LOS ANGELES — Are modern drugs worth the price?
Economist Frank R. Lichtenberg answers his own question with a resounding "yes" in a detailed analysis of "The Value of New Drugs" in the latest issue of The Milken Institute Review.
"Not only is there strong evidence that the benefits from new pharmaceuticals in terms of longer life and better health in old age far exceed the costs," he writes, "it appears that drug innovation also saves money by reducing demand for other forms of medical care."
In his research, Lichtenberg, who teaches economics at the Columbia Business School, examined the issue from a variety of perspectives using a number of large data sets. Among his findings:
- There is a strong statistical relationship between drug introduction and life expectancy. Periods in which the most new drugs have been approved tend to be the periods in which longevity grew most rapidly.
- The number of hospital-bed-days declined most rapidly for those diagnoses with the greatest increase in the total number of drugs prescribed and the greatest change in the distribution of drugs.
- People consuming newer drugs had significantly fewer hospital stays than people consuming older drugs.
- A sustained 10 percent increase in the number of physician visits (which are highly correlated with prescription drug utilization) ultimately leads to a 5 percent reduction in the male death rate.
Also in this issue of the Review, Tom Hazlett, a senior fellow at the Manhattan Institute for Policy Research, examines the Federal Communications Commission′s indecision on divvying up the nation′s radio spectrum.
"The FCC, it seems, is caught between an acknowledgement of the compelling need to let markets decide how spectrum is used and an irresistible urge to force the market to accept the Commission′s guesses about how the spectrum can be used most efficiently," he writes. "Consumers are paying the price for the contradiction and will continue to do so for years."
Other highlights from the new Review:
- Martin Campbell-Kelly, who teaches computer history at the University of Warwick, looks at growing concerns that the use of patents to protect computer software is undermining innovation. "The system for protecting the intellectual property embodied in software is far from perfect," he writes. "But a convincing case to give up on the present system has yet to be made."
- Michael Bernick, director of the State of California′s Employment Development Department, writes about how to assimilate the disabled more fully into the workforce. "Ultimately, if workers with disabilities are to be integrated into employment, the motive must be more than charity; employment must be tied to the skills and strengths that these workers bring to jobs."
- Barry Eichengreen, a professor of economics and political science at the University of California, Berkeley, examines the Euro′s success — or lack thereof — as it approaches its five-year anniversary. "Americans like to spin tales of the coming collapse of Europe′s five-year-old monetary union," he writes. "But the fact that monetary union is part of a large European project means that the euro is not going away."
- Andrew Zimbalist, who teaches economics at Smith College, tackles the sticky issue of the business of sports television, finding that consumers (i.e. fans) are the losers under today′s vertical integration system. "There is mounting evidence that the relationship between sports fans and the entities responsible for putting the games they want to see on the air is broken."
- Glenn Yago and Susanne Trimbath of the Milken Institute describe how financial innovations and technologies can be expanded into new markets to do everything from providing pension plans with new sources of returns to saving global eco-systems. "Perhaps now more than ever, creating more efficient ways of channeling savings to investment is central to progress."
This issue includes an excerpt from Saving Capitalism From The Capitalists, by Raghuram Rajan and Luigi Zingales, whose book is described as a "sophisticated analysis of capitalism′s internal contradictions."
Also in this issue is a charticle by Institute Senior Fellow William Frey on the rather new phenomenon of people moving out of California; and our regular "Lists" feature.