Do (More and Better) Drugs Keep People Out of Hospitals?
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Case studies of a number of specific drugs have shown that these drugs reduced the demand for hospital care and, in some cases, led to decreases in mortality. For example, according to the Boston Consulting Group Inc., operations for peptic ulcers decreased from 97,000 in 1977, when H2 antagonists were introduced, to 19,000 in 1987; this is estimated to have saved $224 million in annual medical costs. The recent Scandinavian Simvastatin Survival Study indicated that giving the drug simvastatin to heart patients reduced their hospital admissions by a third during five years of treatment. It also reduced the number of days that they had to spend in the hospital when they were admitted, and reduced the need for bypass surgery and angioplasty. But treatment with the $2 per day pill that lowered cholesterol did not actually save money: hospital costs were $8 million lower among the 2,221 volunteers who got the drug, but the medicine itself cost $11 million. Other case studies have indicated that government-imposed rationing of pharmaceuticals led to increased use of hospital care.
Source: American Economic Review
Lichtenberg, Frank. "Do (More and Better) Drugs Keep People Out of Hospitals?." American Economic Review 86, no. 2 (May 1996): 384-88.