Contagious Physician Prescribing: Opioid Physician Prescription Spill-overs and Labor Market Effects of Opioid Analgesics

In the United States, 64,000 people were killed by drug overdosis in 2016. This is up 22 percent from the 2015 level of 52,404 deaths, and have prompted policy makers to declare the opioid epidemic a national emergency. Previous literature provide evidence that physicians matter for the treatment choices of their patients, implying that policies targeting this particular group can limit the current opioid epidemic. However, a thorough understanding of the mechanisms of physician prescribing behavior is needed to grasp the full potential of such strategies.

In this paper I contribute to the literature on physician behavior and the opioid epidemic along several important dimensions. Using Danish registry data on the full population linking providers and patients, I document that the opioid prescribing behavior of physicians is dynamic and mutable in nature, and constitutes an important determinant of opioid treatment intensity of individuals. Specifically, I provide evidence that opioid prescribing leniency is partly the result of a diffusion process across physician clinics, spreading from high leniency areas, and effectively constituting a roll-out of opioid leniency across the country. To estimate the diffusion process, I adopt a peer effects framework. I construct physician specific networks and utilize clinic closures due to physician retirement to obtain within-physician variation in composition of peers over time. This allows me to estimate robust spill-over effects. The estimated spill-over effects are non-negligible: an increase in leniency of one standard deviation by a random peer leads to an increase of 5% of a standard deviation in prescribing leniency.

I estimate impacts on labor market outcomes of opioid consumption instrumenting individual opioid consumption leveraging the within physician variation in exposure to the diffusion process. Estimating the labor market effects of opioid consumption is important as it constitutes an understudied branch of costs to the increased opioid use worldwide. I estimate significant negative impacts of opioid usage on labor market income: a one standard deviation increase in opioid use results in a reduction of 7.8 percentage points in the labor market income percentile rank. Moreover, I estimate that opioid usage, despite its intent, actually causes increases in short-term disability: a one percentage increase in opioid use results in an increase of 0.16 percentage point’s short-term disability.

The results have wide implications for policy makers, as they add to the understanding of the dynamics of the contagious nature of the opioid epidemic and extend the cost side of opioid usage beyond effects on health and health care expenditures. Furthermore, the results suggest that the effect of policies targeting individual physicians are magnified, as local reductions in opioid leniency would diffuse to nearby physicians due to the presence of spill-overs.