Policy Brief: The Role of Medical Innovation in Reducing Health Disparities and the Impact of the Inflation Reduction Act | February 2023

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The Biden administration has made reducing health disparities a major goal of its health care agenda. This paper provides analysis of whether and how biopharmaceutical innovation has historically reduced disparities in health outcomes and how reducing such innovation through proposed price controls impacts health disparities. Over time, there has been a convergence in Black and White American longevity in the United States. The difference in life-expectancies has decreased from 7.0 years to 3.6 years between 1980 and 2018, with a total convergence of 3.4 years in longevity. The existing evidence base suggests that between 35% and 73% of this convergence is attributable to biopharmaceutical innovation, with an average effect from the literature of 53%. More specifically, several remarkable innovations in recent decades have played a large role in reducing health disparities for disease classes that affect minority populations relatively more. For the groundbreaking new innovations affecting HIV, Hepatitis C, and COVID-19, we find that in 2021, the Medicaid share of the total volume of these innovations equaled 30.2%, 75.9%, and 31.3%, respectively. Because Medicaid covers 17.8% of the U.S. population, this data suggests a disproportionate impact on poorer populations from these breakthroughs. Given this beneficial impact of innovation on diminishing health disparities, we find that the reduction in innovation induced by the Inflation Reduction Act will counteract these beneficial trends. Specifically, we find that price controls will slow down the growth in overall life expectancy by 9.8% annually and lead to a reduction in longevity convergence between Blacks and Whites by 0.11 years through 2032, which accounts for 10.9% of the projected 0.99 years of convergence without the price controls. These gains are large, considering that overall U.S. longevity has increased by about 0.15 years from each consecutive birth cohort during the period 1960-2019.

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Posted on

February 15, 2023

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