October 16, 2020

Brown Bag Seminar Industrial Economics

The Interaction between Industry Payments to Physicians, Insurance and Drug Costs: Evidence from Medicare Part D


October 16, 2020
10:30 - 11:00


Online seminar via Cisco Webex


Melissa Newham, DIW Berlin und KU Leuven

This is an online seminar using Cisco Webex. You will receive the login data with the invitation to the talk.

Abstract:   High and growing prescription drug costs in the United States are a major concern for policy makers. This paper focuses on the extent to which promotional gifts and other transfers made to physicians by pharmaceutical companies cause physicians to prescribe more expensive medicines. In our analysis, we link data from a federal database on the universe of industry payments between 2014 and 2017 to prescribing behavior in Medicare Part D. We develop a novel empirical strategy that uses data on the prescription behavior of physicians in Vermont, where a strict ban on industry payments to physicians is in place, combined with machine learning techniques to construct the counterfactual outcome for physicians who receive payments in the nearby states of New Hampshire and Maine. Preliminary findings indicate that a gift ban, such as the one implemented in Vermont in 2009, has the potential to result in a 3% decline in the total cost to treat diabetes. We investigate heterogeneity in the treatment effect and find that physicians who have a high share of patients with a low-income subsidy, and thus lower out-of-pocket expenditures, prescribe relatively more brand drugs and expensive drugs in response to industry payments. Our findings illustrate how industry payments interact with insurance to drive up health care costs.


Melissa Newham, DIW Berlin & KU Leuven