Regulating Conflicts of Interest in Medicine Through Public Disclosure: Evidence from a Physician Payments Sunshine Law

Abstract

Hospital and healthcare administrators name high prescription drug costs as one of their largest problems. A significant body of research demonstrates that meals and honoraria from pharmaceutical firms to physicians leads to higher prescribing of expensive, brand name drugs, despite little difference in efficacy. Some administrators and scholars have advocated for mandatory disclosure of these payments in order to reduce this conflict of interest, but many practitioners believe disclosure has little effect on prescribing, and the empirical evidence is mixed. This paper uses a quasi-experiment of a 2009 payment disclosure policy in Massachusetts to estimate the causal impact of public disclosure on prescribing. The comprehensive data set includes all retail prescriptions for 262 drugs in nine drug classes written by 5,730 physicians in five states over 48 months. We show a significant postdisclosure reduction in brand name drug prescriptions by Massachusetts physicians, relative to control physicians in other states. These effects are driven by heavy prescribers of brand name drugs in the prepolicy period, particularly for drugs with large prepolicy sales forces. Effects are also detected before the first data were released, implying that the effects are not because patients or administrators responded to the disclosed payments. Instead, some physicians may have changed their payments and prescriptions behavior to avoid appearing biased. Taken in tandem with the many studies showing that pharmaceutical industry payments influence prescribing, this study suggests a strong role for mandatory public disclosure in reducing conflicts of interest in medicine and costly prescribing of brand name drugs. This paper was accepted by Stefan Scholtes, healthcare management.