Jump to ContentJump to Main Navigation
Show Summary Details
More options …

Forum for Health Economics & Policy

Editor-in-Chief: Goldman, Dana / Romley, John


CiteScore 2018: 0.89

SCImago Journal Rank (SJR) 2018: 0.314
Source Normalized Impact per Paper (SNIP) 2018: 0.548

Online
ISSN
1558-9544
See all formats and pricing
More options …

The Impact of New Drug Launches on Hospitalization in 2015 for 67 Medical Conditions in 15 OECD Countries: A Two-Way Fixed-Effects Analysis

Frank R. Lichtenberg
Published Online: 2019-04-24 | DOI: https://doi.org/10.1515/fhep-2018-0009

Abstract

There are two types of prescription drug cost offsets. The first type of cost offset – from prescription drug use – is primarily about the effect of changes in drug quantity (e.g. due to changes in out-of-pocket drug costs) on other medical costs. Previous studies indicate that the cost offsets from prescription drug use may slightly exceed the cost of the drugs themselves. The second type of cost offset – the cost offset from prescription drug innovation – is primarily about the effect of prescription drug quality on other medical costs. Two previous studies (of a single disease or a single country) found that pharmaceutical innovation reduced hospitalization, and that the reduction in hospital cost from the use of newer drugs was considerably greater than the innovation-induced increase in pharmaceutical expenditure. In this study, we reexamine the impact that pharmaceutical innovation has had on hospitalization, employing a different type of 2-way fixed effects research design. In lieu of analyzing different countries over time for a single disease, or different diseases over time for a single country, we estimate the impact that new drug launches that occurred during the period 1982–2015 had on hospitalization in 2015 for 67 diseases in 15 OECD countries. Our models include both country fixed effects and disease fixed effects, which control for the average propensity of people to be hospitalized in each country and from each disease. The number of hospital discharges and days of care in 2015 is significantly inversely related to the number of drugs launched during 1982–2005, but not significantly related to the number of drugs launched after 2005. (Utilization of drugs during the first few years after they are launched is relatively low, and drugs for chronic conditions may have to be consumed for several years to achieve full effectiveness.) The estimates imply that, if no new drugs had been launched after 1981, total days of care in 2015 would have been 163% higher than it actually was. The estimated reduction in 2015 hospital expenditure that may be attributable to post-1981 drug launches was 5.3 times as large as 2015 expenditure on those drugs.

Keywords: pharmaceutical; innovation; hospitalization

References

  • Acemoglu, D., and J. Linn. 2004. Market size in innovation: theory and evidence from the pharmaceutical industry. Quarterly Journal of Economics 119: 1049–1090.CrossrefGoogle Scholar

  • Afendulis, C. C., Y. He, A. M. Zaslavsky, and M. E. Chernew. 2011. “The Impact of Medicare Part D on Hospitalization Rates.” Health Services Research 46 (4): 1022–1038.Web of SciencePubMedCrossrefGoogle Scholar

  • Bils, M. 2004. “Measuring the Growth from Better and Better Goods,” NBER working paper no. 10606, July.Google Scholar

  • Bresnahan, T. F., and R. J. Gordon. 1996. The Economics of New Goods. Chicago: University of Chicago Press.Google Scholar

  • Briesacher, B. A., Y. Zhao, J. M. Madden, F. Zhang, A. S. Adams, J. Tjia, D. Ross-Degnan, J. H. Gurwitz, and S. B. Soumerai. 2011. “Medicare Part D and Changes in Prescription Drug Use and Cost Burden.” Medical Care 49 (9): 834–841.CrossrefPubMedWeb of ScienceGoogle Scholar

  • Centers for Medicare & Medicaid Services. 2017. “National Health Expenditure Data – Historical.”Google Scholar

  • Centre National Hospitalier d’Information sur le Médicament. 2017. “Thériaque Database.”Google Scholar

  • Congressional Budget Office. 2012. “Offsetting Effects of Prescription Drug Use on Medicare’s Spending for Medical Services,” November.Google Scholar

  • Danzon, P. M., Y. R. Wang, and L. Wang. 2005. “The Impact of Price Regulation on the Launch Delay of New Drugs – Evidence from Twenty-Five Major Markets in the 1990s.” Health Economics 14 (3): 269–292.PubMedCrossrefGoogle Scholar

  • Dorsey, E. R. 2010. “Financial Anatomy of Biomedical Research, 2003–2008.” Journal of the American Medical Association 303 (2): 137–143.CrossrefGoogle Scholar

  • Gaynor, M., J. Li, and W. B. Vogt. 2007. “Substitution, Spending Offsets, and Prescription Drug Benefit Design.” Forum for Health Economics and Policy 10 (2): 1–31.Google Scholar

  • Goldman, D. P., G. F. Joyce, and Y. Zheng. 2007. “Prescription Drug Cost Sharing: Associations with Medication and Medical Utilizations and Spending and Health.” Journal of the American Medical Association 298 (1): 61–69.CrossrefGoogle Scholar

  • Grossman, Gene M., and Elhanan Helpman. 1993. Innovation and Growth in the Global Economy. Cambridge: MIT Press.Google Scholar

  • Hausman, J. 2001. “Mismeasured Variables in Econometric Analysis: Problems from the Right and Problems from the Left.” Journal of Economic Perspectives 15 (4): 57–67.CrossrefGoogle Scholar

  • Hsu, J., M. Price, J. Huang, R. Brand, V. Fung, R. Hui, B. Fireman, J. P. Newhouse, and J. V. Selby. 2006. “Unintended Consequences of Caps on Medicare Drug Benefits.” New England Journal of Medicine 354 (22): 2349–2359.CrossrefGoogle Scholar

  • International Agency for Research on Cancer. 2018. Cancer today, http://gco.iarc.fr/today/home.

  • Jovanovic, B., and Y. Yatsenko. 2012. “Investment in Vintage Capital.” Journal of Economic Theory 147 (2): 551–569.Web of ScienceCrossrefGoogle Scholar

  • Kamal, R., and C. Cox. 2018. “How do Healthcare Prices and use in the U.S. Compare to Other Countries?,” https://www.healthsystemtracker.org/chart-collection/how-do-healthcare-prices-and-use-in-the-u-s-compare-to-other-countries/.

  • Lichtenberg, F. R. 2009a. “Have Newer Cardiovascular Drugs Reduced Hospitalization? Evidence from Longitudinal Country-Level Data on 20 OECD Countries, 1995–2003.” Health Economics 18: 519–534.Web of ScienceCrossrefGoogle Scholar

  • Lichtenberg, F. R. 2009b. “Home or Nursing Home? The Effect of Medical Innovation on the Demand for Long-Term Care.” In The Economics of New Health Technologies: Incentives, Organization, and Financing, edited by J. Costa-Font, C. Courbage, and A. McGuire. Oxford: Oxford University Press.Google Scholar

  • Lichtenberg, F. R. 2014a. “The Impact of Pharmaceutical Innovation on Disability Days and the Use of Medical Services in the United States, 1997–2010.” Journal of Human Capital 8 (4): 432–480.Web of ScienceCrossrefGoogle Scholar

  • Lichtenberg, F. R. 2014b. “Has Medical Innovation Reduced Cancer Mortality?” CESifo Economic Studies 60 (1): 135–177.CrossrefWeb of ScienceGoogle Scholar

  • Lichtenberg, F. R. 2014c. “The Impact of Pharmaceutical Innovation on Longevity and Medical Expenditure in France, 2000–2009.” Economics and Human Biology 13: 107–127.CrossrefGoogle Scholar

  • Lichtenberg, F. R. 2017. “The Impact of Pharmaceutical Innovation on Premature Mortality, Hospital Separations, and Cancer Survival in Australia.” Economic Record 93 (302): 353–378.Web of ScienceCrossrefGoogle Scholar

  • Lichtenberg, F. R. 2018. “The Impact of New Drug Launches on Life-Years Lost in 2015 from 19 Types of Cancer in 36 Countries.” Journal of Demographic Economics 84: 309–354.CrossrefWeb of ScienceGoogle Scholar

  • McWilliams, J. M., A. M. Zaslavsky, and H. A. Huskamp. 2011. “Implementation of Medicare Part D and Nondrug Medical Spending for Elderly Adults with Limited Prior Drug Coverage.” Journal of the American Medical Association 306 (4): 402–409.Web of ScienceCrossrefGoogle Scholar

  • National Cancer Institute. 2018. Enhancing Drug Discovery and Development, https://www.cancer.gov/research/areas/treatment/enhancing-drug-discovery.

  • OECD. 2017a. OECD Health Statistics 2017, Definitions, Sources and Methods, Hospital discharges by diagnostic categories.Google Scholar

  • OECD. 2017b. OECD Health Statistics database.Google Scholar

  • OECD. 2017c. International shortlist for hospital morbidity tabulation.Google Scholar

  • Sampat, B., and F. R. Lichtenberg. 2011. “What are the Respective Roles of the Public and Private Sectors in Pharmaceutical Innovation?.” Health Affairs 30 (2): 332–339.Web of ScienceCrossrefGoogle Scholar

  • Stuart, B. C., J. A. Doshi, and J. V. Terza. 2009. “Assessing the Impact of Drug Use on Hospital Costs.” Health Services Research 44 (1): 128–144.CrossrefPubMedWeb of ScienceGoogle Scholar

About the article

Published Online: 2019-04-24


Funding Source: National Institute on Aging

Award identifier / Grant number: R24 AG048059

National Institute on Aging, Pfizer, and PhRMA, Funder Id: http://dx.doi.org/10.13039/100000049, Grant Number: R24 AG048059.


Citation Information: Forum for Health Economics and Policy, Volume 21, Issue 2, 20180009, ISSN (Online) 1558-9544, DOI: https://doi.org/10.1515/fhep-2018-0009.

Export Citation

©2019 Walter de Gruyter GmbH, Berlin/Boston.Get Permission

Comments (0)

Please log in or register to comment.
Log in