Physician-Industry Interactions: Persuasion and Welfare

65 Pages Posted: 3 Aug 2018

See all articles by Matthew Grennan

Matthew Grennan

University of Pennsylvania - The Wharton School; National Bureau of Economic Research (NBER)

Kyle Myers

Harvard University - Technology & Operations Management Unit

Ashley Swanson

University of Pennsylvania - The Wharton School; NBER

Aaron Chatterji

Duke University - Fuqua School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: July 17, 2018

Abstract

In markets where consumers seek expert advice regarding purchases, firms seek to influence experts, raising concerns about biased advice. Assessing firm-expert interactions requires identifying their causal impact on demand, amidst frictions like market power. We study pharmaceutical firms' payments to physicians, leveraging instrumental variables based on regional spillovers from hospitals' conflict-of-interest policies and market shocks due to patent expiration. We find that the average payment increases prescribing of the focal drug by 73 percent. Our structural model estimates indicate that payments decrease total surplus, unless payments are sufficiently correlated with information (vs. persuasion) or clinical gains not captured in demand.

Keywords: Pharmaceuticals, Payments, Welfare

JEL Classification: I1, L00

Suggested Citation

Grennan, Matthew and Myers, Kyle and Swanson, Ashley and Chatterji, Aaron, Physician-Industry Interactions: Persuasion and Welfare (July 17, 2018). Available at SSRN: https://ssrn.com/abstract=3216172 or http://dx.doi.org/10.2139/ssrn.3216172

Matthew Grennan (Contact Author)

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
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Philadelphia, PA 19104
United States

HOME PAGE: http://www.wharton.upenn.edu/faculty/grennan.cfm

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Kyle Myers

Harvard University - Technology & Operations Management Unit ( email )

Boston, MA 02163
United States

Ashley Swanson

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

NBER ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Aaron Chatterji

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States

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