TY - JOUR AU - Stern,Scott AU - Trajtenberg,Manuel TI - Empirical Implications of Physician Authority in Pharmaceutical Decisionmaking JF - National Bureau of Economic Research Working Paper Series VL - No. 6851 PY - 1998 Y2 - December 1998 UR - http://www.nber.org/papers/w6851 L1 - http://www.nber.org/papers/w6851.pdf N1 - Author contact info: Scott Stern MIT Sloan School of Management 100 Main Street, E62-476 Cambridge, MA 02142 Tel: 617/253-3053 Fax: 617/253-2660 E-Mail: sstern@mit.edu Manuel Trajtenberg Eitan Berglas School of Economics Tel-Aviv University Tel-Aviv 69978 ISRAEL Tel: 972-3-640-9911 Fax: 972-3-640-9908 E-Mail: manuel@post.tau.ac.il M2 - featured in NBER digest on 1999-05-01 AB - This paper studies the consequences of physician authority on pharmaceutical prescribing. Physicians engage in a costly process of particular conditions and characteristics. The relative efficiency of this matching process results from the diagnostic skill of the physician along with the investments made by the doctor in learning about different drugs. While the underlying level of physician skill or knowledge cannot be observed, differences among physicians in terms of these attributes are reflected in their prescribing behavior. We provide evidence for two major findings regarding the exercise of physician authority in this context. First, there is substantial variation in the degree to which physician prescribing is concentrated (i.e., some physicians prescribe a more diverse portfolio of drugs than others). Second, this concentration is correlated with observable drug characteristics. In particular, concentrated prescribers tend to prescribe drugs with high levels of advertising, low prices, and high (lagged) market shares. Our empirical results provide evidence for the importance of both physician effort and diagnostic ability in the prescribing process. In particular, physicians who differentiate among their patients more finely are more likely to have less concentrated prescribing portfolios and to be less sensitive to information sources which promote the use of drugs for the ER -