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Biotechnology industry-physician interaction and OIG guidelines: Evidence from the stock market

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Abstract:

Our article investigates the stock market reaction of the issuance of guidelines by the Office of Inspector General (OIG) to prod biotechnology manufacturers to strengthen self-regulation so as ‘to efficiently monitor adherence to applicable statutes, regulations and program requirements’ in their marketing to physicians. Our empirical results, using standard event study methodology, show significant effect on shareholders’ wealth of 10 large biotechnology firms around various OIG-associated events leading up to the issuance of final guidance. The release of high-level government policy initiative requires the biotechnology industry to review its marketing practices that might be questionable. We provide evidence that suggests that when a public policy initiative significantly affects shareholder wealth, that in turn can impact and alter firm-level behavior without the necessity of adopting a regulation which can be hugely expensive.

Document Type: Research Article

DOI: http://dx.doi.org/10.1057/jcb.2010.21

Publication date: October 1, 2010

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