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Using commercial insurance claims data from 1998-2001, I test the hypothesis through several econometric methods, including a propensity-score matching, interrupted time series, differencing strategies, and an instrumental variables approach. In Paper 2, I investigate the cost-saving effect in one clinical area - atypical antipsychotic agents compared with traditional mood stabilizers as long-term treatment for bipolar disorder. Furthermore, wide variations in safety, efficacy and costs exist across drugs and diseases. Thus, we do not have robust evidence of the aggregate cost-saving effect. In Paper 1, I reassess this evidence and conclude the original findings do not sustain under plausible alternative approaches. He argued that the use of new drugs reduces, on average, total healthcare costs.
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Aggregate-level evidence of the cost-saving effect is supported by two well-cited studies conducted by Frank Lichtenberg. However, if use of newer drugs can reduce spending in other medical services, it may save total healthcare costs (the "cost-saving effect"). Dissertation Titleļ¼ "Do Newer Prescription Drugs Pay for Themselves? Searching for Appropriate Empirical Methodologies"Newer and more expensive drugs account for a large proportion of the recent rapid growth of prescription drug spending.