The Effect of Newer Drugs on Health Spending: Do They Really Increase the Costs?
AbstractWe analyze the influence of technological progress on pharmaceuticals on rising health expenditures using US State level panel data. Improvements in medical technology are believed to be partly responsible for rapidly rising health expenditures. Even if the technological progress in medicine improves health outcomes and life quality, it can also increase the expenditure on health care. Our findings suggest that newer drugs increase the spending on prescription drugs since they are usually more expensive than their predecessors. However, they lower the demand for other types of medical services, which causes the total spending to decline. A one-year decrease in the average age of prescribed drugs causes per capita health expenditures to decrease by $31.92. The biggest decline occurs in spending on hospital and home health care due to newer drugs.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 6846.
Date of creation: Oct 2007
Date of revision:
Health care expenditure; pharmaceuticals; technology diffusion;
Other versions of this item:
- Abdülkad&idot;r C&idot;van & Bülent Köksal, 2010. "The effect of newer drugs on health spending: do they really increase the costs?," Health Economics, John Wiley & Sons, Ltd., vol. 19(5), pages 581-595.
- I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
- I10 - Health, Education, and Welfare - - Health - - - General
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