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Study Shows Use of Newer Drugs Lowers Overall Medical Expenses

Donna Young

The use of newer drugs ultimately results in less spending on other medical services, such as inpatient hospital stays and emergency room visits, according to a recently published study.

Frank Lichtenberg, an economist and professor at Columbia University in New York, used data from the 1996 Medical Expenditure Panel Survey (MEPS) for the study.

MEPS is a nationally representative survey that collects detailed information on the health status, access to care, health care use and expenses, and health insurance coverage of U.S. nursing-home residents and the country’s civilian noninstitutionalized population. The MEPS database includes specific information on the prescriptions, physician office visits, hospitalizations, and home health care of 23,230 people. The federal Agency for Healthcare Research and Quality conducts MEPS.

Lichtenberg’s study, "Are the Benefits of Newer Drugs Worth Their Cost? Evidence from the 1996 MEPS," appeared in the September/October issue of Health Affairs.

From his analysis, Lichtenberg concluded that the MEPS data provide strong support that the replacement of older drugs with newer drugs reduces mortality, morbidity, and total medical spending.

The study found that the taking of a relatively new therapy, costing an average of $18 more than a prescription for an older drug, resulted in a reduction of $71.09 for nondrug medical spending.

For the unit of observation for his study, Lichtenberg used the MEPS "Prescribed Medicine Event" file, containing 171,587 observations.

He analyzed the data on prescribed medicines that were linked to data on individual patients and conditions. Through this data linkage, Lichtenberg explored the effect of a drug’s market age on patients’ mortality and morbidity and total medical expenditures while controlling for a number of characteristics of the person and the event.

Lichtenberg defined a drug’s market age as the number of years before 1996 that the active ingredient was first approved by FDA for marketing.

The 1996 MEPS relied on information provided by patients. Medical conditions were recorded by using International Classification of Diseases, Ninth Revision, Clinical Modification, or ICD-9-CM, codes.

Lichtenberg noted that his analysis has some limitations. To obtain the precise estimates of the effect of drug age on outcomes and spending for specific conditions, he said, larger samples than his are required. And, he added, the only measure of drug quality he used was the amount of time since FDA’s approval of the drug’s marketing. Lichtenberg suggested that other indicators should be investigated, such as sales, international diffusion, and FDA’s evaluation of therapeutic potential.

In addition, Lichtenberg wrote, his study did not account for whether a drug taken for one condition may affect spending and outcomes for other conditions. And, he said, his analysis took into account only the consequences of access to newer drugs, not the determinants of access.

Lee C. Vermeulen, Jr., director of the Center for Drug Policy at University of Wisconsin Hospital (UW) and clinical associate professor at the UW School of Pharmacy, said he does have some concerns about the data used in the study. For instance, he said, the MEPS data is self-reported by patients, and therefore subjective. And, he added, the National Pharmaceutical Council, a nonprofit group supported by pharmaceutical research companies, funded Lichtenberg’s study.

"Because of the funding source, some readers may question the outcome that says newer drugs are a good investment," he said.

But, Lichtenberg’s analysis gives Vermeulen the "ammunition" he needs to show his hospital’s administrators that the value of newer drugs outweighs overall medical costs.

"I can show them the return of the investment, and that the equation works out to allow us to spend more money on newer drugs," Vermeulen said. "The value we get from new medications is enormous. We need to get thinking about medications as good investments. Drugs are our technology, and, as pharmacists, we have to be advocates for our own technology."

But Stephen W. Schondelmeyer, director of the PRIME Institute at the University of Minnesota, said he doesn’t "necessarily buy" the results of Lichtenberg’s study.

"What they are using is like saying that the rate of polio went down because we built more asphalt highways," he said. "If anything, the costs of hospital stays went down because of managed care and other rules. It was recently reported that the number of days spent in the hospital went up in 2000. How is [Lichtenberg] going to use his data to explain that? It’s not good science or policy to take advantage of coincidental correlation."

Schondelmeyer said he does not challenge the view that some new drugs have advantages over older ones.

"But I think his article overstates things and is too general," he said. "Remember, there have been several new, major drugs that have also been pulled from the market. I just don’t see a fair balance in his article."

Vermeulen said he hopes the study won’t influence physicians to prescribe newer drugs over older drugs "just for the sake of it being a new drug."

"What we need to do is take a good look at who benefits from the new drugs and new innovation," he said. "Not all newer drugs are going to benefit everyone. For instance, a patient that has GI bleeds or their kidneys are shutting down should probably be given a newer, and yes, more expensive drug such as a COX-2 [cyclooxygenase type 2] inhibitor for pain. Whereas a healthy man in his 30s that had minor surgery and just needs a painkiller can take ibuprofen. There is probably no benefit for the healthier person to be taking the more expensive drug when a perfectly good, less expensive drug is available."

Vermeulen said formularies can help "control" physicians who are influenced by pharmaceutical sales representatives to write prescriptions for newer drugs that cost more than the older drugs but do not provide additional benefits to the patient.

But, he adds, formularies can, in some cases, act as a barrier when a newer drug would better benefit the patient.

"It is our obligation to get the newer drugs to those who will benefit from the newer drugs."