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Alive and Working: How Access to New Drugs has Slowed the Growth in America's Disability Rates

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Alive and Working: How Access to New Drugs has Slowed the Growth in America's Disability Rates

By Dr. Frank R. Lichtenberg October 27, 2008
Urban PolicyCrime
Health PolicyDrug Development

Have Newer Drugs Kept Americans Off Disability Rolls?

Rising numbers of Americans have been classified as disabled. In particular, between 1995 and 2004, the number of Americans receiving benefits under two federal disability programs—Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI)—rose 30 percent.

Policymakers, who face ever-rising costs and severe budget constraints, are searching for ways to reduce expenditures—or at least, to slow their rate of growth. In this regard, measures to keep working-age Americans off disability rolls—for instance, through access to medical innovations—should be particularly welcome.

The following report examines whether innovation in one form of medical treatment, prescription drugs, has helped reduce the growth in disability rates. Specifically, the report studies patterns in the dispensing of prescription drugs in forty-nine of the fifty states from 1995 to 2004, using data on Medicaid prescriptions in thirty therapeutic groups, which account for virtually all Medicaid medicines dispensed. The data includes the name of the drug and the year in which the U.S. Food and Drug Administration approved its active ingredient—what we call the drug’s “vintage.” For instance, Zocor’s active ingredient, simvastatin, was approved in 1991, making 1991 the drug’s vintage.

Medicaid covered about one in seven prescriptions written in the United States in 2004, and the vintages of Medicaid and non-Medicaid prescriptions are strongly correlated across the states. Earlier studies have established that the fraction of the working-age population receiving disability benefits depends mainly on three variables: health status of the applicant; general labor market conditions; and the generosity of the disability programs. This study concludes that the vintage of drugs used by a state’s residents—to be specific, how recently those drugs’ active ingredient received FDA approval—qualifies as an additional factor in determining the size of that state’s disability rolls. The study found that states in which the difference between average vintage of Medicaid prescriptions in 1995 and average vintage in 2004 was the largest—these being states in which pharmaceutical innovations were adopted quickly—had the smallest increases in disability rates.

For instance, in California, Idaho, Rhode Island, Maryland, and Connecticut, the five states in which the difference between average vintage in 1995 and average vintage in 2004 was largest (the movement always being from less recent to more recent), the number of disability recipients per 100,000 working-age people increased by 800. In Oklahoma, Alabama, Texas, Louisiana, and West Virginia, the five states in which the difference between average vintage in 1995 and average vintage in 2004 was smallest, the number of disability recipients per 100,000 working-age people increased by 1,400, a rate of increase that was 75 percent greater than it was in the first five states. This comparison controlled for behavior-related risk factors such as obesity and smoking as well as education, wage rates, and changes in average age.

By our estimates, if the average vintage of drugs prescribed since 1995 and paid for by Medicaid had not become more recent, the rate of increase at which working-age people were classified as disabled would have been 30 percent higher than it actually was, resulting in 418,000 additional people receiving disability payments in 2004. Social Security benefits paid to this population would have been an additional $4.5 billion.

Consequently, it is reasonable to conclude that access to pharmaceutical innovations has been responsible for keeping large numbers of U.S. residents off disability rolls who otherwise would have joined them.

Interestingly, fewer more recent—and apparently, more effective (and expensive)—drugs were prescribed in states with lower per-capita tax revenue than were prescribed in states with higher per-capita tax revenue, suggesting that financial constraints may be limiting access to newer medicines, even though the therapeutic benefits of these medicines, which may, for instance, reduce the incidence of disability, might have the effect of offsetting their higher costs.

In addition, the vintage of all Medicaid prescriptions became more recent more slowly in states where AIDS/HIV infection rates remained higher than average. In this subset, it is possible that spending on expensive, though highly cost-effective, AIDS/HIV treatment is leaving less money available for relatively new drugs that treat other ailments. Policymakers may, in these cases, want to allocate additional funding to HIV prevention, which is much less expensive than treatment.

The states, as well as the federal government, have an economic incentive to minimize the number of people needing disability payments. Access to medical innovations such as newer prescription drugs can help ensure that even patients with chronic illnesses remain wage earners and taxpayers. Disability funding would then be reserved for those suffering from intractable conditions.

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