Pricey new medications are often blamed for the rising costs of health care in the United States. But this criticism doesn't take into account the big picture of health care spending -- these new, better medicines, in fact, often reduce other medical expenses. I know first-hand about the value of these new medications.
I was deemed a "high risk" patient when I was first diagnosed with multiple myeloma, a bone marrow cancer, on St. Patrick's Day in March of 2009. Fortunately, I responded very well to a new oral cancer treatment regimen that I took with a glass of water every day. I have been on a maintenance dose of this treatment for four years with no perceptible signs of the cancer.
So what does my story say about the value of innovative new therapies? I feel good, I'm able to work teaching college level business economics, and I'm not alone.
In a study published in Economics of Innovation and New Technology, researchers in Sweden found that innovative new treatments reduced the average number of days spent per hospital visit by about 12 percent. These estimated savings almost completely cancelled out the cost of the new medicines during this period.
Similar findings have been seen for other countries, including the United States. Frank Lichtenberg, professor of business at Columbia University Graduate School of Business and a co-author of the study said, "I've done a number of studies that have demonstrated that the use of newer drugs -- while it does increase the pharmaceutical expenditure -- very often reduces other kinds of medical expenditure." These medical expenses include nursing home costs, doctor's office visits, home health care and emergency room visits. And do not forget the cost of driving to the hospital -- gas, tolls and parking -- and the time and effort spent getting there and waiting to see your physician.
Other researchers have found a correlation between increased access to prescription medication and hospitalization rates. A recent study by John Hopkins researchers found that Medicare Part D prescription drug coverage reduced hospitalization rates by 8 percent for an annual cost savings of $1.5 billion for this federal government program.
As to my own example, a study by the IMS Institute for Healthcare Informatics found that new treatment options are making patients healthier in a variety of disease areas, including oncology, hepatitis C, multiple sclerosis and diabetes. As a result, there has been a shift in spending of health care dollars, away from doctor offices visits, hospitalizations and long-term care facilities and toward new medications. And in my case there's the added benefit of an oral regimen that I take at home, which further reduces the need for hospital and doctor visits and all of the related expenses for salaries and supplies.
These cost offsets can often be easily overlooked.
When the cost of new treatment options is put in proper perspective, the benefits of medical innovation often exceed the costs. Take it from me as I head off to work each day as a productive member of society, paying my taxes and my insurance premiums five years after a high risk diagnosis and potential death sentence that was thwarted by advances in medical innovation.