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Empirical Implications of Physician Authority in Pharmaceutical Decisionmaking

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  • Scott Stern
  • Manuel Trajtenberg

Abstract

This paper studies the consequences of physician authority on pharmaceutical prescribing. Physicians engage in a costly process of particular conditions and characteristics. The relative efficiency of this matching process results from the diagnostic skill of the physician along with the investments made by the doctor in learning about different drugs. While the underlying level of physician skill or knowledge cannot be observed, differences among physicians in terms of these attributes are reflected in their prescribing behavior. We provide evidence for two major findings regarding the exercise of physician authority in this context. First, there is substantial variation in the degree to which physician prescribing is concentrated (i.e., some physicians prescribe a more diverse portfolio of drugs than others). Second, this concentration is correlated with observable drug characteristics. In particular, concentrated prescribers tend to prescribe drugs with high levels of advertising, low prices, and high (lagged) market shares. Our empirical results provide evidence for the importance of both physician effort and diagnostic ability in the prescribing process. In particular, physicians who differentiate among their patients more finely are more likely to have less concentrated prescribing portfolios and to be less sensitive to information sources which promote the use of drugs for the

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6851.

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Date of creation: Dec 1998
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Handle: RePEc:nbr:nberwo:6851

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  1. Aghion, Philippe & Tirole, Jean, 1997. "Formal and Real Authority in Organizations," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 105(1), pages 1-29, February.
  2. Steven T. Berry, 1994. "Estimating Discrete-Choice Models of Product Differentiation," RAND Journal of Economics, The RAND Corporation, vol. 25(2), pages 242-262, Summer.
  3. Weisbrod, Burton A, 1991. "The Health Care Quadrilemma: An Essay on Technological Change, Insurance, Quality of Care, and Cost Containment," Journal of Economic Literature, American Economic Association, vol. 29(2), pages 523-52, June.
  4. Glenn Ellison & Edward L. Glaeser, 1994. "Geographic Concentration in U.S. Manufacturing Industries: A Dartboard Approach," NBER Working Papers 4840, National Bureau of Economic Research, Inc.
  5. Sara Ellison Fisher & Iain Cockburn & Zvi Griliches & Jerry Hausman, 1997. "Characteristics of Demand for Pharmaceutical Products: An Examination of Four Cephalosporins," RAND Journal of Economics, The RAND Corporation, vol. 28(3), pages 426-446, Autumn.
  6. Jonathan Gruber & Maria Owings, 1996. "Physician Financial Incentives and Cesarean Section Delivery," RAND Journal of Economics, The RAND Corporation, vol. 27(1), pages 99-123, Spring.
  7. McGuire, Thomas G. & Pauly, Mark V., 1991. "Physician response to fee changes with multiple payers," Journal of Health Economics, Elsevier, Elsevier, vol. 10(4), pages 385-410.
  8. Thomas G. McGuire & Mark V. Pauly, 1991. "Physician Response to Fee Changes with Multiple Payers," Papers, Boston University - Industry Studies Programme 0015, Boston University - Industry Studies Programme.
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  1. > Economic Development Technological Change, and Growth > Technological Change: Choices and Consequences > Technology Assessment > Health Technology Assessment
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Cited by:
  1. Lim, Kwanghui, 2004. "The relationship between research and innovation in the semiconductor and pharmaceutical industries (1981-1997)," Research Policy, Elsevier, Elsevier, vol. 33(2), pages 287-321, March.
  2. Glenn Ellison, 2002. "The Slowdown of the Economics Publishing Process," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 110(5), pages 947-993, October.
  3. Sorisio, Enrico & Strøm, Steinar, 2009. "Innovation and market dynamics in the EPO market," HERO On line Working Paper Series, Oslo University, Health Economics Research Programme 2006:3, Oslo University, Health Economics Research Programme.
  4. John Cawley & John A. Rizzo, 2005. "The Competitive Effects of Drug Withdrawals," NBER Working Papers 11223, National Bureau of Economic Research, Inc.
  5. Balsa, Ana I. & McGuire, Thomas G., 2001. "Statistical discrimination in health care," Journal of Health Economics, Elsevier, Elsevier, vol. 20(6), pages 881-907, November.
  6. Karine Lamiraud & Pierre-Yves Geoffard, 2006. "Therapeutic non adherence: a rational behavior revealing patient preferences ?," PSE Working Papers halshs-00589121, HAL.
  7. Paul Ellickson & Scott Stern & Manuel Trajtenberg, 2001. "Patient Welfare and Patient Compliance -- An Empirical Framework for Measuring the Benefits from Pharmaceutical Innovation," NBER Chapters, in: Medical Care Output and Productivity, pages 539-564 National Bureau of Economic Research, Inc.

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