This is from an NBER Working Paper by Frank Lichtenberg:
We investigate the effect of the vintage (year of FDA approval) of the prescription drugs used by an individual on his or her survival and medical expenditure. When we only control for age, sex, and interview year, we estimate that a one-year increase in drug vintage increases life expectancy by 0.52%. Controlling for other variables including activity limitations, race, education, family income as a percent of the poverty line, insurance coverage, Census region, BMI, smoking and over 100 medical conditions has virtually no effect on the estimate of the effect of drug vintage on life expectancy.
Between 1996 and 2003, the mean vintage of prescription drugs increased by 6.6 years. This is estimated to have increased life expectancy of elderly Americans by 0.41-0.47 years. This suggests that not less than two-thirds of the 0.6-year increase in the life expectancy of elderly Americans during 1996-2003 was due to the increase in drug vintage. The 1996-2003 increase in drug vintage is also estimated to have increased annual drug expenditure per elderly American by $207 and annual total medical expenditure per elderly American by $218. This implies that the incremental cost-effectiveness ratio (cost per life-year gained) of pharmaceutical innovation was about $12,900.
Chris Conover comments: These results imply that at least as far as pharma spending goes, we’re getting rather extraordinary bang for our buck. <$13K to extend a life by one year is extraordinarily cheap. (Medicare pays ~$80K annually keeping kidney dialysis patients alive.)