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Medical Progress Report
No. 2  October 2005


Older Drugs, Shorter Lives? An Examination of the Health Effects of the Veterans Health Administration Formulary

Frank R. Lichtenberg
Columbia University and National Bureau of Economic Research

About the Author

Professor Frank Lichtenberg currently serves as the Courtney C. Brown Professor of Business at the Columbia University Graduate School of Business as well as a research associate of the National Bureau of Economic Research. His work has focused on how new technologies affect the productivity of companies, industries and nations. Dr. Lichtenberg’s studies have ranged from the impact of pharmaceutical innovation to the consequences of leveraged buyouts for efficiency and employment. This research has earned numerous fellowships and awards, including the 1998 Schumpeter Prize and a 2003 Milken Institute Award for Distinguished Economic Research, as well as grants by the National Science Foundation, the National Institute of Standards and Technology, Merck and Co., the Fulbright Commission, and the Alfred P. Sloan Foundation. He has worked for several U.S. government agencies, including the Department of Justice and the Congressional Budget Office, as well as taught at Harvard University and the University of Pennsylvania.

Dr. Lichtenberg received a BA in history from the University of Chicago and an MA and PhD in economics from the University of Pennsylvania.

 


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PRESS RELEASE

WHAT THE PRESS SAID:

Don't Scrimp on Quality, Daily Policy Digest, National Center for Policy Analysis, 10-25-05
Beware of side effects if eyeing VA Drug Plan, Stars and Stripes, 10-24-05
Rules & Red Tape, Mandates, Galen Institute, 10-24-05
Want Cheap Drugs? Don't Scrimp On Quality, Says Prof, Investor's Business Daily, 10-24-05

SUMMARY:
This report analyzes the implications of the VHA’s National Formulary, implemented in 1997 to reduce overall pharmaceutical costs by discouraging access to new drugs. Author Frank Lichtenberg of Columbia University and the National Bureau of Economic Research finds that this policy has had a dramatic effect on survival; though veterans’ life expectancy increased substantially before the National Formulary was introduced, it did not increase, and may have even declined, after it was introduced. There are many proposals in Congress to adopt a system similar to the VA National Formulary for purchases under the new Medicare drug benefit, but these data suggest that this change could reduce well-being, life span, and survival rates among the Medicare population, raising serious questions about the wisdom of these proposals.

TABLE OF CONTENTS:

EXECUTIVE SUMMARY

INTRODUCTION

Addition of New Drugs to the VA National Formulary

Figure 1: Percent of Drugs on 2005 VA National Formulary, by Decade of FDA Approval

Comparison of VA versus Non-VA Use of New Drugs

Figure 2: Percent of 1999-2002 VA and Non-VA Prescriptions for Drugs Less Than 5, 10, and 15 Years Old

The Effect of Using Older Drugs on the Probability of Survival, or Life Expectancy

Life Expectancy of Veterans, 1991–2002

Figure 3: Life Expectancy of Veterans, 1991–2002

CONCLUSION

Figure 4: Veterans’ Life Expectancy vs. Life Expectancy at Birth of All U.S. Males

ABOUT THE AUTHOR

REFERENCES

ENDNOTES

APPENDIX

Table 1: Priority Review Drugs Approved After 1997 Not Listed on 2005 National Formulary

Table 2: Demographic Data on Veterans, 1991–2002

 


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