Ashley Swanson

Physician-Industry Interactions: Persuasion and Welfare

We study how firms target and influence expert intermediaries, and the welfare impact of banning those relationships. In the case study we investigate, manufacturers of statins, a class of cholesterol-lowering drugs, provide meals and other payments to physicians. Leveraging variation in exposure to spillovers from academic medical centers’ conflict-of-interest policies for identification, we estimate significant heterogeneity in the effects of payments on prescribing, with firms targeting highly responsive physicians. Payments offset the negative effects of oligopoly pricing and other frictions on utilization, but at great expense to consumers and insurers because payments promote high-price branded drugs. To understand the net effects of payments in the presence of various factors that may drive a wedge between physicians’ decisions and patients’ best interests, we introduce a decision error into our framework and explore the assumptions under which payments benefit consumers. We calibrate this decision error using clinical trial results on statin effectiveness for a similar population. This exercise suggests that, in the case of statins, firm payments to physicians benefit consumers due to significant underprescribing at baseline.

Preferred Pharmacy Networks and Drug Costs

Selective contracting is an increasingly popular tool for reducing health care costs, but these savings must be weighed against consumer surplus losses from restricted access. In both public and private prescription drug insurance plans, issuers utilize preferred pharmacy networks to reduce drug prices. We show that, in the Medicare Part D program, drug plans with more restrictive preferred pharmacy networks, and plans with fewer enrollees who are insensitive to preferred pharmacy discounts on copays, pay lower retail drug prices. We then use estimates of plan and pharmacy demand to estimate the first-order costs and benefits of selective contracting in the presence of enrollees with heterogeneous sensitivity to preferred supplier incentives. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Prescription drug use under Medicare Part D: A linear model of nonlinear budget sets

Medicare Part D enrollees face a complicated decision: they dynamically choose prescription drug consumption in each period given difficult-to-find prices and a non-linear budget set. We use Part D claims data to estimate a flexible model of consumption that accounts for non-linear prices, dynamic responses, and salience. We use reduced form price responses from a linear regression of consumption on coverage range prices to compare performance under several models of behavior. We find small price elasticities, substantial myopia, and that salient characteristics impact consumption beyond their effect on prices. A hyperbolic discounting model with salience fits the data best.