The Impact of Information Technology on the Diffusion of New Pharmaceuticals

Kenneth J. Arrow, Kamran Bilir, Alan T. Sorensen

NBER Working Paper No. 23257
Issued in March 2017
NBER Program(s):   HC   IO

How does information affect the diffusion of innovations? This paper evaluates the influence of physicians' access to detailed drug information on their decisions about which products to prescribe. Combining data on prescriptions and use of a point-of-care electronic drug reference database for over 125,000 individual U.S. physicians, we find that those using the reference prescribe a significantly more diverse set of products, are faster to begin prescribing new generic drugs, and also have a greater propensity to prescribe generics in general. Notably, physicians using the reference database are not faster to prescribe new branded drugs. Given that a new generic drug resembles its branded equivalent clinically, these results are consistent with database users responding primarily to the increased accessibility of non-clinical information such as drug price and insurance formulary data; the results also suggest improvements to physician information access could have important implications for the costs and efficiency of medical care. We address possible selection effects in physician types by relying on within-doctor variation and an instrument for adoption timing that is based on the marketing strategy of the drug reference firm.

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Document Object Identifier (DOI): 10.3386/w23257

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