For Every Free Lunch You Don’t Eat, I’ll Eat Three
I never really understood why some physicians wouldn’t take the free pharma lunches that were offered at the office or hospital. I even asked a few of them why they weren’t eating and they babbled off something about ethics and free lunches as they are related to drugs.
What’s The Main Argument?
The main argument is that the free lunches, pens, and prescription pads increase the cost of the drug to the consumer. This is absolute nonsense and emphasizes the average physician’s lack of understanding of basic business principles.
Now I won’t deny that the cost of marketing new drugs is factored into the cost of the drug. This cost is passed to the consumer. However, you aren’t doing your patients a disservice for sitting in on a free lunch. In other words, the price of the drug will not change. Let me explain.
If money isn’t allocated towards free physician lunches in a company’s marketing budget, they will allocate that money into marketing elsewhere. For example, if all direct physician marketing was banned, drug companies would simply shift that money into another advertising vertical such as print, television, or radio ads.
Let’s talk about that.
Economics 101
Let’s look at this from a business standpoint. Each product that is produced and sold has what is known as an optimum price point. This is the price that will produce both optimum revenues and sales volume. It looks like this:
As you can clearly see, if you drop the price volume will increase but revenues will drop. Conversely, if you increase the price your volume will decrease. If you adjust the price too high or low on either side, you will also begin to decrease your revenues no matter which way you are moving your price. At this point you are at sub optimum levels.
So What About Marketing Expenses?
As stated earlier, the argument is that eliminating the drug rep lunches and free pens will decrease the cost of the drug to the consumer.
Marketing directly to physicians is extremely effective and most likely offers drug companies the most bang for their advertising dollar. If they are banned from marketing directly to physicians through free lunches, they’ll simply shift those marketing dollars into other areas in order to maintain optimum volume.
Get off your ethics soapbox and spend some drug company money. Who gives a shit, they’re going to spend it anyway.
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MS IV said
August 12 2007 @ 8:01 am
yes, I agree that the pharm company’s marketing money will be spent somewhere, regardless.
However, what about the idea that doctors are subconsciously influenced to prescribe the drug if they’re constantly seeing the name on pens, pads, other merchandise?
Don’t get me wrong, I use the free drug pens, too, (they’re cheap and I’m constantly losing my pens) but with a vague sense of guilt.
Hoover said
August 12 2007 @ 9:55 am
I don’t doubt that some physicians are writing scripts subconsciously. I do think it’s a small minority, though. Some of the guys that I worked with during medical school ate the lunches but didn’t appear to be influenced at all to write a particular drug. I think this represents the majority.
Garrett said
August 12 2007 @ 12:11 pm
Looks like somebody needed to take Econ 301, or at least look up what a Laffer curve is.
If direct-marketing to physicians is such a good bang for their buck, then eliminating that good bang-for-buck doesn’t mean at all that the money would simply go somewhere else in the same magnitude, because the marginal benefit of spending that money somewhere else is not similar. In fact, removing direct-to-physician marketing would change that optimum price, as the cost to the firm increases.
As such, you can’t say at all what happens if direct-marketing goes away.
The price could go down because of less money spent on marketing, resulting in a) increased revenue, due to greater sales and an inaccurate estimate of optimum price; b) static revenue, if the higher-volume expectations of a price drop and change in prescribing privileges roughly canceled out, or c) decreased revenue, with a lower price not leading to greater sales, and physician practices going towards not prescribing.
I could reiterate each of the above scenarios if the price stayed the same, or if the price were raised. But you’re probably finding this as tedious as I am. No matter how you feel about direct-marketing to physicians, the logic of this post very much distorts sound economic principles. That blue line shifts itself based on costs, and the way in which it will do so is based on assumptions that we are tampering with.
Hoover said
August 12 2007 @ 2:26 pm
Great comment Garret. I stand corrected.
Eat those free lunches anyway.
=)
Garrett said
August 13 2007 @ 9:53 am
As a psychiatrist2B, I figure I’ll just eat all the free lunches EXCEPT the ones for the psych meds. Then I’m clean :0)
Flighterdoc said
August 13 2007 @ 12:43 pm
I always ask my colleagues who make such insipid comments about the little junk stuff (including free lunches, pens, clipboards, etc) if they are really so corrupt as to be corrupted by crap like this?
I mean, they’ve admitted that they’re whores, and cheap ones, too.
Sometimes a patient will ask about my ‘Celebrex’ pen or ‘Viagra’ reflex hammer. I tell them that the pharm reps have to give me that sort of stuff when they give me the free samples…and I give the free samples away, for free…
I don’t mind the free samples, pens, and junk like that. I have never been to a pharm ‘educational’ dinner, or on a cruise, and don’t plan on starting now. I’d rather eat dinner with my wife, and sail my own boat than be on a cruise.
And I’ll never be id’d by the AMA or the pharm cos as a ‘leader’ in any particular drug. I always write for generics, if possible. And damned few patients need the latest or greatest.
Old MD Girl said
August 13 2007 @ 3:01 pm
Psychiatrist Garrett, eh? No wonder you had time to post such a lengthy comment.
My understanding of drug pricing was that it was based on price discrimination and consumer willingness to pay rather than on covering the costs of production, drug development, or marketing costs. If that’s true, eliminating/boycotting direct-to-consumer advertising would have no effect on the price of the drug, it would just reduce the amount of the drug sold.
Tim said
August 29 2007 @ 5:10 am
But if such a small minority of physicians are influenced by these little things, why would the drug companies spend so much money on them?
I don’t buy into the argument of skipping free lunches to change drug prices. But for me to say that I will not be influenced one bit by somebody giving me free stuff is to give a bit too much credit to myself. Just seeing the name on a pen all the time is enough to imprint it in your mind.
young bludz said
September 7 2007 @ 1:55 pm
for every free lunch u eat ill eat the all dinner ladies!
Hoover said
September 7 2007 @ 8:40 pm
rawr, a troll is in da house
Norm said
December 20 2007 @ 10:01 pm
I am a retired drug rep. When I hear a physician espouse their morally superior attitude it makes me sick. How about the physician that will not refill an Rx unless they see the patient so they can get another $100.00 office call. I am not talking about the new patient on a statin or a drug like coumadin or digitalis. But to make a patient come in to get a refill on an antihistamine or nasal steroid, get real. A buddy of mine wanted to get a script for Viagra, the doc would not call it in unless my buddy came into the office, bear in mind that my friend goes to this office once a year for a physical and had normal BP. And don’t get me started on the whore doctors that would sell my free samples.
Michael Rack said
January 3 2008 @ 6:49 pm
I am probably influenced a little by the samples, pens, and occasional lunches I get from drug reps, but not as much as the self-righteous academics who get $75,000 research grants and $3000 speaking fees from the drug companies.
Thaddeus Buttmunch MD said
April 10 2008 @ 1:14 pm
Norm…get REAL. we spend twelve years in Hades crappy social lives no sex life b/c we are either studying or slaving away in the Hospital. At least I EARN my money.
…and BTW the pharm reps are not geniuses, just jocks and former cheerleaders who use sex to sell their product.
I am salaried, I see patients frequently when they have diabetes and blood pressure. But you are not an active patient if you do not come at LEAST once a year to get checked out. That’s defensive medicine more than greed
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