Mandatory disclosure: Theory and evidence from industry-physician relationships

Article in a working paper series

Daniel L. Chen, Vardges Levonyan, S.Eric Reinhart and Glen Taksler, "Mandatory disclosure: Theory and evidence from industry-physician relationships", IAST working paper, n. 16-57, October 2016.

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.

Keywords

Physician Payment
Conflicts of Interest
Ethics

JEL codes

I18: Health: Government Policy; Regulation; Public Health
K23: Regulated Industries and Administrative Law

IAST Discipline

Law
Print this page