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Nursing home residence rates, by single year of age (age 65-95): 1999 vs. 1985

Frank R. Lichtenberg
– “Quality of life”/functional status • Biomedical innovation is responsible for a significant part of improvements in health 1950- 1955- 1960- 1965- 1970- 1975- 1980- 1985- 1990- 1995-
More developed regions
Less developed regions
1950- 1955- 1960- 1965- 1970- 1975- 1980- 1985- 1990- 1995-
Nursing home residents 65 years and over per 1,000 population, age adjusted, 1973-1999 • New drugs tend to cost more—sometimes a great • Much of the increase in per capita drug expenditure is due to the replacement of older (often generic) drugs by newer, more expensive branded drugs • New drugs cost more, but are they worth more? • There are two main ways in which they could be – They could result in better outcomes (longer life, higher quality of life, higher productivity) – They could reduce utilization of other medical (female); Generic Tablets; 25 mg; 2 tablets/day; 30 day • Improved quality of life/functional status • Reduced utilization of other medical services • Increased productivity/ability to work – Lower probability of being out of labor force – Fewer days of work missed by people with jobs • Solow, Technical Progress, Capital Formation, and Economic Growth: “technological progress needs to be ‘embodied’ in newly produced…goods before there can be any effect on output.” • Grossman and Helpman, Innovation and Growth in the Global Economy: “innovative goods are better than older products simply because they provide more ‘product services’ in relation to their cost of production.” • Bresnahan and Gordon, The Economics of New Goods: “New goods are at the heart of economic progress” • Bils: Measuring the Growth from Better and Better Goods, “Much of economic growth occurs through growth in quality as new models of consumer goods replace older, sometimes inferior, models.” • Compare the health outcomes or expenditure of individuals, or groups of individuals (where group is defined by region, disease, or both) using newer vs. older drugs, controlling for other factors • Key explanatory variable is the mean vintage of • The vintage of a drug is the year in which the drug’s active ingredient was first marketed • Example: Anastrozole is a 1995-vintage drug 1. Aggregate evidence: HIV/AIDS patients 2. Aggregate evidence: Entire populations 3. Individual-level evidence: Puerto Rico HIV/AIDS Survival functions: 1993 vs. 2000 Survival function 1/1/1993
Survival function 1/1/2000
rob. of
P 20%

Years since diagnosis
1981 1983 1985 1987 1989 1991 1993 1995 1997 1999
Between 1995 and 1997, seven new molecules and two new drug classes for treating HIV were introduced Change in average HIV/AIDS drug utilization Change in average no. of HIV Rx's
% change in mortality rate
• Estimates of a mortality model imply that actual life expectancy in 2001 was 13.4 years higher than it would have been if the drug utilization rate had not increased from its 1993 level. About 60% of the total 22.6-year increase in life expectancy during 1993-2001 is attributable to the increase in drug utilization.
• Estimates of a model of hospital discharges imply that increased utilization of HIV drugs caused hospital utilization to decline by .25 to .29 discharges per person per year. About one-third of the total decline in hospital utilization during 1993-2001 is attributable to the increase in drug utilization; 56% of the increase in HIV drug expenditure appears to have been offset by a reduction in hospital expenditure. The impact of new drug
launches on longevity:
evidence from longitudinal, disease-
level data from 52 countries, 1982-2001
– World Health Organization data on the age distribution of deaths, by country, disease, and year – IMS Health data on drug launches, by country, • Estimate relationship between cumulative number of drugs launched 3 years earlier and prob. of dying after age 65 • Include extensive controls for potentially • Has tracked new product introductions • In August 2001 the database contained over 165,000 records of individual product introductions between 1982 and 2001 • Allows measurement, for each country and therapeutic area, of the total number of ingredients launched, and the number of new chemical entities launched 422 422 414
ARGENTINA
174 171 153 142
PAKISTAN
SINGAPORE
SAUDI ARABIA
MALAYSIA
Number of NCEs launched
Launch date
Tenecteplase is used to dissolve blood clots that have formed in the blood vessels of the heart and seriously lessen the flow of blood in the heart. This medicine is used to improve survival after a heart attack.
Years since initial world launch
• Launches of New Chemical Entities (NCEs) have a strong positive impact on the probability of survival • Launches of (older) drugs that are not NCEs—many of which may already have been on the market—do not increase longevity Contribution of NCE launches to
longevity increase
expectancy of the entire population of sample countries increased by almost two (1.96) years. • The estimates imply that NCE launches accounted for 0.79 years (40%) of the 1986-2000 increase in longevity. expectancy of the entire population resulting from NCE launches is .056 years, or 2.93 weeks. Contribution of NCE launches to increase in life expectancy of the population since 1986 increase in longevity due to NCE launches In 1997, average per capita pharmaceutical expenditure in OECD countries was about $250 The average annual increase in life expectancy of the entire population resulting from NCE launches is .056 years Hence pharmaceutical expenditure per person per year divided by the increase in life-years per person per year attributable to NCE launches is about $4500 This is far lower than most estimates of the value of Moreover, since the numerator includes expenditure on old drugs as well as on recently-launched NCEs, it probably grossly overstates the cost per life-year gained from the launch of NCEs The effect of drug vintage on
survival rates:
individual-level evidence from
Puerto Rico’s Medicaid program
• All medical and pharmacy claims of ASES beneficiaries during the period January 1-June 30, 2000 • List of all Puerto Rican residents who died U.S.--total
U.S.--Medicaid
POST1970 + β
POST1980 + β
POST1990 + γ Z + ε
= 1 if individual i died during the period 2000-2002
= 0 otherwise
POST1970
= the fraction of individual i’s prescribed medicines
whose active ingredients were approved by the FDA
after 1970

POST1980
= the fraction of individual i’s prescribed medicines
whose active ingredients were approved by the FDA
after 1980

POST1990
= the fraction of individual i’s prescribed medicines
whose active ingredients were approved by the FDA
after 1990

= a vector of covariates
ε = a disturbance
Demographic information (age, sex,
Person’s utilization of services (number
of physician encounters, pharmacy claims, hospital admissions during Jan.-June 2000) • Nature of person’s illnesses (diagnosis
codes grouped into 15 broad disease groups) ity rat 3.0%
2.0%
1.5%

year mo 1.0%
0.5%
0.0%

Drug vintage
Circulatory system
Endocrine/metabolic
Neoplasms
The effect of using newer drugs on admissions of elderly Americans to hospitals and nursing homes: state-level evidence from 1993-2003 The effect of using newer drugs on admissions of elderly Americans to hospitals and nursing homes: • Examine the effect of pharmaceutical innovation on admissions of elderly Americans to hospitals and nursing homes during 1997-2003, using longitudinal state-level data on 12 states. • Hospital and nursing home admissions data derived from the State Inpatient Databases, which contain the universe of inpatient discharge abstracts in participating States • State-level drug utilization information for outpatient drugs – Very precise information about the vintage (FDA approval year) distribution of over 43,000 products utilized by 24 million people, by state and calendar quarter, from 1991 to the present.
– The extent of utilization of new drugs in the Medicaid program is strongly correlated with the extent of utilization of new drugs in general. • percent of state residents below the poverty line • percent of state residents with no public or • percent of state residents who completed high • percent of state residents who completed 4 • mean body mass index (BMI) of state residents 40 • Mean vintage of Medicaid Rx’s increased by 6.2 years between 1997 – Mean vintage of 1997 Rx’s was 1976.0 – Mean vintage of 2003 Rx’s was 1982.6 • States that had larger increases in drug vintage had smaller increases in the number of hospital and nursing-home admissions per elderly person. • Use of newer drugs (increase in mean vintage) increased drug expenditure per person by $284-$778 in 2003 • Use of newer drugs reduced the number of hospital admissions by 6.1 per hundred people in 2003; this was worth $785 per person • Use of newer drugs reduced the number of nursing home admissions by 2.7 per hundred people in 2003; this was worth $1166 per person • Although use of newer drugs increases life expectancy, it reduces lifetime admissions to hospitals and nursing homes Hospital admissions per thousand people
Availability of new drugs and
Americans’ ability to work
older workers: human-capital losses introduction of new drugs has increased society’s ability to produce goods and services, by increasing the number of hours worked per member of the working-age population. • Attempt to determine whether the value of the increase in goods and services resulting from new drugs exceeds the cost of the drugs.
Numerous case studies of specific drugs• Terbutaline (approved by the FDA in 1974) Glipizide (1984) for diabetesSumatriptan and rizatriptan (1992 and 1998, respectively) for migraines. However, it is difficult to estimate from case studies the average or aggregate effect of new drugs on ability to work • Principal source of information on the health of the population of the United States • During that period, it collected information from 1,017,164 working-age Americans on 133 chronic conditions and impairments – whether each person was unable to work, mainly due to one of the chronic conditions, and – the number of work-days missed in the two weeks preceding the interview due to each chronic condition (for currently employed persons) • Each respondent to the survey was asked Condition
% unable to work
If no drugs approved after 1982
– “Quality of life”/functional status • Biomedical innovation is responsible for a significant part of improvements in health • Public health depends on the quality as well as the • There is an easily measured characteristic of drugs that is strongly correlated with quality: vintage – The vintage of a drug is the year in which the drug’s • Mean vintage (or the % of new drugs) varies across • Both micro and macro evidence indicate that drug vintage has important effects on mortality, hospital and nursing home utilization, and other health outcomes • “Pharmaceutical Knowledge-Capital Accumulation and Longevity,” in Measuring Capital in the New Economy, ed. by Carol Corrado, John Haltiwanger, and Dan Sichel, pp. 237-269 (University of Chicago Press, 2005).
• "Availability of new drugs and Americans' ability to work," Journal of Occupational and Environmental Medicine 47 (4), April 2005, 373-380.
• “The Effect of Access Restrictions on the Vintage of Drugs Used by Medicaid Enrollees,” American Journal of Managed Care 11, Special Issue, 2005, SP7-SP13.
• "The impact of new drug launches on longevity: evidence from longitudinal disease- level data from 52 countries, 1982-2001," International Journal of Health Care Finance and Economics 5, 2005, pp. 47-73.
“Sources of U.S. Longevity Increase, 1960-2001,” Quarterly Review of Economics and Finance 44(3), pp. 369-389 (July 2004).
“The Effect of New Drugs on HIV Mortality in the U.S., 1987-1998,” Economics and Human Biology 1 (2003) 259-266.
• “Pharmaceutical Innovation, Mortality Reduction, and Economic Growth,” in Measuring the Gains from Medical Research: An Economic Approach, ed. by Kevin M. Murphy and Robert H. Topel (Chicago: University of Chicago Press, 2003), pp. 74-109.
• “Are the Benefits of Newer Drugs Worth Their Cost? Evidence from the 1996 MEPS,” Health Affairs 20(5), September/October 2001, 241-51.

Source: http://www.vboe.ch/download/veranstaltungen/Vortrag_Lichtenberg_17.10.%202007.pdf

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