Single Payer in America

The VA saves money by using older drugs rather than the newest available. This choice saves money. But it also shortens lives.

The Manhattan Institute reminds us of this study of the Veterans Administration by Frank Lichtenberg of Columbia University and the National Bureau of Economic Research. The VA saves money by using older drugs rather than the newest available.

Only 38% of the drugs approved in the 1990s, and 19% of the drugs approved by the FDA since 2000, are on the VA National Formulary. Only 22% (17) of the 77 priority-review drugs approved since 1997 are on the 2005 National Formulary. The drugs used in the VA health system from 1999 to 2002 were older than the drugs used in the rest of the U.S. health-care system. For example, the percentages of VA and non-VA prescriptions for drugs less than five years old were 5.6% and 8.6%, respectively, and the percentages for drugs less than fifteen years old were 31.4% and 39.0%.

This choice saves money. But it also shortens lives.

This paper estimates the impact of the use of new drugs on longevity, based on annual data on Medicaid drug use and mortality by state, disease, and year, for all fifty states during the period 1991-2001. These estimates imply that increased use of older drugs in the VA system, as a result of the Formulary, has reduced mean age at death of its patients by 0.17 years, or 2.04 months; the value of this reduction in longevity may be nearly $25,000 per person. Moreover, demographic data published by the VA indicate that the life expectancy of veterans increased substantially before the National Formulary was introduced (during 1991-97) but did not increase, and may even have declined, after it was introduced (1997-2002).

Veterans today. Everybody else tomorrow?