The impact of reducing pharmaceutical industry payments on physician prescribing

Policymakers in the U.S. have expressed the hope that reducing payments from pharmaceutical companies to physicians will result in lower drug expenditures by reducing branded prescribing. This paper analyzes how the overall use and charges for generic and branded prescriptions change in an inpatient setting after a physician has had a payment from a pharmaceutical company reduced or cut off entirely. This research analyzes the impact of a pharmaceutical company cutting speaking payments to physicians in order to use fewer physicians more often, so the removal of payments is unrelated to a change in the company's product offering. Using hospital discharge data from New Jersey, this research employs a within‐physician differences‐in‐differences design and finds that physicians who have payments reduced do not alter the number of or charges for prescriptions relative to unpaid physicians, neither do physicians who have their payments cut off but are still being paid by other pharmaceutical companies. Physicians who have their payments cut but who are not being paid by other companies, however, increase in the charges for and number of prescriptions written (both branded and generic) relative to their unpaid peers.