Upload
others
View
2
Download
0
Embed Size (px)
Citation preview
Asymmetric Social Interactions in Physician Prescription
Behavior: The Role of Opinion Leaders
Harikesh Nair
Assistant Professor of Marketing, Graduate School of Business
Stanford University, 518 Memorial Way, Stanford, CA 94305
Phone: 650-723-9675; Fax: 650-725-7979
Puneet Manchanda
Associate Professor of Marketing, Ross School of Business
University of Michigan, 701 Tappan St., Ann Arbor, MI 48109
Phone: 734-5591; Fax: 734-936-8716
Tulikaa Bhatia
Assistant Professor of Marketing, Rutgers Business School
94 Rockefeller Road, Piscataway, NJ 08854, Phone: 732-445-5274
Past versions: June 2006, May 2008
This version: December 3, 2008
Abstract
We quantify the impact of social interactions and peer effects in the context of prescription choices by physicians. Using detailed individual-level prescription data, along with self-reported social network information, we document that physician prescription behavior is significantly influenced by the behavior of research-active specialists, or “opinion leaders” in the physician’s reference group. We leverage a natural experiment in the category, whereby new guidelines released about the therapeutic nature of the focal drug generated conditions where physicians were more likely to be influenced by the behavior of specialist physicians in their network. We find important, statistically significant peer effects that are robust across model specifications. We use the estimates to measure the incremental value to firms of directing targeted sales-force activity to these opinion leaders, and present estimates of the social multiplier of detailing in this category. KeyKeyKeyKey----wordswordswordswords: Social Interactions, Peer effects, Social Multiplier, Contagion, Physician Prescription Behavior, Pharmaceutical Industry.
* The authors are listed in reverse alphabetical order. The authors would like to thank Ron Burt,
Pradeep Chintagunta, Tim Conley, Wes Hartmann, Peter Reiss, Christophe Van den Bulte, Raphael
Thomadsen and seminar participants at Berkeley (Haas), Chicago GSB (O&M), Christian Albrechts
University, Erasmus, Michigan (Information Systems; College of Pharmacy) and participants at Frank
M. Bass (Dallas, 2007), INFORMS Practice of Marketing Science (Wharton, 2007), IOFest (Stanford,
2006), Marketing Science (Pittsburgh, 2006) and SICS (Berkeley, 2006) conferences, and at the 7th
Choice Symposium (Wharton, 2007) for feedback; and an anonymous pharmaceutical company for
providing the data. Manchanda would like to thank the Kilts Center for Marketing and the True North
Communications faculty research fund at the University of Chicago for research assistance. The
authors can be contacted via e-mail at [email protected] (Nair),
[email protected] (Manchanda) and [email protected] (Bhatia). The usual
disclaimer applies.
1
1. Introduction
Marketers, sociologists and economists have traditionally been interested in the role of
interpersonal communication (i.e., communication outside the firm’s control) on consumer
choice and consumption behavior. These interactions have been variously labeled as “peer-
effects,” “contagion” and “word-of-mouth effects.” In this paper, we test and provide empirical
support for asymmetric peer-effects. These effects arise when some consumers exert a
stronger influence on the attitudes and behavior of other consumers than vice versa. Such
consumers have typically been labeled “opinion leaders” in the literature (Rogers 2003,
Chapter 8). There is little research in marketing that has tested for the existence of these
asymmetric peer-effects.
The context of our analysis is prescription drug choice by physicians. An asymmetric
social interaction or “peer effect” arises in this setting because non-specialist physicians may
rely on prominent physicians, the “opinion leaders,” to help reduce the uncertainty around
their prescription choices. The role of opinion leaders becomes most salient when changes
occur in the therapeutic environment, as these typically lead to increased uncertainty about
drug efficacy among the non-specialist physicians. The pharmaceutical industry believes in
the existence of such opinion leaders, and has invested in targeting marketing activities at
opinion leaders (CIE 2004). However, to date, there is little empirical evidence that opinion
leaders “matter” i.e., significantly influence the opinions and behavior of other physicians.
Coleman, Katz and Menzel 1966 (the classic study in this field) found no asymmetries in peer
effects between nominators and their opinion leader’s adoption pattern for a new drug.
Recent work using the same data as that study found no peer effects at all (Van den Bulte
and Lillien 2001). Finally, using simulations based on computational models of network
tipping, Watts and Dodds (2007) also find little or no role for opinion leaders. Our main
empirical question therefore is to test for, and to measure the extent of asymmetric peer
effects in this category. We then use our analysis to explore the implications of these peer
effects for targeted allocation of marketing effort in the form of personal sales-calls or
“detailing” to these opinion leaders. More generally, the issues we address in econometrically
identifying and measuring peer effects are relevant across a broad range of social networking
situations in which firms are interested in understanding the return on investment of
marketing activity to opinion leaders (e.g. Godes and Mayzlin 2004).
Asymmetric social interactions have important implications for the allocation of
marketing effort by firms. If present, they increase the return-on-investment to marketing
2
activity targeted at agents having stronger influence. In the pharmaceutical context, if
actions of opinion leaders have a true causal effect on the prescription behavior of other
physicians, then marketing effort directed at the opinion leader will generate a multiplier
effect. The multiplier arises because an incremental sales-call to an opinion leader increases
the opinion leader’s prescriptions, and on the margin, induces the physicians he influences to
prescribe more. The extent to which net prescriptions are higher due to these cross-physician
spillovers is the social multiplier (c.f. Becker and Murphy 2000). Given that the
pharmaceutical industry in the US currently sets physician-level detailing based on past
prescription volume (c.f. Manchanda, Rossi and Chintagunta 2004), the presence of
significant social multipliers would imply that the return-on-investment of detailing to
opinion leaders may be much higher than is suggested by just the opinion leader’s
prescription volume. We use our estimates to measure the social multiplier of detailing in
our data.
To test for these effects, we leverage a novel dataset that is based on a combination of
primary (survey) and secondary (behavioral) data. Broadly speaking, there are five major
challenges that arise in measuring these effects. First, some effort needs to be made to
identify the opinion leaders that constitute the reference group for a given physician. Second,
once these opinion leaders have been identified, some change in the environment needs to
take place in a manner that this change affects the attitudes and/or behavior of the opinion
leader. Third, these changes then needs to be transmitted to the agents whose opinions
and/or behavior is affected by the opinion leader’s behavior (or opinions). Fourth, there
should be a resultant change in the behavior of these consumers. Finally, we need to be able
to distinguish between correlation and causation in the observed behavior of physicians and
their opinion leaders. As we discuss below, correlation in behavior can arise from three
possible sources – endogenous group formation, correlated unobservables and/or simultaneity
– and we need to be able to control for these explanations. As the past literature on social
interactions has pointed out (c.f. Manski 1993, Moffitt 2001), solving this identification
problem is a formidable challenge. Our dataset, which comes from the pharmaceutical
industry, enable us to formulate empirical strategies that address most, if not all, of these
issues. Our data contain survey information on the social networks of physicians, as well as
individual-level panel data on the prescription behavior of these physicians and the doctors
they nominate. We believe our identification strategy is novel to the literature, and is
relevant across a broad range of situations involving the analysis of data arising from social
interactions.
3
Our analysis of the data reveals significant evidence for peer effects. These effects
persist after allowing for endogenous group formation, targeted marketing activity,
correlated unobservables and simultaneity, and are also robust to functional form. We find
that opinion leaders behavior significantly affects physician behavior after an exogenous
change in the market that resulted in a change in the therapeutic environment.
Interestingly, in the changed environment, we find that peer effects have more marginal
impact on prescriptions than targeted detailing. Our empirical results also find that peer
effects in this category are “asymmetric” in the sense that opinion leaders’ prescriptions are
not statistically significantly affected by the prescription pattern of the physicians they
influence.
We then use our results to explore the implications of targeting detailing at the
opinion leaders. We quantify the direct effect of detailing on opinion leader prescriptions, as
well as the indirect effect on prescriptions by the corresponding nominating physician
generated via peer influence. We find that for the average opinion leader, who influences
1.56 physicians, social interactions alone provide an additional 5% increase in prescription
revenue. This implies a social multiplier of detailing in this category of about 1.05. For the
top opinion leader, who influences 17 physicians, we find a social multiplier of 1.35. The
large differences underscore the importance of both the correct identification of opinion
leaders, as well the identification of top influencers among these opinion leaders in order to
make optimal resource allocation decisions.
In summary, our key contributions are as follows. First, we document the existence of
asymmetric peer effects amongst a specific social network. Specifically, we provide evidence
for these effects in the domain of physician prescription decisions. Further, we document the
finding that peer influence can significantly impact on behavior even in stable, mature
categories. These are novel findings that add to the literature on peer effects in the presence
of marketing, especially in the pharmaceutical industry. Second, we discuss and clarify how
the identification issues that arise in measuring and testing for causal peer effects may be
overcome for data-rich settings such as ours. Third, we measure empirically the extent to
which peer effects matter in driving prescriptions of both physicians and opinion leaders, and
show that these are robust to functional form and alternative specifications of peer effects.
Further, we use our estimates to derive implications for marketing resource allocation for
firms in the industry, and present estimates of the social multiplier effects of detailing.
Finally, the increasing salience of social networks in the economy has generated renewed
interest among theorists in many fields to incorporate aspects of social networks into their
4
frameworks. Robust evidence of social effects increases the practical, real-world relevance of
these models.
The rest of the paper is organized as follows. The next section discusses the industry
background and reviews the relevant literature. Sections 3 and 4 present the model and
describe the data. Section 5 presents results from estimation. The last section concludes.
2. Industry Background and Related Literature
2.1 Industry Background
As mentioned above, the pharmaceutical industry strongly believes that opinion leaders (also
referred to as thought leaders) play an important role in the adoption and usage of new
products by practicing physicians. These opinion leaders are typically believed to be
physicians who have an academic title with the department of a medical school and have
contributed peer-reviewed publications (Tan 2003). Both these characteristics are believed to
lend credibility and authority to their opinions and beliefs about various products.
As would be expected, the industry believes that the role of the opinion leaders is the
strongest when a new product is launched (or is about to be launched). For example, the
industry spends an estimated 24% of their new product commercialization budget on opinion
leader activities (CIE 2004). The same study also showed that the 15 largest pharmaceutical
manufacturers spend 32% of their total marketing expenditures on opinion leaders. Opinion
leader activity is also stepped up when environmental changes occur. In the pharmaceutical
industry, these are typically the launch of a new competitive drug, the withdrawal of a drug,
issue of new guidelines by the Department of Health and Human Service and/or the National
Institutes of Health (NIH) or the emergence of new scientific evidence on the efficacy of a
drug or class of drugs. Physicians also socialize at meetings and symposia, and exchange
knowledge through scientific and medical journal articles. These interpersonal
communications between physicians can provide information to a physician about the
efficacy of new drugs in trials and in practice, new trends in the treatment of particular
diseases of interest, availability of generic substitutes, etc. As noted before, these information
flows can potentially affect the prescribing behavior of the influenced physicians.
Marketing to opinion leaders is typically managed by direct contact with these
physicians through detailing. In some pharmaceutical companies, special teams consisting of
higher caliber detailers carry out most of this detailing activity. Members of such teams are
typically designated “Medical Scientific Liaisons” (MSLs). A typical team in a large
5
pharmaceutical company consists about of about 45 MSLs. Industry estimates suggest that
about half of the large pharmaceutical companies have MSL teams (CIE 2004).
In conclusion, the existence of opinion leaders is taken for granted in the
pharmaceutical industry. While firms try and manage their relationships with these opinion
leaders via marketing, anecdotal evidence suggests that the identification of opinion leaders
and the extent to which they impact other physicians are issues that the industry grapples
with. Specifically, first, firms may not usually have a clear idea about who these opinion
leaders are.1 Second, there is little systematic understanding of the mechanisms through
which opinion leaders and nominating physicians interact. Finally, there is little
quantification of the return on investment from targeting these opinion leaders.
2.2. Related Literature
Our work is related to the sociology, economics and marketing literature on social networks
(e.g. Burt 1987; Coleman, Katz and Menzel 1966, Van den Bulte and Lilien 2001, Duflo and
Saez 2001). The main focus of this related literature has been to test for social interactions
and peer effects using micro-level data.2 There is some work that has postulated the
existence of asymmetric peer effects. For example, Reingen and Kernan (1986) focus on
identifying the links of a given social network via surveys for a piano tuner service. They
note that individuals with stronger ties are more likely to activate the flow of referral.
However, they do not explicitly try to document the existence and effectiveness of opinion
leaders. Other researchers such as Summers (1970) have tried to examine the characteristics
of opinion leaders. They found that opinion leaders are typically more knowledgeable about a
product category, but do not explore the quantification of the effect of opinion leaders for
outcomes. A few other papers from the medical literature have used surveys and/or field
1 For information on firms providing tools for identifying and targeting physician opinion-leaders see
for e.g., www.estcomedical.com/thoughtleader/ and mattsonjack.com/keymd.asp, and also the “Medical
Science Liaison Quarterly,” http://www.mslquarterly.com/. These reports indicate that most
pharmaceutical companies rely on sociometric approaches (described in the next section) to identify
opinion leaders. There are some attempts to identify opinion leaders using behavioral (i.e., secondary)
data. However, these are subject to the Manski (1993) critique that estimates of social interactions
derived via post-hoc identification of peers from outcome data are likely biased upward. 2 A related stream of work in the diffusion of innovations literature has modeled asymmetric contagion
effects using a macro-level modeling approach. The general approach is to build a mathematical model
with an ex-ante assumption on how two (usually) groups of consumers respond to peer behavior -
specifically, ‘imitators’ are affected by the actions of all other previous adopters while ‘innovators’ are
not affected by peer actions. The resulting model is then applied to aggregate sales data to infer the
size of the two groups. Some representative publications that follow this approach are Tanny and
Derzko (1988), Steffens and Murthy (1992) and Van den Bulte and Joshi (2007)). With only aggregate
data, this literature cannot test for (asymmetric) peer effects at the individual level. Thus, our work
must be seen as complementary to this stream of work.
6
experiments to test for opinion leader effects. (e.g., Valente et al. 2003, Lomas et al. 1991 and
Celentano et al. 2000). In economics, researchers have investigated social interaction effects
more generally in the context of crop-technology adoption (Bandiera and Rasul 2006; Conley
and Udry 2000), welfare participation (Bertrand, Luttmer, and Mullainathan 2000), health-
plan choices (Sorensen 2005); and retirement plan choices (Duflo and Saez 2002), to name a
few. A small, but growing number of recent papers in the marketing literature has also
investigated the potential role of peer-effects in new product adoption (e.g. Van den Bulte
and Lilien 2001, Manchanda, Xie and Youn 2004 and Iyengar et al. 2008 on new drug
adoption; Bell and Song 2007 on Internet grocer adoption; Nam, Manchanda and
Chintagunta 2006 on video-on-demand adoption). We refer the interested reader to
Hartmann et al. 2007 for a recent and broad overview of the social interactions literature,
which also discusses approaches from several related fields.
Broadly speaking, relative to the previous literature cited above, our approach has
several distinguishing characteristics. These include documenting the asymmetric nature of
peer interactions, distinguishing causal peer effects as opposed to correlated outcomes that
do not rely on peer effects, and the determination of peer effects in mature product categories
i.e., using post-adoption behavior. In terms of the causal effect determination, we believe this
paper is one of the first to comprehensively outline and address the identification issues
related to endogenous network formation, correlated unobservables and simultaneity, and to
include specific controls for targeted marketing activity in the analysis of social interactions
in the presence of marketing.
3. Model
We now discuss our model framework and empirical strategy. Our empirical framework is a
descriptive linear model of prescription behavior, which we interpret as the reduced form of
the behavioral process generating prescriptions for physicians and their opinion leaders (for
structural approaches see Brock and Durlaf 2001; and more recently, Hartmann 2008). In
the “robustness” section later, we discuss some extensions of this linear model that
accommodate alternative specifications of the effect of peers as well as relax the linearity
assumption (via the use of a count model). In the context of this model, we clarify and discuss
how we address the main identification issues inherent in measuring peer effects using
micro-level data. We index physicians by i, i’s opinion leader by j(i), and time by t. Let D
denote detailing, and y and x denote new prescriptions for physicians and opinion leaders
7
respectively. The starting point of our empirical specification for physician prescriptions is a
linear regression:
( ),it it itj i ty D xβ δ υ= + + (1)
Here vit denotes unobserved factors that shift prescriptions of physician i over time. While
ideally we would like to include the actual opinions of the opinion leader as a covariate to
capture the social interaction, these are unavailable in our data. Here, we think of the
prescriptions of the opinion leader as a proxy for these opinions (later, we present extensive
sensitivity checks to different proxies for leader opinions). Formally, our test for the
asymmetric peer effect in prescription behavior is whether δ is statistically significantly
different from zero. An alternative model that uses the share, rather than levels of
prescriptions is equivalent to (1), since the overall volume of prescriptions written for the
disease condition remained roughly constant across the months in our data. Identification of
peer effects in this model requires us to resolve five issues described earlier - reference-group
determination, change in the external environment, existence of a communication
mechanism between the physician and the opinion leader, an outcome variable that can be
measured and the ability to rule out correlation in observed behavior between the physician
and the opinion leader arising from endogenous group formation, targeted marketing
activity, correlated unobservables and simultaneity. We discuss these in sequence below.
Reference group/peer determination
First, we need to identify the proper reference group or reference peer for each agent, such
that the effect of the group/peer’s behavior on the agent’s actions can be measured. Manski
(1993 & 2000) discusses in detail the need for exogenously defined social network
information to identify peer effects from behavioral data. Intuitively, one cannot use behavior
itself to define reference groups, if the goal is to obtain the effect of a reference group’s
behavior on an agent’s actions. By grouping agents with ex-post similar actions together, a
researcher attempting this approach essentially produces an upward bias in any peer effects
unearthed through subsequent analysis. Similarly, geographic or location specific proxies for
reference groups cannot sort between peer effects and common unobservables that affect the
actions of all agents in the location similarly. We overcome these challenges in our
application by using a new dataset that contains detailed social network information
obtained via a “sociometric” approach (e.g., Coleman et al. 1996; Valente et al. 2003; Valente
and Pumpuang 2007). In the sociometric approach, individuals units are directly surveyed to
8
obtain information about other individuals who exert a peer effect on their behavior.3 Each
physician in the survey self-reports the doctor whose opinions he incorporates in his
prescription decisions, thus identifying his social network. This provides us an exogenous
measure of the physician’s reference group or peer, circumventing the need to rely on
behavior, location or geography-based proxies. Thus, in the setup of equation (1), j(i) is
known exogenously. Our use of the term “opinion leader” is to be interpreted in this sense as
referring to doctors nominated by physicians in this survey (described in detail in a later
section).
Change in the External Environment
In stable product categories with well-established brands, agents tend to have little
uncertainty about product quality, and may need rely on other’s actions to make decisions. In
stable drug categories, general practitioners may have little uncertainty about the usage and
efficacy of the drugs they prescribe. Peer effects may be hard to uncover in such settings.
Changes in the environment add exogenous variation that assist in unearthing the peer
effect. An advantage of our data is that it covers a time-period where there was a significant
change in the recommended usage of drugs in the therapeutic category. For the therapeutic
category that we study, this environmental change relates to new treatment guidelines
issued by the National Institutes of Health (NIH) regarding appropriate treatment for
specific disease indications (we describe the new guidelines later in the paper.) The
guidelines were issued by the NIH following fresh evidence available from post-release drug
trials. This environmental change occurs around the mid-point of the data, and is exogenous
to behavior as it arises from the behavior of a third party that is not affected by the actions of
physicians and their opinion leaders.
Interaction between the Physician and the Opinion Leader
In the survey, physicians also report their mode of interactions with their opinion leaders.
Hence, our data also allow us to provide some insights into the mechanism through which
the opinion leader effect manifests itself.
3 In contrast, some studies follow the “key informant” approach, where a few individuals are polled to
determine the identity of individuals with social influence (e.g., Celentano et al. 2000). Interestingly,
Iyengar et al. (2008) find that the set of self-reported opinion leaders are different from those identified
via a sociometric approach. Others in development economics who have adopted sociometric approaches
include, Conley and Udry (2000) and Kremer and Miguel (2004). In the absence of such data,
researchers have often defined networks based on geographical location (Bell and Song 2007;
Manchanda et. at. 2004); dorm/work location (Sorensen 2005; Dufflo & Saez 2003; Sacerdote 2001); and
ethnic/cultural proximity (Munshi and Myaux, 2002; Bertrand et al., 2000).
9
Outcome Variable
The external change in the treatment environment generates higher uncertainty regarding
drug efficacy among family and general practitioners, making them more likely to value the
opinion of specialists in the category (we discuss this in detail later). The exogenous variation
aids in identification. Given the nature of the exogenous change, all physicians are likely to
adapt their prescription behavior to reflect the new guidelines. Hence, our identification
strategy focuses on how changes in prescription behavior of nominating physicians (y in
equation 1) before and after the issuance of the guidelines, is related to changes in
prescription behavior of their corresponding opinion leaders.
Distinguishing Causality from Correlation
As mentioned above, peer effects imply that the behavior of agents in the same reference
group would tend to be correlated. However, correlation in the behavior of agents per se does
not imply that any one agent’s action has a causal effect on the actions of others in the group.
In addition to peer effects, such correlation in behavior could arise due to three other factors,
viz. endogenous group formation, correlated unobservables and simultaneity (see Moffitt
2001 for a discussion.) Only a causal peer effect implies a social multiplier; hence it is
important to sort out causal effects from each of these sources of correlation. In our
application, another factor that could lead to correlation is targeted marketing.
Endogenous group formation
Endogenous group formation arises in our context if physicians choose doctors with similar
“tastes” for prescriptions as their opinion leaders. For instance, physicians who face patient
bases requiring treatments using a specific class of therapeutic drugs may meet experts in
that therapeutic category at conferences organized by drug companies. If physicians choose
these experts as opinion leaders, it is likely that such physician-opinion leader pairs tend to
prescribe more in the therapeutic category than average. In this case, the observed
correlation in the behavior of the physician and his opinion leader could arise from omitted
individual characteristics that are correlated within the group. In equation (1), such
endogenous group formation implies that physician i’s unobserved tastes (vit) and opinion
leader j’s tastes for prescriptions could be correlated – if opinion leader j’s tastes also drive
his prescriptions, xjt, this generates a correlation between xjt and vit leading to a upward bias
in the estimates of δ.
The solution to the group formation problem is facilitated by the availability of panel
data (as noted by Manski 1993, the prospect for identification of peer effects in cross-
10
sectional data are poor). Panel data enables us to include physician-specific fixed effects in
the regression (1). In terms of our model, we write,
it i itυ α η= + (2)
where αi is a fixed effect specific to physician i, which controls for unobserved (to the
econometrician) time invariant tastes for prescriptions. By controlling for physician i’s tastes,
we control for the portion of vit that is correlated with xjt via correlation with opinion leader
j’s tastes, thus accommodating the endogenous group formation problem. The identifying
assumption is that, we assume that group selection is fixed over time, and that physician
group formation is not influenced by changes in the external environment.
Correlated unobservables
A second concern is whether there exist correlated unobservables that drive prescriptions of
both the physician and the opinion leader similarly. If uncorrected, these manifest
themselves as peer effects. An obvious source of correlation is sales-force activity (i.e.
detailing) directed at physicians and opinion leaders by drug companies. One can partly
control for this source of correlation by including time-period fixed effects that pick up
common trends in marketing activity to physicians (e.g. Van den Bulte and Lilien 2001). In
our setting, we fully control for such marketing activity by obtaining direct data on detailing
to physicians, which we include as explanatory variables in the regression. A potential
concern with using this variation arises because detailing may be targeted to physicians. As
documented in the recent literature (e.g. Manchanda, Rossi and Chintagunta 2004) many
pharmaceutical companies in the US, including our firm, decide detailing allocations based
on a volume-based rule, whereby physicians are allocated detailing levels corresponding to
their position in deciles of past prescription volume in the focal category (we find evidence for
this detailing pattern in our data.) Then, the volume-based detailing rule implies that D may
be correlated with vit.
Our control for this potential endogeneity derives from the nature of the targeting
rule. In effect, on account of stable patient bases, physicians rarely move across deciles (we
find this in our data as well). Thus, the inclusion of physician fixed effects pick out the
across-physician variation in detailing, and controls for the endogeneity concern. Thus, only
within-physician, across-time variation in detailing is used for identification. Fixed effects do
not fully absorb all detailing variation however, as in practice, actual detailing levels are
centered around, but not exactly equal to top-down allocated levels due to several
unanticipated factors that affect visits. These include physicians’ time-constraints (e.g. the
physician is not in his office during a detailing visit), or unanticipated detailer time-
11
constraints (a patient is taking too long, requiring postponement of the visit). This deviation
from pre-allocated levels is orthogonal to physician unobservables, and is used for
identification. Thus, the underlying identifying assumption is that after controlling for αi,
within-physician detailing is independent of other physician and time-period specific
unobservables, ηit.
We also consider the possibility that there may be additional correlated
unobservables that generate co-movement in prescriptions. Candidates for such
unobservables include trends in overall prescriptions across all physicians in the category, as
well as any spatially correlated region/location specific shocks to prescription behavior that
are captured by ηjt. We address these as follows. First, we include a full set of time-period
fixed effects. These control for any time-trends common across all physicians and opinion
leaders. Second, recall we include physician fixed effects. As none of the surveyed physicians
in our data share a zip code, physician fixed effects are equivalent to including a full set of
zip code fixed effects. Hence, time-invariant spatially correlated unobservables are also fully
controlled for. A final issue is whether there are unobservables that are correlated at the
level of the zip code and time.
To consider this issue, we discuss a potential difference-in-difference approach. We
have access to the prescription behavior of all physicians in the country. We use this data to
compute the mean prescription of all other physicians in physician i’s zip-code, denoted by z-
i,t, which we include as a covariate in the regression. Essentially z-i,t proxies for all
unobserved time-period and location-specific shocks to prescriptions that are common to all
physicians in i’s location.4 By including these in the regression, we essentially use the
prescription behavior of other physicians in i’s location as a control. Thus, we further
decompose (2) as,
−= +it it itzη γ ε (3)
where εit is a mean zero error term. Note this strategy is subject to the implicit caveat that a
given physician’s opinion leader does not influence other physicians in his zip code.
Unfortunately, data on the social networks of the universe of physicians is not available to
test this. Hence, our approach will be to present extensive sensitivity checks in which z-i,t is
included or excluded from the regression. Tests for correlated unobservables (presented in
§5.1) suggest that most of the spurious correlation is along the temporal dimension, which is
fully picked up by time-period fixed effects. Hence, the effect of z-i,t on our results is small.
4 Less than 10% of opinion leaders and nominators are in the same zip code in our data. Our results do
not change if we exclude these physicians from our sample.
12
Simultaneity
The final factor that must be considered here is simultaneity. Simultaneity implies that
physician i’s actions and opinion leader j(i)’s actions may be contemporaneously
interdependent. If peer effects exist, the fact that opinion leaders affect physicians while
physicians simultaneously affect them leads to an upward bias in the estimation of the
interactions. In the context of our model, if physician i and opinion leader j’s prescriptions
are simultaneously determined, high values of εit would tend to induce high values of xj(i),t,
thus leading to an upward bias.
We control for the simultaneity problem via exclusion restrictions. In our context,
detailing to the opinion leader, Dj(i),t, as well as the mean prescriptions of all other physicians
in the opinion leader’s zip-code, z-j(i),t, form excluded variables that affect the prescriptions of
the opinion leader (the endogenous variable), and can be excluded from the prescription
equation for physician i. Both Dj(i),t and z-j(i),t impact the opinion leader’s prescriptions, and
are thus correlated with the endogenous variable xj(i),t, but uncorrelated with εit. Thus they
serve as instruments for xj(i),t thus addressing the simultaneity concern. An alternative
approach would be to assume that only past opinion leader prescriptions affect the
physician’s current prescriptions (i.e. there is no contemporaneous linkage in behavior.) We
explore model sensitivity to such specifications in the “Robustness” section.
Note that if we assumed that, given their “expert” status (details in the “Data”
section below), opinion leaders were not affected by physicians, there would be no
simultaneity problem by construction. Rather than assume away simultaneity concerns a
priori in this manner, we use the data to check whether peer effects are truly asymmetric.
We run the analogous regressions for opinion leader j(i) (i.e. xj(i),t regressed on αj(i), Dj(i),t, yit
and z-j(i),t) to check whether physician-prescriptions have a significant effect on the
prescription behavior of their opinion leaders. Analogously, Dit and z-it are excluded variables
for the opinion leader’s prescription equation, and serve as instruments for yit in the opinion
leader’s prescription equation.
Final Specification
Based on the above discussion, our final specification for physician i’s prescriptions is,
( ) ,,, 1,.., ; 1,..,α γ β δ γ ε−+= + + + + = =
tit i it i t itj i ty D x z i N t T (3)
The corresponding specification for i’s opinion leader is:
( ) ( ) ( ) ( ) ( ), ,, ,, 1,.., ;α τ ϖ ς ζ ε
−+= + + + + =
t itj i t j i j i t j i t j i tx D y z t T (4)
13
We estimate both specifications via fixed-effects panel data linear instrumental variables
regression. Note that the issues we identify and try to control for above are relevant for any
analysis of behavioral data involving social interactions, whether using structural or
reduced-form models. We now describe our data.
4. Data Description
Our data pertain to physician prescription behavior in a large therapeutic class (we cannot
reveal the name of this class due to confidentiality concerns). The drugs in this class address
a serious chronic disease condition that affects about a quarter of all adults in the United
States. We consider a combination drug category in this therapeutic class of drugs that treats
the chronic disease.
The dataset we use in our analysis is a combination of primary and secondary data.
The primary data come from a market survey data of 1500 physicians chosen randomly from
a set of 56,000 regularly prescribing physicians across the United States in this therapeutic
category. The survey was commissioned by a large pharmaceutical company and carried out
by a market research firm with the pharmaceutical company bearing all costs
(confidentiality reasons preclude us from naming the companies). The survey was carried out
in Jan-Feb 2004. The main objective of the survey was to obtain names of those doctors
whose actions influence the nominating physician’s approach to the treatment of the chronic
disease treated by combination drugs. Nominating physicians were encouraged to name
doctors who were known to them (by reputation or otherwise) and then queried about the
mechanisms by which they were able to obtain information about the opinion leader’s beliefs
and actions.5 From this survey, we have access to information on 290 physician-opinion
leader pairs. Note that our use of the term “opinion leader” is to be interpreted in this sense
as referring to physicians nominated in this survey. The opinion leaders so identified reflect
each nominating physician’s subjective opinion regarding who in the field he considers an
expert, and whose opinion he incorporates while making prescription decisions in this
therapeutic category. We believe this individual-specific measure is the appropriate one for
identifying peer effects in such settings.
5 The specific questions asked during the survey were (a) “Whose opinions do you value most regarding
the treatment and/or management of [disease condition] among [disease condition] patients?”, and, (b)
“How do you obtain information from that Influencer about the treatment/management of [disease
condition]?” It is possible that the wording of this question could “encourage” respondents to name an
opinion leader even when there isn’t one. However, if a respondent “made up” the name of an opinion
leader, the peer effect we calibrate using (independently) obtained behavioral data should be
attenuated. In other words, the survey bias, if present, works against our finding of peer effects.
14
These data were then supplemented by secondary data – also collected with the help
of the company – on the prescription behavior and the marketing activity directed at both the
physicians and the opinion leaders. These data span a period of 24 months (from April 2002
to March 2004 inclusive) and contain the prescription counts for the combination-drug
category and the count of details received for each month for the universe of physicians for
the company’s drug. Interestingly, for this drug, the pharmaceutical firm had decided to rely
almost entirely on regular detailing to manage relationships with the opinion leaders. Our
interviews with the managers of the firm indicated that while the firm would have liked to
consider other forms of marketing, such as the setting up of an MSL team, they were not
doing that during the period of our data. We also learnt from the firm that only about 50% of
the doctors identified as opinion leaders in the survey were on the firm’s own list of opinion
leaders.
Descriptives: Primary data
We have demographic and location information for 290 opinion leader-physician pairs
(including primary affiliation, zip-code and specialty). There are 267 unique nominating
physicians. There are 182 unique nominated physicians (“opinion leaders”). The distribution
of nominations in the survey is presented in Tables 1 and 2. Interestingly, over 91% of
physicians reported being influenced by only one opinion leader. About 38% of the nominated
doctors were named as opinion leaders by more than one physician. We do not see any
overlap between opinion leaders and nominating physicians.6
The typical opinion leader is a research-active specialist physician in the therapeutic
category and is associated with a university-based hospital. 97.4% of the opinion leaders are
specialists. Over 90% of the opinion leaders in the sample are associated with hospitals, and
about 30% are affiliated with University hospitals. The average opinion leader has published
about 7.2 refereed papers (st. dev. 9.68, min 0, max 40) in this therapeutic class, confirming
his status as an “expert.” The survey also queried the nominating physicians about their
mode of interaction with the opinion leader. The dominant mechanism of information
transfer as reported by the physicians was direct contact, with about 94.5% of nominating
physician mentions. This provides some support for our model formulation (equation 1) in
6 The pharmaceutical firm that commissioned the survey asked the market research firm for a list of
only those physicians who nominated an opinion leader (and the opinion leader identity). Thus, we
have only information on physicians who have an opinion leader. The consequence is that in essence,
we measure the “treatment on the treated”, where the “treatment” is the effect of an opinion leader.
Note that conditional on having an opinion leader, we do control for the selectivity of the chosen opinion
leader (i.e. the endogenous group formation problem) via inclusion of physician fixed-effects that pick
up common unobserved traits that could lead to group formation (details below).
15
which the nominating physician is assumed to respond to the prescriptions of the
corresponding OPL. Other mechanisms of interaction included symposia/conferences (78%),
meeting in clinical and/or hospital settings (67%) and via scientific articles published by the
opinion leader (32%).
Prescription/detailing data
The secondary dataset contains information on 24 months of new prescriptions for the
combination-drug category for the entire universe of physicians in the therapeutic class of
the disease. The data also contains information on monthly physician-level detailing activity
by the focal firm in the category. Unfortunately, detailing activity for the other competing
drugs in the category is not available at the individual physician-level. The combination drug
category we considered has 4 prescription drugs. Table 3 reports the market shares of the 4
drugs during the time-period of our data. Based on this, we focus on the two largest drugs
viz. drug 2, the focal drug, and drug 1, the main competitor. We supplemented our data with
monthly national aggregate detailing for drug 1 (detailing for drugs 3 and 4 was negligible).
The distribution of aggregate detailing for the two drugs is presented in Figure 1.
Descriptive statistics for the sample are provided in Table 4. The table shows that
nominating physicians typically write a larger number of prescriptions (almost twice that of
the opinion leaders) and also receive a higher level of detailing (about 50% higher). This is
consistent with anecdotal evidence that opinion leaders tend to be focussed more on medical
research and academic publication rather than practice. As can be seen from the table,
opinion leaders are detailed less than the nominating physicians. This is likely to be a
function of the category volume rule followed in the industry (whereby physicians who
prescribe more at the category level get correspondingly higher details.)7
Change in drug-usage guidelines
7 Looking at z-it in Table 4, we see that the average physician in a zip code prescribes 0.75 new
prescriptions per month in this disease category, which is much higher than that prescribed by
physicians included in our survey. This is driven by the fact that we are averaging over many
physicians in each zip code who do not prescribe often in this disease category (for instance, a
nephrologist may not prescribe drugs for heart disease – a “disease condition” – but is included among
the set of physicians in a focal doctor’s zip code). An alternative approach is to include only physicians
who are “active prescribers” in this disease category (the population of interest from the firm’s point-of-
view) in computing z-it. Our motivation for adopting the current approach is a) it is possible that the
guidelines affected all doctors in the zip-code, not just active prescribers, and hence including the
prescriptions of all doctors in computing z-it would better pick up the overall effect of the guidelines; b)
since we did not have access to the database of physicians from which the company picked the random
sample, we would otherwise have to make arbitrary guesses about who to include when computing z-it.
Given this, we also present several robustness checks in which we drop z-it from the regressions,
instead controlling for its effects via a full set of month-fixed effects. We thank an anonymous referee
for suggesting this approach.
16
An important aspect of the data is that it covers a time-period where there was a significant
change in the guidelines for the usage of drugs in this therapeutic category. This change in
the treatment environment is important for us since it is then that family and general
practitioners are most likely to seek and value the opinion of specialists in the category.
Appendix A provides excerpts from published sources and the summary findings from survey
of physicians attesting that, in general, a change in guidelines usually increases the
uncertainty in terms of physician prescription decisions. The increased uncertainty of
nominating physicians regarding drug efficacy in the changed environment thus aids in
identifying the effect of opinion leaders on prescription behavior. In our context, an
exogenous change in the market occurred in May 2003, in the form of an announcement by
the National Institutes of Health (NIH) affiliate releasing new treatment guidelines for the
disease. Thus, we have 13 months of behavioral data before the guidelines were released and
11 months after. The guidelines suggested that, as against the prevailing norm, the
initiation of treatment for severe cases of this condition should comprise of at least two
agents (or molecules). The guidelines also stated that more than one drug would be required
to treat most cases of the disease. These guidelines tended to favor the so called combination
drugs in this category. A combination drug typically had the two agents in the same pill and
results in “polytherapy”. This had the obvious advantage of increasing compliance amongst
patients i.e., taking two pills is much easier than taking one. However, there were additional
therapeutic benefits for patients beginning therapy using these combination drugs. These
(combination) drugs also had been shown to have therapeutic advantages such higher
efficacy (than for two drugs taken individually), lower side effects and higher potency with
lower dosages. Thus, we expect that all combination drugs, including drug 2, should show an
increase in prescriptions after these guidelines were issued. Prior to the issuance of new
guidelines, combination drugs were generally considered “aggressive” therapy. 8
We now document the changes in prescription and detailing behavior before and
after the release of the guidelines. Figure 2 presents the distribution of mean monthly
prescriptions in the combination-drug category for nominating physicians and opinion
leaders before and after May 2003 (when the new treatment guidelines were introduced). For
each physician, we compute the mean monthly new prescriptions before and after and
present them in a box plot. As can be seen from the figure, both sets of physicians prescribe
more of the combination drugs category. The mean increase in new prescriptions across both
8 The firm also showed us survey data collected from 319 physicians after the guidelines were released.
These physicians noted that, based on the guidelines, they would expect polytherapy to become more
prevalent, leading to an increase in the prescription levels of combination drugs.
17
groups is about 10%. Again, as before, the nominating physicians prescribe more than the
opinion leaders before and after.
We now turn our attention to the distribution of monthly detailing for drug 2 across
all physicians and months. Figure 3 presents the distribution of mean monthly detailing for
drug 2 for physicians and opinion leaders before and after. As before, we compute the mean
monthly detailing before and after for each physician, and present them in a box plot.
Interestingly, the firm seems to deviate from the detailing allocation rule cited above just
after May 2003. This can be seen from the figure as the firm details more to opinion leaders
after the change even though they write fewer prescriptions in the combination-drug
category (see Figure 2). At the same time, detailing to the “regular” physicians remains
relatively unchanged before and after the issuance of the guidelines (the difference is not
statistically significant.) This suggests that the firm has some knowledge of the opinion
leader-status of these specialists. As noted earlier, about half of the nominated opinion
leaders had been characterized as opinion leaders by the firm prior to the survey.
To summarize, we have a unique dataset that combines information from primary
and secondary sources. Our data suggest that opinion leaders are less heavy prescribers in
the therapeutic category relative to the average physician. We find that the NIH guidelines
impact the prescription behavior of both nominating physicians and opinion leaders – on
average the prescription quantity goes up by 10%. This is consistent with the content of the
guideline (as described above). We also find that the firm that markets drug 2 changes the
allocation of its detailing resources after the release of the guidelines. Specifically, before the
release of the new guidelines, the firm devotes a lesser amount of detailing to the opinion
leaders. However, this pattern is reversed after the guidelines are released. This is
consistent with firm feedback that detailing is the main instrument that is used by this firm
in this therapeutic category in terms of managing its relationship with opinion leaders.
5. Results
We now present the results from the analysis of the data. We first present some model-free
evidence for the presence of correlated unobservables in prescriptions between the physicians
and the opinion leaders. We then present results from various OLS and fixed effects
instrumental variables specifications that control for the identification issues discussed in
section 2. We then discuss robustness of our main results to alternative model specifications.
We conclude by using our estimates to measure the incremental value of targeted sales force
18
activity to the opinion leaders in the data, which we use to estimate the social multiplier of
detailing.
5.1. Testing for correlated unobservables
Recall that unobservables correlated across physicians and the opinion leader which shift
prescriptions similarly can result in spurious correlation, and bias the estimate of the peer
effect parameters. One approach to this problem was to use the mean prescriptions of other
physicians in the focal physician’s zip code to control for such potentially correlated
unobservables. Correlated unobservables could arise along both the temporal and spatial
dimensions. For example, the new NIH guidelines could generate an overall incentive to
prescribe the combination drugs for both physicians and opinion leaders. This manifests
itself as an overall trend in prescriptions, which when ignored, could generate a spurious
correlation in the physician and opinion leader’s prescriptions over time. Alternatively,
spurious correlation could arise from unobserved shocks to prescriptions of both physicians
and opinion leaders that are contemporaneously spatially correlated.
To check whether mean prescriptions of other physicians in the focal physician’s zip
code reveal a trend over time (i.e. a common temporal shock to prescriptions) we regress z-it,
the mean prescriptions of all other physicians in i’s zip-code, on physician and time period
specific fixed effects. The time period specific fixed effects from this regression are presented
in Figure 4 (all the time-period dummies are significant). The plot reveals an upward trend
in mean prescriptions over time. By controlling for z-it we do not use this potentially common
component of variation in prescriptions over time to identify peer effects. For comparison, we
also plot the corresponding coefficients from regressing the mean prescriptions of other
physicians in the opinion leader’s zip code (z-OPL,t) on month dummies. Recall that z-OPL,t
contains unobserved shocks that shift the opinion leader’s prescriptions over time. This plot
also reveals an upward trend. The picture suggests that there exist correlated temporal
shocks in the prescriptions of both physicians and Opinion leaders, which if not controlled
for, could lead to spurious findings of peer effects.
We also check the extent to which spurious correlation could arise from spatial
dependence in unobservables that drive prescriptions of the physician and the opinion
leader. Recall that we use the mean prescriptions of other physicians in the focal physician’s
zip code to control for the unobservables. We can get a sense of the extent of spatial
correlation holding the temporal variation fixed, by looking at the dependence in the mean
prescriptions of other physicians in the physician and the opinion leader’s zip-codes time-
period by time-period. Table 5 shows the correlations between z-it and z-OPL,t in the data each
19
month (Physician-opinion leader combinations that shared a common zip-code were dropped
- about 9.6% of the observations.) In general, we do not find much evidence in the data of
statistically significant spatially correlated shocks, suggesting that the main component of
correlated unobservables is along the temporal dimension. Analogously, we check for
correlation in z-it and z-OPL,t along the temporal dimension after controlling for across
physician variation (i.e. we first regress z-it and z-OPL,t on physician and opinion leader fixed
effects respectively, and report the correlation in the residuals from this regression). This
correlation in the data was 0.0502, which is statistically significant (p < 0.0001).
5.2. Parameter estimates
In the first subsection, we first present results from our primary specification (equation 3), in
which we test whether physician prescriptions is significantly affected by the opinion leader’s
prescription behavior. We then present results for the reverse regressions (equation 4) in
which we test whether physician prescriptions is significantly affected by the nominating
physician’s prescription behavior.
Effect of Opinion Leader behavior on Physician Prescriptions
OLS Estimation Results
We start with discussing the estimates from OLS and fixed effects specifications of the
model. The dependant variable in all regressions is the total new prescriptions by the
nominating physician in the category. Results from OLS linear regression are presented in
Table 6. From the table, we see that the effect of the OPL’s prescriptions is positive and
significant. Further, the magnitude of the effect is higher after month 13 (May 03), when the
NIH guidelines were introduced. This is consistent with a basic pattern of correlation
between the physician and opinion leader’s prescriptions. The OLS estimate of the detailing
coefficient is also large and strongly statistically significant. However, this specification does
not take into account the fact that heavier detailing is targeted by firms towards higher
volume physicians. Hence, the OLS estimate is likely biased upward.
Fixed-Effects Estimation Results
We present the results from the fixed effects linear regression in Table 7. Recall that fixed
effects control for both potential endogenous group formation as well as the targeting of
detailing to high-volume prescribers. However, these estimates do not control for potential
simultaneity biases. Not surprisingly, the magnitude of the detailing coefficient drops under
fixed effects. The F-statistics from the regression strongly reject the null that all the fixed
20
effects are zero. Although not reported, the hypothesis that the fixed effects are uncorrelated
with the included variables is also strongly rejected in all specifications. The variable z-it
controls for both temporal and spatially correlated shocks, and is statistically significant. The
regressions in columns 3 & 4 in Table 7 indicate that after controlling for physician fixed
effects and z-it, the effect of opinion prescriptions after May 2003 is positive and strongly
significant (t = 3.09). The results indicate that the effect of the opinion leader’s prescription is
significant only after the release of the guidelines. In particular, the OPL has little effect on
prescriptions prior to May 2003, when the category was relatively stable. Given the timing of
the survey (Jan-Feb 2004), these results cannot be explained by a mere measurement effect
i.e., opinion leaders and their behavior becoming more salient because the survey evoked the
relationship between the nominating physician and the opinion leader. These results are
consistent with the observed nature of change in category and suggest peer effects following
the guideline release. Interestingly, after controlling for fixed effects, detailing is not
significant in explaining physicians’ prescriptions over time. The marginal effect of an
opinion leader’s prescription is more than 100 times larger than the detailing effect in the
latter time periods. This suggests that targeting opinion leaders with detailing with the aim
of increasing their prescriptions is a better strategy for firms seeking to increase category
volume among physicians in this market. We explore this strategy toward the end of this
section.
Fixed-effects Instrumental Variable Results
We now discuss the results from the fixed-effects instrumental variable (IV) regressions.
Recall that we use instrumental variables to accommodate potential biases arising due to
concerns related to simultaneity. The endogenous variable we instrument for is xj(i),t. We use
the detailing to the opinion leader, Dj(i),t, as well as the mean prescriptions of all other
physicians in the opinion leader’s zip-code, z-j(i),t, along with squared terms of both, as
instruments. Results from the first-stage regressions of xj(i),t on the instruments are
presented in Table 8. Columns 1 & 2 present results from the regressions of the endogenous
variable on only the excluded instruments, while columns 3 and 4 present the results from
the regressions of the endogenous variable on the entire first-stage matrix. The F-statistics
from both regressions strongly reject the null that the exogenous instruments have no
explanatory power. The first-stage is able to explain about 59% of the variation in the
opinion leader’s prescriptions. Thus, it is clear that we do not have a weak instruments
problem. The signs of the parameters also make sense intuitively. In particular, detailing to
the opinion leader has a positive and significant effect on the opinion leader’s prescriptions,
21
and the mean prescriptions of other doctors in the opinion leader’s zip-code is positively
significantly correlated with the opinion leader’s prescriptions. These suggest that the
instruments are working correctly.
Results for the fixed-effects IV regressions are presented in Table 9. The IV estimates
parallel the results from Table 5. Looking at columns 3 - 4 in Table 8, we find that opinion
leader’s prescriptions have a statistically significant effect on the nominating physicians
behavior after May 2003 (t =2.06), when the NIH guidelines were released. In Table 10, we
repeat the IV regressions including a full set of month fixed effects, and continue to find a
significant effect for the opinion leader’s prescriptions post-guidelines. Table 10 also presents
sensitivity to the inclusion of z-it in the regression. Recall that in computing z-it, we included
the prescriptions of all other doctors in a physician’s zip-code, which may include physicians
who are not in the target population of interest to the firm (the target population for the firm
includes only “active prescribers” in this disease category). In that case, z-it may not be
correctly capturing unobservables relevant to the focal physician’s prescriptions. We present
robustness to z-it in the following way. From Table 5, we see that the z-it are capturing
unobservables that are correlated mostly along the temporal, rather than spatial, dimension.
These effects may thus be captured via time-period fixed effects. On a referee’s suggestion,
we also explored month-fixed effects that are specific to each zip-code, but find that the data
are too thin to support this specification.
We present specifications with a full set of month-fixed effects, with and without
including z-it, and find our results continue to be robust. We interpret these results as
evidence that there exist peer effects in prescription behavior in these data. In subsequent
sections below, we will examine whether the peer effects we find have economically
significant consequences for firm’s marketing efforts in this industry.
Effect of Physician behavior on Opinion Leader Prescriptions
We now check whether peer effects in this category are asymmetric, by testing whether the
prescription behavior of nominating physicians has statistically significant effects on the
actions of their opinion leaders. Rather than assume each nominated doctor has a
disproportionate impact on the physician-doctor dyad, we wish to verify whether the data
supports the notion that the nominated doctors are experts, and are less affected by the
behavior of the nominators. The specifications we estimate correspond to equation 4. For
brevity, we present the fixed effect IV regressions that incorporate a full set of fixed effects
for the opinion leaders, and uses the detailing to the nominating physician and the mean
prescriptions of all other doctors in the nominating physician’s zip-code (along with squared
22
terms) as instruments for the nominating physician’s prescriptions. We present
specifications with and without the mean prescription behavior of all other doctors in the
opinion leader’s zip-code as controls for unobservables; and with and without a full set of
month-fixed effects. Table 11 presents the results. We find that the nominating physician’s
behavior does not have a statistically significant effect on the opinion leader’s prescriptions.
These results hold after allowing for a post-guideline interaction effect (columns 3 & 4).
Detailing to the opinion leader is found to have a strong significant effect on prescriptions.9
We take the results in Table 11 as evidence that peer effects tend to be asymmetric, at least
in this particular context.
Robustness
We now present several specification checks to ascertain the robustness of our findings.
First, we present regressions in which peer effects are interacted with month-fixed effects.
Second, recall that in our empirical model, we use the number of prescriptions by the opinion
leader as a proxy for the opinion leader’s opinions regarding drug use in this therapeutic
category, which are transmitted to the nominating physician via interactions, and which
subsequently affect the nominating physicians behavior. As noted before, we believe that this
is a reasonable measure since 94.5% of physicians in the survey report direct contact with
the opinion leader, thus justifying the assumption maintained in (1) that the opinion leader’s
prescriptions, xj(i),t, could be known to the physician. Rather than take a stand on a specific
parametric model of interactions, our approach tests for these measures using a reduced-
form approach. In this section, we verify that the qualitative nature of our findings are
robust to alternative specifications of the manner in which the opinion leader’s behavior
affects the nominating physician.
Robustness to varying specifications of peer effects
We now examine robustness to alternative specifications of the peer effect. We explore five
different specifications that vary in the timing as well as the nature of the effect of the
opinion leader’s behavior on the nominating physicians. Let fOPL(t) denote the variable
summarizing the opinion leader’s behavior on the physician’s prescriptions in month t. The
various specifications of fOPL(t) we consider are:
9 One potential reason why detailing effects may be stronger for opinion leaders may be that
pharmaceutical firms assign their “better” sales-people to make calls to these physicians. Separating
out such “detailer” effects require data on the identity of the detailer in addition to the number of
details made. Unfortunately, these data are not available.
23
1. fOPL(t) = ( ), 1j i tx
−≡ Lagged Opinion Leader prescriptions.
2. fOPL(t) = ( )( ),j i tI x ≡ Indicator for whether Opinion Leader prescribed this month.
3. fOPL(t) = ( )( ), 1j i tI x
−≡ Lagged indicator for whether Opinion Leader prescribed.
4. fOPL(t) = ( )1 ,
t
j ixτ τ=∑ ≡ Cumulative prescriptions by Opinion Leader as of this month.
5. fOPL(t) = ( )11 ,
t
j ixτ τ
−=∑ ≡ Lagged cumulative prescriptions.
Table 12 presents results from linear fixed effects IV regressions in which each of the five
fOPL(t) functions are included as regressors. As before, we use Dj(i),t, as well as the mean
prescriptions of all other physicians in the opinion leader’s zip-code, z-j(i),t, along with squared
terms of both, transformed analogously to fOPL(t) as instruments (see last 2 rows of Table 10
for precise definitions.) Looking at Table 12, we see that the main message from our early
results remains robust to these alternative definitions: Opinion leaders have a statistically
significant effect on prescriptions after the guidelines were issued. We also checked
robustness to our assumption of linearity by estimating a fixed effects negative binomial
(NBD) regression model (Hausman, Hall, Griliches 1984). This model accounts for the count
nature of prescription data, allows for over dispersion, and also accommodates potential non-
linearities in the prescription response function. The results from the NBD regression
(available from the authors on request) support the basic finding that opinion leader
prescriptions have a positive and significant effect on physician prescriptions post-guidelines
remains unchanged. We interpret this as providing some robustness checks on the results
from our linear model.
Finally, to check whether the peer effects varied by physician and opinion leader
characteristics, we also estimated versions of the linear fixed effects model (results not
reported here) in which the opinion leader’s prescriptions were interacted with opinion
leader’s and physician characteristics (specialty & number of published papers) as well as
the channel of social interaction. We found that these interactions were not statistically
significant. A goal for future research is to further identify the mechanism through which
social effects occur – this provides a motivation for collecting more data of the form we have.
An alternate approach may also be to design interventions with randomized treatments
(Sacerdote, 2001; Duflo and Saez, 2003; Kremer and Miguel, 2004), or through field studies
(Godes and Mayzlin 2004).
24
In sum, our results provide significant evidence for asymmetric peer effects. These
effects persist after controlling for problems of endogenous group formation, targeted
marketing activity, correlated unobservables and simultaneity, and are also robust to
functional form. We find that opinion leader behavior significantly affects physician behavior
after an exogenous change in the market that resulted in a change in the therapeutic
environment.
Targeting sales force activity to the Opinion Leaders
We now use our results to explore the implications of targeting detailing at the opinion
leaders. In particular, we wish to estimate the social multiplier associated with detailing in
this industry. As was discussed previously, the focal firm seemed to be aware of the
relevance of opinion leaders and did indeed shift detailing toward opinion leaders after the
guideline release. An incremental detail to an opinion leader has two effects: first, it
increases the prescriptions by the opinion leader; and second, the increase in the
prescriptions by the opinion leader increases prescriptions by the corresponding physician.
We use our model estimates to measure both effects.
We first estimate a prescription response function for the opinion leaders (given our
results from the previous section, we do not include the nominating physician’s prescriptions
as a covariate). We regress opinion leader prescriptions on opinion leader detailing while
controlling for the common shocks using the mean prescriptions of all other physicians in the
opinion leaders zip-code. Table 13 presents results from both OLS and fixed effects
specifications. As noted before, the effect of detailing is strongly significant for opinion
leaders. The effect persists even after using fixed effects to control for potential targeting by
firms of opinion leaders. As expected, the coefficient of detailing drops in absolute magnitude
when moving from the OLS to the fixed effects model. However, the marginal effect of
detailing of drug 2 is 0.136 – this is significantly larger than the corresponding effect for
nominating physicians.
We now use these estimates to compute the incremental revenue of an additional
detail by both drugs 1 and 2 to an opinion leader. Note that total marginal effect of drug 1
and 2 detailing is 0.127 (0.136-0.009). In the aggregate data for the category, we find that one
new prescription generates on average two renewals (obtained by subtracting one - the new
prescription - from the number of total prescriptions generated per prescriptions for our
therapeutic category). Further, the revenue from one additional dose of a combination drug is
around $ 50.00. Thus, the incremental revenue from an additional prescriptions is about $
150.00. Given this, the incremental revenue from one additional detail in the category is
25
$19.05 ($150.00*0.127). We then compute the incremental revenue arising from the increase
in opinion leader prescriptions for a nominating physician for each month after the guideline
change. We use the results from the main regression in the last column in Table 10. Post
guidelines, the additional revenue from a nominating physician as a result of the increase in
opinion leader prescriptions is 0.127*0.032*$ 150 = $ 0.61. From Table 2, the average opinion
leader in our sample influences 1.56 physicians. Hence, the total effect arising out of a social
interaction is 1.56*$0.61 = $0.95. For the average opinion-leader, this accounts for about
4.76% (=0.95/(19.05+0.95)) of the total revenue effect of detailing; implying a social multiplier
of detailing in the category of 1.05. For the top opinion leader, who influences 17 physicians,
we obtain a social-multiplier of about 1.35% (Figure 5 provides the distribution of social
multipliers for the physicians in our data). Note these are likely the lower bound on the peer
effect since z-it could contain some prescriptions generated via the opinion leader effect. Even
so, we find that peer effects alone provide a 5%- 35% lift in the return-on-investment from
targeting marketing at opinion leaders. A take-away from the analysis is that opinion leader
identification is of key importance to the company.
6. Conclusions
Our paper adds to the small but growing literature that documents peer effects using
individual consumer level data. The unique and novel features of our application include the
asymmetric nature of the interaction and the presence of marketing activity whose effects
are moderated by the interactions among agents. The existence of the peer effect generates
spillovers that multiply the returns to targeting influential agents within a group.
Our key contributions can therefore be seen as providing evidence for asymmetric
peer effects in physician prescription decisions via the use of a novel dataset from the
pharmaceutical industry. Previous academic and industry literature has provided little
support for these effects in this context, in spite of strong industry beliefs in the existence of
these effects. We do this while addressing the identification challenge – separating out
causality from multiple sources that give rise to correlations – inherent in this problem. The
detected effects are robust to model specification and functional form. Finally, we use the
estimated causal effects to derive implications for marketing resource allocation for firms in
the industry and present estimates of the social multipliers effects of marketing activity
(detailing). Our estimates indicate important peer effects in prescription choice, and
economically significant social multiplier effects in detailing.
26
Our analysis has some limitations. First, the network in our approach is “thin”
relative to networks used in previous research. Richer networks could allow researchers to
investigate effect of network structure on the peer effect. Second, given that we only have the
treatment effect “on the treated,” we cannot compute the social multiplier across all types of
physicians. Our conversations with the firm suggest that most general practitioner doctors in
this category may be subject to some form of peer influence; hence treatment on the treated
is likely the right policy-relevant treatment effect. Third, we do not have direct
measurements on the information or opinions shared by the opinion leader with the
nominating physician. While this is a limitation, our results are robust to many functions of
the opinion leader’s prescription activity. An interesting extension of our research would be
to investigate how peer effects are moderated by the nature of nominator and opinion leader
interactions (e.g., in person, via e-mail etc.) over time. Fourth, our data also come from one
specific therapeutic category and from one survey. We also do not have any data on the
identities of the sales force and patients seen by the physicians in our sample. Fifth, we also
do not have access to marketing activity for all drugs in this category at the individual
physician level e.g., we only have aggregate detailing for drug 1 (the market leader). Finally,
we have limited demographics on opinion leaders and nominating physicians. We are also
unable to accommodate unobserved heterogeneity in peer effects; on the other hand, given we
found limited evidence for observed heterogeneity in peer effects, this may be not be
unreasonable for these data. Our hope is that with access to richer data, these limitations
will be addressed in future work.
References
Bandiera, O. and Imran Rasul (2006), “Social Networks and Technology Adoption in
Northern Mozambique,” Economic Journal, 116, 869-902.
Becker, G. and K. Murphy (2000), Social Economics. Cambridge: Harvard University Press.
Becker, Marshall H. (1970), “Sociometric location and innovativeness: Reformulation and
extension of the diffusion model,” American Sociological Review, 35, 267-283.
Bell, David R. and Sangyoung Song. (2007), “Social Contagion and Trial on the Internet:
Evidence from Online Grocery Retailing,” Quantitative Marketing and Economics, 5(4),
361-400.
Bertrand, M., E. Luttmer, and S. Mullainathan (2000). “Network Effects and Welfare
Cultures,” Quarterly Journal of Economics, 115(3), 1019–1055.
Brock, William A. and Steven N. Durlauf. (2001). “Discrete Choice With Social Interactions,”
Review of Economic Studies, 68(235,Apr), 235-260.
Burt, Ronald S. (1987), “Social Contagion and Innovation: Cohesion versus Structural
equivalence,” American Journal of Sociology, 92, 1287-1335.
27
Celentano, David D., Katherine C. Bond, Cynthia M. Lyles, Sakol Eium Trakul, Vivian F.-L
Go, Chris Beyrer, Chainarong na Chiangmai, Kenrad E. Nelson, Chirasak Khamboonruang
and Chayan Vaddhanaphuti. (2000), “Preventive Intevention to Reduce Sexually
Transmitted Infections,” Archives of Internal Medicine, 160, Feb 28, 535-540.
Coleman, James S., Elihu Katz, and Herbert Menzel. (1966), “Medical Innovation: A
Diffusion Study,” The Bobbs-Merrill Company, Indianapolis, IN.
Conley, T. G. and C. R. Udry. (2000), “Learning About a New Technology: Pineapple in
Ghana,” Working Paper, University of Chicago.
Cutting Edge Information (CIE). (2004), “Pharmaceutical Thought Leaders: Brand Strategies
and Product Positioning,” Report PH64.
Dufflo, E. and Emmanuel Saez. (2003), “The Role of Information and Social Interactions in
Retirement Plan Decisions: Evidence from a Randomized Experiment,” Quarterly Journal
of Economics 118(3), pp. 815-842.
Godes, David, and Dina Mayzlin. (2004). “Firm-Created Word-of-Mouth Communication: A
Field-Based Quasi-Experiment,” Marketing Science, forthcoming.
Granovetter, M.S. (1985). “Economic action and social structure: the problem of
embeddedness”, American Journal of Sociology, vol. 91, pp. 481–510.
Hartmann, Wesley (2008), “Demand Estimation with Social Interactions and the
Implications for Targeted Marketing,” Working paper, Stanford University.
Hartmann, Wesley R., Puneet Manchanda, Harikesh Nair, Matthew Bothner, Peter Dodds,
David Godes, Kartik Hosanagar and Catherine Tucker (2007), “Modeling Social
Interactions: Identification, Empirical Methods and Policy Implications,” Marketing
Letters, forthcoming.
Hausman, Jerry, Bronwyn H. Hall and Zvi Griliches. (1984), “Econometric Models for Count
Data with an Application to the Patents-R&D Relationship,” Econometrica 52: 909-938.
Iyengar, R., Valente, T. and Van den Bulte, C. (2008), “Opinion Leadership and Social
Contagion in New Product Diffusion,” working paper, University of Pennsylvaia.
Kremer, M. and Miguel, E. (2004). “Worms: identifying impacts on education and health in
the presence of treatment externalities,” Econometrica, vol. 72, pp. 159–218.
Lomas, Jonathan, Murray Enkin, Geoffrey M. Anderson, Walter J. Hannah, Eugene Vadya
and Joel Singer. (1991), “Opinion Leaders vs Audit and Feedback to Implement Practice
Guidelines,” Journal of the American Medical Association, 265 (17), 2202-2207.
Manchanda, Puneet, Peter E. Rossi and Pradeep K. Chintagunta (2003), “Response modeling
with non-random marketing mix variables,” Journal of Marketing Research, 41, 467-478.
Manchanda, Puneet, Ying Xie and Nara Youn (2004), “The Role of Targeted Communication
and Contagion in New Product Adoption,” Marketing Science, forthcoming.
Manski, C. F., (1993), “Identification of Endogenous Social Effects: The Reflection Problem,”
Review of Economic Studies 60, pp. 531-542.
Manski, C. F., (2000), “Economic Analysis of Social Interactions,” Journal of Economic
Perspectives 14(3), 115–136.
Moffitt, R., (2001). “Policy Interventions, Low-Level Equilibria, and Social Interactions,” in
Durlauf, S. and Young, P. (Ed.) Social Dynamics, Brookings Institution Press and MIT
Press 45-82
28
Munshi, K. and Myaux, J. (2002). “Development as a process of social change: an application
to the fertility Transition”, mimeo, Brown University.
Nam, Sungjoon, Puneet Manchanda and Pradeep K. Chintagunta (2006), “The Effects of
Service Quality and Word-of-Mouth on Customer Acquisition, Retention and Usage,”
working paper, University of Michigan.
Reingen, Peter H. and Jerome B. Kernan. (1986), “Analysis of Referral Networks in
Marketing: Methods and Illustration,” Journal of Marketing Research, 23 (November), 370-
378.
Rogers, Everett M. (2003), “Diffusion of Innovations,” 5th Ed., The Free Press, New York.
Sacerdote, B. (2001). “Peer effects with random assignment: results for Dartmouth
roommates”, Quarterly Journal of Economics, vol. 116, pp. 681–704.
Sorensen, A. (2005), “Social Learning and Health Plan Choice,” forthcoming, RAND Journal
of Economics.
Steffens, P.R., and D.N.P. Murthy (1992), “A mathematical model for new product diffusion:
The influence of innovators and imitators,” Mathematical and Computer Modeling, 16 (4),
11-26.
Summers, John O. (1971), “The Identity of Women’s Clothing Fashion Opinion Leaders,”
Journal of Marketing Research, 7 (May), 178-185.
Tan, Robert S. (2003), “Physician executives as opinion leaders in biotechnology and
pharmaceuticals,” Physician Executive, 29 (3), 26.
Tanny, S.M., and N.A. Derzko (1988), “Innovators and imitators in innovation diffusion
modeling,” Journal of Forecasting, 7, 225-234.
Valente, Thomas and Pumpuang, Patchareeya (2007), “Identifying Opinion Leaders to
Promote Behavior Change,” Health Education and Behavior, 34, 881-896.
Valente, Thomas H., Beth R. Hoffman, Annamara Ritt-Olson, Kara Lichtman and C.
Anderson Johnson. (2003), “Effects of a Social-Network Method for Group Assignment
Strategies on Peer-Led Tobacco Prevention Programs in Schools,” American Journal of
Public Health, 93 (11), 1837-1843.
Van den Bulte, Christophe and Yogesh V.Joshi (2007), “New Product Diffusion with
Influentials and Imitators,” Marketing Science, forthcoming.
Van den Bulte, Christopher and Gary L. Lilien. (2001), “Medical Innovation Revisited: Social
Contagion versus Marketing Effort,” American Journal of Sociology, 106(5), 1409-35.
Watts, D.J. and P.S. Dodds, (2007) “Influentials, Networks, and Public Opinion Formation,”
Journal of Consumer Research., Vol. 34.
Appendix A: The Effect of New Guidelines
In general, guidelines are released to advocate new courses of therapy, to report the efficacy
of the drug to alleviate symptoms not considered in the past, to report interactions with
existing drugs etc. Thus, the primary outcome of these new guidelines are changes in
prescription behavior, especially prescriptions. Note, however, that the release of new
guidelines usually results in a period of confusion about the implications and the intended
use of those guidelines. This confusion arises as guidelines are phrased in general terms and
29
not for each individual patient. In addition, many times, the guidelines can give rise to
questions that need to be answered once the guidelines have been followed.
We illustrate the increased uncertainty post guideline issuance using three cases of new
guidelines (all text in italics in the excerpts below is ours). First, in the case of the American
Heart Association’s guidelines for women’s use of aspirin, the issued guidelines were not
precise, leading to confusion – as is evident from this excerpt below (from www.health.yahoo.com):
“Women and Heart Disease, Part 1: Aspirin Confusion” Posted by Simeon Margolis, M.D.,
Ph.D. on Thu, Mar 08, 2007, 4:27 am PST
“The 2007 update of the American Heart Association's guidelines for women has led to some confusion regarding the use of aspirin. The guidelines do indeed state that women 65 years or older should consider taking low-dose aspirin (81 mg daily or 100 mg every other day), and there is no mention that the presence of risk factors should affect this decision.”
The second case is that of screening guidelines for cervical cancer using Pap tests. We
include excerpts from www.aafp.org and Market Wire below:
“Although the American Cancer Society, American College of Obstetricians and Gynecologists, and U.S. Preventive Services Task Force have released new guidelines for screening, differing language, requirements
and timelines in these guidelines can confuse family physicians and their female patients.” www.aafp.org,
Oct 11, 2005.
“Confusion Over Pap Test Guidelines”
“There's a wealth of misleading information about Pap tests and cervical cancer. Headlines are filled with reports of new guidelines and the possibility of a vaccine that could prevent cervical cancer. But this all creates confusion for women and may discourage them from getting a Pap test. Pathologists, physicians who care for patients through laboratory medicine, say that even with the new guidelines, every woman needs to have a regular Pap test. For some women, that means every year. For other women, that may mean every other year.”
Market Wire, December, 2002.
The final illustration is that of the FDA guidelines for pharmacist guidelines on drug
compounding.
“Despite FDA's new compounding guidelines, confusion reigns
“Reaction to the new guidelines was mixed. Susan Bishop, manager of regulatory affairs and political action for the American Pharmaceutical Association, said pharmacists who were hoping for guidance from the FDA would find more confusion than clarification. Rather than a strict distinction between compounding and manufacturing, the agency is laying out broad directions for enforcement and reserving the right to change course without warning. "I don't know if I would call the document useful," Bishop said. It doesn't give pharmacists any comfort to hear that they may be breaking the law, but that FDA might also decide to
change its mind on whether or not they're breaking the law.” www.drugtopics.com, July 1,
2002
We also polled a convenience sample of physicians (n=4, details on physician demographics
below) and asked them the following question – “In your opinion, when new guidelines are
30
released by bodies such as the FDA and NIH, do they in general, lead to lower or higher
uncertainty in treatment especially in the first few months following the guideline release?
In addition to your answer, please provide the context in which we should interpret your
answer.”
We summarize the findings below: 1. All four physicians felt that guidelines lead to increased uncertainty. 2. This is because the “clinical presentation” of each patient is different and the
physician needs to “individualize” the treatment for the patient. Guidelines do not provide a clear indication of when they would be applicable and when not leading to confusion about whether the treatment is relevant for a given patient. For example, an issue with moving to a combination drug is that the use of combination drug dramatically increases the possibility of negative interactions with other courses of therapy that the patient may be undergoing. The guidelines do not explicitly detail this and therefore the physician needs to verify, for each patient, the possibility of such negative interactions.
3. In general, the role of guidelines is to increase awareness of treatment options. It is not to provide “rules of thumb” that would lead to lower treatment uncertainty.
4. One of the physicians offered up a specific example of her dilemma. A recent release of clinical data suggests that Vytorin/Zetia does not help patients trying to lower cholesterol. If guidelines based on this result are released, then this physician said that the guidelines would have to be interpreted on a patient-by-patient basis – causing her more uncertainty. Specifically, her options would be to take all her patients off the drug, leave patients who are responding positively to the drug on the drug or follow a phased withdrawal.
Physicians Consulted (full names not revealed due to confidentiality reasons):
� Dr. P.K. – Specialist, Houston Northwest medical center, Houston, TX � Dr. R.K. – Former Medical director, Robert Wood Johnson hospital rehabilitation
Center, Cranbury, NJ � Dr. P.S. – Internist, LaPeer Regional Hospital, Detroit, MI � Dr. R.T. – Family Practice, UMDNJ, New Jersey
Taken together, these data illustrate why and how new guidelines lead to increased
uncertainty in most cases.
Table 1: Distribution of Nominations
Number of Nominations Number of Nominators
1 245
2 21
3 1
Total 267
Notes: To be read as: there were 245 physicians who nominated 1 opinion leader, 21 who
nominated 2 opinion leaders, and 1 who nominated 3 opinion leaders.
31
Table 2: Distribution of Opinion Leader Nominations
Number of
nominations
Number of
Opinion Leaders
1 112
2 56
3 7
4 5
8 1
17 1
Total 182
Notes: to be read as, there are 112 doctors who were nominated as opinion leaders by exactly
1 physician, 56 doctors who were nominated as opinion leaders by exactly 2 physicians, etc,
and 1 doctor who was nominated as an opinion leader by 17 physicians.
Table 3: In-sample market-shares of combination drugs
Physicians Opinion
Leaders
Drug 1 0.924 0.861
Drug 2 0.073 0.138
Drug 3 0.003 0.002
Drug 4 0.000 0.000
Table 4: Sample descriptives
Variable Mean Std. Dev. Min Max
Physician prescriptions 4.16 4.40 0 39
Opinion Leader prescriptions 2.23 4.85 0 54
Physician details (drug 2) 0.75 1.35 0 11
Opinion Leader details (drug 2) 0.52 1.15 0 10
Z-it 0.75 0.94 0 13.7
Z-OPL,t 0.40 0.38 0 3.3
Notes: Number of observations in sample = 6960. Z-it refers to the mean prescriptions of all other
physicians in nominator i’s zip-code; Z-OPL,t refers to the mean prescriptions of all other physicians in
nominator OPL’s zip-code;
32
Table 5: Correlation between mean prescriptions of other physicians in the physician’s and the opinion leader’s zip-codes
Month Apr-02 May-02 Jun-02 Jul-02 Aug-02 Sep-02 Oct-02 Nov-02 Dec-02 Jan-03 Feb-03 Mar-03
Correlation 0.103 0.083 0.012 0.043 0.029 0.037 0.062 0.027 0.020 0.044 0.031 -0.004
p-value 0.097 0.180 0.851 0.493 0.637 0.548 0.318 0.662 0.745 0.483 0.614 0.949
Month Apr-03 May-03 Jun-03 Jul-03 Aug-03 Sep-03 Oct-03 Nov-03 Dec-03 Jan-04 Feb-04 Mar-04
Correlation -0.020 0.054 -0.025 0.009 0.021 0.038 -0.017 0.021 0.052 0.005 0.012 0.074
p-value 0.751 0.381 0.687 0.888 0.730 0.545 0.783 0.734 0.402 0.937 0.846 0.235
Table 6: OLS Regressions of Physician prescriptions on Opinion Leader’s prescriptions1
Param t-stat Param t-stat Param t-stat
Constant 4.079 8.03 4.039 7.93 4.173 8.19
Drug 2 Detailing 0.825 21.80 0.826 21.82 0.821 21.68
Drug 1 Detailing (aggregate) -0.012 -1.38 -0.012 -1.39 -0.017 -1.91
OPL_Nrx 0.071 6.77 0.070 6.59 0.048 0.88
Z-it 0.059 1.09 0.050 3.36
I(t>=May 03) 0.298 2.63
OPL_Nrx* I(t>=May 03) 0.039 1.86
F 174.91 131.48 90.76
R2 0.0701 0.0703 0.0726
Table 7: Fixed-Effect Regressions of Physician prescriptions on Opinion Leader’s prescriptions1
Param t-stat Param t-stat Param t-stat
Constant 4.243 12.61 4.104 12.07 4.297 12.65
Drug 2 Detailing 0.014 0.40 0.012 0.35 0.001 0.02
Drug 1 Detailing (aggregate) -0.002 -0.29 -0.002 -0.30 -0.007 -1.27
OPL_Nrx 0.002 0.21 0.002 0.20 -0.022 -1.79
Z-it 0.190 2.73 0.138 1.99
I(t>=May 03) 0.369 4.92
OPL_Nrx* I(t>=May 03) 0.043 3.09
F 46.9500 47.020 47.4700
R2 0.6050 0.6054 0.6087
1Fixed effects for nominating physicians included, but not reported. Nobs =6960.
33
Table 8: First stage regressions of OPL prescriptions on instruments
On only excluded
instruments
On first-stage
instrument matrix1
Param t-stat Param t-stat
Drug 2 detailing to nominating
physician
-0.041 -1.02
Aggregate Drug 1 detailing (1000-s) -0.014 -2.11
I(t>May 03) 0.002 0.03
Z-it -0.057 -0.72
Drug 2 detailing to OPL 2.311 20.89 1.296 14.37
(Drug 2 detailing to OPL)2 -0.167 -7.29 -0.110 -6.30
Z-OPL,t 2.173 6.72 1.765 4.04
(Z-OPL,t)2 -0.993 -5.40 -0.243 -1.06
Constant 0.724 7.42 -0.816 -1.00
F 343.88 47.97
R2 0.1651 0.5904
N 6960
1Fixed effects for nominating physicians included, but not reported. Nobs =6960
Table 9: Fixed-Effect Instrumental Variable Regressions of Physician prescriptions on
Opinion Leader’s prescriptions1
Param t-stat Param t-stat Param t-stat
Drug 2 Detailing 0.078 1.95 0.073 1.83 0.000 0.01
Drug 1 Detailing (aggregate) 0.011 0.32 0.010 0.27 -0.007 -1.21
OPL_Nrx -0.001 -0.18 -0.001 -0.19 0.011 0.28
Z-it 0.188 2.70 0.139 1.99
I(t>=May 03) 0.386 3.80
OPL_Nrx* I(t>=May 03) 0.032 2.06
J-stat (Sargen) 10.572 10.354 9.476
Chi2 pvalue (degrees of freedom) 0.0143 (3) 0.0158 (3) 0.1485 (6)
1Fixed effects for nominating physicians included, but not reported. Nobs =6960.
Table 10: Regressions of Physician prescriptions on Opinion Leader’s prescriptions with
full set of physician and time-period fixed effects1
Fixed effects Fixed-Effects IV
Param t-stat Param t-stat Param t-stat Param t-stat
Constant 1.678 2.17 1.627 2.10
Drug 2 Detailing -0.009 -0.25 -0.010 -0.27 -0.009 -0.25 -0.010 -0.26
Drug 1 Detailing (aggregate) 0.042 3.26 0.042 3.22 0.139 3.95 0.137 3.88
OPL_Nrx -0.023 -1.83 -0.023 -1.82 0.001 0.02 0.000 -0.01
Z-it 0.119 1.71 0.120 1.72
OPL_Nrx* I(t>=May 03) 0.042 3.02 0.042 3.01 0.031 2.06 0.031 2.05
Time-period fixed effects Y Y Y Y
F 47.710 47.730
R2 0.6125 0.6127
J-stat (Sargen) 7.299 7.302
Chi2 pvalue (degrees of freedom) 0.2941 (6) 0.2938 (6)
1Nobs = 6960.
34
Table 11: Fixed effects instrumental variable regressions of OPL prescriptions
Param t-stat Param t-stat Param t-stat Param t-stat
Nominator_NRx 0.001 0.02 -0.037 -0.48 -0.058 -0.76 -0.041 -0.46
Nominator_NRx*I(t >=May
03) 0.044 0.90 0.063 1.31 0.058 1.13
Drug 2 detailing 0.136 4.35 0.115 3.61 0.110 3.41 0.115 3.59
Drug 1 detailing
(aggregate: 1000-s) -0.009 -2.06 -0.012 -2.70 0.000 0.01 0.008 0.21
Z-it 0.752 3.22 0.538 2.28 0.480 2.03
I(t >=May 03) 0.066 0.34
All month fixed effects? N N Y Y
J-stat (Sargen) 6.81 5.23 4.85 2.14
Chi2 pvalue (degrees of
freedom) 0.0782 (3) 0.2645 (4) 0.3027 (4) 0.3437 (2)
Notes: 1New treatment guidelines issued in May 03. Fixed effects for each opinion leader estimated,
but not reported. Robust t-stats reported.
Table 12: Robustness checks: Fixed effects IV regressions of Physician prescriptions on
functions of OPL prescriptions
[1] [2] [3] [4] [5]
f(OPL_NRx):
( ), 1j i tx
−
OPL
prescriptions
last month
( )( ),j i tI x
Did OPL
prescribe?
( )( ), 1j i tI x
−
Did OPL
prescribe last
month?
( )1 ,
t
j ixτ τ=∑
How much has
OPL prescribed
as of this month?
( )11 ,
t
j ixτ τ
−=∑
How much has
OPL prescribed
as of last month?
Param t-stat Param t-stat Param t-stat Param t-stat Param t-stat
Drug 2 detailing -0.021 -0.56 -0.018 -0.47 -0.023 -0.61 -0.019 -0.50 -0.019 -0.51
Drug 1 detailing
(aggregate: 1000-s) 0.412 3.37 0.347 2.20 0.315 1.80 0.526 3.95 0.525 3.95
f(OPL_NRx) -0.018 -0.43 0.582 0.72 1.339 1.33 -0.007 -1.91 -0.007 -1.19
f(OPL_NRx)*I(t >=May 03)1 0.036 3.04 0.303 3.64 0.802 3.30 0.005 1.94 0.005 1.93
Z-it 0.112 1.57 0.104 1.45 0.133 1.77 0.126 1.75 0.126 1.75
Month fixed effects included? Y Y Y Y Y
Instruments2 ( ), 1j i t−w ( ),j i t
w ( ), 1j i t−w
( )1 ,
t
j iτ τ=∑ w ( )1 , 1
t
j iτ τ= −∑ w
Chi2 pvalue (degrees of freedom) 0.262 (4) 0.316 (4) 0.1197 (4) 0.7642 (4) 0.7523 (4)
Notes: Each column presents results from fixed-effects IV regressions of a physician’s prescriptions
on a function of his opinion leader’s prescriptions. For example, column [1] presents results from
fixed-effects IV regressions of a physician’s prescriptions on a lagged values of of his opinion leader’s
prescriptions; the effect of lagged opinion-leader prescriptions pre-guidelines is -0.018, and post-
guidelines is -0.018+0.036 = 0.018. Dependant variable in all IV regressions is Physician NRx = yit.
Physician and month fixed-effects estimated in all specifications, but not reported. 1Guidelines
released in May 2003. 2w denotes the vector of available instrumental
variables: ( ) ( ) ( ) ( )( )2 2
, , , ,, , ,
it j i t j i t j i t j i tx x z z
− −=w .
35
Table 13: Responsiveness of OPL prescriptions to detailing
OLS Fixed Effects1 Variable
Param t-stat Param t-stat
Constant 2.167 4.05 2.358 9.02
Drug 2 Detailing 1.614 34.09 0.136 4.35
Drug 1 detailing (aggregate) -0.018 -1.98 -0.009 -2.06
Z-OPL,t 0.679 4.75 0.753 3.44
F 426.33 12.79
R2 0.155 0.826
N 6670
Notes: Fixed effects for each OPL estimated, but not reported. Robust t-stats reported.
Figure 1: Aggregate detailing: Combination drugs
50
55 57
65
57
50
61
54 53
60 58 59
65
54
68 65
60 58
64
51
43
53
62
57
13
17 15 16
15 15 16
12 10
13
20
15 12
19
24 26
20 21 19
17 19
24 24 25
0
10
20
30
40
50
60
70
80
Apr- 02
May- 02
Jun- 02
Jul- 02
Aug- 02
Sep- 02
Oct- 02
Nov- 02
Dec- 02
Jan- 03
Feb- 03
Mar- 03
Apr- 03
May- 03
Jun- 03
Jul- 03
Aug- 03
Sep- 03
Oct- 03
Nov- 03
Dec- 03
Jan- 04
Feb- 04
Mar- 04
Month
1000-s of details Drug 1 details
Drug 2 details
36
Figure 2: Distribution of Category prescriptions before and after issuance of new NIH
guidelines
1 2
3.5
4
4.5
5M
ea
n N
Rx p
er
mo
nth
Physicians
1 2
1.9
2
2.1
2.2
2.3
2.4
2.5
2.6
2.7
2.8
Me
an
NR
x p
er
mo
nth
OPL-s
Before BeforeAfter After
Figure 3: Distribution of detailing before and after issuance of new NIH guidelines
1 2
0.2
0.4
0.6
0.8
1
1.2
1.4
Me
an
de
tails
pe
r m
on
th
Before
Physicians
BeforeBefore1 2
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
Me
an
de
tails
pe
r m
on
th
After
OPL-s
After Before
37
Figure 4: Variation in mean prescriptions of other physicians in the
physician’s zip-code over time, controlling for across physician variation
0 5 10 15 20 25-0.05
0
0.05
0.1
0.15
0.2
0.25
0.3
Month (1 = May 2002)
Me
an
NR
x o
f o
the
r p
hysic
ian
s in
zip
-co
de
Z-i
Z-OPL
Figure 5: Distribution of social-multipliers in data
1 1.05 1.1 1.15 1.2 1.25 1.3 1.35 1.40
0.1
0.2
0.3
0.4
0.5
0.6
0.7
Social Multipliers
Pro
portio
n