Empirical Implications of Physician Authority in Pharmaceutical Decisionmaking

44 Pages Posted: 31 Jan 1999 Last revised: 23 Mar 2022

See all articles by Scott Stern

Scott Stern

Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER)

Manuel Trajtenberg

Tel Aviv University - Eitan Berglas School of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Date Written: December 1998

Abstract

This paper studies the consequences of physician authority on pharmaceutical prescribing. Physicians engage in a costly process of particular conditions and characteristics. The relative efficiency of this matching process results from the diagnostic skill of the physician along with the investments made by the doctor in learning about different drugs. While the underlying level of physician skill or knowledge cannot be observed, differences among physicians in terms of these attributes are reflected in their prescribing behavior. We provide evidence for two major findings regarding the exercise of physician authority in this context. First, there is substantial variation in the degree to which physician prescribing is concentrated (i.e., some physicians prescribe a more diverse portfolio of drugs than others). Second, this concentration is correlated with observable drug characteristics. In particular, concentrated prescribers tend to prescribe drugs with high levels of advertising, low prices, and high (lagged) market shares. Our empirical results provide evidence for the importance of both physician effort and diagnostic ability in the prescribing process. In particular, physicians who differentiate among their patients more finely are more likely to have less concentrated prescribing portfolios and to be less sensitive to information sources which promote the use of drugs for the

Suggested Citation

Stern, Scott and Trajtenberg, Manuel, Empirical Implications of Physician Authority in Pharmaceutical Decisionmaking (December 1998). NBER Working Paper No. w6851, Available at SSRN: https://ssrn.com/abstract=144969

Scott Stern (Contact Author)

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

Cambridge, MA 02142
United States
617-253-3053 (Phone)
617-253-2660 (Fax)

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

Manuel Trajtenberg

Tel Aviv University - Eitan Berglas School of Economics ( email )

P.O. Box 39040
Ramat Aviv, Tel Aviv, 69978
Israel
+972 3640 9911 (Phone)
+972 3640 9908 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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