Manhattan Institute for Policy Research.
Subscribe   Subscribe   MI on Facebook Find us on Twitter Find us on Instagram      

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


  • Arias, E. (2004), "United States Life Tables, 2002," National Vital Statistics Reports, vol. 53, no 6. Hyattsville, Md.: National Center for Health Statistics.
  • Blumenthal, David, and Roger Herdman, eds. (2000), Description and Analysis of the VA National Formulary, VA Pharmacy Formulary Analysis Committee, Division of Health Care Services (Washington, D.C.: National Academies Press),
  • Lichtenberg, Frank R. (2005), "Pharmaceutical Knowledge-Capital Accumulation and Longevity," in Measuring Capital in the New Economy, ed. Carol Corrado, John Haltiwanger, and Dan Sichel (Chicago: University of Chicago Press, forthcoming).
  • ______ (2005), "Availability of New Drugs and Americans' Ability to Work," Journal of Occupational and Environmental Medicine 47 (4), April, 373-380.
  • ______ (2005), "The Effect of Access Restrictions on the Vintage of Drugs Used by Medicaid Enrollees," American Journal of Managed Care 11 (January).
  • ______ (2005), "The Impact of New Drug Launches on Longevity: Evidence from Longitudinal Disease-Level Data from 52 Countries, 1982-2001," International Journal of Health Care Finance and Economics 5, pp. 47-73.
  • ______ (2005), "Home, or Nursing Home? The Effect of Medical Innovation on the Demand for Long-Term Care" (March), working paper.
  • ______ (2005), "The Impact of Increased Use of HIV Drugs on Longevity and Medical Expenditure: An Assessment Based on Aggregate U.S. Time-Series Data" (February), working paper.
  • ______ (2004), "The Effect of Drug Vintage on Survival: Micro Evidence from Puerto Rico's Medicaid Program," NBER Working Paper No. 10884 (November),
  • ______ (2004), "Sources of U.S. Longevity Increase, 1960-2001," Quarterly Review of Economics and Finance 44, no. 3 (July): 369-89.
  • ______ (2004), "The Expanding Pharmaceutical Arsenal in the War on Cancer," NBER Working Paper No. 10328 (February),
  • ______ (2003), "The Effect of New Drugs on HIV Mortality in the U.S., 1987-1998," Economics and Human Biology 1: 259-66.
  • ______ (2003), "Pharmaceutical Innovation, Mortality Reduction, and Economic Growth," in Measuring the Gains from Medical Research: An Economic Approach, ed. Kevin M. Murphy and Robert H. Topel (Chicago: University of Chicago Press), 74-109.
  • ______ (2001), "Are the Benefits of Newer Drugs Worth Their Cost? Evidence from the 1996 MEPS," Health Affairs 20, no. 5 (September/October): 241-51.
  • ______ (2000), "The Effect of Pharmaceutical Utilisation and Innovation on Hospitalisation and Mortality," in Productivity, Technology, and Economic Growth, ed. B. van Ark, S. K. Kuipers, and G. Kuper (Kluwer Academic Publishers).
  • ______ (1996), "Do (More and Better) Drugs Keep People Out of Hospitals?," American Economic Review 86 (May): 384-88.
  • Lyles A, Luce B, Rentz A. (1997) Managed care pharmacy, socioeconomic assessments, and drug adoption decisions. Social Science & Medicine. 1997; 45:511-521.
  • Massachusetts Outpatient Formulary Guide. 1999. Mather DB, Sullivan SD, Augenstein D, Fullerton PDS, Atherly D. Incorporating Clinical Outcomes and Economic Consequences into Drug Formulary Decisions: A Practical Approach. The American Journal of Managed Care. 1999; 5(3):277-285.
  • Moriyama, I. M., and S. O. Gustavus (1972), Cohort Mortality and Survivorship: United States Death-Registration States, 1900-68. Vital Health Statistics, vol. 3, no. 16. Hyattsville, Md.: National Center for Health Statistics.
  • Murphy, Kevin M., and Robert H. Topel (2003), "The Economic Value of Medical Research," in Measuring the Gains from Medical Research: An Economic Approach, ed. Murphy and Topel (Chicago: University of Chicago Press), 41-73.
  • Preston, S. M., P. Heuveline, and M. Guillot (2001), Demography: Measuring and Modeling Population Processes (Oxford: Blackwell).
  • Sales, Mariscelle M., et al. (2005), "Pharmacy Benefits Management in the Veterans Health Administration: 1995 to 2003," American Journal of Managed Care (February): 104-12.
  • Shryock, H. S., J. S. Siegel, et al. (1971), The Methods and Materials of Demography, vol. 2. U.S. Bureau of the Census. Washington, D.C.: U.S. Government Printing Office.
  • Sloan FA, Whetten-Goldstein K, Wilson A. Hospital pharmacy decisions, cost containment, and the use of cost-effectiveness analysis. Social Science & Medicine. 1997; 45(4):523-533.
  • United States General Accounting Office (2001), "VA Drug Formulary: Better Oversight Is Required, but Veterans Are Getting Needed Drugs," report to the ranking member, Committee on Veterans' Affairs, U.S. Senate (January), GAO-01-183.
  • United States General Accounting Office (1999), "VA Drug Formulary: VA's Management of Drugs on Its National Formulary," GAO report to the ranking minority member, Committee on Veterans' Affairs, U.S. Senate (December), GAO/HEHS-00-34.


Center for Medical Progress.


MPR 02 PDF (200 kb)



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

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.




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


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





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

Table 2: Demographic Data on Veterans, 1991–2002


Home | About MI | Scholars | Publications | Books | Links | Contact MI
City Journal | CAU | CCI | CEPE | CLP | CMP | CRD | ECNY
Thank you for visiting us.
To receive a General Information Packet, please email
and include your name and address in your e-mail message.
Copyright © 2015 Manhattan Institute for Policy Research, Inc. All rights reserved.
52 Vanderbilt Avenue, New York, N.Y. 10017
phone (212) 599-7000 / fax (212) 599-3494