Biomedical innovation, longevity, and quality of life

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Biomedical innovation, longevity, and quality of
life

• Frank R. Lichtenberg
• Columbia University and
• National Bureau of Economic Research
• frank.lichtenberg_at_columbia.edu

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

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Life expectancy at birth, world, 1950-2000
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Life expectancy at birth, by region
Unlike GDP, longevity is converging
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Nursing home residents 65 years and over per
1,000 population, age adjusted, 1973-1999
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New drugs cost more, but are they worth more?

• New drugs tend to cost moresometimes a great
  deal morethan 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)

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Cost of breast cancer treatment
Drug FDA Approval year Cost of treatment per month
Anastrozole 1995 227.23 (Breast Cancer Arimidex 1 mg 1 tablet/day 30 day supply)
Letrozole 1997 232.96 (Breast Cancer Femara 2.5 mg 1 tablet/day 30 day supply)
Methyltestosterone 1971 205.99 (Metastatic Breast Cancer (female) Android 25 mg 2 tablets/day 30 day supply)
Methyltestosterone 1971 6.18 (Metastatic Breast Cancer (female) Generic Tablets 25 mg 2 tablets/day 30 day supply)
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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

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Role of new goods in economic growth

• Solow, Technical Progress, Capital Formation, and
  Economic Growth technological progress needs to
  be embodied in newly producedgoods 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.

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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
  drugs active ingredient was first marketed
• Example Anastrozole is a 1995-vintage drug

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Mean vintage of Medicaid Rx's, by year
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of U.S. prescriptions that contained
ingredients approved after 1985
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Mean vintage of 2002 Medicaid Rxs, by state
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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

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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

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HIV/AIDS Survival functions 1993 vs. 2000
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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
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Change in average HIV/AIDS drug utilization and
change in mortality rate
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Drug utilization and hospital utilization
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• 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 1993-2001 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 1993-2001 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.

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The impact of new drug launches on
longevityevidence from longitudinal,
disease-level data from 52 countries, 1982-2001
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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

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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

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Countries with most and fewest drug launches
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Example tenecteplase

• Launch date Country
• 6/00 USA
• 3/01 Finland
• 5/01 UK
• 9/01 Norway
• 10/01 Canada
• 10/01 South Africa
• 11/01 Ireland

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.
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Drug launch probability profiles U.S. vs. Canada
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Findings

• Launches of New Chemical Entities (NCEs) have a
  strong positive impact on the probability of
  survival
• Launches of (older) drugs that are not NCEsmany
  of which may already have been on the marketdo
  not increase longevity

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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 1986-2000 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.

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

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The effect of drug vintage on survival rates
individual-level evidence from Puerto Ricos
Medicaid program
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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 2000-2002.

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Low utilization of post-1980 drugs in ASES
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DIEDi b1970 POST1970i b1980 POST1980i b1990
POST1990i g Zi ei where
DIEDi 1 if individual i died during the period 2000-2002
0 otherwise
POST1970i the fraction of individual is prescribed medicines whose active ingredients were approved by the FDA after 1970
POST1980i the fraction of individual is prescribed medicines whose active ingredients were approved by the FDA after 1980
POST1990i the fraction of individual is prescribed medicines whose active ingredients were approved by the FDA after 1990
Zi a vector of covariates
ei a disturbance
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Covariates

• Demographic information (age, sex, region)
• Persons utilization of services (number of
  physician encounters, pharmacy claims, hospital
  admissions during Jan.-June 2000)
• Nature of persons illnesses (diagnosis codes
  grouped into 15 broad disease groups)

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Mortality rate declines as drug vintage increases
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Analysis by disease group
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The effect of using newer drugs on admissions of
elderly Americans to hospitals and nursing homes
state-level evidence from 1993-2003
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The effect of using newer drugs on admissions of
elderly Americans to hospitals and nursing homes
state-level evidence from 1993-2003

• Examine the effect of pharmaceutical innovation
  on admissions of elderly Americans to hospitals
  and nursing homes during 1997-2003, 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.

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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

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Findings

• Mean vintage of Medicaid Rxs increased by 6.2
  years between 1997 and 2003
• Mean vintage of 1997 Rxs was 1976.0
• Mean vintage of 2003 Rxs was 1982.6
• 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

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Availability of new drugs andAmericans ability
to work
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of People Unable to Work, by Age
Illness-induced early retirement of older
workers human-capital losses
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Research objectives

• Investigate the extent to which the introduction
  of new drugs has increased societys 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.

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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

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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
  1982-1996
• During that period, it collected information from
  1,017,164 working-age Americans on 133 chronic
  conditions and impairments

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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

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20 most frequent conditions
Condition N cum N cum unable to work
Sinusitis 27,457 12.6 27,457 12.6 0.1
Arthritis 22,668 10.4 50,125 22.9 6.8
Hypertension 22,428 10.3 72,553 33.2 3.7
Allergic Rhinitis 18,029 8.2 90,582 41.4 0.1
Gastrointestinal Disorders - Other 14,264 6.5 104,846 47.9 1.0
Skin Disorders - Other 11,148 5.1 115,994 53.0 0.2
Migraines 8,726 4.0 124,720 57.0 0.8
Bronchitis 7,884 3.6 132,604 60.6 0.8
Headaches 7,315 3.3 139,919 64.0 0.5
Cardiovascular Disease 7,152 3.3 147,071 67.3 10.4
Asthma 6,820 3.1 153,891 70.4 3.9
Dermatitis 6,381 2.9 160,272 73.3 0.2
Peripheral Vascular Disease 6,200 2.8 166,472 76.1 0.7
Diabetes 5,269 2.4 171,741 78.5 13.3
Bursitis/Tendonitis 4,024 1.8 175,765 80.4 1.3
Ulcers 3,855 1.8 179,620 82.1 2.7
Acne 3,174 1.5 182,794 83.6 0.0
Thyroid Disorders 3,005 1.4 185,799 85.0 1.7
Anemia 2,873 1.3 188,672 86.3 1.4
Kidney Disorders 2,704 1.2 191,376 87.5 3.5
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Probability of being unable to work in 1996due
to 47 major chronic conditions
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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

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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

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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
  drugs 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

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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. 237-269 (University of
  Chicago Press, 2005).
• "Availability of new drugs and Americans' ability
  to work," Journal of Occupational and
  Environmental Medicine 47 (4), April 2005,
  373-380.
• 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, 1982-2001," International
  Journal of Health Care Finance and Economics 5,
  2005, pp. 47-73.
• Sources of U.S. Longevity Increase, 1960-2001,
  Quarterly Review of Economics and Finance 44(3),
  pp. 369-389 (July 2004).
• The Effect of New Drugs on HIV Mortality in the
  U.S., 1987-1998, Economics and Human Biology 1
  (2003) 259-266.
• 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. 74-109.
• Are the Benefits of Newer Drugs Worth Their
  Cost? Evidence from the 1996 MEPS, Health
  Affairs 20(5), September/October 2001, 241-51.