The Cost Effectiveness of New Drugs
Between 1996 and 2003, the mean vintage of prescription drugs increased by 6.6 years. This is estimated to have increased life expectancy of elderly Americans by 0.41-0.47 years. This suggests that not less than two-thirds of the 0.6-year increase in the life expectancy of elderly Americans during 1996-2003 was due to the increase in drug vintage. The 1996-2003 increase in drug vintage is also estimated to have increased annual drug expenditure per elderly American by $207, and annual total medical expenditure per elderly American by $218. This implies that the incremental cost-effectiveness ratio (cost per life-year gained) of pharmaceutical innovation was about $12,900.
I wonder if current data trends can follow this same life expectancy with the development of current FDA approved medications.
“This implies that the incremental cost-effectiveness ratio (cost per life-year gained) of pharmaceutical innovation was about $12,900”
That seems kinda high. I wonder what steps could be made to improve efficiency.
Johnston,
The pharmaceutical companies have no incentive to be more efficient as long as slight progress is being made.
I disagree Neil, if a pharm company develops a drug that is more efficient than others, it can put the competition out of business. That’s a pretty good incentive to me.
True, but why upset the cow thats feeding the family?
Lichtenberg does good work. Much of his research highlights the benefits of new drugs. Critics like Marcia Angell criticize drug makers as cranking out too many “me too” drugs, but each new class has incremental improvements over the previous class of drugs. New drugs are expensive and their effectiveness varies, but it’s for consumers to decide along with their doctors.
“We examine the impact of the vintage (original FDA approval year) of drugs used to treat a patient on the patient’s 3-year probability of survival…For pre-1970 drugs, the estimated mortality rate is 4.4%. The mortality rates for 1970s, 1980s, and 1990s drugs are 3.6%, 3.0%, and 2.5%, respectively.”
Yay statistics
Of course big pharm has an incentive to make people live longer. The cost of healthcare per “extra” year of life is outrageous.
I don’t know if the trade-off ratio can necessarily be considered a healthy rate.