LOOK PAST PRICE FOR HEALTH CARE VALUE
November 14, 2008
Access to one type of medical innovation -- newer prescription drugs -- may have affected disability rates in the U.S. working-age population during the period 1995-2004, says Frank Lichtenberg, a professor at the Columbia University Graduate School of Business and a research associate of the National Bureau of Economic Research.
Using data on all Medicaid prescriptions in 30 classes of medicines that account for the vast majority of drugs used by patients, along with information on when the active ingredient in each medicine was approved by the Food and Drug Administration (FDA), Lichtenberg was able to measure the average drug "vintage" in each year for 49 out of 50 states. For instance, Zocor's active ingredient, simvastatin, was approved in 1991, making 1991 the drug's vintage. The average age of all drugs in a state can then be used to establish a statewide drug vintage.
According to Lichtenberg, a state's average drug vintage was also an important factor in determining the size of disability rolls; in other words, states in which the average vintage of Medicaid prescriptions increased the most experienced smaller increases in disability. For instance:
- In the five states where drug vintage increased the most -- California, Idaho, Rhode Island, Connecticut and Maryland -- disability increased by 800 recipients per 100,000 working-age people from 1995-2004.
- In the five states where drug vintage increased the least -- Oklahoma, Alabama, Texas, Louisiana and West Virginia -- disability increased by 1,400 recipients per 100,000 working-age people, or 57 percent more (the study controlled for other factors such as changes in average age, education, wage rates, and behavioral risk factors such as obesity and smoking).
- If patients and doctors hadn't had access to these newer vintage medicines since 1995, Lichtenberg estimates that the disability rolls would have increased by an additional 30 percent; this translates into 418,000 more disabled Americans getting an additional $4.5 billion in support from Social Security.
Other factors were at play as well. Drug vintage increased more slowly in states where AIDS/HIV infection rates declined more slowly than average. In a small subset of states, it's possible that spending on AIDS/HIV treatment -- though highly cost effective -- is leaving less money available for newer medicines to treat other ailments, says Lichtenberg.
Source: Frank R. Lichtenberg, "Look Past Price For Health Care Value," Investor's Business Journal, November 12, 2008.
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