Working Paper: NBER ID: w24864
Authors: Matthew Grennan; Kyle Myers; Ashley Swanson; Aaron Chatterji
Abstract: We study how firms target and influence expert intermediaries. In our empirical context, pharmaceutical manufacturers provide payments to physicians during promotional interactions. We develop an identification strategy based on plausibly exogenous variation in payments driven by differential exposure to spillovers from academic medical centers’ conflict-of-interest policies. Using a detailed case study of an important class of cardiovascular drugs, we estimate heterogeneous effects of payments on prescribing, with firms targeting highly responsive physicians. Our model of supply and demand allows us to quantify how oligopoly prices reduce drug prescribing, and how payments move prescribing closer to the optimal level, but at great financial cost to patients and payers. In our estimated model, consumers are worse off with payments, unless there is substantial underprescribing due to behavioral or other frictions. In a final exercise, we calibrate such frictions using clinical data. We estimate that, in this case study, payments benefit consumers.
Keywords: pharmaceuticals; expert intermediaries; payments to physicians; consumer welfare
JEL Codes: I1; L0
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Payments from pharmaceutical firms (G35) | Prescribing behavior (I11) |
| Stricter AMC policies (G18) | Likelihood of physician-firm interactions (I11) |
| Stricter AMC policies (G18) | Meal payments (J33) |
| Meal payments (J33) | Prescribing behavior (I11) |
| Payment ban (E42) | Statin use (C46) |
| Payment ban (E42) | Use of focal branded statins (L65) |
| Payments (E42) | Targeting of physicians (I11) |
| Targeting of physicians (I11) | Prescribing behavior (I11) |