LDI Research Seminar Series

Frank R. Lichtenberg, PhD
Courtney C. Brown Professor of Business
Columbia University Graduate School of Business
Research Associate of the National Bureau of Economic Research

"The Effect of New Drugs on Longevity and Quality of Life"

November 15, 2002
12:00 - 1:30 PM
Colonial Penn Center Auditorium

Abstract Biosketch Paper Powerpoint Slides

Pharmaceutical knowledge-capital accumulation and longevity Abstract People value leisure time as well as goods, so longevity increase is an important part of economic growth, broadly defined. R&D is the principal source of economic growth, and the pharmaceutical industry is the most R&D- intensive sector of the economy. In this paper we assess the contribution of pharmaceutical R&D to longevity increase (hence to economic growth), by analyzing the relationship between FDA approvals of new molecular entities and changes in the age distribution of deaths, using longitudinal disease-level data. We compute the stock of drugs available (i.e., previously approved by the FDA) to treat a given condition in a given year by combining FDA data with data from First DataBank’s National Drug Data File. We use the CDC’s Compressed Mortality File to measure changes in the age distribution of deaths, by cause of death. The estimates indicate that approval of standard-review drugs—drugs whose therapeutic qualities the FDA considers to be similar to those of already marketed drugs—has no effect on longevity, but that approval of priority-review drugs—those considered by the FDA to offer significant improvement s in the treatment, diagnosis, or prevention of a disease—has a significant positive impact on longevity. Increases in the stock of (labeled and unlabeled) drugs to treat a condition increase the mean age at which people die from that condition, and reduce the probability of dying before the age of 65. The increase in the stock of priority-review drugs is estimated to have increased mean age at death by 0.39 years (4.7 months) during the period 1979-1998. Ten percent of the total increase in mean age at death was due to the increase in the stock of priority review drugs. The rate of return on investment in pharmaceutical R&D is 18%. This rate of return reflects only the value of increased longevity among Americans; foreigners also benefit, and evidence suggests that there may be additional benefits of new drugs to Americans, including reduced hospital expenditure and reduced limitations on work and other activities.

Frank R. Lichtenberg is Courtney C. Brown Professor of Business at the Columbia University Graduate School of Business, and a Research Associate of the National Bureau of Economic Research. He received a BA with Honors in History from the University of Chicago and an MA and PhD in Economics from the University of Pennsylvania.

Mr. Lichtenberg previously taught at Harvard University and the University of Pennsylvania. He has served as an expert for the Federal Trade Commission, the U.S. Dept. of Justice, and state Attorneys General, and has testified before Congress. He has worked for several U.S. government agencies, including the Department of Justice, the Congressional Budget Office, and the Census Bureau, and been a visiting scholar at the Wissenschaftszentrum Berlin, the University of Munich, and elsewhere.

Some of Professor Lichtenberg's research has examined how the introduction of new technology arising from research and development affects the productivity of companies, industries and nations. Recently he has performed studies of the impact of pharmaceutical innovation on mortality rates, the effect of computers on productivity in business and government organizations, and the consequences of takeovers and leveraged buyouts for efficiency and employment. His articles have been published in numerous scholarly journals and in the popular press. His book Corporate Takeovers and Productivity has been published by MIT Press. He was awarded the 1998 Schumpeter Prize for his paper, Pharmaceutical Innovation as a Process of Creative Destruction.

He has been awarded research fellowships, grants, and contracts by the National Science Foundation, the National Institute of Standards and Technology, Merck and Co., the Fulbright Commission, the Brookings Institution, the Alfred P. Sloan Foundation, The German Marshall Fund, the American Enterprise Institute, and other organizations. He has served as a consultant to private organizations and government agencies including the Securities Industry Association, Pfizer, Inc., the Community Preservation Corporation, the RAND Corporation, the New York City Water Board, Touche Ross and Co., The Walt Disney Company, McGraw-Hill, and the National Pharmaceutical Council. He is a Director of the economics consulting firm LECG, LLC.

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