertised and requested drug to be the most
`effective course of treatment. The greater the number of
`other medications available, the greater the possibility that
`the prescriber will choose a treatment other than the drug
`the patient saw advertised. Some research suggests that
`DTC advertising encourages individuals to visit their doc-
`tors and increases sales for the advertised drug’s class—but
`not necessarily for the advertised drug itself.15
`
`Detailing expenditures do not exhibit the same relation-
`ship between average spending and the number of com-
`petitors in a drug class. Even when there are several alter-
`native treatments available, drug manufacturers have an
`incentive to spend on detailing to help doctors differenti-
`ate their drugs from those of their competitors. In a visit
`to a physician, a drug company’s sales representative can
`remind the doctor of the company’s products, provide
`samples that the physician can distribute to patients, and
`compare the benefits and risks of the company’s drugs
`with those of competing treatments. Because the physi-
`cian decides which drug best meets a patient’s needs, any
`increase in sales that results from detailing expenditures is
`likely to accrue directly to the drug that is the focus of the
`detailing rather than to any potential substitutes.
`
`Years Since FDA Approval
`Although there are substantial differences among drugs
`in the amount spent in a given year on advertising and
`promotions to physicians, there are fewer differences in
`those patterns over a drug’s life cycle. Pharmaceutical
`manufacturers promote more of their products to both
`physicians and consumers in the first few years after a
`drug has received approval from the FDA.16 Manufact-
`urers tend to reduce spending for both DTC advertising
`and detailing the longer the product is on the market
`(see Figure 5). The longer a product remains on the
`
`15. See Toshiaki Iizuka and Ginger Zhe Jin, “The Effect of Prescrip-
`tion Drug Advertising on Doctor Visits,” Journal of Economics
`and Management Strategy, vol. 14, no. 3 (2005); and Rosenthal
`and others, Demand Effects of Recent Changes in Prescription Drug
`Promotion.
`
`16. Drugs approved before the FDA issued its 1997 draft guidance
`document on advertising may not have any reported spending for
`DTC advertising for several years into their life cycle.
`
`Eye Therapies Exhibit 2042, 7 of 8
`Slayback v. Eye Therapies - IPR2022-00142
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`E C O N O M I C A N D B U D G E T I S S U E B R I E F
`8 CONGRESSIONAL BUDGET OFFICE
`
`Figure 5.
`Time Path of DTC Spending for Prescription Drugs
`(Millions of dollars)
`
`(Percentage of drugs)
`
`10
`
`02468
`
`Average Expenditures (Left scale)
`Percentage of Drugs with
`DTC Spending (Right scale)
`
`50
`
`40
`
`30
`
`20
`
`10
`
`0
`
`0
`
`5
`
`Years Since FDA Approval
`
`10
`
`15
`
`Source: Congressional Budget Office based on data from SDI Promotional Audits and Food and Drug Administration, Electronic Orange Book
`(accessed June 2009), available at www.accessdata.fda.gov/scripts/cder/ob/default.cfm.
`Note: DTC = direct to consumer; FDA =Food and Drug Administration.
`
`market, the more likely it is to face competition both from
`other brand-name drugs and from generic versions.17
`
`For advertised drugs, the average spending on DTC adver-
`tising per drug stays fairly constant for several years, while
`average spending for detailing falls off more quickly, drop-
`ping 18 percent from year 1 to year 2.18 Drug companies
`typically persist for several years in their advertising cam-
`paigns for drugs with large DTC advertising expenditures.
`In many cases, that occurs because pharmaceutical manu-
`
`17. With brand-name competitors, drug manufacturers may still have
`strong incentives to promote their drugs to differentiate them
`from rivals. A generic version does not offer the same incentive
`because, in order to win FDA approval, a generic drug must have
`demonstrated bioequivalence to its brand-name counterpart. In
`addition, most states permit or mandate that pharmacists substi-
`tute generics when they are available and when the physician has
`not specified that the brand-name drug is necessary.
`
`18. The jump in participation and average expenditures from year 0
`(the year in which FDA approval was received) to year 1 (the
`following year) is probably due to the fact that, for many drugs,
`year 0 does not constitute a complete calendar year.
`
`facturers use DTC advertising to introduce drugs with
`large potential markets, and it may take time to penetrate
`those markets. Drug companies may also continue high
`DTC spending to attract customers before a competitor
`enters the market.
`
`Pharmaceutical manufacturers keep a detailing presence
`for many drugs for a number of years, but average spend-
`ing declines more quickly. That observation suggests that
`drug companies may spend substantially to introduce
`physicians to a new drug and then reduce the intensity of
`their physician-directed efforts thereafter.
`
`This brief was prepared by Sheila Campbell of CBO’s
`Microeconomic Studies Division. It and other CBO
`publications are available at the agency’s Web site
`(www.cbo.gov).
`
`Douglas W. Elmendorf
`Director
`
`Eye Therapies Exhibit 2042, 8 of 8
`Slayback v. Eye Therapies - IPR2022-00142
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`