Impact of the Physician Payments Sunshine Act on Prescription Drug Utilization and Spending

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PROJECT SUMMARY The study proposes to evaluate the early impact of the Physician Payments Sunshine Act (PPSA), an Affordable Care Act provision that requires public disclosure of payments made from medical product manufacturers, including pharmaceutical companies, to physicians starting August 2013. The long-term goal of this proposal is to contribute to our understanding of how disclosure of financial relationships between physicians and the pharmaceutical industry impacts healthcare affordability, efficiency and cost transparency. The study has the following specific aims: 1) determine the effects of the PPSA on overall utilization of and spending on prescription drugs in the two drug classes: statins and antipsychotics; 2) determine the effects of the PPSA on utilization and spending separately for brand-name drugs with and without generic equivalents as well as generic drugs in each class; 3) examine heterogeneity in the effects of the PPSA by physician specialty, prescribing volume in the pre-PPSA period, and payment from pharmaceutical companies. We propose to analyze data from Health Care Cost Institute containing medical and pharmacy claims from three national insurers covering 50 million individuals. Our quasi-experimental research design exploits the fact that two states, Massachusetts and Vermont, implemented their own public disclosure legislations similar to the PPSA before 2013. We will employ difference-in-difference and event study approaches, using MA and VT as the control group. Our treatment group includes six of the remaining Northeastern states without reporting mandates prior to the PPSA. Therefore, our research design allows us to estimate the differences in utilization and spending measures before versus after the implementation of the PPSA among commercially insured patients in the treatment states relative to the control states. The proposed research is expected to provide one of the first pieces of rigorous evidence on the effectiveness of the PPSA in improving the efficiency and affordability of prescription drug provision, as well as the underlying mechanism of such effects. It will also shed light on potential unintended consequences of the PPSA. It will provide timely and critical information as well as further legislative efforts aimed at curbing financial relationships between pharmaceutical companies and physicians.