Trump’s Going After Prescription Drug Ads. What It Means for Pharmaceutical Sales.

Various studies suggest that direct-to-consumer ads have a significant impact on sales. (Eric Thayer/Bloomberg)

A new Trump administration crackdown on prescription drug ads directed at consumers could substantially drag on pharmaceutical revenues—if it’s successful at reining in the billions of dollars that drug companies spend on ads each year in the U.S.

The effort falls well short of banning the ads outright. But coordinated announcements Tuesday from the U.S. Department of Health and Human Services, the Food and Drug Administration, and the White House promised a sweeping attack on pharmaceutical advertising, including an important rule change, and a threat of “aggressive enforcement” of violations of drug ad regulations.

It remains unclear what impact these government measures will have on direct-to-consumer drug ads—on which drugmakers spend more than $10 billion a year in the U.S.

U.S. courts have held that the ads are shielded by First Amendment speech protections, but in a note to investors late Tuesday, Raymond James healthcare policy analyst Chris Meekins wrote that the administration looks to be trying to kill drug advertising with “disclosure and rule-making.”

It’s unclear how the effort will fare if it faces legal challenges—or who will conduct the promised enforcement. Meekins wrote Tuesday that most of the office at the FDA responsible for enforcing drug advertising rules has been laid off in the sweeping workforce cuts that Health Secretary Robert F. Kennedy Jr. has undertaken through the agencies he oversees.

However, if the measures do lead to fewer consumer-facing drug ads, the hit to sales of new, branded drugs could be significant.

Direct-to-consumer advertising of prescription drugs have only existed at a large scale in the U.S. since the late 1990s, when a change in FDA rules allowed drugmakers to abbreviate the risk disclosures they included in their TV ads. Decades of academic studies have consistently shown that they are extremely effective at driving sales of the drugs they promote. The drugmakers themselves know it, too, as evinced by their marketing budgets: Drugmakers spend as much as half a billion dollars a year per drug promoting their biggest products.

Various studies suggest that direct-to-consumer ads have a significant impact on sales. A recent report by the Congressional Budget Office cited research showing that a 10% change in direct-to-consumer drug ad spending correlates to a 1% to 2.3% change in prescription drug spending. In one creative study published in 2023, researchers found that after Medicare prescription drug coverage was instituted in 2006—and companies ramped up advertising in areas with large populations of seniors—the number of prescriptions bought by non-elderly people in senior-heavy areas that had been blanketed with ads rose by 6%.

That research is difficult to translate into theoretical potential revenue impacts, but those could be material—especially for the branded drugs that are the biggest targets for drug ad dollars. The federal government’s attack on drug ads could specifically erode the profits of the least effective branded medicines: A 2023 study published in the Journal of the American Medical Association found that proportionally more direct-to-consumer ad dollars are spent on drugs that offer less clinical benefit.

Surveys show that patients consistently report asking their doctors about a medicine they heard about in an advertisement. A poll by the health policy group KFF in January found that 18% of people who have seen advertisements for prescription drugs had asked a doctor about a medicine they saw advertised. In 2018, that number was 20%.

Drug stocks were down slightly on Wednesday. Eli Lilly was down 0.1%, Pfizer was down 0.7%, Johnson & Johnson was down 1.1%, and Merck was down 0.8%. Despite the uncertainties surrounding the Trump White House’s ability to cut down on drug ads, investors seemed to be taking the threat very seriously.

Write to Josh Nathan-Kazis at josh.nathan-kazis@barrons.com