  This paper studies how gifts - monetary or in-kind payments - from drug firms
to physicians in the US affect prescriptions and drug costs. We estimate
heterogeneous treatment effects by combining physician-level data on
antidiabetic prescriptions and payments with causal inference and machine
learning methods. We find that payments cause physicians to prescribe more
brand drugs, resulting in a cost increase of $30 per dollar received. Responses
differ widely across physicians, and are primarily explained by variation in
patients' out-of-pocket costs. A gift ban is estimated to decrease drug costs
by 3-4%. Taken together, these novel findings reveal how payments shape
prescription choices and drive up costs.
