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The Effect of Pharmaceutical Utilization and Innovation on Hospitalization and Mortality


  • Frank R. Lichtenberg


This paper presents an econometric analysis of the effect of changes in the quantity and type of pharmaceuticals prescribed by physicians in outpatient visits on rates of hospitalization, surgical procedure, mortality, and related variables. It examines the statistical relationship across diseases between changes in outpatient pharmaceutical utilization and changes in inpatient care utilization and mortality during the period 1980-92. The estimates indicate that the number of hospital stays, bed-days, and surgical procedures declined most rapidly for those diagnoses with the greatest increase in the total number of drugs prescribed and the greatest change in the distribution of drugs, by molecule. The estimates imply that an increase of 100 prescriptions is associated with 1.48 fewer hospital admissions, 16.3 fewer hospital days, and 3.36 fewer inpatient surgical procedures. A $1 increase in pharmaceutical expenditure is associated with a $3.65 reduction in hospital care expenditure.

Suggested Citation

  • Frank R. Lichtenberg, 1996. "The Effect of Pharmaceutical Utilization and Innovation on Hospitalization and Mortality," NBER Working Papers 5418, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:5418
    Note: HE PR

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    References listed on IDEAS

    1. Jaffe, Adam B, 1986. "Technological Opportunity and Spillovers of R&D: Evidence from Firms' Patents, Profits, and Market Value," American Economic Review, American Economic Association, vol. 76(5), pages 984-1001, December.
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    Cited by:

    1. Frank R. Lichtenberg, 2001. "The Allocation of Publicly Funded Biomedical Research," NBER Chapters,in: Medical Care Output and Productivity, pages 565-590 National Bureau of Economic Research, Inc.
    2. Theurl, Engelbert & Winner, Hannes, 2007. "The impact of hospital financing on the length of stay: Evidence from Austria," Health Policy, Elsevier, vol. 82(3), pages 375-389, August.
    3. Martin Gaynor & Jian Li & William B. Vogt, 2006. "Is Drug Coverage a Free Lunch? Cross-Price Elasticities and the Design of Prescription Drug Benefits," NBER Working Papers 12758, National Bureau of Economic Research, Inc.
    4. Sule Akkoyunlu & Frank R. Lichtenberg & Boriss Siliverstovs & Peter Zweifel, 2010. "Spurious correlation in estimation of the health production function: A note," Economics Bulletin, AccessEcon, vol. 30(3), pages 2505-2514.
    5. James W. Hughes & Michael J. Moore & Edward A. Snyder, 2002. ""Napsterizing" Pharmaceuticals: Access, Innovation, and Consumer Welfare," NBER Working Papers 9229, National Bureau of Economic Research, Inc.
    6. James W. Shaw & William C. Horrace & Ronald J. Vogel, 2002. "The Productivity of Pharmaceuticals in Improving Health: An Analysis of the OECD Health Data," HEW 0206001, EconWPA, revised 11 May 2003.
    7. Paris Cleanthous, 2011. "Evaluating Innovation and Moral Hazard in Pharmaceuticals," University of Cyprus Working Papers in Economics 03-2011, University of Cyprus Department of Economics.
    8. Lee G. Branstetter & Chirantan Chatterjee & Matthew Higgins, 2011. "Regulation and Welfare: Evidence from Paragraph IV Generic Entry in the Pharmaceutical Industry," NBER Working Papers 17188, National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • 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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