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The Effect of Pharmaceutical Innovation on Longevity: Patient Level Evidence from the 1996–2002 Medical Expenditure Panel Survey and Linked Mortality Public-use Files

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  • Lichtenberg Frank R.

    (Columbia University, 504 Uris Hall, 3022 Broadway, New York, 10027 NY, USA)

Abstract

This study uses patient-level data to analyze the effect of technological change embodied in pharmaceuticals on the longevity of elderly Americans. Previous patient-level studies could not control for important patient attributes such as education, income, and race; they did not provide estimates of the effect of using newer drugs on life expectancy, or of the overall cost-effectiveness of new drugs relative to old drugs; and they were not based on nationally representative samples of individuals. Our data, primarily derived from the Medical Expenditure Panel Survey and the Linked Mortality Public-use Files, enable us to overcome those limitations.We investigate the effect of the vintage (year of U.S. Food and Drug Administration approval) of the prescription drugs used by an individual on his or her survival and medical expenditure, controlling for a number of demographic characteristics and indicators and determinants of health status. When we control only for age, sex, and interview year, we estimate that a 1-year increase in drug vintage increases life expectancy by 0.52%. Controlling for a much more extensive set of other attributes (the mean year the person started taking his or her medications, and dummy variables for activity limitations, race, education, family income as a percent of the poverty line, insurance coverage, Census region, body mass index, smoking, and more than 100 medical conditions) has virtually no effect on the estimate of the effect of drug vintage on life expectancy. Between 1996 and 2003, the mean vintage of prescription drugs increased by 6.6 years. This is estimated to have increased the life expectancy of elderly Americans by 0.41–0.47 years. This suggests that not less than two-thirds of the 0.6-year increase in the life expectancy of elderly Americans during 1996–2003 was due to the increase in drug vintage. The 1996–2003 increase in drug vintage is also estimated to have increased annual drug expenditure per elderly American by $207, and annual total medical expenditure per elderly American by $218. This implies that the incremental cost-effectiveness ratio (cost per life-year gained) of pharmaceutical innovation was about $12,900. This estimate of the cost per life-year gained from the use of newer drugs is a small fraction of leading economists’ estimates of the value of (willingness to pay for) an additional year of life. It is also consistent with estimates from clinical trials.

Suggested Citation

  • 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.
    • Handle: RePEc:bpj:fhecpo:v:16:y:2013:i:1:p:1-33:n:1
    DOI: 10.1515/fhep-2012-0032
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    References listed on IDEAS

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    1. Douglas Almond & Bhashkar Mazumder, 2006. "How did schooling laws improve long-term health and lower mortality?," Working Paper Series WP-06-23, Federal Reserve Bank of Chicago.
    2. Duggan Mark G & Evans William N, 2008. "Estimating the Impact of Medical Innovation: A Case Study of HIV Antiretroviral Treatments," Forum for Health Economics & Policy, De Gruyter, vol. 11(2), pages 1-39, January.
    3. Bresnahan, Timothy F. & Gordon, Robert J. (ed.), 2008. "The Economics of New Goods," National Bureau of Economic Research Books, University of Chicago Press, number 9780226074184, October.
    4. Frank R. Lichtenberg & Gautier Duflos, 2008. "Pharmaceutical innovation and the longevity of Australians: A first look," Advances in Health Economics and Health Services Research, in: Beyond Health Insurance: Public Policy to Improve Health, pages 95-117, Emerald Group Publishing Limited.
    5. Adriana Lleras-Muney, 2005. "The Relationship Between Education and Adult Mortality in the United States," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 72(1), pages 189-221.
    6. Frank Lichtenberg, 2011. "The quality of medical care, behavioral risk factors, and longevity growth," International Journal of Health Economics and Management, Springer, vol. 11(1), pages 1-34, March.
    7. Timothy F. Bresnahan & Robert J. Gordon, 1996. "Introduction to "The Economics of New Goods"," NBER Chapters, in: The Economics of New Goods, pages 1-26, National Bureau of Economic Research, Inc.
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    9. Timothy F. Bresnahan & Robert J. Gordon, 1996. "The Economics of New Goods," NBER Books, National Bureau of Economic Research, Inc, number bres96-1, March.
    10. Frank Lichtenberg, 2012. "Contribution of Pharmaceutical Innovation to Longevity Growth in Germany and France, 2001–7," PharmacoEconomics, Springer, vol. 30(3), pages 197-211, March.
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    Cited by:

    1. Lane, Julia I. & Owen-Smith, Jason & Rosen, Rebecca F. & Weinberg, Bruce A., 2015. "New linked data on research investments: Scientific workforce, productivity, and public value," Research Policy, Elsevier, vol. 44(9), pages 1659-1671.
    2. Hostenkamp, Gisela & Lichtenberg, Frank R., 2015. "The impact of recent chemotherapy innovation on the longevity of myeloma patients: US and international evidence," Social Science & Medicine, Elsevier, vol. 130(C), pages 162-171.
    3. Joan Costa‐Font & Cristina Vilaplana‐Prieto, 2020. "‘More than one red herring'? Heterogeneous effects of ageing on health care utilisation," Health Economics, John Wiley & Sons, Ltd., vol. 29(S1), pages 8-29, October.
    4. Frank R. Lichtenberg & Billie Pettersson, 2014. "The impact of pharmaceutical innovation on longevity and medical expenditure in Sweden, 1997-2010: evidence from longitudinal, disease-level data," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 23(3), pages 239-273, April.
    5. Eric Budish & Benjamin N. Roin & Heidi Williams, 2015. "Do Firms Underinvest in Long-Term Research? Evidence from Cancer Clinical Trials," American Economic Review, American Economic Association, vol. 105(7), pages 2044-2085, July.
    6. Eric Budish & Benjamin Roin & Heidi Williams, 2013. "Do fixed patent terms distort innovation? Evidence from cancer clinical trials," Discussion Papers 13-001, Stanford Institute for Economic Policy Research.
    7. 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.
    8. Joshua Krieger & Danielle Li & Dimitris Papanikolaou, 2022. "Missing Novelty in Drug Development," The Review of Financial Studies, Society for Financial Studies, vol. 35(2), pages 636-679.
    9. Frank R. Lichtenberg, 2017. "How Cost-Effective Are New Cancer Drugs in the U.S.?," CESifo Working Paper Series 6683, CESifo Group Munich.
    10. 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.
    11. Frank R. Lichtenberg, 2017. "The impact of pharmaceutical innovation on cancer mortality in Mexico, 2003–2013," Latin American Economic Review, Springer;Centro de Investigaciòn y Docencia Económica (CIDE), vol. 26(1), pages 1-22, December.
    12. Frank R. Lichtenberg, 2017. "The Impact of Pharmaceutical Innovation on Premature Mortality, Hospital Separations, and Cancer Survival in Australia," The Economic Record, The Economic Society of Australia, vol. 93(302), pages 353-378, September.
    13. Nishimura, Junichi & Nagaoka, Sadao & Yoneyama-Hirozane, Mariko, 2022. "The impact of science-intensive drugs on longevity and cure rate: Evidence from new prescription drugs launched in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 64(C).
    14. Rebecca McKibbin & Bruce A. Weinberg, 2021. "Does Research Save Lives? The Local Spillovers of Biomedical Research on Mortality," NBER Working Papers 29420, National Bureau of Economic Research, Inc.

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    More about this item

    Keywords

    pharmaceuticals; longevity; innovation; mortality; prescription drugs;
    All these keywords.

    JEL classification:

    • 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

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