The new drug offset effect: some national and international evidence

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The new drug offset effect: some national and international evidence

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Santerre, Rexford E

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Rexford Santerre

Abstract

The new drug offset effect theory argues that new drugs pay for themselves by keeping people out of more expensive medical facilities. However, few studies have tested the new drug offset theory. This paper examines the impact of new drugs on aggregate medical care costs using data for the U.S. and some countries belonging to the Organization for Economic Cooperation and Development. The results from both tests imply a typical new drug slows the growth of overall medical care spending. Consequently, even health policy decision-makers with limited time horizons should consider the harmful effects of drug price controls.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 13628.

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Date of creation: 25 Feb 2009
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Handle: RePEc:pra:mprapa:13628

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Find related papers by JEL classification:
I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

This paper has been announced in the following NEP Reports:

NEP-ALL-2009-03-07 (All new papers)
NEP-HEA-2009-03-07 (Health Economics)

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References listed on IDEAS
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Frank Lichtenberg, 2002. "Benefits and Costs of Newer Drugs: An Update," NBER Working Papers 8996, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Other versions:
- 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. [Downloadable!]
- Frank R. Lichtenberg, 2007. "Benefits and costs of newer drugs: an update," Health Economics, John Wiley & Sons, Ltd., vol. 28(4-5), pages 485-490. [Downloadable!]
Garry MacDonald & Sandra Hopkins, 2002. "Unit root properties of OECD health care expenditure and GDP data," Health Economics, John Wiley & Sons, Ltd., vol. 11(4), pages 371-376. [Downloadable!]
Lichtenberg, Frank R, 1996. "Do (More and Better) Drugs Keep People Out of Hospitals?," American Economic Review, American Economic Association, vol. 86(2), pages 384-88, May. [Downloadable!] (restricted)
Pierre-Yves Crémieux & Marie-Claude Meilleur & Pierre Ouellette & Patrick Petit & Martin Zelder & Ken Potvin, 2005. "Public and private pharmaceutical spending as determinants of health outcomes in Canada," Health Economics, John Wiley & Sons, Ltd., vol. 14(2), pages 107-116. [Downloadable!]

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