Regulating Conflicts of Interest through Public Disclosure: Evidence from a Physician Payments Sunshine Law

48 Pages Posted: 10 Mar 2020

See all articles by Matthew Chao

Matthew Chao

Williams College

Ian Larkin

University of California, Los Angeles (UCLA) - Anderson School of Management

Date Written: February 16, 2020

Abstract

Hospital and health care administrators have often named prescription drug costs as one of their largest cost problems. Relatedly, a significant body of research demonstrates that meals and honoraria from pharmaceutical firms to physicians leads to higher prescribing of expensive, brand name drugs. Some administrators and scholars have advocated for mandatory disclosure of these payments in order to reduce this conflict of interest, but many practitioners believe disclosure has little effect on prescribing. This paper uses a quasi-experiment of a 2009 payment disclosure policy in Massachusetts to estimate the causal impact of public disclosure on prescribing. The comprehensive dataset includes all retail prescriptions for 262 drugs in 9 drug classes written by 5730 physicians in five states over 48 months. We show a significant post-disclosure reduction in brand name drug prescriptions by Massachusetts physicians, relative to control doctors in other states. These effects are driven by heavy prescribers of brand name drugs in the pre-policy period, particularly for drugs with large pre-policy sales forces. Effects are also detected before the first data were released, implying that the effects are not because patients or administrators responded to the disclosed payments. Instead, some physicians may have reduced payments after disclosure is mandated, leading to changes in their prescriptions. Taken in tandem with the many studies showing that industry payments influence prescribing, this study suggests a strong role for mandatory public disclosure in reducing conflicts of interest in medicine and costly prescribing of brand name drugs.

Keywords: Conflicts of Interest, Disclosure, Social Image, Pharmaceutical Marketing, Reciprocity

JEL Classification: D91, I18, K32, M31, M38

Suggested Citation

Chao, Matthew and Larkin, Ian, Regulating Conflicts of Interest through Public Disclosure: Evidence from a Physician Payments Sunshine Law (February 16, 2020). Available at SSRN: https://ssrn.com/abstract=3539990 or http://dx.doi.org/10.2139/ssrn.3539990

Matthew Chao (Contact Author)

Williams College ( email )

Williamstown, MA 01267
United States

Ian Larkin

University of California, Los Angeles (UCLA) - Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

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