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Biomedical innovation, longevity, and quality of life Frank R. Lichtenberg Columbia University and National Bureau of Economic Research

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Presentation on theme: "Biomedical innovation, longevity, and quality of life Frank R. Lichtenberg Columbia University and National Bureau of Economic Research"— Presentation transcript:

1 Biomedical innovation, longevity, and quality of life Frank R. Lichtenberg Columbia University and National Bureau of Economic Research

2 2 Health is improving –Longevity –“Quality of life”/functional status Biomedical innovation is responsible for a significant part of improvements in health

3 3 Life expectancy at birth, world,

4 4 Life expectancy at birth, by region Unlike GDP, longevity is converging

5 5 Nursing home residents 65 years and over per 1,000 population, age adjusted,

6 6 New drugs cost more, but are they worth more? New drugs tend to cost more—sometimes a great deal more—than older drugs 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 worth more –They could result in better outcomes (longer life, higher quality of life, higher productivity) –They could reduce utilization of other medical care (e.g. hospitals and nursing homes)

7 7 Cost of breast cancer treatment Drug FDA Appr oval year Cost of treatm ent per month Anastrozole1995$ (Breast Cancer; Arimidex; 1 mg; 1 tablet/day; 30 day supply) Letrozole1997$ (Breast Cancer; Femara; 2.5 mg; 1 tablet/day; 30 day supply) Methyltestosterone1971$ (Metastatic Breast Cancer (female); Android; 25 mg; 2 tablets/day; 30 day supply) Methyltestosterone1971$6.18 (Metastatic Breast Cancer (female); Generic Tablets; 25 mg; 2 tablets/day; 30 day supply)

8 8 Potential benefits of newer drugs Longer life Improved quality of life/functional status Reduced utilization of other medical services –Hospitals –Nursing homes Increased productivity/ability to work –Lower probability of being out of labor force (completely unable to work) –Fewer days of work missed by people with jobs

9 9 Role of new goods in economic growth 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.”

10 10 General research approach 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 drugs used by an individual or group 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

11 11 Mean vintage of Medicaid Rx's, by year

12 12 % of U.S. prescriptions that contained ingredients approved after 1985

13 13 Mean vintage of 2002 Medicaid Rx’s, by state

14 14 Several types of evidence Individual level Aggregate level –By disease and year –By region and year –By disease, region, and year Each approach has advantages and disadvantages

15 15 Impact of new drugs on longevity 1.Aggregate evidence: HIV/AIDS patients in the U.S. 2.Aggregate evidence: Entire populations of 52 countries 3.Individual-level evidence: Puerto Rico Medicaid program

16 16 HIV/AIDS Survival functions: 1993 vs. 2000

17 17 No. of HIV/AIDS Rx's per person with HIV/AIDS Between 1995 and 1997, seven new molecules and two new drug classes for treating HIV were introduced

18 18 Change in average HIV/AIDS drug utilization and % change in mortality rate

19 19 Drug utilization and hospital utilization

20 20 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 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 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.

21 The impact of new drug launches on longevity: evidence from longitudinal, disease- level data from 52 countries,

22 22 Econometric approach Link two major databases: –World Health Organization data on the age distribution of deaths, by country, disease, and year –IMS Health data on drug launches, by country, disease (therapeutic class), and year Estimate relationship between cumulative number of drugs launched 3 years earlier and prob. of dying after age 65 Include extensive controls for potentially confounding variables

23 23 IMS Health Drug Launches database Has tracked new product introductions worldwide since 1982 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

24 24 Countries with most and fewest drug launches

25 25 Example: tenecteplase Launch dateCountry 6/00USA 3/01Finland 5/01UK 9/01Norway 10/01Canada 10/01South Africa 11/01Ireland 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.

26 26 Drug launch probability profiles: U.S. vs. Canada

27 27 Findings 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

28 28 Contribution of NCE launches to longevity increase Between 1986 and 2000, average life 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 increase in longevity. The average annual increase in life expectancy of the entire population resulting from NCE launches is.056 years, or 2.93 weeks.

29 29 Contribution of NCE launches to increase in average life expectancy of the population since 1986

30 30 Cost per life-year gained from the launch of NCEs 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 a life-year 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

31 The effect of drug vintage on survival rates: individual-level evidence from Puerto Rico’s Medicaid program

32 32 Data All medical and pharmacy claims of ASES beneficiaries during the period January 1- June 30, 2000 –Almost 800,000 people; 540,000 had pharmacy claims –About 12.2 million claims List of all Puerto Rican residents who died during the period

33 33 Low utilization of post-1980 drugs in ASES

34 34 DIED i =  1970 POST1970 i +  1980 POST1980 i +  1990 POST1990 i +  Z i +  i where: DIED i = 1 if individual i died during the period = 0 otherwise POST1970 i = the fraction of individual i’s prescribed medicines whose active ingredients were approved by the FDA after 1970 POST1980 i = the fraction of individual i’s prescribed medicines whose active ingredients were approved by the FDA after 1980 POST1990 i = the fraction of individual i’s prescribed medicines whose active ingredients were approved by the FDA after 1990 ZiZi = a vector of covariates ii = a disturbance

35 35 Covariates Demographic information (age, sex, region) 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)

36 36 Mortality rate declines as drug vintage increases

37 37 Analysis by disease group

38 The effect of using newer drugs on admissions of elderly Americans to hospitals and nursing homes: state-level evidence from

39 39 The effect of using newer drugs on admissions of elderly Americans to hospitals and nursing homes: state-level evidence from Examine the effect of pharmaceutical innovation on admissions of elderly Americans to hospitals and nursing homes during , 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 purchased by State Medicaid agencies. –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.

40 40 Other factors controlled for state and year fixed effects per capita income percent of state residents below the poverty line percent of state residents with no public or private health insurance percent of state residents who completed high school percent of state residents who completed 4 years of college mean body mass index (BMI) of state residents

41 41 Findings Mean vintage of Medicaid Rx’s increased by 6.2 years between 1997 and 2003 –Mean vintage of 1997 Rx’s was –Mean vintage of 2003 Rx’s was 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

42 42

43 43 ADM a LE old LE new Old-drug profile New-drug profile

44 Availability of new drugs and Americans’ ability to work

45 45 % of People Unable to Work, by Age Illness-induced early retirement of older workers: human-capital losses

46 46 Research objectives Investigate the extent to which the 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.

47 47 Previous evidence re. the impact of new drugs on ability to work Numerous case studies of specific drugs Terbutaline (approved by the FDA in 1974) for asthma Glipizide (1984) for diabetes Sumatriptan 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

48 48 National Health Interview Survey Principal source of information on the health of the population of the United States Survey remained the same during the period During that period, it collected information from 1,017,164 working-age Americans on 133 chronic conditions and impairments

49 49 Condition-specific data NHIS collected information about: –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 about 1/6 of the 133 conditions

50 50 20 most frequent conditions ConditionN%cum Ncum % unable to work Sinusitis27, , % Arthritis22, , % Hypertension22, , % Allergic Rhinitis18, , % Gastrointestinal Disorders - Other14, , % Skin Disorders - Other11, , % Migraines8, , % Bronchitis7, , % Headaches7, , % Cardiovascular Disease7, , % Asthma6, , % Dermatitis6, , % Peripheral Vascular Disease6, , % Diabetes5, , % Bursitis/Tendonitis4, , % Ulcers3, , % Acne3, , % Thyroid Disorders3, , % Anemia2, , % Kidney Disorders2, , %

51 51 Probability of being unable to work in 1996 due to 47 major chronic conditions

52 52 Benefits vs. costs of new drugs Benefit: increase in expected earnings due to increased probability of being able to work Cost: average expenditure on new drugs for these conditions

53 53 Biomedical innovation, longevity, and quality of life Health is improving –Longevity –“Quality of life”/functional status Biomedical innovation is responsible for a significant part of improvements in health

54 54 Summary Public health depends on the quality as well as the quantity of pharmaceuticals consumed 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 active ingredient was first marketed Mean vintage (or the % of new drugs) varies across individuals, regions, and diseases Both micro and macro evidence indicate that drug vintage has important effects on mortality, hospital and nursing home utilization, and other health outcomes

55 55 Some of my published articles “Pharmaceutical Knowledge-Capital Accumulation and Longevity,” in Measuring Capital in the New Economy, ed. by Carol Corrado, John Haltiwanger, and Dan Sichel, pp (University of Chicago Press, 2005). "Availability of new drugs and Americans' ability to work," Journal of Occupational and Environmental Medicine 47 (4), April 2005, “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, ," International Journal of Health Care Finance and Economics 5, 2005, pp “Sources of U.S. Longevity Increase, ,” Quarterly Review of Economics and Finance 44(3), pp (July 2004). “The Effect of New Drugs on HIV Mortality in the U.S., ,” Economics and Human Biology 1 (2003) “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 “Are the Benefits of Newer Drugs Worth Their Cost? Evidence from the 1996 MEPS,” Health Affairs 20(5), September/October 2001,


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