Single Payer Healthcare - Effect on Medical Industry

[XenaLives]

"You have a system of pharmaceutical promotion that changed the way medicine is practiced and no one stopped it".

The quote is from the video below:
https://www.cbsnews.com/news/opioid-epidemic-did-the-fda-ignite-the-crisis-60-minutes/?ftag=MSF0951a18

The entire system of "pharmaceutical promotion" is the root cause, that must be stopped. The U.S. and New Zealand are the only countries in the world that permit drugs to be advertised to end users.

Excerpt from an interesting study:

There is a lack of consensus on whether DTCA serves primarily to inform or persuade,
which matters for assessing its value to patients. This distinction hinges partly on the extent to
which DTCA impacts drug utilization and the mechanisms underlying advertising’s impacts,
such as whether the effects of DTCA stem from the initiation of therapy versus adherence and
whether there are spillovers of advertising on non-advertised drugs. However, identifying
DTCA’s causal effects on utilization has been challenging empirically, since demand factors
often influence both the amount of advertising and the timing of advertisements. Some studies
have tried to address these endogeneity concerns with instrumental variable strategies, though it
is difficult to find appropriate instruments given the close relationship between demand and
advertising decisions.
We address these challenges by introducing a new quasi-experimental approach to estimating
how DTCA influences drug utilization. We exploit a large shock to DTCA driven by the
introduction of Medicare Part D in 2006. Our instrumental variable strategy exploits variation
across geographic areas in the share of the population that is covered by Medicare (ages 65+) to
predict changes in advertising exposure across areas. We show that there was a large relative
increase in advertising exposure immediately following the introduction of Part D in geographic
areas with a high share of elderly compared to areas with a low elderly share. Prior to Part D,
both the levels and trends in advertising exposure across high and low elderly share areas were
nearly identical. Since advertising cannot be perfectly targeted to the elderly, we use the sudden
differential increase in advertising exposure for non-elderly that live in elderly-dominated areas
to estimate the effects of advertising on drug use. This strategy hinges on the observation that
non-elderly individuals are exposed to the increase in DTCA but do not receive Part D insurance
coverage, which may independently impact drug utilization.
This paper makes four main contributions. First, we exploit a major policy change to
identify the effects of DTCA on drug utilization. The use of policy shocks as natural
experiments has been scarce in the existing advertising literature, although it is a promising
approach for obtaining variation in advertising that is unrelated to individual demand. Second,
the large policy shock provides an ideal setting for estimating a broad array of behavioral
responses to advertising on both the extensive and intensive margins, including drug initiation
and adherence. We isolate these responses to explore welfare implications of advertising. Prior
studies on the revenue consequences of advertising have largely focused on overall utilization
and spending. Third, we use data from two novel sources. We measure pharmaceutical
advertising using data on Nielsen “ratings” – a measure of the fraction of people in a target
audience that view advertisements. We observe ratings for two target audiences: the non-elderly
(under 65) and the elderly (65+). While most of the prior DTCA literature uses advertising
expenditures or the volume of ads to quantify advertising, ratings are a more direct measure of
actual advertising exposure.4This measure is more often used outside of the DTCA literature to
measure exposure to other types of television programming (e.g., Kearney and Levine, 2015;
Kanazawa and Funk, 2001). We obtain measures of drug utilization using administrative
pharmacy claims from a database covering about 18 million person-years. Finally, we quantify
spillover effects of Part D on the non-elderly population. Numerous studies have examined the
effects of Part D on the elderly but few have considered the effects on the non-elderly.5

We find that drug utilization is highly responsive to advertising exposure. Following Part
D, there was a 6 percent increase in the number of prescriptions purchased by the non-elderly in
areas with high elderly share, relative to areas with low elderly share. Event study results using
quarterly utilization data show that this differential effect coincided precisely with the
implementation of Part D in 2006. The event study also confirms that there were no differential
pre-trends in utilization across higher and lower elderly share areas, providing support for the
identifying assumption that the trends would have continued to be the same in the absence of
Part D. Our results show that a 10 percent increase in advertising views leads to a 5.4 percent
increase in total prescriptions filled for advertised chronic drugs, which implies an advertising
exposure elasticity of 0.54, and an estimated advertising expenditure elasticity of 0.23.
Expanded take-up of prescription drugs accounts for about 70% of the total effect of
advertising, while increased adherence to drug therapy accounts for the remaining 30%. While
advertising increased drug adherence for existing patients, we also find that individuals who
initiate drug treatments due to advertising are on average less compliant suggesting some
potential wasteful spending. We find evidence that advertising also increased the use of nonadvertised
drugs in the same therapeutic class as advertised drugs. This effect is concentrated
among generic drugs. DTCA on net does not cause substitution away from lower-cost generics
to higher-cost advertised drugs; it leads to increased use of generics rather than decreased use.

https://med.stanford.edu/content/dam/sm/hsr/documents/AlpertHealthEconSeminar_Sep2018.pdf