Melissa Newham, ETH Zürich - Who pays for gifts to physicians?

Title: Who pays for gifts to physicians? Heterogeneous effects of industry payments on drug costs

Abstract: This paper estimates the impact of gifts - monetary or in-kind payments - from pharmaceutical firms on physicians’ prescription decisions and drug costs in the US. Using exhaustive micro data on prescriptions for anti-diabetic drugs from Medicare Part D, we find that payments cause physicians to prescribe more brand drugs. On average, for every dollar spent, payments generate a $6 increase in drug costs. We then estimate heterogeneous causal effects via machine-learning methods. We find large heterogeneity in responses to payments across physicians. Differences are predominantly explained by the insurance coverage of patients: physicians prescribe more brand drugs in response to payments when patients benefit from subsidies that reduce out-of-pocket drug costs. Finally, we estimate that a gift ban would reduce drug costs to treat diabetes by 3%.

Presenter:  Melissa Newham, ETH Zürich

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