Drug Firms' Payments and Physicians' Prescribing Behavior in Medicare Part D

50 Pages Posted: 23 Sep 2015

See all articles by Colleen Marie Carey

Colleen Marie Carey

Cornell University - Department of Policy Analysis and Management

Ethan M.J. Lieber

University of Notre Dame

Sarah Miller

University of Michigan at Ann Arbor

Date Written: September 21, 2015

Abstract

In a pervasive but controversial practice, drug firms frequently make monetary or in-kind payments to medical providers. Critics are concerned that drug firms are distorting prescribing behavior away from the best interests of patients, while defenders of the practice claim that payments arise from the need to educate providers about changing drug technologies. Using two different identification strategies, we investigate the effect of payments from drug firms on individual-level prescribing behavior in Medicare Part D. We find that individuals whose providers receive payments from a drug firm tend to increase expenditure on the firm's products. Our method accounts for the selection of physicians into payments (which may result if, e.g., pharmaceutical firms target payments to physicians who see a large number of patients) and our finding holds even when we look over time within individuals who change providers. However, using hand-collected efficacy data on four major therapeutic classes, we find that those receiving payments also prescribe higher-quality drugs on average. In addition, we examine four case studies of major drugs going off patent. Providers receiving payments from the firms experiencing the patent expiry transition their patients just as quickly to generics as prescribers who do not receive such payments. These results suggest that, absent other interventions to facilitate education, policies such as the Physician Payments Sunshine Act may reduce the efficacy of drugs prescribed.

Keywords: health, health economics, Medicare, prescription drugs

JEL Classification: I13, I18, G22

Suggested Citation

Carey, Colleen Marie and Lieber, Ethan and Miller, Sarah, Drug Firms' Payments and Physicians' Prescribing Behavior in Medicare Part D (September 21, 2015). Available at SSRN: https://ssrn.com/abstract=2663681 or http://dx.doi.org/10.2139/ssrn.2663681

Colleen Marie Carey

Cornell University - Department of Policy Analysis and Management ( email )

Ithaca, NY
United States

Ethan Lieber

University of Notre Dame ( email )

3049 Jenkins Nanovic Halls
Notre Dame, IN 46556
United States

Sarah Miller (Contact Author)

University of Michigan at Ann Arbor ( email )

500 S. State Street
Ann Arbor, MI 48109
United States

HOME PAGE: http://www-personal.umich.edu/~mille/

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