Has Pharmaceutical Innovation Reduced Social Security Disability Growth?

International Journal of the Economics of Business, Vol. 18, No. 2, pp. 293-316, 2011

34 Pages Posted: 26 Oct 2011

See all articles by Frank R. Lichtenberg

Frank R. Lichtenberg

Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Date Written: July 2011

Abstract

This paper analyzes longitudinal state-level data during the period 1995–2004 to investigate whether use of newer prescription drugs has reduced the ratio of the number of workers receiving Social Security Disability Insurance benefits to the working-age population (the “DI recipiency rate”).

All of the estimates indicate that there is a significant inverse relationship between disability recipiency and a good indicator of pharmaceutical innovation use: the mean vintage (FDA approval year) of Medicaid prescriptions. (Changes in Medicaid drug vintage are strongly correlated across states with changes in non-Medicaid drug vintage.) Disability recipiency is also consistently inversely related to the average wage rate and the fraction of state residents with at least a college education, and directly related to mean age.

From 1995 to 2004, the actual disability rate increased 30%, from 2.62% to 3.42%. The estimates imply that in the absence of any post-1995 increase in drug vintage, the increase in the disability rate would have been 30% larger: the disability rate would have increased 39%, from 2.62% to 3.65%. This means that in the absence of any post-1995 increase in drug vintage, about 418,000 more working-age Americans would have been DI recipients.

Suggested Citation

Lichtenberg, Frank R., Has Pharmaceutical Innovation Reduced Social Security Disability Growth? (July 2011). International Journal of the Economics of Business, Vol. 18, No. 2, pp. 293-316, 2011, Available at SSRN: https://ssrn.com/abstract=1949300

Frank R. Lichtenberg (Contact Author)

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