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Estimating the Impact of Medical Innovation: A Case Study of HIV Antiretroviral Treatments

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Author Info
Mark Duggan (University of Maryland, College Park)
William Evans (University of Notre Dame)

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Abstract

As health care consumes a growing share of GDP, the demand for better evidence regarding the effects of health care treatments and how these vary across individuals is increasing. Estimating this with observational data is difficult given the endogeneity of treatment decisions. But because the random assignment clinical trials (RACTs) used in the FDA approval process only estimate average health effects and do not consider spending, there is no good alternative. In this study we use administrative data from California's Medicaid program to estimate the impact of HIV antiretroviral treatments (ARVs). We use data on health care utilization to proxy for health status and exploit the rapid takeup of ARVs following their FDA approval. Our estimate of a 68 percent average mortality rate reduction is in line with the results from RACTs. We also find that the ARVs lowered short-term health care spending by reducing expenditures on other categories of medical care. Combining these two effects we estimate the cost per life year saved at $19,000. Our results suggest an alternative method for estimating the real-world effects of new treatments that is especially well-suited to those treatments that diffuse rapidly following their approval.

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Publisher Info
Article provided by Berkeley Electronic Press in its journal Forum for Health Economics & Policy.

Volume (Year): 11 (2008)
Issue (Month): 2 ()
Pages: 1102-1102
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Handle: RePEc:bep:fhecpo:v:11:y:2008:i:2:p:1102-1102

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Related research
Keywords: HIV AIDS antiretrovirals innovation Medicaid

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Bhattacharya, Jayanta & Goldman, Dana & Sood, Neeraj, 2003. "The link between public and private insurance and HIV-related mortality," Journal of Health Economics, Elsevier, vol. 22(6), pages 1105-1122, November. [Downloadable!] (restricted)
    Other versions:
  2. Dana Goldman & Darius Lakdawalla & Neeraj Sood, 2004. "HIV Breakthroughs and Risk Sexual Behavior," NBER Working Papers 10516, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. David Meltzer, 1997. "Accounting for Future Costs in Medical Cost-Effectiveness Analysis," NBER Working Papers 5946, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. Duggan, Mark, 2005. "Do new prescription drugs pay for themselves?: The case of second-generation antipsychotics," Journal of Health Economics, Elsevier, vol. 24(1), pages 1-31, January. [Downloadable!] (restricted)
  5. Amil Petrin, 2002. "Quantifying the Benefits of New Products: The Case of the Minivan," Journal of Political Economy, University of Chicago Press, vol. 110(4), pages 705-729, August. [Downloadable!] (restricted)
  6. Heckman, James J & Smith, Jeffrey, 1997. "Making the Most Out of Programme Evaluations and Social Experiments: Accounting for Heterogeneity in Programme Impacts," Review of Economic Studies, Blackwell Publishing, vol. 64(4), pages 487-535, October. [Downloadable!] (restricted)
  7. Manning, Willard G, et al, 1987. "Health Insurance and the Demand for Medical Care: Evidence from a Randomized Experiment," American Economic Review, American Economic Association, vol. 77(3), pages 251-77, June. [Downloadable!] (restricted)
  8. Alberto Abadie & Joshua Angrist & Guido Imbens, 2002. "Instrumental Variables Estimates of the Effect of Subsidized Training on the Quantiles of Trainee Earnings," Econometrica, Econometric Society, vol. 70(1), pages 91-117, January. [Downloadable!] (restricted)
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  9. Anup Malani, 2006. "Identifying Placebo Effects with Data from Clinical Trials," Journal of Political Economy, University of Chicago Press, vol. 114(2), pages 236-256, April. [Downloadable!] (restricted)
  10. Tomas J. Philipson & Anupam B. Jena, 2005. "Who Benefits from New Medical Technologies? Estimates of Consumer and Producer Surpluses for HIV/AIDS Drugs," NBER Working Papers 11810, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  11. Tat Y. Chan & Barton H. Hamilton, 2006. "Learning, Private Information, and the Economic Evaluation of Randomized Experiments," Journal of Political Economy, University of Chicago Press, vol. 114(6), pages 997-1040, December. [Downloadable!] (restricted)
  12. Meltzer, David, 1997. "Accounting for future costs in medical cost-effectiveness analysis," Journal of Health Economics, Elsevier, vol. 16(1), pages 33-64, February. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Frank R. Lichtenberg, 2006. "The Impact of Increased Utilization of HIV Drugs on Longevity and Medical Expenditures: An Assessment Based on Aggregate U.S. Time-Series Data," NBER Working Papers 12406, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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This page was last updated on 2008-11-19.

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