Newer Drugs = Less Disability


The Manhattan Institute has just released a new study by Columbia University economist Frank Lichtenberg that finds that using newer (and more expensive) drugs reduces disability rates. As the study reports:

…the report studies patterns in the dispensing of prescription drugs in forty-nine of the fifty states from 1995 to 2004, using data on Medicaid prescriptions in thirty therapeutic groups, which account for virtually all Medicaid medicines dispensed. The data includes the name of the drug and the year in which the U.S. Food and Drug Administration approved its active ingredient—what we call the drug's "vintage." For instance, Zocor's active ingredient, simvastatin, was approved in 1991, making 1991 the drug's vintage.,,

he study found that states in which the difference between average vintage of Medicaid prescriptions in 1995 and average vintage in 2004 was the largest—these being states in which pharmaceutical innovations were adopted quickly—had the smallest increases in disability rates…

By our estimates, if the average vintage of drugs prescribed since 1995 and paid for by Medicaid had not become more recent, the rate of increase at which working-age people were classified as disabled would have been 30 percent higher than it actually was, resulting in 418,000 additional people receiving disability payments in 2004. Social Security benefits paid to this population would have been an additional $4.5 billion.

Consequently, it is reasonable to conclude that access to pharmaceutical innovations has been responsible for keeping large numbers of U.S. residents off disability rolls who otherwise would have joined them.

Whole Manhattan Institute report here. My article on Big Pharma—"Goddamn the Pusher Man"—here.

NEXT: What If Ted Stevens Threatens Not to Resign?

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. Correlation does not equal causation. I wanted to be the first to get that in. 😉

    Interesting stuff. Medical science marches forward.

  2. Ronald Bailey,

    Any studies on regulation and disability. That is whether regulation in this area leads to more disability than would otherwise be the case in a less or no regulated drug industry?

  3. Seward,

    That would be interesting.

    I have, in the past, seen the studies that suggest that the FDA, for example, actually costs more lives than it saves. The time delay in getting drugs to the market is a bigger factor than the safety from testing the drugs.

    From a pure pragmatic standpoint, that would suggest that FDA regulation needs to, at the very least, be cut back to the point that the deaths due to time delay equals the deaths due to unsafe drugs. (Realizing there are other things than just deaths that go into the equation, but ditto for them)

  4. As I would have expected. In all the constant carping about the cost of new drugs, most commit the fallacy of assuming that the cost of new drugs should be compared to zero, rather than the cost that would have been incurred absent the new drugs.

    For drugs that substitute for or minimize invasive treatments, the drugs are often a hell of a bargain.

  5. Wasn’t it John Edwards who made a statement about how drug companies were evil because they needed to make more of the drugs they had and making them cheaper instead of focusing so much on R&D?

  6. Medicare spending on prescription drugs: good for the economy.

  7. robc,

    Well, there is the safety issue that regulation is concerned, but there is also an efficacy standard, which may be more burdensome than a safety standard.

  8. Joe has a point here; to the extent that we’re committed as a country for providing people a minimum standard of living (something that I, along with folks like Hayek and Friedman, think we should do), it makes sense to pay for medical treatments that keep people healthy enough to take care of themselves.

  9. We need a party in office that would actually look at issues like these. It isn’t going to happen this election, but it could happen next election if enough people see what these guys have to say:


  10. jorgen,

    What if they don’t want to undertake the treatment?

  11. Yes, the pharmacuetical companies have produced many drugs that have tremendously improved the quality of life for those that need them. The trouble is, they do it very inefficiently- protected by both patents and lack of consumer knowledge. They spend more on marketing than R&D, and all too often “new” drugs are merely minor variations on existing medicines. Also, the profit motive makes them want to medicalize every undesirable human condition, which contributes to the cost of public and private health coverage around the world.

    Here’s a better way: have private philanthropy and governments fund competitions to develop new drugs. The winners would be decided by health professionals for their overall utility in advancing public health. These formulations would then be turned over to generic manufacturers to pump out as cheaply as possible for the benefit of consumers everywhere. The drug companies would still be free to patent other medications, but consumers would at least know they didn’t have enough utility to merit a prize. This model worked for the development of private space travel, as many of you are aware.

  12. Yes, the pharmacuetical companies blah, blah blah. Yadda, yadda yadda.

    Tiresome as always.

Please to post comments

Comments are closed.