The Cost of Influence: How Gifts to Physicians Shape Prescriptions and Drug Costs

47 Pages Posted: 8 Apr 2022 Last revised: 11 Oct 2023

See all articles by Melissa Newham

Melissa Newham

ETH Zürich - CER-ETH - Center of Economic Research at ETH Zurich; KU Leuven

Marica Valente

University of Innsbruck

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

Suggested Citation

Newham, Melissa and Valente, Marica, The Cost of Influence: How Gifts to Physicians Shape Prescriptions and Drug Costs (October 7, 2023). Available at SSRN: https://ssrn.com/abstract=4048089 or http://dx.doi.org/10.2139/ssrn.4048089

Melissa Newham (Contact Author)

ETH Zürich - CER-ETH - Center of Economic Research at ETH Zurich

Zürichbergstrasse 18
Zurich, 8092
Switzerland

KU Leuven ( email )

Oude Markt 13
Leuven, Vlaams-Brabant 3000
Belgium
3000 (Fax)

Marica Valente

University of Innsbruck ( email )

Universitätsstr. 15
Innsbruck, 6020
Austria

HOME PAGE: http://https://sites.google.com/view/maricavalente

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
309
Abstract Views
1,100
Rank
202,656
PlumX Metrics