We provide empirical evidence that pharmaceutical firms respond strategically. They reduce promotional payments to physicians for drugs facing the largest discounts and increase promotion for others that remain more profitable.

Governments often regulate prices (e.g., capping drug prices or taxing unhealthy goods) to achieve policy goals. But what happens when firms respond strategically? In our new Management Science paper, we study how pharma firms adjust promotions under the 340b Program.

The FTC's case against PepsiCo highlights how promotional payments can give big-box retailers an unfair advantage. My research shows that side payments are just as important as wholesale price discounts in supplier negotiations. #FTC #EconSky