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

I examine the effect of pharmaceutical innovation on the functional status of nursing home residents using cross-sectional, patient-level data from the 2004 National Nursing Home Survey. This was the first public-use survey of nursing homes that contains detailed information about medication use, and it contains better data on functional status than previous surveys. Residents using newer medications and a higher proportion of priority-review medications were more able to perform all five activities of daily living (ADLs), controlling 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. The ability of nursing home residents to perform activities of daily living is positively related to the number of "new" (post-1990) medications they consume, but unrelated to the number of old medications they consume. If 2004 nursing home residents had used only old medications, the fraction of residents with all five ADL dependencies would have been 58%, instead of 50%. During the period 1990-2004, pharmaceutical innovation reduced the functional limitations of nursing home residents by between 1.2% and 2.1% per year.