Essays on pharmaceuticals and health care expenditures
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The U.S. pharmaceutical industry has been remarkably successful in developing new treatments for many of the leading causes of morbidity and mortality. These new treatments and their high prices lead government and private parties to increase spending and raise the issue of access. Price and cost increases have stimulated insurance costs, raising questions about the value of new technologies. A key way to address the increase in pharmaceutical prices is to investigate the impact of newer therapies on overall health expenditure. There is a conflict among researchers about the benefits and costs of newer and better drugs. Some researchers argue that newer and better drugs keep people out of hospitals and provide significant cost savings. Another group of researchers argue in their work that newer drugs do not really provide significant cost savings. This dissertation investigates the impacts of break-through drug classes on overall health care expenditures. Empirical evidence presented in this dissertation shows that drugs belonging to new drug classes provide significant advances in treatment of conditions compared to other drugs. The results indicate that all new drug classes except Fluoroquinolones provide substantial cost savings on overall health care expenditures. This dissertation also explores the relations between FDA Therapeutic Drug Classification and total health care expenditures. It offers a better methodology by incorporating both the quality and the age of the drugs to capture their effects on total health care expenditures. It studies the impacts of the quality and the age of the drugs on the diseases of following therapeutic classes: musculoskeletal system and connective tissue, skin and subcutaneous tissue, neoplasm, mental disorders, nervous system and sense organs, circulatory system, respiratory system, digestive system, genitourinary system. The nature of therapeutic conditions coupled with their duration lead us to conclude that for some therapeutic categories newer priority drugs are preferable, for others newer standard drugs are better. The results suggest that there is no general rule to state that newer priority drugs decrease health care expenditures.