The Cost of Influence: How Gifts to Physicians Shape Prescriptions and Drug Costs
47 Pages Posted: 8 Apr 2022 Last revised: 11 Oct 2023
Date Written: October 7, 2023
Abstract
This paper investigates the influence of gifts - monetary and in-kind payments - from drug firms to US physicians on prescription behavior and drug costs. Using causal models and machine learning, we estimate physicians' heterogeneous responses to payments on antidiabetic prescriptions. We find that payments lead to increased prescription of brand drugs, resulting in a cost rise of $30 per dollar received. Paid physicians show higher responses when they treat higher proportions of patients receiving a government-funded low-income subsidy that lowers out-of-pocket drug costs. We estimate that Vermont's gift ban decreased diabetes drug costs by 3%, with savings of up to 8% for physicians serving highly subsidized patients.
Keywords: public health, payments to physicians, heterogeneous treatment effects, causal machine learning
JEL Classification: I11, I18, M31
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