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The Effect of Pharmaceutical Utilization and Innovation on Hospitalization and Mortality


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  • Frank R. Lichtenberg


This paper presents an econometric analysis of the effect of changes in the quantity and type of pharmaceuticals prescribed by physicians in outpatient visits on rates of hospitalization, surgical procedure, mortality, and related variables. It examines the statistical relationship across diseases between changes in outpatient pharmaceutical utilization and changes in inpatient care utilization and mortality during the period 1980-92. The estimates indicate that the number of hospital stays, bed-days, and surgical procedures declined most rapidly for those diagnoses with the greatest increase in the total number of drugs prescribed and the greatest change in the distribution of drugs, by molecule. The estimates imply that an increase of 100 prescriptions is associated with 1.48 fewer hospital admissions, 16.3 fewer hospital days, and 3.36 fewer inpatient surgical procedures. A $1 increase in pharmaceutical expenditure is associated with a $3.65 reduction in hospital care expenditure.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5418.

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Date of creation: Jan 1996
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Publication status: Published as "The Effect of Government Funding on Private Industrial Research and Development: A Re-Assessment", JINDE, Vol. 36, no. 1 (1987): 97-104. With Donald Siegel, published as "The Effect of Control Changes on the
Handle: RePEc:nbr:nberwo:5418

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  1. Jaffe, Adam B, 1986. "Technological Opportunity and Spillovers of R&D: Evidence from Firms' Patents, Profits, and Market Value," American Economic Review, American Economic Association, American Economic Association, vol. 76(5), pages 984-1001, December.
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Cited by:
  1. James W. Shaw & William C. Horrace & Ronald J. Vogel, 2002. "The Productivity of Pharmaceuticals in Improving Health: An Analysis of the OECD Health Data," HEW, EconWPA 0206001, EconWPA, revised 11 May 2003.
  2. Frank R. Lichtenberg, 2001. "The Allocation of Publicly Funded Biomedical Research," NBER Chapters, National Bureau of Economic Research, Inc, in: Medical Care Output and Productivity, pages 565-590 National Bureau of Economic Research, Inc.
  3. Paris Cleanthous, 2011. "Evaluating Innovation and Moral Hazard in Pharmaceuticals," University of Cyprus Working Papers in Economics, University of Cyprus Department of Economics 03-2011, University of Cyprus Department of Economics.
  4. Martin Gaynor & Jian Li & William B. Vogt, 2006. "Is Drug Coverage a Free Lunch? Cross-Price Elasticities and the Design of Prescription Drug Benefits," NBER Working Papers 12758, National Bureau of Economic Research, Inc.
  5. Sule Akkoyunlu & Frank R. Lichtenberg & Boriss Siliverstovs & Peter Zweifel, 2009. "Spurious correlation in estimation of the health production function: A note," KOF Working papers, KOF Swiss Economic Institute, ETH Zurich 09-227, KOF Swiss Economic Institute, ETH Zurich.
  6. James W Hughes & Michael J Moore & Edward A Snyder, 2003. "Napsterizing Pharmaceuticals: Access, Innovation and Consumer Welfare," Levine's Working Paper Archive 618897000000000555, David K. Levine.
  7. Lee G. Branstetter & Chirantan Chatterjee & Matthew Higgins, 2011. "Regulation and Welfare: Evidence from Paragraph IV Generic Entry in the Pharmaceutical Industry," NBER Working Papers 17188, National Bureau of Economic Research, Inc.


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