Pharmaceutical drugs redux

In 2019 I presented this excerpt:

Humans are living longer, better lives thanks to innovations in prescription drugs over the past three decades, according to several new studies by Frank Lichtenberg, the Courtney C. Brown Professor of Business.

Every year, according to Lichtenberg’s research, drugs launched since 1982 are adding 150 million life-years to the lifespans of people in 22 countries that he analyzed. He calculated the average pharmaceutical expenditure per life-year saved at $2,837 — a bargain, he says.

“According to most health economists and policymakers, if you could extend someone’s life by a year for less than $3,000, that is highly cost effective,” says Lichtenberg, who gathered new data for these studies to cast a never-before seen view of the econometrics of prescription drugs. “People might be surprised by how cost-effective drugs appear to be in general.”

…To tease out the answer, the professor gathered data on drug launches and the age-standardized premature mortality rate by country, disease, and year. Drawing on data from the World Health Organization, the United Nations, consulting company IQVIA, and French database Theriaque, Lichtenberg was able to identify the role that pharmaceutical innovation played in reducing the number of years of life lost due to 66 diseases in 27 countries. (“Years of life lost” is an estimate of the average years a person would have lived if he or she had not died prematurely.)

OK, now a simple economics question: given such numbers, should we be spending more on pharmaceutical drugs, or less?  I might add that biomedicine has made some spectacular advances as of late, so the notion that these are average costs, and the marginal cost slants sharply upward, probably is not true.

Here are further MR posts on this line of research.  Here are Lichtenberg’s NBER working papers.

How many of you got the simple economics question right?