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Drug Diffusion Through Peer Networks: The Influence of Industry Payments

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  • Leila Agha
  • Dan Zeltzer

Abstract

Pharmaceutical companies' marketing efforts primarily target physicians, often through individual detailing that entails monetary or in-kind transfers. We study how peer influence broadens these payments' reach beyond the directly paid physicians. Combining Medicare prescriptions and Open Payments data for anticoagulant drugs, we document that pharmaceutical payments target highly connected physicians. We exploit within-physician variation in payment exposure over time to estimate the payments' influence. Unlike the paid doctor, peer physicians are not directly selected by the pharmaceutical company on the basis of their expertise or enthusiasm for the target drug. Yet, following a large payment, prescriptions for the target drug increase both by the paid physician and the paid physician's peers. These peer effects influence doctors who share patients with the paid physician, even when the two doctors are not affiliated with the same group practice. We find no evidence that payments reduce prescriptions among high-risk patients. Over the period 2014--2016, physician payments associated with anticoagulant marketing increased the drugs' prescription volume by 23 percent, with peer spillovers contributing a quarter of the increase.

Suggested Citation

  • Leila Agha & Dan Zeltzer, 2019. "Drug Diffusion Through Peer Networks: The Influence of Industry Payments," NBER Working Papers 26338, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:26338
    Note: AG HC HE IO PE PR
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    References listed on IDEAS

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    1. Raghuram Iyengar & Christophe Van den Bulte & Thomas W. Valente, 2011. "Opinion Leadership and Social Contagion in New Product Diffusion," Marketing Science, INFORMS, vol. 30(2), pages 195-212, 03-04.
    2. Matthew Grennan & Kyle Myers & Ashley Swanson & Aaron Chatterji, 2018. "Physician-Industry Interactions: Persuasion and Welfare," NBER Working Papers 24864, National Bureau of Economic Research, Inc.
    3. Charles F. Manski, 1993. "Identification of Endogenous Social Effects: The Reflection Problem," Review of Economic Studies, Oxford University Press, vol. 60(3), pages 531-542.
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    More about this item

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • 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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