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Financial Conflicts of Interest in Medicine

60 Pages Posted: 23 Jul 2013 Last revised: 27 Jan 2014

Joseph Engelberg

University of California, San Diego (UCSD) - Rady School of Management

Christopher A. Parsons

University of California, San Diego (UCSD) - Rady School of Management

Nathan Tefft

Bates College

Date Written: January 26, 2014

Abstract

We use the geographic distance between a doctor’s office and drug company headquarters to instrument for the likelihood of pecuniary transfers, such as meals or speaking fees. Doctors tilt prescriptions in favor of the paying firm’s drugs, shifting away from both branded and generic substitutes. Larger transfers cause larger shifts in prescriptions. We explore two potential explanations: 1) information flow (or its perception), and 2) rent seeking. Payments increase prescriptions of branded drugs over generic equivalents, situations where information cannot play a large role. However, doctors residing in states known to be corrupt in other ways (e.g., electoral fraud) are much more sensitive to payments from the drug industry, as are male doctors.

Keywords: physician payments, prescription behavior, Sunshine Act

JEL Classification: I10, I18

Suggested Citation

Engelberg, Joseph and Parsons, Christopher A. and Tefft, Nathan, Financial Conflicts of Interest in Medicine (January 26, 2014). Available at SSRN: https://ssrn.com/abstract=2297094 or http://dx.doi.org/10.2139/ssrn.2297094

Joseph Engelberg (Contact Author)

University of California, San Diego (UCSD) - Rady School of Management ( email )

9500 Gilman Drive
Rady School of Management
La Jolla, CA 92093
United States

Christopher Parsons

University of California, San Diego (UCSD) - Rady School of Management ( email )

9500 Gilman Drive
Mail Code 0502
La Jolla, CA 92093-0112
United States

Nathan Tefft

Bates College ( email )

Lewiston, ME 04240
United States

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