Pharmaceutical innovation and the longevity of Australians: A first look

Abstract

The purpose of this paper is to examine the impact of pharmaceutical innovation on the longevity of Australians. The approach utilized involves estimation of difference-in-differences models using longitudinal, disease-level data during the period 1995–2003 to determine whether the diseases that had above-average increases in mean vintage (FDA approval year) of drugs had above-average reductions in mortality. Our findings are that the mean age at death increased more for diseases with larger increases in mean drug vintage. A 5-year increase in mean drug vintage is estimated to increase mean age at death by almost 11 months. The number of years of potential life lost before the ages of 65 and 70 (but not before age 75) was reduced by use of newer drugs. During the period 1995–2003, mean age at death increased by about 2.0 years, from 74.4 to 76.4. The estimates imply that, in the absence of any increase in drug vintage, mean age at death would have increased by only 0.7 years. The increase in drug vintage accounts for about 65% of the total increase in mean age at death. Estimated cost per life-year gained from using newer drugs is $10,585. An estimate by previous investigators of the value of a statistical Australian life-year ($70,618) is 6.7 times as large. We acknowledge potential limitations of this study by discussing several reasons why our estimate of the cost per life-year gained from using newer drugs could be too high or low. The value of this paper's evidence is primarily due to the government's Pharmaceutical Benefits Scheme: Australia has much better data on drug utilization than most other countries.

Citation

Lichtenberg, F.R. and Duflos, G. (2008), "Pharmaceutical innovation and the longevity of Australians: A first look", Helmchen, L., Kaestner, R. and Lo Sasso, A. (Ed.) Beyond Health Insurance: Public Policy to Improve Health (Advances in Health Economics and Health Services Research, Vol. 19), Emerald Group Publishing Limited, Leeds, pp. 95-117. https://doi.org/10.1016/S0731-2199(08)19005-7