Curbing Pharma Influence: The Effect of Marketing Restrictions on Physicians’ Prescribing Behavior and Healthcare Expenditure

Abstract

The impact of direct-to-physician marketing and its regulation on prescribing behavior, drug expenditures, and patient outcomes remains contested. The pharmaceutical industry argues that such marketing keeps doctors informed about new medicines, while critics express concerns about potential distortions in prescribing patterns, prompting calls for stricter regulation. Some states have begun adopting such regulations, but little is known about their effects on prescribing behavior and healthcare expenditures. New Jersey implemented a policy in January 2018, imposing significant restrictions on direct-to-physician marketing, including limits on meal payments and caps on remuneration for consulting and speaking engagements. Using this policy as an exogenous source of variation and two federal administrative databases in a difference-in-difference event-study design, I estimate a 23% reduction in the dollar value of marketing received and a 4.4% decrease in the prescribing of marketed drugs by New Jersey prescribers compared to their peers in New York and Pennsylvania. I also estimate a 6% relative decline in overall drug expenditures, driven by a welfare-enhancing shift from branded to generic prescribing. The policy’s impacts were most pronounced among prescribers who received the highest payments prior to implementation, particularly for promotional speaking, with no significant change observed among those receiving limited or no payments. The policy equally affected both new and established drugs, suggesting that doctor-pharma financial ties are not purely informational.

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