What Causes Geographic Variation in Drug Prescribing? Evidence from Physician Migration

ABSTRACT

In this article, we examine the importance of individual physicians in explaining the significant variation in prescription drug spending in Medicare Part D. By tracking prescribing behavior before and after physician relocations, we find that movers' prescribing converges toward the average of their new location. However, this convergence is far from complete, highlighting the importance of idiosyncratic physician‐specific factors. Overall, these physician‐specific factors explain about 60 to 70 percent of the cross‐sectional variation in prescription drug spending, suggesting that physicians are one of the most important supply‐side determinants of this variation. We investigate several potential mechanisms behind this partial convergence.