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The Effect of Using Newer Drugs on Admissions of Elderly Americans to Hospitals and Nursing Homes: State-level Evidence from 1997 to 2003


  • Frank Lichtenberg



Objective: To test the hypothesis that, ceteris paribus, people using newer, or later vintage drugs will be in better health, and will therefore be less likely to be admitted to hospitals and nursing homes, by examining the effect of pharmaceutical innovation on the utilisation of hospital and long-term care by elderly Americans during 1997–2003. Design: An estimation of difference-in-differences models of hospital discharge rates using longitudinal state-level data on 12 states. Data on the utilisation of over 43 000 products, by state and year, were obtained from state Medicaid agencies. The extent of utilisation of new drugs in the Medicaid programme is strongly correlated with the extent of utilisation of new drugs in general. Patients or study participants: All elderly residents of 12 states during the period 1997–2003. Intervention: The relative utilisation of new and old drugs. Main outcome measures: Discharges per elderly individual, discharges to nursing homes per elderly individual, and inpatient deaths per elderly individual. Results: States that had larger increases in drug vintage had smaller increases in the number of hospital discharges per elderly individual. They also had smaller increases in the number of hospital discharges to nursing homes and the number of in-hospital deaths per elderly individual. Conclusions: Even the upper-bound estimate of the increase in 2003 drug expenditure attributable to the 1997–2003 increase in drug vintage is lower than the sum of the lowest estimates of the 2003 hospital and nursing home expenditure reductions attributable to the 1997–2003 increase in drug vintage. Copyright Adis Data Information BV 2006

Suggested Citation

  • Frank Lichtenberg, 2006. "The Effect of Using Newer Drugs on Admissions of Elderly Americans to Hospitals and Nursing Homes: State-level Evidence from 1997 to 2003," PharmacoEconomics, Springer, vol. 24(3), pages 5-25, December.
  • Handle: RePEc:spr:pharme:v:24:y:2006:i:3:p:5-25
    DOI: 10.2165/00019053-200624003-00002

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    References listed on IDEAS

    1. Plutarchos Sakellaris & Daniel J. Wilson, 2004. "Quantifying Embodied Technological Change," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(1), pages 1-26, January.
    2. Bahk, Byong-Hong & Gort, Michael, 1993. "Decomposing Learning by Doing in New Plants," Journal of Political Economy, University of Chicago Press, vol. 101(4), pages 561-583, August.
    3. Charles R. Hulten, 1992. "Growth Accounting When Technical Change is Embodied in Capital," NBER Working Papers 3971, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Apostolos Tsiachristas† & René Goudriaan & Wim Groot, 2013. "The welfare effects of innovative pharmaceuticals: an international perspective from the Dutch experience," Applied Economics, Taylor & Francis Journals, vol. 45(9), pages 1219-1226, March.
    2. Karine Lamiraud & Stephane Lhuillery, 2016. "Endogenous Technology Adoption and Medical Costs," Health Economics, John Wiley & Sons, Ltd., vol. 25(9), pages 1123-1147, September.
    3. de Meijer, Claudine & O’Donnell, Owen & Koopmanschap, Marc & van Doorslaer, Eddy, 2013. "Health expenditure growth: Looking beyond the average through decomposition of the full distribution," Journal of Health Economics, Elsevier, vol. 32(1), pages 88-105.
    4. Michel Dumont & Peter Willemé, 2013. "Working Paper 02-13 - Machines that go ‘ping’: medical technology and health expenditures in OECD countries," Working Papers 1302, Federal Planning Bureau, Belgium.

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