Innovation International Health Care Systems Pharmaceuticals

Do new drugs really improve health outcomes?

Of course, clinical trials demonstrate whether a drug is efficacious or not, but are new drugs effective in the real world on average? Have they improved health outcomes at the country level? And do they provide good value?

A series of recent paper by Frank Lichtenberg (see Lichtenberg 2019, Lichtenberg 2020a, Lichtenberg 2020b) aims to answer these questions. The papers generally look at the cumulative number of new drugs approved and how this would affect the number of disability adjusted life years (DALYs) or years of life lost (YLL) after accounting for disease and year fixed effects. Using this approach, Lichtenberg finds new drugs have a major impact on health.

Canada: 2000-2016:

  • New drug launches during 1986-2001 reduced the age-standardized years of life lost (YLL) rate in 2016 by 28%.
  • Drugs launched during 1986-2001 are estimated to have reduced the number of DALYs lost in 2016 by 2.31 million.
  • Expenditure in 2016 on drugs launched during 1986-2001 per DALY gained in 2016 from those drugs was 2842 USD.

US Cancer drugs: 2000-2014

  • Cancer drugs approved during 2000–2014 are estimated to have reduced the number of potential years of life lost before age 75 in 2014 by 719,133.
  • Cancer drugs approved during 1989–2005 are estimated to have reduced hospital cost in 2013 by $4.8 billion.
  • Our baseline estimate of the cost per life-year gained in 2014 from cancer drugs approved during 2000–2014 is $7853.

Ireland: 2000-2015

  • New Chemical Entities launched during 1983–1997 are estimated to have reduced the total number of disability-adjusted life-years (DALYs) lost in 2015 by about 234,600

Could other health innovations be responsible for these observed trends? Lichtenberg argues no.

Failure to control for non-pharmaceutical medical innovation (e.g.innovation in diagnostic imaging, surgical procedures, and medical devices) is also unlikely to bias estimates of the effect of pharmaceutical innovation on the burden of disease, for two reasons. First, …88% of privately-funded U.S. funding for biomedical research came from pharmaceutical and biotechnology firms (Dorsey et al. (2010)). Second, previous research based on U.S. data (Lichtenberg (2014a;2014b)) indicated that non-pharmaceutical medical innovation is not positively correlated across diseases with pharmaceutical innovation.

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