Working Paper: NBER ID: w8996
Authors: Frank Lichtenberg
Abstract: We update and extend our previous study of the effect of drug age -- years since FDA approval -- on total medical expenditure, in several respects. The estimates indicate that, in the entire population, a reduction in the age of drugs utilized reduces non-drug expenditure 7.2 times as much as it increases drug expenditure. In the Medicare population, a reduction in the age of drugs utilized reduces non-drug expenditure by all payers 8.3 times as much as it increases drug expenditure; it reduces Medicare non-drug expenditure 6.0 times as much as it increases drug expenditure. About two-thirds of the non-drug Medicare cost reduction is due to reduced hospital costs. The remaining third is approximately evenly divided between reduced Medicare home health care cost and reduced Medicare office-visit cost. We also found that the mean age of drugs used by Medicare enrollees with private Rx insurance is about 9% lower than the mean age of drugs used by Medicare enrollees without either private or public Rx insurance.
Keywords: No keywords provided
JEL Codes: I12; L65; O33; H51
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Drug Age (years since FDA approval) (L65) | Nondrug Expenditure (H51) |
| Drug Age (years since FDA approval) (L65) | Total Drug Expenditure (H51) |
| Nondrug Expenditure (H51) | Hospital Costs (I11) |
| Nondrug Expenditure (H51) | Home Health Care Costs (I11) |
| Nondrug Expenditure (H51) | Office Visit Costs (I11) |
| Private Prescription Drug Coverage (I13) | Drug Age (mean age of drugs) (I12) |