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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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  • Frank R. Lichtenberg

Abstract

We investigate the effect of the vintage (year of FDA approval) of the prescription drugs used by an individual on his or her survival and medical expenditure. When we only control for age, sex, and interview year, we estimate that a one-year increase in drug vintage increases life expectancy by 0.52%. Controlling for other variables including activity limitations, race, education, family income as a percent of the poverty line, insurance coverage, Census region, BMI, smoking and over 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 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.

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  • Frank R. Lichtenberg, 2012. "The Effect of Pharmaceutical Innovation on Longevity: Patient-Level Evidence from the 1996-2002 Medical Expenditure Panel Survey and Linked Mortality Public-Use Files," NBER Working Papers 18552, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:18552
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    Cited by:

    1. 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.
    2. 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.
    3. 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.
    4. 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.
    5. 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.
    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. 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.
    8. 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.
    9. 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.
    10. Frank R. Lichtenberg, 2017. "How Cost-Effective Are New Cancer Drugs in the U.S.?," CESifo Working Paper Series 6683, CESifo Group Munich.
    11. 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.
    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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    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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