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Pharmaceutical innovation and the longevity of Australians: a first look

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  • Frank R. Lichtenberg
  • Gautier Duflos

Abstract

We examine the impact of pharmaceutical innovation on the longevity of Australians during the period 1995-2003. Due to the government's Pharmaceutical Benefits Scheme, Australia has much better data on drug utilization than most other countries. We find that mean age at death increased more for diseases with larger increases in mean drug vintage. The estimates indicate that increasing the mean vintage of drugs by 5 years would increase mean age at death by almost 11 months. The estimates also indicate that using newer drugs reduced the number of years of potential life lost before the ages of 65 and 70 (but not before age 75). During the period 1995-2003, mean age at death increased by about 2.0 years, from 74.4 to 76.4. The estimates imply that, in the absence of any increase in drug vintage, mean age at death would have increased by only 0.7 years. The increase in drug vintage accounts for about 65% of the total increase in mean age at death. We obtain a rough estimate of the cost per life-year gained from using newer drugs. Under our assumptions, using newer drugs (increasing drug vintage) increased life expectancy by 1.23 years and increased lifetime drug expenditure by $12,976; the cost per life-year gained from using newer drugs is $10,585. An estimate made by other investigators of the value of a statistical Australian life-year ($70,618) is 6.7 times as large as our estimate of the cost per life-year gained from using newer drugs. We discuss several reasons why our estimate of the cost per life-year gained from using newer drugs could be too high or too low.

Suggested Citation

  • Frank R. Lichtenberg & Gautier Duflos, 2008. "Pharmaceutical innovation and the longevity of Australians: a first look," NBER Working Papers 14009, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:14009
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    1. Frank R. Lichtenberg, 2015. "Pharmaceutical Innovation, Longevity, and Medical Expenditure in Greece, 1995-2010," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 22(2), pages 277-299, July.
    2. Pierre Dubois & Olivier de Mouzon & Fiona Scott-Morton & Paul Seabright, 2015. "Market size and pharmaceutical innovation," RAND Journal of Economics, RAND Corporation, vol. 46(4), pages 844-871, October.
    3. Lichtenberg Frank R., 2013. "The Effect of Pharmaceutical Innovation on Longevity: Patient Level Evidence from the 1996–2002 Medical Expenditure Panel Survey and Linked Mortality Public-use Files," Forum for Health Economics & Policy, De Gruyter, vol. 16(1), pages 1-33, January.
    4. Lichtenberg, Frank R., 2013. "The impact of therapeutic procedure innovation on hospital patient longevity: Evidence from Western Australia, 2000–2007," Social Science & Medicine, Elsevier, vol. 77(C), pages 50-59.
    5. Frank R. Lichtenberg, 2012. "Pharmaceutical Innovation and Longevity Growth in 30 Developing and High-income Countries, 2000-2009," NBER Working Papers 18235, National Bureau of Economic Research, Inc.
    6. Branstetter, Lee G. & Kwon, Namho, 2018. "South Korea's transition from imitator to innovator: The role of external demand shocks," Journal of the Japanese and International Economies, Elsevier, vol. 49(C), pages 28-42.
    7. Lichtenberg, Frank R., 2014. "The impact of pharmaceutical innovation on longevity and medical expenditure in France, 2000–2009," Economics & Human Biology, Elsevier, vol. 13(C), pages 107-127.
    8. Lichtenberg, Frank R. & Tatar, Mehtap & Çalışkan, Zafer, 2014. "The effect of pharmaceutical innovation on longevity, hospitalization and medical expenditure in Turkey, 1999–2010," Health Policy, Elsevier, vol. 117(3), pages 361-373.

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    More about this item

    JEL classification:

    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O56 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Oceania

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