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Drug Diffusion through Peer Networks: The Influence of Industry Payments

Author

Listed:
  • Leila Agha
  • Dan Zeltzer

Abstract

Pharmaceutical companies market to physicians through individual detailing accompanied by monetary or in-kind transfers. Large compensation payments to a small number of physicians account for most of this promotional spending. Studying US promotional payments and prescriptions for anticoagulant drugs, we investigate how peer influence broadens the payments' reach. Following a compensation payment, prescriptions for the marketed drug increase from both the paid physician and the paid physician's peers. Payments increase prescriptions to both recommended and contraindicated patients. Over three years, marketed anticoagulant prescriptions rose 23 percent due to payments, with peer spillovers contributing a quarter of the increase.

Suggested Citation

  • Leila Agha & Dan Zeltzer, 2022. "Drug Diffusion through Peer Networks: The Influence of Industry Payments," American Economic Journal: Economic Policy, American Economic Association, vol. 14(2), pages 1-33, May.
    • Handle: RePEc:aea:aejpol:v:14:y:2022:i:2:p:1-33
    DOI: 10.1257/pol.20200044
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    Cited by:

    1. Amaral-Garcia, S.;, 2022. "Medical Device Companies and Doctors: Do their interactions affect medical treatments?," Health, Econometrics and Data Group (HEDG) Working Papers 22/10, HEDG, c/o Department of Economics, University of York.
    2. Joshua L. Krieger & Xuelin Li & Richard T. Thakor, 2022. "Find and Replace: R&D Investment Following the Erosion of Existing Products," Management Science, INFORMS, vol. 68(9), pages 6552-6571, September.
    3. Ronja Flemming & Franziska Frölich & Norbert Donner‐Banzhoff & Leonie Sundmacher, 2023. "Diffusion of a new drug among ambulatory physicians—The impact of patient pathways," Health Economics, John Wiley & Sons, Ltd., vol. 32(4), pages 970-982, April.
    4. Raphael E Cuomo & Mingxiang Cai & Neal Shah & Tim K Mackey, 2021. "Physicians payment in the United States between 2014 and 2018: An analysis of the CMS Open Payments database," PLOS ONE, Public Library of Science, vol. 16(6), pages 1-13, June.
    5. Agostina Brinatti & Xing Guo, 2023. "Third-Country Effects of U.S. Immigration Policy," Staff Working Papers 23-60, Bank of Canada.
    6. Carey, Colleen & Lieber, Ethan M.J. & Miller, Sarah, 2021. "Drug firms’ payments and physicians’ prescribing behavior in Medicare Part D," Journal of Public Economics, Elsevier, vol. 197(C).
    7. Newham, Melissa & Valente, Marica, 2024. "The cost of influence: How gifts to physicians shape prescriptions and drug costs," Journal of Health Economics, Elsevier, vol. 95(C).
    8. Avdic, Daniel & Blankart, Katharina, 2021. "A Hard Look at “Soft” Cost‐control Measures in Healthcare Organizations: Evidence from Preferred Drug Policies in Germany," CINCH Working Paper Series (since 2020) 74978, Duisburg-Essen University Library, DuEPublico.
    9. David M. Cutler & J. Travis Donahoe, 2024. "Addiction, Thick Market Externalities, and the Persistence of the Opioid Epidemic," NBER Working Papers 32055, National Bureau of Economic Research, Inc.
    10. Sofia Amaral-Garcia, 2020. "Medical Device Companies and Doctors: Do their Interactions Affect Medical Treatments ?," Working Papers ECARES 2020-18, ULB -- Universite Libre de Bruxelles.
    11. Gruber, Jonathan & Lin, Mengyun & Yi, Junjian, 2023. "The largest insurance program in history: Saving one million lives per year in China," Journal of Public Economics, Elsevier, vol. 226(C).
    12. Lawler, Emily C. & Skira, Meghan M., 2022. "Information shocks and pharmaceutical firms’ marketing efforts: Evidence from the Chantix black box warning removal," Journal of Health Economics, Elsevier, vol. 81(C).
    13. Méndez, Susan J. & Scott, Anthony & Zhang, Yuting, 2021. "Gender differences in physician decisions to adopt new prescription drugs," Social Science & Medicine, Elsevier, vol. 277(C).
    14. Sebastian Calónico & Rafael Di Tella & Juan Cruz Lopez del Valle, 2023. "The Political Economy of a “Miracle Cure”: The Case of Nebulized Ibuprofen and its Diffusion in Argentina," NBER Working Papers 31781, National Bureau of Economic Research, Inc.
    15. Kelli Marquardt & Conor Ryan, 2023. "The Role of Information in Pharmaceutical Advertising: Theory and Evidence," Working Paper Series WP 2023-40, Federal Reserve Bank of Chicago.
    16. Carey, Colleen & Daly, Michael & Li, Jing, 2025. "Nothing for something: Marketing cancer drugs to physicians increases prescribing without improving mortality," Journal of Public Economics, Elsevier, vol. 242(C).

    More about this item

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology; Plastics
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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