Equal Prescriptions for Unequal Patients

Doctors with highly concentrated portfolios tend to prescribe drugs with higher levels of advertising and high market share.

A cornerstone of the American health care system lies in the authority granted to physicians to prescribe drugs to patients. But how does physician authority and ability actually affect your treatment?

In Empirical Implications of Physician Authority in Pharmaceutical Decisionmaking (NBER Working Paper No. 6851) , Scott Stern and Manuel Trajtenberg tackle the implications of physician authority by studying pharmaceutical prescribing. Patients want the right drug for their illness, but physicians' diagnostic abilities vary. What's more, the incentives for doctors to invest in understanding subtle differences in drug effectiveness may vary considerably. Not surprisingly, then, the authors unearth evidence of systematic differences in physician behavior.

In their analysis, they argue that physicians with top-notch diagnostic skills would prescribe a more diverse portfolio of drugs. Superior medical discrimination would show up in a willingness to dip into a wide array of drugs to deal with a patient's particular problem. Less discriminating physicians in contrast would rely more on advertising, popularity, and other low-cost sources of information for their prescription judgment. For example, if a certain anti-depressant is well-known and has a large market share, it's likely that the less-skilled doctor would prescribe it to his patients without regard to the finer distinctions between the specific conditions of each of them. "By focusing on concentration in prescribing as a key characteristic of physicians, we link these differences in prescription behavior to more fundamental but mostly unobservable features of physicians such as their diagnostic ability," write the authors.

Their results, based on a 1993 and 1994 sample of over 1,500 prescriptions for depression and hypertension, are compelling. They find a great deal of variation among physicians in their portfolio of drugs. Doctors with highly concentrated portfolios tend to prescribe drugs with higher levels of advertising and high market share. There is weaker evidence for the influence of low price and positive reviews in the scientific literature. These doctors seem more likely to relate to each patient as the "average" patient rather than as an idiosyncratic individual.

In sharp contrast, "physicians who differentiate among their patients more finely are more likely to have less concentrated portfolios and to be less sensitive to information sources which promote the use of drugs for the 'average' patient," they write.

-- Chris Farrell