Healthy Skepticism Library item: 18818

Warning: This library includes all items relevant to health product marketing that we are aware of regardless of quality. Often we do not agree with all or part of the contents.

Publication type: Journal Article

Jambulingam T, Sharma R
Estimating the value of internet marketing in the US pharmaceutical industry
Journal of Medical Marketing 2010 Aug 27; 10:(4):332–343
http://www.palgrave-journals.com/jmm/journal/v10/n4/abs/jmm201024a.html

Abstract:

On 2 April 2009 the Food and Drug Administration (FDA) released warning letters to 14 major pharmaceutical companies about search engine advertising, effectively curtailing an aspect of internet marketing by pharmaceutical industry. These warning letters were posted to the public on 3 April 2009. Given that the efficient market hypotheses suggest that stock prices fully reflect all publicly available information and are unbiased indicators of firm value, this article presents an analysis of stock market reactions of pharmaceutical firms around the time of the FDA announcement, using both regular and abnormal returns. We analyze two groups of firms, those that received the warning letters and those that did not receive the letters. We find a significantly negative stock market reaction for both groups of firms, suggesting that the letters had negative impact on shareholder’s value to the industry as a whole. The results indicate that internet marketing is important, and thus it is imperative that the industry works in tandem with the FDA to develop better guidelines on the appropriate use of the internet for the marketing of pharmaceuticals. The cost for pharmaceutical firms for not utilizing the internet capabilities to communicate value to the stakeholders can be significant.

Keywords:
internet; marketing; pharmaceutical; promotions; value; social media