'Let the Sun Shine in': The Impact of Industry Payment Disclosure on Physician Prescription Behavior

Abstract

U.S. pharmaceutical companies frequently pay doctors to promote their drugs. This has raised concerns about conflict of interest, which policy-makers have attempted to address by introducing payment disclosure laws. However, it is unclear if such disclosure has an effect on physician prescription behavior. We use individual-level claims data from a major provider of health insurance in the U.S. and employ a difference-in-differences research design to study the effect of the payment disclosure law introduced in Massachusetts in June 2009. The research design exploits the fact that while physicians operating in Massachusetts were impacted by the legislation, their counterparts in the neighboring states of Connecticut, New York, New Hampshire, and Rhode Island were not. In order to keep the groups of physicians comparable, we restrict our analysis to physicians in the counties that are on the border of these states. We find that the Massachusetts disclosure law resulted in a decline in prescriptions in all three drug classes studied: statins, antidepressants, and antipsychotics. Our findings are robust to alternative control groups, time periods and estimation methods. We also show that the effect is highly heterogeneous across physician groups. Finally, we explore potential mechanisms driving these results.

Keywords: Pharmaceutical Marketing, Physician Payments, Disclosure, Causal Inference, Difference-In-Difference, Generalized Synthetic Control, Sunshine Law, Public Policy, Quasi-Experiment

JEL Classification: M30, M31, M38, H75, I11, I18