OBJECTIVE: Industrial organization economics theory suggested firms may over- or under-advertise to deter or accommodate entry depending on how advertising affects the profits of competitors, and if the competing products are strategic substitutes or complements. The objective of this study was to determine if this theory holds for pharmaceutical products. Such information would increase policy makers' understanding of how advertising affects competition when considering advertising regulations. METHODS: Data on products for eight therapy areas (asthma, migraine, obesity, Parkinson's disease, seizure, depression, dyslipidemia, and gastric and duodenal ulcer) from January, 1995 to December, 2001 were analyzed on a quarterly basis. Multivariate analyses were performed to examine the strategic relationship between advertising expenditures and product sales. Changes in an existing product's advertising expenditure in the period after new product entry were examined using time-disease fixed-effects regression, by controlling for the type of new entrants (the presence of creative entrants, uncreative entrants or both in the same period), patent life, and market share. Creative entrants were new products with novel pharmacological mechanisms of action that were different from that of existing products. Uncreative entrants included me-too drugs and generic products. Advertising expenditure and sales data were obtained from Scott-Levin Market Research Audit. Patent and product entry information were from published references. RESULTS: Multivariate analyses showed competing pharmaceutical products were strategic complements and sales of new entrants increased with existing product's advertising expenditure, although these relationships were not statistically significant. There were no statistically significant changes in advertising expenditure in response to any types of new product entry. CONCLUSION: The strategic effect of advertising on market competitiveness was weak and not significant. No evidence was found that pharmaceutical firms would use advertising as a strategic tool to deter or accommodate entry. These results did not support regulating pharmaceutical advertising based on anti-competitive grounds.