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Is newer always better? Re-evaluating the benefits of newer pharmaceuticals

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  • Law, Michael R.
  • Grépin, Karen A.
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    Abstract

    Whether newer pharmaceuticals justify their higher costs by reducing other health expenditures has generated significant debate. We replicate a frequently cited paper by Lichtenberg on drug "offsets" and find the results disappear using a more appropriate model or updated dataset. Further, we test the suitability of similar methods using newer hypertension drugs. We find our observational results run counter to well-established clinical evidence on comparative efficacy and conclude that our model, as well as other studies that do not adequately control for unobserved characteristics that jointly determine drug choice and health expenditures, are likely subject to significant bias.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Health Economics.

    Volume (Year): 29 (2010)
    Issue (Month): 5 (September)
    Pages: 743-750

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    Handle: RePEc:eee:jhecon:v:29:y:2010:i:5:p:743-750

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    Web page: http://www.elsevier.com/locate/inca/505560

    Related research

    Keywords: Prescription drugs Drug offsets Health care costs;

    References

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    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.:
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    1. Frank R. Lichtenberg, 2007. "Benefits and costs of newer drugs: an update," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(4-5), pages 485-490.
    2. Manning, Willard G. & Mullahy, John, 2001. "Estimating log models: to transform or not to transform?," Journal of Health Economics, Elsevier, vol. 20(4), pages 461-494, July.
    3. Duan, Naihua, et al, 1983. "A Comparison of Alternative Models for the Demand for Medical Care," Journal of Business & Economic Statistics, American Statistical Association, vol. 1(2), pages 115-26, April.
    4. David M. Cutler & Mark McClellan & Joseph P. Newhouse & Dahlia Remler, 1998. "Are Medical Prices Declining? Evidence From Heart Attack Treatments," The Quarterly Journal of Economics, MIT Press, vol. 113(4), pages 991-1024, November.
    5. Frank R. Lichtenberg, 2004. "The Effect of Drug Vintage on Survival: Micro Evidence from Puerto Rico's Medicaid Program," NBER Working Papers 10884, National Bureau of Economic Research, Inc.
    6. Anirban Basu & Willard G. Manning & John Mullahy, 2004. "Comparing alternative models: log vs Cox proportional hazard?," Health Economics, John Wiley & Sons, Ltd., vol. 13(8), pages 749-765.
    7. Gaynor Martin & Li Jian & Vogt William B, 2007. "Substitution, Spending Offsets, and Prescription Drug Benefit Design," Forum for Health Economics & Policy, De Gruyter, vol. 10(2), pages 1-33, July.
    8. Richard G. Frank & Thomas G. McGuire & Sharon-Lise Normand, 2006. "Cost-Offsets of New Medications for Treatment of Schizophrenia," NBER Working Papers 12643, National Bureau of Economic Research, Inc.
    9. Buntin, Melinda Beeuwkes & Zaslavsky, Alan M., 2004. "Too much ado about two-part models and transformation?: Comparing methods of modeling Medicare expenditures," Journal of Health Economics, Elsevier, vol. 23(3), pages 525-542, May.
    10. 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.
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