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Mandatory disclosure: Theory and evidence from industry-physician relationships

Author

Listed:
  • Chen, Daniel L.
  • Levonyan, Vardges
  • Reinhart, S.Eric
  • Taksler, Glen

Abstract

We present and test a model of mandatory disclosure. The effects of disclosure laws on what is being disclosed are typically unknown since data on disclosed activity rarely exist in the absence of disclosure laws. We exploit data from legal settlements disclosing $316 million in pharmaceutical company payments to 316,622 physicians across the U.S. from 2009-2011. States were classified as having strong, weak, or no disclosure based on whether the data was reported only to state authorities (weak) or were publicly available (strong). Strong disclosure law was associated with reduced payments among doctors accepting less than $100 and increased payments among doctors accepting greater than $100. Weak disclosure states, despite imposing administrative compliance costs to industry, were indistinguishable from no disclosure states. This result suggests that the mechanism for fewer small payments in strong disclosure states was physicians’ reduced willingness to accept payments rather than the imposition of significant administrative costs on industry. We conduct additional analysis holding fixed the cost for pharmaceutical companies of disclosing data, which was possible because Massachusetts began releasing payment data online during our sample period. Differences-in-differences analyses and multiple regression yield similar estimates for each payment category: Mandatory disclosure reduced payments for speaking and for meals but increased payments for consulting activities. Significant disclosure aversion reducing conflicts of interest is consistent with the policy goals of mandatory disclosure, though the increased payments among those receiving large payments may have been unintended.

Suggested Citation

  • Chen, Daniel L. & Levonyan, Vardges & Reinhart, S.Eric & Taksler, Glen, 2016. "Mandatory disclosure: Theory and evidence from industry-physician relationships," TSE Working Papers 16-716, Toulouse School of Economics (TSE).
  • Handle: RePEc:tse:wpaper:31115
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    Cited by:

    1. Tong Guo & Srinivasaraghavan Sriram & Puneet Manchanda, 2020. "“Let the Sunshine In”: The Impact of Industry Payment Disclosure on Physician Prescription Behavior," Marketing Science, INFORMS, vol. 39(3), pages 516-539, May.
    2. Bernardita Vial & Pilar Alcalde, 2020. "Intermediary Commissions in a Regulated Market with Heterogeneous Customers," Documentos de Trabajo 532, Instituto de Economia. Pontificia Universidad Católica de Chile..

    More about this item

    Keywords

    Physician Payment; Conflicts of Interest; Ethics;
    All these keywords.

    JEL classification:

    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law

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