Dimensions: 6'' x 9'' 90 pages AEI Press  (Washington) Publication Date: March 2004 Paperback ISBN: 084474194-9 Price: $ 15.00 Add to Cart   Examination Copies

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May 2004
Health Care Matters: Pharmaceuticals, Obesity, and the Quality of Life
By Richard D. Miller Jr. and H. E. Frech III

For many years, health policy in wealthy countries has rested on the assumption that health-care consumption is not productive and that it does relatively little to produce better health. Researchers comparing health consumption from country to country have largely failed to find a relationship between it and actual health outcomes. This study shows that it is time to rethink this conventional wisdom, in particular as it relates to pharmaceutical consumption.

Richard D. Miller Jr. is a senior research analyst at the Institute for Public Research within the Center for Naval Analyses (CNA) Corporation in Alexandria, Virginia. He has also served as an economist for the Bureau of Labor Statistics in Washington, D.C. H. E. Frech III is a professor of economics at the University of California--Santa Barbara, and an adjunct professor at Sciences Po in Paris. Earlier he served as an economist in the predecessor of the U.S. Department of Health and Human Services.

Model and Methodology

Starting with the very basic assumption that an individual's health can be explained by his or her personal behavior, social status (wealth), and consumption of health-care goods and services (including pharmaceuticals), we can estimate how better health might be produced for a whole population, and at what cost.

To say the least, this endeavor raises many questions that continue to dog researchers in the field of health-care economics. For instance, how do we define health? Until recently, the only consistent way to do so-at least for the purpose of making comparisons across countries-was to define it as longer life expectancy or lower infant mortality. While both of these measures are clearly important, they are hardly perfect for measuring the results of health-care consumption. In today's wealthy countries, consumption of health care and pharmaceuticals is intended not merely to increase survival at the beginning of life or longevity at the end. Rather, it aims to enable people to live fuller lives throughout the course of life, to improve the quality of their lives. Heart surgery might add years to life while hip replacement surgery might not, but the latter enables many to have active lives free of pain. While a certain cancer drug might prolong survival, a medication for asthma might simply allow a person to exercise. Measuring improvement in the quality of life is a difficult exercise, especially when we try to compare it in different countries. Here, our research benefits directly from the recent work of the World Health Organization, which now produces data specifically for this purpose.

However, it is not just the limitations of available data that make assessing the productivity of health spending a complex task. Obviously, many factors combine to produce health. At a very basic level, public health measures such as the provision of clean drinking water and sanitation systems have a huge impact. Education and wealth can play a role. Lifestyle decisions, such as whether to smoke or how much to weigh, also play an increasingly important role in the health of the citizens of wealthy countries.

In our study, we analyze the effects of pharmaceutical and other health-care consumption in most of the Organization for Economic Cooperation and Development (OECD) countries on health, life expectancy, and mortality due to circulatory diseases, cancer, and respiratory diseases. We also analyze the effects of wealth and three major lifestyle variables--smoking, drinking, and obesity--on those measures of health.

Main Results

Greater pharmaceutical consumption leads not just to longer lives, but also to a higher quality of life, as measured by the number of years people can expect to live without disabling health conditions. In this study, which takes advantage of newly available data, we find that greater pharmaceutical use has an even stronger effect on the quality of life than it does on life expectancy. More specifically, we find that a 10 percent increase in pharmaceutical consumption (roughly $25 per person) would increase a sixty-year-old's disability-adjusted life expectancy (our measure of quality of life) by about 0.9 percent (sixty-two days for females and fifty-one days for males), and would raise his or her unadjusted life expectancy by 0.6 percent (fifty-one days for females and forty-two days for males). We also find that our improved model and newer data reveal the relationship between pharmaceutical consumption and life expectancy to be even stronger than the relationship we uncovered in our previous research.

Greater pharmaceutical consumption is effective in lowering mortality from circulatory disease, cancer, and respiratory disease-the ailments that together account for three out of four deaths in the wealthy countries of the OECD. Greater drug use is especially effective in lowering circulatory disease mortality, which alone accounts for four out of every ten deaths in OECD countries. Specifically, a 10 percent increase in pharmaceutical consumption would decrease premature mortality (before the age of seventy) from circulatory disease by almost 2 percent. It would lower mortality for those ages sixty-five to seventy-four by about 3.6 percent, and for those ages seventy-five and over by 1.5 percent. Greater pharmaceutical consumption has less of an effect on mortality due to cancer and respiratory disease, although it does lower cancer mortality among those over the age of seventy-five and respiratory disease mortality among those ages sixty-five to seventy-four.

In this study, we also estimate how much it would cost to raise life expectancy (or disability-adjusted life expectancy) with increased pharmaceutical consumption. Greater pharmaceutical consumption could greatly benefit society, being a relatively cheap way to extend life and improve health. For instance, our results indicate that the lifetime cost of extending the life expectancy for forty-year-old Americans by one year to be roughly $17,000 for men and $16,000 for women. Current estimates place the benefit to society of an extra year of life at $150,000, making this a bargain. In fact, for all countries and at all ages, our estimates of extending life expectancy by one year through increased drug consumption stood well below this level.

In general, countries that currently spend the least on pharmaceuticals would see the greatest benefits from an increase in that spending. As an example consider Ireland, which has the lowest pharmaceutical consumption among the OECD countries in our sample, and France, which has the highest. An additional dollar spent on pharmaceuticals in Ireland would increase disability-adjusted life expectancy among women by 4.6 days. In France, such an increase in drug consumption would cause an increase in this health measure of less than one day.

However, our models tell us little about the relationship between consumption of non-pharmaceutical medical care and either quality of life or life expectancy. Likewise, the data tell us little about what effect non-pharmaceutical health-care consumption has on mortality due to the specific diseases we study here. When we do observe an effect, we are unable to form a clear conclusion as to its cause. Because consumption of non-pharmaceutical health care services is so closely related to wealth in OECD countries, it is simply impossible to discern whether the observed effect is the result of spending more on health care or of being wealthier. In our previous research, we found no link between non-pharmaceutical health-care consumption and life expectancy.

In most cases, we find that obesity outranks both smoking and drinking as a risk factor for health and life expectancy. We found it to be detrimental to health, leading to shorter life expectancy, poorer quality of life, and far greater mortality from circulatory disease. This was the only variable other than pharmaceutical consumption that had consistently powerful effects on health. We found that a 10-percent reduction in obesity levels would raise disability-adjusted life expectancy at birth by about 0.2 percent and at age sixty by about 0.5 percent. The same reduction in obesity levels would cut premature mortality due to circulatory disease by nearly 4 percent. Given that obesity is extremely high in the United States and on the rise in several other countries, this is also an important finding. For cancer, the second most common cause of death, tobacco and alcohol consumption tend to have a greater effect than obesity, though it still plays a role. This research should draw further attention to obesity as a threat to public health.

Implications

The fact that pharmaceutical consumption produces better health has several important public policy implications. For one, it lends support to proposals to increase coverage of drugs in both public and private health insurance systems, especially for the elderly. That said, lurking behind many proposals to do this, with respect to public sector programs such as Medicare, is the impetus to control drug prices. An effort of this sort might well undermine the intended benefits. For instance, such a policy may decrease the costs faced by these public programs, but it is also likely that price controls would discourage the development of new drugs by lowering the potential return of drug research to drug manufacturers.

Most fundamentally, this study shows that policymakers should no longer base their proposals on the assumption that health-care consumption does not improve health, but rather on a new understanding that such consumption--especially pharmaceutical use--does matter. 

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