OBJECTIVE: To evaluate the presence of first-mover advantage for pharmaceutical advertising that would support the entry deterrence theory in the pharmaceutical market. METHODS: Advertising elasticities of demand for pharmaceutical products in the periods following new product entries were estimated using time and disease fixed effects estimation. One-period and two-period lag models were estimated. Logarithm of a product's sales revenue was regressed on its own advertising expenditure, total advertising expenditure of competing products in the same market, number of competing products, number of years the product has been on market, a dummy variable indicating whether the product is a new entrant, and an interaction term between the dummy variable and the product's own advertising expenditure. Scott-Levin Market Research Audit advertising expenditure and product sales data from Jan 1995 to Dec 2001 were used were analyzed on a quarterly basis. Products from eight therapy markets were examined: asthma, migraine, obesity, Parkinson's disease, seizure, depression, lipid disorder, and gastric and duodenal ulcer. RESULTS: In both lag models, product sales significantly increased with a product's own advertising expenditure, and significantly decreased with the total advertising expenditure of competing products, and the number of competing products. For existing products, advertising elasticity of demand was estimated to be 0.068% in the one-period lag model and 0.062% in the two-period lag model. Elasticity estimates for new entrants was lower at 0.046% and 0.044%, respectively. The elasticity estimates between new and existing products were not significantly different. Comparing results of the two lag models, advertising elasticity of demand depreciated at 8.7% per quarter. CONCLUSIONS: Results did not find any significant first-mover advantage in the effectiveness of advertising between earlier and later entrants that would support the potential entry deterrence effect of advertising in the pharmaceutical market. These results did not support regulating pharmaceutical advertising based on anti-competitive grounds.