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I analyse the effect that pharmaceutical innovation had on premature (before age 75 and 80) mortality from all diseases in Australia during the period 1998-2011 by investigating whether the diseases that experienced more pharmaceutical innovation had larger declines in premature mortality. My estimates indicate that 60 per cent of the 1998-2011 decline in premature (before age 75) mortality was due to previous pharmaceutical innovation. They also indicate that previous pharmaceutical innovation accounted for 40 per cent of the 1986-2007 increase (from 49.0 per cent to 61.6 per cent) in the 5-year relative cancer survival rate, controlling for mean age at diagnosis and the number of patients diagnosed, and that if no new drugs had been introduced during 1986-1999, the number of hospital separations in 2011 would have been about 13 per cent higher, ceteris paribus. My estimates indicate that new drugs listed on the Pharmaceutical Benefits Scheme during 1989-2002 reduced the number of life-years lost from all diseases before ages 75 and 80 in 2011 by 143,639 and 257,602, respectively, and that the innovation was cost-saving: the reduction in hospital expenditure attributable to it exceeded expenditure on the drugs. Even if it completely ignores the apparent reduction in hospital expenditure, the evidence indicates that pharmaceutical innovation was highly cost-effective. [ABSTRACT FROM AUTHOR]
