Information shocks and pharmaceutical firms' marketing efforts: Evidence from the Chantix black box warning removal

Abstract

We study how pharmaceutical firm marketing responds to a regulatory decision that represents a positive information shock about drug safety. In the context of the smoking cessation drug Chantix, we estimate the effects of a Food and Drug Administration (FDA) decision to remove the drug's black box warning on two forms of marketing: monetary and in-kind payments to physicians (detailing) and direct-to-consumer advertising. Using identification strategies that leverage geographic variation in latent demand for smoking cessation therapy and the targeted nature of the information shock, we find that the removal of the warning significantly increased Chantix-related detailing payments and increased expenditures on national television advertising of Chantix. Understanding these firm-level strategic promotion responses is important, as they have implications for the dissemination of new drug information and the behaviors of physicians and consumers.

Keywords: Difference-in-differences; FDA regulation; Pharmaceutical marketing; Smoking cessation.