Financial Conflicts of Interest in Medicine
60 Pages Posted: 23 Jul 2013 Last revised: 27 Jan 2014
Date Written: January 26, 2014
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: Suggested Citation