This study analyzes data on prescribed medicines from the 1996 Medical Expenditure Panel Survey (MEPS) to examine the association between the use of newer medicines and morbidity, mortality, and health spending. We find that people consuming newer drugs were significantly less likely to die by the end of the survey and were significantly less likely to experience work-loss days than were people consuming older drugs. Our most notable finding, however, is that use of newer drugs tends to lower all types of nondrug medical spending, resulting in a substantial net reduction in the total cost of treating a given condition.
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