Dr. Jennifer Troyer, associate dean for research and graduate programs, partnered with Dr. Denis G. Arnold, professor of management and surtman distinguished professor of business ethics at UNC Charlotte, to write a 23-paged paper on pharmaceutical marketing and innovation.
Troyer and Arnold conducted research that found that pharmaceutical companies are willing to spend more money on marketing drugs that are similar to what is already on the market, rather than spending money on developing and producing innovative drugs that can really help people.
The former also requires considerably less time and effort.
“Many scholars have argued that large pharmaceutical firms have emphasized the marketing of expensive, new drugs that are no better than existing generic or over the counter drugs as a business strategy rather than developing truly innovative new drugs,” said Arnold. “Our study is the first to investigate this issue empirically.”
While this business approach might be financially safer for pharmaceutical companies, it is disadvantageous for the general public.
There are people with many diseases and a slew of health problems who are in dire need of new drugs that will help their ailments.
In their paper, titled “Does Increased Spending on Pharmaceutical Marketing Inhibit Pioneering Innovation?”, Troyer and Arnold point out that the problem stems from the U.S. patent laws.
An excerpt taken from their paper states, “If the benefits of new drugs with patent protection are negligible in comparison to alternative therapies (e.g., over-the-counter medication, generic prescription medications, or lifestyle changes), then patent protection and the high cost of these drugs, is difficult to justify.”
Instead, pharmaceutical companies spend billions of dollars marketing the drugs that they already have patent rights over.
Troyer and Arnold note in their research paper, “The pharmaceutical industry has seen an overall rise in expenditures on marketing coincidental with the FDA’s change in policy that permitted direct-to-consumer advertising (DTCA) on television.”
They add that not all of the marketing methods used by pharmaceutical companies have been legal.
Throughout the course of Troyer and Arnold’s study, the pharmaceutical industry has paid billions of dollars in penalties for using illegal marketing strategies.
Arnold and Troyer list off-label marketing, which is when companies promote uses and benefits of a drug that were not previously approved by the Food and Drug Administration (FDA); as well as physician kick-backs, which is when doctors are paid by pharmaceutical companies to prescribe drugs, as just a few illegal marketing strategies that are being employed.
“The persistent utilization of illegal marketing in the pharmaceutical industry, despite the significant financial and reputational costs, is one indication of the important role of marketing in enhancing revenues,” taken from Troy and Arnold’s research paper.
Troyer and Arnold list five recommendations for policy makers to remedy the issues that are hindering innovations within pharmaceutical companies.
One such recommendation is to modify the Internal Revenue Code to make all marketing expenditures non-tax refundable.
At the moment, most marketing expenditures are.
As for what the general public should be aware of, Arnold says that, “We should all be mindful that many studies have demonstrated that prescription drug advertising is misleading and typically downplays the risk of the drugs while overstating the benefits.”
“Does Increased Spending on Pharmaceutical Marketing Inhibit Pioneering Innovation?” was published in the Journal of Health Politics, Policy and Law Jan. 5.