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Research Article
The effect of newer drugs on health spending: do they really increase the costs?
Article first published online: 29 APR 2009
DOI: 10.1002/hec.1494
Copyright © 2009 John Wiley & Sons, Ltd.
1099-1050/asset/cover.gif?v=1&s=af8abe1b1dd6990bc2f6af06e451153b7d74332a "Health Economics")
Additional Information
How to Cite
Ci̇van, A. and Köksal, B. (2010), The effect of newer drugs on health spending: do they really increase the costs?. Health Economics, 19: 581–595. doi: 10.1002/hec.1494
Publication History
- Issue published online: 8 APR 2010
- Article first published online: 29 APR 2009
- Manuscript Accepted: 19 MAR 2009
- Manuscript Revised: 28 JAN 2009
- Manuscript Received: 12 DEC 2007
- Abstract
- References
- Cited By
Keywords:
- health-care expenditure;
- pharmaceuticals;
- technology diffusion
Abstract
We analyze the influence of technological progress on pharmaceuticals on rising health expenditures using US State level panel data. Improvements in medical technology are believed to be partly responsible for rapidly rising health expenditures. Even if the technological progress in medicine improves health outcomes and life quality, it can also increase the expenditure on health care. Our findings suggest that newer drugs increase the spending on prescription drugs since they are usually more expensive than their predecessors. However, they lower the demand for other types of medical services, which causes the total spending to decline. We estimate that a 1-year decrease in the average age of prescribed drugs causes per capita health expenditures to decrease by $45.43. The biggest decline occurs in spending on hospital care due to newer drugs. Copyright © 2009 John Wiley & Sons, Ltd.