Mandatory Disclosure: Theory and Evidence from Industry-Physician Relationships

The interaction of disclosure laws and the targeted behavior is typically unknown since data on disclosed activity rarely exist in the absence of disclosure laws. We exploit legal settlements disclosing pharmaceutical company payments across the United States. Strong-disclosure states (requiring publicly available data) had reduced payments among doctors accepting less than $100 and increased payments among doctors accepting greater than $100. Weak-disclosure states (requiring reporting to state authorities), despite imposing administrative compliance costs to industry, were indistinguishable from nondisclosure states, which suggests physicians' disclosure aversion as a primary mechanism. Additional analyses holding fixed the cost for pharmaceutical companies of disclosing data and a differences-in-discontinuities model in distribution of payments at the disclosure threshold among strong- and weak-disclosure states support this interpretation. Significant disclosure aversion reducing conflicts of interest is consistent with the policy goals of mandatory disclosure, though the increased payments among those receiving large payments may have been unintended.