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arXiv · 2203.01778

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

Melissa Newham·Marica Valente
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Abstract

This paper studies how gifts - monetary or in-kind payments - from drug firms to physicians in the US affect prescriptions and drug costs. We estimate heterogeneous treatment effects by combining physician-level data on antidiabetic prescriptions and payments with causal inference and machine learning methods. We find that payments cause physicians to prescribe more brand drugs, resulting in a cost increase of $30 per dollar received. Responses differ widely across physicians, and are primarily explained by variation in patients' out-of-pocket costs. A gift ban is estimated to decrease drug costs by 3-4%. Taken together, these novel findings reveal how payments shape prescription choices and drive up costs.

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Melissa Newham, Marica Valente. 2022-03-03. The Cost of Influence: How Gifts to Physicians Shape Prescriptions and Drug Costs. https://arxiv.org/abs/2203.01778

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