Consumer Surplus from Cancer Drugs

David Henderson

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Between 1988 and 2000, life expectancy for cancer patients increased by roughly four years, and the average willingness-to-pay for these survival gains was roughly $322,000. Improvements in cancer survival during this period created 23 million additional life-years and roughly $1.9 trillion of additional social value, implying that the average life-year was worth approximately $82,000 to its recipient. Health care providers and pharmaceutical companies appropriated 5-19% of this total, with the rest accruing to patients. The share of value flowing to patients has been rising over time.

This is from Eric C. Sun, Anupam B. Jena, Darius N. Lakdawalla, Carolina M. Reyes, Tomas J. Philipson, and Dana P. Goldman, "An Economic Evaluation of the War on Cancer," NBER Working Paper No. 15574, December 2009.

I couldn't find an ungated version.

H/T to Free Market Mojo.

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CATEGORIES: Economics of Health Care

COMMENTS (4 to date)

Latest Comment

michael writes:

It is worth noting that most college students reading this blog have access to NBER working papers through their library websites.

Posted January 3, 2010 4:11 AM

Matt writes:

Does "willingness-to-pay" mean that's what they paid out of pocket?

Posted January 3, 2010 2:20 PM

Blackadder writes:

Between 1988 and 2000, life expectancy for cancer patients increased by roughly four years

How much of that is simply a statistical artifact of earlier detection?

Posted January 4, 2010 8:42 AM

Dan Weber writes:

I really have to repeat Blackadder's question. It's one of the biggest problems with people who think that "early detection saves lives." Well, it might, but most analyses along these lines fail basic statistical corrections.

There is also the Will Rogers effect.

As someone who tries to keep up-to-date on medical research and oncology (albeit as an amateur), a 4 year extension in cancer survival would be amazing. Especially because "cancer" is a cover-all word for a huge category of different conditions.

Posted January 4, 2010 11:26 AM

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