Can Disclosure of Pharmaceutical Industry Payments Induce Cost Conscious Prescribing? Evidence from New Jersey

Abstract

This paper examines whether disclosure of pharmaceutical industry payments to physicians reduces branded prescribing by disclosed physicians in hospital care. The basis of disclosure is the threat of reputational consequences; however, it is not clear that reputational incentives (either social or financial) will be particularly strong in the hospital context. Using hospital discharge data from the New Jersey Department of Health, I exploit a unique natural experiment in which physicians are observed after receiving payments but before they are aware that they will be disclosed. Using differences-in-differences to compare within-physician prescriptions of branded drugs before and after their payments were disclosed, I find that disclosure does not induce cost consciousness as hoped: disclosure led to a 0.8 percentage point increase in the share of branded drugs by disclosed physicians relative to undisclosed physicians.