The Effect of Pharmaceutical Innovation on the Functional Limitations of Elderly Americans: Evidence from the 2004 National Nursing Home Survey

Purpose – To examine the effect of pharmaceutical innovation on the functional status of nursing home residents. Methodology/approach – Estimation of econometric models of the ability of nursing home residents to perform activities of daily living (ADLs) using cross-sectional, patient-level data from the 2004 National Nursing Home Survey. The explanatory variables of primary interest are the characteristics (e.g., the mean vintage (FDA approval year)) of the medications used by the resident. We control for age, sex, race, marital status, veteran status, where the resident lived prior to admission, primary diagnosis at the time of admission, up to 16 diagnoses at the time of the interview, sources of payment, and facility fixed effects. Findings – The ability of nursing home residents to perform ADLs is positively related to the number of “new” (post-1990) medications they consume, but unrelated to the number of old medications they consume. I estimate that if 2004 nursing home residents had used only old medications, the fraction of residents with all five ADL dependencies (number of activities for which the resident is not independent) would have been 58% instead of 50%. Social implications – During 1990–2004, pharmaceutical innovation reduced the functional limitations of nursing home residents by between 1.2% and 2.1% per year. Originality/value of chapter – The first public-use survey of nursing homes that contains detailed information about medication use, and better data on functional status than previous surveys, is used to help explain why there has been a significant decline in the functional limitations of older people.