Home The Impact of New Drug Launches on Hospitalization in 2015 for 67 Medical Conditions in 15 OECD Countries: A Two-Way Fixed-Effects Analysis
Article
Licensed
Unlicensed Requires Authentication

The Impact of New Drug Launches on Hospitalization in 2015 for 67 Medical Conditions in 15 OECD Countries: A Two-Way Fixed-Effects Analysis

  • Frank R. Lichtenberg EMAIL logo
Published/Copyright: April 24, 2019

Abstract

There are two types of prescription drug cost offsets. The first type of cost offset – from prescription drug use – is primarily about the effect of changes in drug quantity (e.g. due to changes in out-of-pocket drug costs) on other medical costs. Previous studies indicate that the cost offsets from prescription drug use may slightly exceed the cost of the drugs themselves. The second type of cost offset – the cost offset from prescription drug innovation – is primarily about the effect of prescription drug quality on other medical costs. Two previous studies (of a single disease or a single country) found that pharmaceutical innovation reduced hospitalization, and that the reduction in hospital cost from the use of newer drugs was considerably greater than the innovation-induced increase in pharmaceutical expenditure. In this study, we reexamine the impact that pharmaceutical innovation has had on hospitalization, employing a different type of 2-way fixed effects research design. In lieu of analyzing different countries over time for a single disease, or different diseases over time for a single country, we estimate the impact that new drug launches that occurred during the period 1982–2015 had on hospitalization in 2015 for 67 diseases in 15 OECD countries. Our models include both country fixed effects and disease fixed effects, which control for the average propensity of people to be hospitalized in each country and from each disease. The number of hospital discharges and days of care in 2015 is significantly inversely related to the number of drugs launched during 1982–2005, but not significantly related to the number of drugs launched after 2005. (Utilization of drugs during the first few years after they are launched is relatively low, and drugs for chronic conditions may have to be consumed for several years to achieve full effectiveness.) The estimates imply that, if no new drugs had been launched after 1981, total days of care in 2015 would have been 163% higher than it actually was. The estimated reduction in 2015 hospital expenditure that may be attributable to post-1981 drug launches was 5.3 times as large as 2015 expenditure on those drugs.

Award Identifier / Grant number: R24 AG048059

Funding statement: National Institute on Aging, Pfizer, and PhRMA, Funder Id: http://dx.doi.org/10.13039/100000049, Grant Number: R24 AG048059.

Appendix

Table 4:

Thousands of 2015 Hospital Discharges, by Country and Disease.

CauseAustriaCanadaDenmarkFinlandFranceGermanyIrelandIsraelItalyMexicoPortugalSpainSwitzerlandSwedenUK
0101 Intestinal infectious diseases except diarrhoea8.817.91.93.347.2107.75.63.016.58.05.716.77.15.937.9
0102 Diarrhoea and gastroenteritis of presumed infectious origin13.03.55.656.0151.03.414.340.92.78.76.25.9
0103 Tuberculosis1.11.00.30.45.78.30.20.34.84.10.50.72.8
0104 Septicaemia5.625.812.87.028.6124.32.44.041.917.09.643.89.472.4
0105 Human immunodeficiency virus [HIV] disease0.71.00.30.11.61.40.00.25.08.04.23.00.10.12.1
0201 Malignant neoplasm of colon, rectum and anus22.422.96.97.454.2168.32.83.753.113.99.246.79.245.2
0202 Malignant neoplasms of trachea, bronchus and lung21.719.14.15.244.4201.72.52.141.94.84.935.06.938.1
0203 Malignant neoplasms of skin13.71.92.12.721.9102.51.11.614.49.41.98.32.09.9
0204 Malignant neoplasm of breast24.610.34.08.358.1175.72.34.855.535.17.434.26.235.4
0205 Malignant neoplasm of uterus5.97.21.91.913.439.51.01.312.418.61.89.33.113.7
0206 Malignant neoplasm of ovary6.83.31.01.67.629.40.60.66.97.30.75.01.69.3
0207 Malignant neoplasm of prostate10.410.43.14.434.294.10.91.423.96.617.17.523.7
0208 Malignant neoplasm of bladder9.58.51.93.348.1104.61.14.263.03.84.742.35.430.8
0210 Carcinoma in situ2.83.80.50.713.532.20.51.17.74.11.07.43.00.86.8
0211 Benign neoplasm of colon, rectum and anus3.13.11.91.331.633.50.50.79.10.41.05.51.80.76.2
0301 Anaemias10.615.06.26.7126.688.14.410.944.121.55.025.63.89.955.7
0401 Diabetes mellitus23.236.65.97.399.3221.85.533.1136.37.926.56.610.050.3
0501 Dementia9.71.210.720.70.50.69.91.13.13.417.7
0502 Mental and behavioural disorders due to alcohol17.810.513.9292.42.210.16.515.621.943.5
0503 Mental and behavioural disorders due to use of other psychoactive subst.5.91.92.8105.40.31.86.36.26.317.78.6
0504 Schizophrenia, schizotypal and delusional disorders13.613.713.9133.80.314.245.19.633.614.713.328.7
0505 Mood [affective] disorders35.38.813.4376.70.53.652.511.026.527.818.925.7
0601 Alzheimer’s disease1.30.16.63.018.90.20.14.90.30.22.10.27.3
0602 Multiple sclerosis5.91.50.70.96.960.70.60.55.61.32.31.81.05.1
0603 Epilepsy13.512.64.66.662.1153.53.83.527.717.83.717.97.67.838.6
0604 Transient cerebral ischaemic attacks and related syndromes7.89.44.27.238.0109.83.33.830.61.72.914.94.410.322.7
0901 Hypertensive diseases22.66.82.95.731.3278.32.33.633.944.07.431.64.73.9
0902 Angina pectoris10.66.16.1234.82.971.214.42.26.713.438.2
0903 Acute myocardial infarction16.769.010.413.8234.26.510.3121.416.512.354.118.526.8104.3
0904 Other ischaemic heart disease44.14.610.4123.7253.35.413.976.921.68.941.113.94.873.7
0905 Pulmonary heart disease & diseases of pulmonary circulation8.312.03.73.646.069.21.71.924.93.43.520.25.27.734.4
0906 Conduction disorders and cardiac arrhythmias34.653.623.025.1192.2441.69.418.5135.116.514.779.016.336.2129.1
0907 Heart failure26.364.28.021.8225.6443.36.213.8200.722.319.2127.430.892.5
0908 Cerebrovascular diseases44.551.813.027.2156.2449.915.9235.546.324.0104.434.8139.5
0909 Atherosclerosis11.66.92.211.757.7199.51.72.341.30.54.621.19.36.811.9
1001 Acute upper respiratory infections and influenza14.519.54.37.845.4101.48.811.822.520.52.48.212.498.4
1002 Pneumonia38.367.032.439.9180.5310.027.9146.384.47.4129.022.342.3298.6
1003 Other acute lower respiratory infections11.914.33.48.284.5152.28.233.933.314.78.96.2144.9
1005 Other diseases of upper respiratory tract19.08.03.42.660.1186.22.811.661.324.43.541.613.63.033.8
1006 Chronic obstructive pulmonary disease and bronchiectasis29.186.313.38.591.8287.711.850.130.49.690.211.718.2163.2
1007 Asthma4.111.13.73.649.752.94.14.18.321.52.423.13.13.661.6
1103 Diseases of oesophagus10.27.92.62.032.678.52.61.511.310.31.811.03.33.236.0
1104 Peptic ulcer4.09.52.61.617.764.80.91.115.54.92.810.82.85.215.4
1105 Dyspepsia and other diseases of stomach and duodenum14.57.61.60.828.9153.73.51.619.915.12.314.03.42.531.1
1109 Crohn’s disease and ulcerative colitis6.310.53.22.716.648.42.12.415.91.71.711.11.84.327.1
1110 Other noninfective gastroenteritis and colitis8.91.70.821.063.20.910.53.72.833.12.12.1
1114 Other diseases of intestine19.114.36.34.864.0186.73.62.618.312.63.019.25.08.365.6
1116 Other diseases of liver6.59.92.41.723.149.90.91.938.035.43.520.12.32.615.8
1119 Diseases of pancreas6.924.04.05.443.074.61.93.526.921.66.331.74.06.741.3
1201 Infections of the skin and subcutaneous tissue11.126.05.73.168.9140.28.315.722.735.85.130.29.76.1115.2
1202 Dermatitis, eczema and papulosquamous disorders4.01.70.71.812.577.20.91.95.52.00.62.11.91.08.8
1301 Coxarthrosis [arthrosis of hip]30.734.48.710.3103.6274.43.81.763.85.114.780.1
1302 Gonarthrosis [arthrosis of knee]37.560.18.212.7105.4292.02.74.873.318.813.4101.6
1304 Other arthropathies32.25.310.7170.9301.45.76.451.617.515.534.713.1104.7
1305 Systemic connective tissue disorders4.23.51.61.514.647.00.71.011.14.91.06.31.93.56.5
1306 Deforming dorsopathies and spondylopathies19.314.76.78.966.2268.53.224.04.32.817.611.830.3
1307 Intervertebral disc disorders28.75.35.147.5235.81.632.315.14.034.6
1308 Dorsalgia37.57.93.46.454.9303.12.43.67.013.80.48.66.736.5
1309 Soft tissue disorders31.112.33.64.7113.8268.77.575.730.95.251.825.78.561.5
1401 Glomerular and renal tubulo-interstitial diseases12.923.96.216.8118.3175.15.734.930.79.531.711.915.461.2
1402 Renal failure20.522.95.34.045.2117.83.17.689.9189.74.029.34.79.578.7
1404 Other diseases of the urinary system26.441.613.412.083.7236.813.022.764.653.719.988.216.420.2226.2
1405 Hyperplasia of prostate6.213.31.43.538.358.30.73.844.120.63.326.47.33.921.3
1406 Other diseases of male genital organs8.44.21.51.850.663.42.13.223.630.02.422.25.52.426.1
1407 Disorders of breast26.27.814.62.4
1408 Inflammatory diseases of female pelvic organs3.33.61.00.719.730.20.82.710.314.21.38.12.01.314.5
1409 Menstrual, menopausal and other female genital conditions8.21.61.311.033.12.01.816.934.20.93.72.92.021.4
Table 5:

Number of Post-1981 New Chemical Entities Launched During 1982–2015, by Country and Disease.

CauseAustriaCanadaDenmarkFinlandFranceGermanyIrelandIsraelItalyMexicoPortugalSpainSwitzerlandSwedenUK
Mean10.58.69.710.010.310.49.36.310.09.27.49.89.79.410.0
0101 Intestinal infectious diseases except diarrhoea414444414224343
0102 Diarrhoea and gastroenteritis of presumed infectious origin111111111211111
0103 Tuberculosis312213212011123
0104 Septicaemia735565436755554
0105 Human immunodeficiency virus [HIV] disease28283131283129142924923302931
0201 Malignant neoplasm of colon, rectum and anus1099998948857999
0202 Malignant neoplasms of trachea, bronchus and lung1613161717161591112913141517
0203 Malignant neoplasms of skin127101110108486879108
0204 Malignant neoplasm of breast241922232524221424201323232223
0205 Malignant neoplasm of uterus222222222212222
0206 Malignant neoplasm of ovary888888758858888
0207 Malignant neoplasm of prostate131213141313116911812131212
0208 Malignant neoplasm of bladder222222212222222
0210 Carcinoma in situ11912131013114118411101011
0211 Benign neoplasm of colon, rectum and anus111111111111111
0301 Anaemias746757647736667
0401 Diabetes mellitus312830303131302228312230313031
0501 Dementia111111111111111
0502 Mental and behavioural disorders due to alcohol101101101101111
0503 Mental and behavioural disorders due to use of other psychoactive subst.222222222222222
0504 Schizophrenia, schizotypal and delusional disorders767557747767656
0505 Mood [affective] disorders201718191918171517181918171717
0601 Alzheimer’s disease444444444444444
0602 Multiple sclerosis1412141314151591310414121315
0603 Epilepsy1611141514151571591115141415
0604 Transient cerebral ischaemic attacks and related syndromes656666615446566
0901 Hypertensive diseases312429283737291934313232312730
0902 Angina pectoris1512131414141581311913151115
0903 Acute myocardial infarction18171618151816917151015171517
0904 Other ischaemic heart disease111110129121061296911911
0905 Pulmonary heart disease & diseases of pulmonary circulation131212121213126116612111212
0906 Conduction disorders and cardiac arrhythmias988988728747987
0907 Heart failure181617171719181319191618181919
0908 Cerebrovascular diseases989999948779899
0909 Atherosclerosis333333312323323
1001 Acute upper respiratory infections and influenza201415172018151518201618161716
1002 Pneumonia221619212322191220191419202019
1003 Other acute lower respiratory infections191314161817131317181416151615
1005 Other diseases of upper respiratory tract221520222323201423212223202021
1006 Chronic obstructive pulmonary disease and bronchiectasis211618182020171219181720191918
1007 Asthma989799759858979
1103 Diseases of oesophagus777777767777777
1104 Peptic ulcer888888878888888
1105 Dyspepsia and other diseases of stomach and duodenum111111111111111
1109 Crohn’s disease and ulcerative colitis666655625415656
1110 Other noninfective gastroenteritis and colitis111111101111111
1114 Other diseases of intestine424545313234354
1116 Other diseases of liver107910910861064991010
1119 Diseases of pancreas111111111111111
1201 Infections of the skin and subcutaneous tissue211417181919171019181217191718
1202 Dermatitis, eczema and papulosquamous disorders15131314121412101212713141315
1301 Coxarthrosis [arthrosis of hip]222231133332112
1302 Gonarthrosis [arthrosis of knee]222231133332112
1304 Other arthropathies242123242022211122221522222224
1305 Systemic connective tissue disorders777647747447667
1306 Deforming dorsopathies and spondylopathies128121210101041010710101012
1307 Intervertebral disc disorders101111100001111
1308 Dorsalgia222231112222212
1309 Soft tissue disorders344443324344334
1401 Glomerular and renal tubulo-interstitial diseases161315141516131416161415151415
1402 Renal failure1011111010111091110910101110
1404 Other diseases of the urinary system282126272929252028262428262527
1405 Hyperplasia of prostate787588878778767
1406 Other diseases of male genital organs141112131516101116151516131213
1407 Disorders of breast000020001110000
1408 Inflammatory diseases of female pelvic organs886713127612121212868
1409 Menstrual, menopausal and other female genital conditions201251223333111

Figure 5: Plot of the Residuals from the Unweighted Regression ln(DISCHARGESdc) = αd + δc + ɛdc against DISCHARGESdc.
Figure 5:

Plot of the Residuals from the Unweighted Regression ln(DISCHARGESdc) = αd + δc + ɛdc against DISCHARGESdc.

References

Acemoglu, D., and J. Linn. 2004. Market size in innovation: theory and evidence from the pharmaceutical industry. Quarterly Journal of Economics 119: 1049–1090.10.1162/0033553041502144Search in Google Scholar

Afendulis, C. C., Y. He, A. M. Zaslavsky, and M. E. Chernew. 2011. “The Impact of Medicare Part D on Hospitalization Rates.” Health Services Research 46 (4): 1022–1038.10.1111/j.1475-6773.2011.01244.xSearch in Google Scholar PubMed

Bils, M. 2004. “Measuring the Growth from Better and Better Goods,” NBER working paper no. 10606, July.10.3386/w10606Search in Google Scholar

Bresnahan, T. F., and R. J. Gordon. 1996. The Economics of New Goods. Chicago: University of Chicago Press.10.7208/chicago/9780226074184.001.0001Search in Google Scholar

Briesacher, B. A., Y. Zhao, J. M. Madden, F. Zhang, A. S. Adams, J. Tjia, D. Ross-Degnan, J. H. Gurwitz, and S. B. Soumerai. 2011. “Medicare Part D and Changes in Prescription Drug Use and Cost Burden.” Medical Care 49 (9): 834–841.10.1097/MLR.0b013e3182162afbSearch in Google Scholar PubMed

Centers for Medicare & Medicaid Services. 2017. “National Health Expenditure Data – Historical.”Search in Google Scholar

Centre National Hospitalier d’Information sur le Médicament. 2017. “Thériaque Database.”Search in Google Scholar

Congressional Budget Office. 2012. “Offsetting Effects of Prescription Drug Use on Medicare’s Spending for Medical Services,” November.Search in Google Scholar

Danzon, P. M., Y. R. Wang, and L. Wang. 2005. “The Impact of Price Regulation on the Launch Delay of New Drugs – Evidence from Twenty-Five Major Markets in the 1990s.” Health Economics 14 (3): 269–292.10.1002/hec.931Search in Google Scholar PubMed

Dorsey, E. R. 2010. “Financial Anatomy of Biomedical Research, 2003–2008.” Journal of the American Medical Association 303 (2): 137–143.10.1001/jama.2009.1987Search in Google Scholar

Gaynor, M., J. Li, and W. B. Vogt. 2007. “Substitution, Spending Offsets, and Prescription Drug Benefit Design.” Forum for Health Economics and Policy 10 (2): 1–31.10.2202/1558-9544.1084Search in Google Scholar

Goldman, D. P., G. F. Joyce, and Y. Zheng. 2007. “Prescription Drug Cost Sharing: Associations with Medication and Medical Utilizations and Spending and Health.” Journal of the American Medical Association 298 (1): 61–69.10.1001/jama.298.1.61Search in Google Scholar

Grossman, Gene M., and Elhanan Helpman. 1993. Innovation and Growth in the Global Economy. Cambridge: MIT Press.Search in Google Scholar

Hausman, J. 2001. “Mismeasured Variables in Econometric Analysis: Problems from the Right and Problems from the Left.” Journal of Economic Perspectives 15 (4): 57–67.10.1257/jep.15.4.57Search in Google Scholar

Hsu, J., M. Price, J. Huang, R. Brand, V. Fung, R. Hui, B. Fireman, J. P. Newhouse, and J. V. Selby. 2006. “Unintended Consequences of Caps on Medicare Drug Benefits.” New England Journal of Medicine 354 (22): 2349–2359.10.1056/NEJMsa054436Search in Google Scholar

International Agency for Research on Cancer. 2018. Cancer today, http://gco.iarc.fr/today/home.Search in Google Scholar

Jovanovic, B., and Y. Yatsenko. 2012. “Investment in Vintage Capital.” Journal of Economic Theory 147 (2): 551–569.10.1016/j.jet.2010.10.017Search in Google Scholar

Kamal, R., and C. Cox. 2018. “How do Healthcare Prices and use in the U.S. Compare to Other Countries?,” https://www.healthsystemtracker.org/chart-collection/how-do-healthcare-prices-and-use-in-the-u-s-compare-to-other-countries/.Search in Google Scholar

Lichtenberg, F. R. 2009a. “Have Newer Cardiovascular Drugs Reduced Hospitalization? Evidence from Longitudinal Country-Level Data on 20 OECD Countries, 1995–2003.” Health Economics 18: 519–534.10.1002/hec.1382Search in Google Scholar

Lichtenberg, F. R. 2009b. “Home or Nursing Home? The Effect of Medical Innovation on the Demand for Long-Term Care.” In The Economics of New Health Technologies: Incentives, Organization, and Financing, edited by J. Costa-Font, C. Courbage, and A. McGuire. Oxford: Oxford University Press.10.1093/acprof:oso/9780199550685.003.0015Search in Google Scholar

Lichtenberg, F. R. 2014a. “The Impact of Pharmaceutical Innovation on Disability Days and the Use of Medical Services in the United States, 1997–2010.” Journal of Human Capital 8 (4): 432–480.10.1086/679110Search in Google Scholar

Lichtenberg, F. R. 2014b. “Has Medical Innovation Reduced Cancer Mortality?” CESifo Economic Studies 60 (1): 135–177.10.1093/cesifo/ift014Search in Google Scholar

Lichtenberg, F. R. 2014c. “The Impact of Pharmaceutical Innovation on Longevity and Medical Expenditure in France, 2000–2009.” Economics and Human Biology 13: 107–127.10.1016/j.ehb.2013.04.002Search in Google Scholar

Lichtenberg, F. R. 2017. “The Impact of Pharmaceutical Innovation on Premature Mortality, Hospital Separations, and Cancer Survival in Australia.” Economic Record 93 (302): 353–378.10.1111/1475-4932.12332Search in Google Scholar

Lichtenberg, F. R. 2018. “The Impact of New Drug Launches on Life-Years Lost in 2015 from 19 Types of Cancer in 36 Countries.” Journal of Demographic Economics 84: 309–354.10.1017/dem.2018.11Search in Google Scholar

McWilliams, J. M., A. M. Zaslavsky, and H. A. Huskamp. 2011. “Implementation of Medicare Part D and Nondrug Medical Spending for Elderly Adults with Limited Prior Drug Coverage.” Journal of the American Medical Association 306 (4): 402–409.10.1001/jama.2011.1026Search in Google Scholar

National Cancer Institute. 2018. Enhancing Drug Discovery and Development, https://www.cancer.gov/research/areas/treatment/enhancing-drug-discovery.Search in Google Scholar

OECD. 2017a. OECD Health Statistics 2017, Definitions, Sources and Methods, Hospital discharges by diagnostic categories.Search in Google Scholar

OECD. 2017b. OECD Health Statistics database.Search in Google Scholar

OECD. 2017c. International shortlist for hospital morbidity tabulation.Search in Google Scholar

Sampat, B., and F. R. Lichtenberg. 2011. “What are the Respective Roles of the Public and Private Sectors in Pharmaceutical Innovation?.” Health Affairs 30 (2): 332–339.10.1377/hlthaff.2009.0917Search in Google Scholar

Stuart, B. C., J. A. Doshi, and J. V. Terza. 2009. “Assessing the Impact of Drug Use on Hospital Costs.” Health Services Research 44 (1): 128–144.10.1111/j.1475-6773.2008.00897.xSearch in Google Scholar PubMed

Published Online: 2019-04-24

©2019 Walter de Gruyter GmbH, Berlin/Boston

Downloaded on 15.9.2025 from https://www.degruyterbrill.com/document/doi/10.1515/fhep-2018-0009/html
Scroll to top button