Skip to main content

Modeling the Effects of Promotional Efforts on Aggregate Pharmaceutical Demand: What We Know and Challenges for the Future

  • Chapter
  • First Online:
Innovation and Marketing in the Pharmaceutical Industry

Part of the book series: International Series in Quantitative Marketing ((ISQM,volume 20))

Abstract

Pharmaceutical marketing is becoming an important area of research in its own right, as evidenced by the steady increase in relevant papers published in the major marketing journals in recent years. These papers utilize different modeling techniques and types of data. In this chapter we focus on empirical research that studies the effect of marketing on aggregate pharmaceutical demand and we start with an overview of the most important published work. We then focus on two questions that are particularly relevant for the pharmaceutical market: (1) How do marketing variables affect the diffusion pattern of newly introduced pharmaceutical innovations? (2) How do dynamics influence pharmaceutical marketing effectiveness? We conclude with a look at some issues for the future along with an associated research agenda.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Chapter
USD 29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD 149.00
Price excludes VAT (USA)
  • Available as EPUB and PDF
  • Read on any device
  • Instant download
  • Own it forever
Softcover Book
USD 199.99
Price excludes VAT (USA)
  • Compact, lightweight edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info
Hardcover Book
USD 279.99
Price excludes VAT (USA)
  • Durable hardcover edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

References

  • Achilladelis B, Antonakis N (2001) The dynamics of technological innovation: the case of the pharmaceutical industry. Res Policy 30(4):535–588

    Article  Google Scholar 

  • Albers S, Mantrala MK, Sridhar S (2010) Personal selling elasticities: a meta-analysis. J Mark Res 47(5):840–853

    Article  Google Scholar 

  • Angell M (2005) The truth about the drug companies: how they deceive us and what to do about it. Random House Trade Paperbacks, New York

    Google Scholar 

  • Avorn J, Solomon DH (2000) Cultural and economic factors that (mis)shape antibiotic use: the nonpharmacologic basis of therapeutics. Ann Intern Med 133:128–135

    Article  Google Scholar 

  • Azoulay P (2002) Do pharmaceutical sales respond to scientific evidence? J Econ Manag Strat 11(4):551–594

    Article  Google Scholar 

  • Babor E, Ballinger BR, Fenton GW (1996) Influences on psychotropic drug prescription in a psychiatric service. Psychiatr Bull 20:406–409

    Article  Google Scholar 

  • Bass FM (1969) A new product growth for model consumer durables. Manag Sci 15(5):215–227

    Article  Google Scholar 

  • Bass FM, Krishnan TV, Jain DC (1994) Why the Bass model fits without decision variables. Mark Sci 13(3):203–223

    Article  Google Scholar 

  • Bass FM, Jain DC, Krishnan TV (2000) Modeling the marketing-mix influence in new-product diffusion. In: Mahajan V, Muller E, Wind Y (eds) New-product diffusion models. Kluwer Academic Publishers, Dordrecht, pp 99–122

    Google Scholar 

  • Berndt ER, Bui L, Reiley DR, Urban GL (1995) Information, marketing, and pricing in the U.S. anti-ulcer drug market. Am Econ Rev 85(2):100–105

    Google Scholar 

  • Berndt ER, Bui L, Reiley DR, Urban GL (1997) The roles of marketing, product quality and price competition in the growth and composition of the U.S. anti-ulcer drug industry. In: Bresnahan TF, Gordon RJ (eds) The economics of new products. University of Chicago Press, Chicago, pp 277–322

    Google Scholar 

  • Berndt ER, Bhattacharjya A, Mishol DN, Arcelus A, Lasky T (2002) An analysis of the diffusion of new antidepressants: variety, quality, and marketing efforts. J Ment Health Policy Econ 5(1):3–19

    Google Scholar 

  • Berndt ER, Kyle MK, Ling DC (2003a) The long shadow of patent expiration: generic entry and RX-to-OTC switches. In: Feenstra RC, Shapiro MD (eds) Scanner data and price indexes. University of Chicago Press, Chicago, pp 229–274

    Chapter  Google Scholar 

  • Berndt ER, Pindyck RS, Azoulay P (2003b) Consumption externalities and diffusion in pharmaceutical markets: anti-ulcer drugs. J Ind Econ 51(2):243–270

    Article  Google Scholar 

  • Bhattacharya J, Vogt WB (2003) A simple model of pharmaceutical price dynamics. J Law Econ 23(2):599–626

    Article  Google Scholar 

  • Bowman D, Gatignon H (1996) Order of entry as a moderator of the effect of the marketing mix on market share. Mark Sci 15(3):222–242

    Article  Google Scholar 

  • Calfee JE (2002) Public policy issues in direct-to-consumer advertising of prescription drugs. J Public Policy Mark 21(2):174–193

    Article  Google Scholar 

  • Calfee JE, Winston C, Stempski R (2002) Direct-to-consumer advertising and the demand for cholesterol-reducing drugs. J Law Econ 45(10):673–690

    Article  Google Scholar 

  • Camacho N, Landsman V, Stremersch S (2010) The connected patient. In: Wuyts S, Dekimpe M, Gijsbrechts E, Pieters R (eds) The connected customer: the changing nature of consumer and business markets. Routledge Academic, New York, pp 107–139

    Google Scholar 

  • Chandrasekaran D, Tellis GJ (2007) A critical review of marketing research on diffusion of new products. In: Malhotra NK (ed) Review of marketing research, vol 3. M.E. Sharpe, Armonk, NY, pp 39–80

    Chapter  Google Scholar 

  • Chatterjee R, Eliashberg J (1990) The innovation diffusion process in heterogeneous population: a micromodeling approach. Manag Sci 36(9):1057–1079

    Article  Google Scholar 

  • Chetley A (1995) Problem drugs. Health Action International, Amsterdam

    Google Scholar 

  • Ching A, Ishihara M (2010) The effects of detailing on prescribing decisions under quality uncertainty. Quant Mark Econ 8(2):123–165

    Article  Google Scholar 

  • Chintagunta PK, Desiraju R (2005) Strategic pricing and detailing behavior in international markets. Mark Sci 24(1):67–80

    Article  Google Scholar 

  • CMS (2011) National Health Expenditures 2009 highlights. https://www.cms.gov/NationalHealthExpendData/downloads/highlights.pdf. Accessed 13 July 2011

  • Coscelli A (2000) The importance of doctors’ and patients’ preferences in the prescription decision. J Ind Econ 48(3):349–369

    Article  Google Scholar 

  • Coscelli A, Shum M (2004) An empirical model of learning and patient spillovers in new drug entry. J Econ 122(2):213–246

    Google Scholar 

  • Currie GR, Park S (2002) The effects of advertising and consumption experience on the demand for antidepressant drugs. Working paper, University of Calgary

    Google Scholar 

  • Danzon PM, Chao LW (2000) Cross-national price differences for pharmaceuticals: how large, and why? J Health Econ 19(2):159–195

    Article  Google Scholar 

  • De Laat E, Windmeijer F, Douven R (2002) How does pharmaceutical marketing influence doctors’ prescribing behaviour? CPB Netherlands’ Bureau for Economic Policy Analysis, The Hague

    Google Scholar 

  • Dekimpe MG, Hanssens DM (1999) Sustained spending and persistent response: a new look at long-term marketing profitability. J Mark Res 36(4):397–412

    Article  Google Scholar 

  • Desiraju R, Nair H, Chintagunta P (2004) Diffusion of new pharmaceutical drugs in developing and developed nations. Int J Res Mark 21(4):341–357

    Article  Google Scholar 

  • Families USA (2001) Off the charts: pay, profits and spending by drug companies. Families USA Publication 01-104

    Google Scholar 

  • Families USA (2002) Profiting from pain: where prescription drug dollars go. Families USA Publication 02-105

    Google Scholar 

  • Fischer M, Albers S (2010) Patient- or physician-oriented marketing: what drives primary demand for prescription drugs? J Mark Res 47(1):103–121

    Article  Google Scholar 

  • Fischer M, Leeflang PSH, Verhoef PC (2010) Drivers of peak sales for pharmaceutical brands. Quant Mark Econ 8(4):429–460

    Article  Google Scholar 

  • Fok D, Franses PH (2007) Modeling the diffusion of scientific publications. J Econ 139(2):376–390

    Google Scholar 

  • Frenzel A, Grupp H (2009) Using models of innovation diffusion to forecast market success: a practitioners’ guide. Res Eval 18(1):39–50

    Article  Google Scholar 

  • Gatignon H, Weitz B, Bansal P (1990) Brand introduction strategies and competitive environments. J Mark Res 27(4):390–401

    Article  Google Scholar 

  • Gönül FF, Carter F, Petrova E, Srinivasan K (2001) Promotion of prescription drugs and its impact on physicians’ choice behavior. J Mark 65(3):79–90

    Article  Google Scholar 

  • Gonzalez J, Sismeiro C, Dutta S, Stern P (2008) Can branded drugs benefit from generic entry? The role of detailing and price in switching to non-bioequivalent molecules. Int J Res Mark 25(4):247–260

    Article  Google Scholar 

  • Guseo R, Guidolin M (2009) Modelling a dynamic market potential: a class of automata networks for diffusion of innovations. Technol Forecast Soc Change 76(6):806–820

    Article  Google Scholar 

  • Haaijer-Ruskamp FM, Denig P (2001) Invloeden bij het Kiezen van Geneesmiddelen. Geneesmiddelenbulletin 35(4):37–42

    Google Scholar 

  • Hahn M, Park S, Krishnamurthi L, Zoltners AA (1994) Analysis of new product diffusion using a four-segment trial-repeat model. Mark Sci 13(3):224–247

    Article  Google Scholar 

  • Hellerstein JK (1998) The importance of the physician in the generic versus trade-name prescription decision. Rand J Econ 29(1):108–136

    Article  Google Scholar 

  • Helsen K, Schmittlein DC (1993) Analyzing duration times in marketing research: evidence for effectiveness of hazard models. Mark Sci 12(4):395–414

    Article  Google Scholar 

  • Hurwitz MA, Caves RE (1988) Persuasion or information—promotion and the shares of brand name and generic pharmaceuticals. J Law Econ 31(2):299–320

    Article  Google Scholar 

  • Iizuka T, Jin GZ (2005) The effect of prescription drug advertising on doctor visits. J Econ Manag Strategy 14(3):701–727

    Article  Google Scholar 

  • IMS (2010) IMS health forecasts global pharmaceutical market growth of 5–7 percent in 2011, reaching $800 billion. http://www.imshealth.at/portal/site/ims/menuitem.d248e29c86589c9c30e81c033208c22a/?vgnextoid=119717f27128b210VgnVCM100000ed152ca2RCRD. Accessed 11 Nov 2011

  • Jain DC (1992) Marketing mix effects on the diffusion of innovations. Working paper, Kellogg Graduate School of Management, Northwestern University

    Google Scholar 

  • Jain DC, Vilcassim NJ (1991) Investigating household purchase timing decisions: a conditional hazard function approach. Mark Sci 10(1):1–23

    Article  Google Scholar 

  • Joseph K, Mantrala M (2009) A model of the role of free drug samples in physicians’ prescription decisions. Mark Lett 20(1):15–29

    Article  Google Scholar 

  • Kaiser Family Foundation (2010) U.S. health care costs: background brief. http://www.kaiseredu.org/Issue-Modules/US-Health-Care-Costs/Background-Brief.aspx. Accessed 11 Nov 2011

  • Kalyanaram G, Robinson WT, Urban GL (1995) Order of market entry: established empirical generalizations, emerging empirical generalizations, and future research. Mark Sci 14(3):G212–G221

    Article  Google Scholar 

  • Keller J, Pauwels K (2009) Managing across substitute categories—changing pharmaceutical marketing elasticities and budget allocation. Working paper, Dartmouth College

    Google Scholar 

  • Kolsarici C, Vakratsas D (2010) Category- versus brand-level advertising messages in a highly regulated environment. J Mark Res 47(6):1078–1089

    Article  Google Scholar 

  • Kremer STM, Bijmolt THA, Leeflang PSH, Wieringa JE (2008) Generalizations on pharmaceutical marketing effectiveness. Int J Res Mark 25(4):234–246

    Article  Google Scholar 

  • Leeflang PSH, Wieringa JE (2010) Modeling the effects of pharmaceutical marketing. Mark Lett 21(2):121–133

    Article  Google Scholar 

  • Leeflang PSH, Mijatovic GM, Saunders J (1992) Identification and estimation of complex multivariate lag structures—a nesting approach. Appl Econ 24(2):273–283

    Article  Google Scholar 

  • Leeflang PSH, Wittink DR, Wedel M, Naert PA (2000) Building models for marketing decisions. Kluwer Academic Publishers, Dordrecht

    Book  Google Scholar 

  • Leeflang PSH, Bijmolt THA, van Doorn J, Hanssens DM, van Heerde HJ, Verhoef PC, Wieringa JE (2009) Creating lift versus building the base: current trends in marketing dynamics. Int J Res Mark 26(1):13–20

    Article  Google Scholar 

  • Leffler KB (1981) Persuasion or information? The economics of prescription drug advertising. J Law Econ 24(1):45–74

    Article  Google Scholar 

  • Lieberman MB, Montgomery DB (1988) First-mover advantages. Strat Manag J 9(Special Issue):41–58

    Article  Google Scholar 

  • Lilien GL, Rao AG, Kalish S (1981) Bayesian estimation and control of detailing effort in a repeat-purchase diffusion environment. Manag Sci 27(5):493–506

    Article  Google Scholar 

  • Mahajan V, Muller E (1979) Innovation diffusion and new product growth models in marketing. J Mark 43(4):55–68

    Article  Google Scholar 

  • Mahajan V, Wind Y (1986) Innovation diffusion models of new product acceptance. Ballinger Publishing Company, Cambridge, MA

    Google Scholar 

  • Mahajan V, Muller E, Bass FM (1990) New product diffusion models in marketing: a review and directions for future research. J Mark 54(1):1–26

    Article  Google Scholar 

  • Mahajan V, Muller E, Wind Y (2000) New-product diffusion models. Kluwer Academic Publishers, Dordrecht

    Google Scholar 

  • Mahecha LA (2006) Rx-to-OTC switches: trends and factors underlying success. Nat Rev Drug Discov 5(5):380–386

    Article  Google Scholar 

  • Manchanda P, Honka E (2005) The effects and role of direct-to-physician marketing in the pharmaceutical industry: an integrative review. Yale J Health Policy Law Ethics 5(2):785–822

    Google Scholar 

  • Manchanda P, Wittink DR, Ching A, Cleanthous P, Ding M, Dong XJ, Leeflang PSH, Misra S, Mizik N, Narayanan S, Steenburgh T, Wieringa JE, Wosinska M, Xie Y (2005) Understanding firm, physician and consumer choice behavior in the pharmaceutical industry. Mark Lett 16(3–4):293–308

    Article  Google Scholar 

  • Meade N, Islam T (2006) Modelling and forecasting the diffusion of innovation—a 25-year review. Int J Forecast 22(3):519–545

    Article  Google Scholar 

  • Montgomery DB, Silk AJ (1972) Estimating dynamic effects of market communications expenditures. Manag Sci 18(10):B-485–B-501

    Article  Google Scholar 

  • Murphy MN, Smith MC, Juergens JP (1992) The synergic impact of promotion intensity and therapeutic novelty on market performance of prescription drugs. J Drug Issues 22(2):305–316

    Google Scholar 

  • Narayanan S, Desiraju R, Chintagunta PK (2004) Return on investment implications for pharmaceutical promotional expenditures: the role of marketing-mix interactions. J Mark 68(4):90–105

    Article  Google Scholar 

  • Narayanan S, Manchanda P, Chintagunta PK (2005) Temporal differences in the role of marketing communication in new product categories. J Mark Res 42(3):278–290

    Article  Google Scholar 

  • Neslin SA (2001) ROI analysis of pharmaceutical promotion (RAPP): an independent study. Presentation to the Association of Medical Publications

    Google Scholar 

  • OECD (2011) OECD health data 2011—frequently requested data. http://www.oecd.org/document/16/0,3343,en_2649_34631_2085200_1_1_1_1,00.html. Accessed 13 July 2011

  • Osinga EC, Leeflang PSH, Wieringa JE (2010) Early marketing matters: a time-varying parameter approach to persistence modeling. J Mark Res 47(1):173–185

    Article  Google Scholar 

  • Osinga EC, Leeflang PSH, Wieringa JE (2011) How generic drugs affect brands before and after entry. Working paper, Tilburg University

    Google Scholar 

  • Parsons LJ, Vanden Abeele P (1981) Analysis of sales call effectiveness. J Mark Res 18(1):107–113

    Article  Google Scholar 

  • Pauwels K, Hanssens DM (2007) Performance regimes and marketing policy shifts. Mark Sci 26(3):293–311

    Article  Google Scholar 

  • Peres R, Muller E, Mahajan V (2010) Innovation diffusion and new product growth models: a critical review and research directions. Int J Res Mark 27(2):91–106

    Article  Google Scholar 

  • Rao AG, Yamada M (1988) Forecasting with a repeat purchase diffusion-model. Manag Sci 34(6):734–752

    Article  Google Scholar 

  • Rizzo JA (1999) Advertising and competition in the ethical pharmaceutical industry: the case of antihypertensive drugs. J Law Econ 42(1):89–116

    Article  Google Scholar 

  • Roberts JH, Lattin JM (2000) Disaggregated-level diffusion models. In: Mahajan V, Muller E, Wind Y (eds) New-product diffusion models. Kluwer Academic Publishers, Dordrecht, pp 207–236

    Google Scholar 

  • Rosenthal MB, Berndt ER, Donohue JM, Epstein AM, Frank RG (2003) Demand effects of recent changes in prescription drug promotion. Front Health Policy Res 6(1):1–27

    Google Scholar 

  • Ruiz-Conde E, Wieringa JE, Leeflang PSH (2011) Longitudinal and cross-sectional effects of marketing instruments on diffusion of pharmaceuticals. Working paper, University of Groningen

    Google Scholar 

  • Shankar V (1997) Pioneers’ marketing mix reactions to entry in different competitive game structures: theoretical analysis and empirical illustration. Mark Sci 16(3):271–293

    Article  Google Scholar 

  • Shankar V (2009) Marketing expenditures over the product life cycle: asymmetries between dominant and weak brands. Working paper, Mays Business School, Texas A&M University

    Google Scholar 

  • Shankar V, Carpenter GS, Krishnamurthi L (1998) Late mover advantage: how innovative late entrants outsell pioneers. J Mark Res 35(1):54–70

    Article  Google Scholar 

  • Shankar V, Carpenter GS, Krishnamurthi L (1999) The advantages of entry in the growth stage of the product life cycle: an empirical analysis. J Mark Res 36(2):269–276

    Article  Google Scholar 

  • Shankar V, Carpenter GS, Krishnamurthi L (2008) Strategic marketing decision models for the pharmaceutical industry. In: Wierenga B (ed) Handbook of marketing decision models. Springer, New York, pp 469–498

    Chapter  Google Scholar 

  • Shugan SM (2004) Endogeneity in marketing decision models. Mark Sci 23(1):1–3

    Article  Google Scholar 

  • Sood A, James GM, Tellis GJ (2009) Functional regression: a new model for predicting market penetration of new products. Mark Sci 28(1):36–51

    Article  Google Scholar 

  • Spurling GK, Mansfield PR, Montgomery BD, Lexchin J, Doust J, Othman N, Vitry AI (2010) Information from pharmaceutical companies and the quality, quantity, and cost of physicians’ prescribing: a systematic review. PLoS Med 7(10):e1000352

    Article  Google Scholar 

  • Stremersch S (2008) Health and marketing: the emergence of a new field of research. Int J Res Mark 25(4):229–233

    Article  Google Scholar 

  • Stremersch S, Lemmens A (2009) Sales growth of new pharmaceuticals across the globe: the role of regulatory prices. Mark Sci 28(4):690–708

    Article  Google Scholar 

  • Stremersch S, Van Dyck W (2009) Marketing of the life sciences: a new framework and research agenda for a nascent field. J Mark 73(4):4–30

    Article  Google Scholar 

  • Sultan F, Farley JU, Lehmann DR (1990) A meta-analysis of applications of diffusion models. J Mark Res 27(1):375–388

    Article  Google Scholar 

  • Tellis GJ, Stremersch S, Yin E (2003) The international takeoff of new products: the role of economics, culture, and country innovativeness. Mark Sci 22(2):188–208

    Article  Google Scholar 

  • The Pharma Letter (1994) French key pharma data for 1993. http://www.thepharmaletter.com/file/69410/french-key-pharma-data-for-1993.html. Accessed 2 June 2011

  • Urban GL, Carter T, Gaskin S, Mucha Z (1986) Market share rewards to pioneering brands: an empirical analysis and strategic implications. Manag Sci 32(6):645–659

    Article  Google Scholar 

  • USA Today, Kaiser Family Foundation, Harvard School of Public Health (2008) The public on prescription drugs and pharmaceutical companies

    Google Scholar 

  • Vakratsas D, Kolsarici C (2008) A dual-market diffusion model for a new prescription pharmaceutical. Int J Res Mark 25(4):282–293

    Article  Google Scholar 

  • Van den Bulte C (2000) New product diffusion acceleration: measurement and analysis. Mark Sci 19(4):366–380

    Article  Google Scholar 

  • Van den Bulte C, Iyengar R (2011) Tricked by truncation: spurious duration dependence and social contagion in hazard models. Mark Sci 30(2):233–248

    Article  Google Scholar 

  • Van den Bulte C, Joshi YV (2007) New-product diffusion with influentials and imitators. Mark Sci 26(3):400–421

    Article  Google Scholar 

  • Van den Bulte C, Lilien GL (2001) Medical innovation revised: social contagion versus marketing effort. Am J Sociol 106(5):1409–1435

    Article  Google Scholar 

  • Venkataraman S, Stremersch S (2007) The debate on influencing doctors’ decisions: are drug characteristics the missing link? Manag Sci 53(11):1688–1701

    Article  Google Scholar 

  • Wazana A (2000) Physicians and the pharmaceutical industry: is a gift ever just a gift? J Am Med Assoc 283:373–380

    Article  Google Scholar 

  • Windmeijer F, De Laat E, Douven R, Mot E (2006) Pharmaceutical promotion and GP prescription behavior. Health Econ 15(1):5–18

    Article  Google Scholar 

  • Wittink DR (2002) Analysis of ROI for Pharmaceutical Promotion (ARPP). Presentation to the Association of Medical Publications

    Google Scholar 

Download references

Author information

Authors and Affiliations

Authors

Corresponding author

Correspondence to Jaap E. Wieringa .

Editor information

Editors and Affiliations

Rights and permissions

Reprints and permissions

Copyright information

© 2014 Springer Science+Business Media New York

About this chapter

Cite this chapter

Wieringa, J.E., Osinga, E.C., Conde, E.R., Leeflang, P.S.H., Stern, P. (2014). Modeling the Effects of Promotional Efforts on Aggregate Pharmaceutical Demand: What We Know and Challenges for the Future. In: Ding, M., Eliashberg, J., Stremersch, S. (eds) Innovation and Marketing in the Pharmaceutical Industry. International Series in Quantitative Marketing, vol 20. Springer, New York, NY. https://doi.org/10.1007/978-1-4614-7801-0_20

Download citation

Publish with us

Policies and ethics