The impact of drug innovation on disability and medical care

New pharmaceutical products aim to help individuals live longer, healthier lives. However, when new drugs come to market, they are typically indicated for a specific disease. In the real world, however, many individuals face multiple conditions. In fact, 57% of Americans have 2 or more medical conditions and 27% have 5 or more medical conditions.

To estimate the impact of new pharmaceuticals, a recent NBER paper by Lichtenberg (2021) uses 1998- 2015 waves of the Medical Expenditure Panel Survey (MEPS) data. Data on the FDA approval years of drugs (including their Anatomical Therapeutic Chemical [ATC] codes) were obtained from DrugCentral 2021.

The key econometric strategy is to examine changes in the likelihood of disability, receipt of Social Security Disability Insurance, or use of specific medical services (e.g., hospitalization, home health care) across diseases based on the number of new drugs and new drug classes previously introduced. Because uptake of new medication is often slow, the authors use lagged approvals to impact current year outcomes. The regression model also separates first

Based on this approach, the authors finds that:

Previous innovation is estimated to have reduced: the number of people who were completely unable to work at a job, do housework, or go to school in 2015 by 4.5%; the number of people with cognitive limitations by 3.2%; the number of people receiving SSI in 2015 by 247 thousand (3.1%); and the number of people receiving Social Security by 984 thousand (2.0%). Previous innovation is also estimated to have caused reductions in home health visits (9.2%), inpatient events (5.7%), missed school days (5.1%), and outpatient events (4.1%)

The author also states that the value of these reductions in disability, Social Security recipiency, and medical care services resulted in a savings of $115 billion in 2015. Do read the full article here.

Leave a Reply

Your email address will not be published. Required fields are marked *