Benefits justify cost of newer Rx drugs

November 1, 2001

Pharmaceutical Representative

According to a study conducted by Columbia University economist Frank R. Lichtenberg, pharmaceutical innovation is paying off for American consumers by improving the quality of their lives, and for payers by lowering total healthcare expenditures.

According to a study conducted by Columbia University economist Frank R. Lichtenberg, pharmaceutical innovation is paying off for American consumers by improving the quality of their lives, and for payers by lowering total healthcare expenditures.

The study concludes that savings in other medical spending significantly offsets spending on newer prescription drugs among American consumers. The conclusions are based on analysis of the 1996 Medical Expenditure Panel Survey, the most current nationally representative database on the use of healthcare services and spending.

A broader look

In his study, "Are the Benefits of Newer Drugs Worth Their Cost? Evidence from the 1996 MEPS," Lichtenberg found that people who used newer prescription drugs were less likely to die or to lose time at work, and spent fewer days in the hospital.

As a result, consumers of newer prescription drugs tended to spend significantly less on other healthcare services, thereby reducing overall expenditures. According to Lichtenberg, the cost of newer drugs was offset by an estimated fourfold reduction in non-drug spending.

"The art of good medical care involves treating the whole patient. Likewise, we must take a broader look at healthcare spending to understand both the direct and indirect effects of how we spend our healthcare dollars in order to determine where we are experiencing the greatest benefits," said Karen Williams, president of the Washington-based National Pharmaceutical Council, which sponsored the study. "This new data by Dr. Lichtenberg shows the importance of understanding the overall value of pharmaceuticals, not only to individual patients, but to society as a whole." PR

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