Working Paper: NBER ID: w18552
Authors: 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. \n \nBetween 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.
Keywords: Pharmaceutical Innovation; Longevity; Medical Expenditure; FDA Approval; Survival Analysis
JEL Codes: I12; J11; O33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| drug vintage (I12) | life expectancy (J17) |
| increase in drug vintage (6.6 years from 1996 to 2003) (C41) | life expectancy for elderly Americans (J14) |
| drug vintage (I12) | annual drug expenditure (H51) |
| drug vintage (I12) | total medical expenditure per elderly American (H51) |
| increase in drug vintage (N00) | increase in life expectancy (I14) |