Measuring the Gains from Medical Research An Economic Approach
edited by Kevin M. Murphy and Robert H. Topel
University of Chicago Press, 2003
Cloth: 978-0-226-55178-4 | Electronic: 978-0-226-55179-1


In 1998, health expenditures in the United States accounted for 12.9% of national income-the highest share of income devoted to health in the developed world. The United States also spends more on medical research than any other country-in 2000, the federal government dedicated $18.4 billion to it, compared with only $3.7 billion for the entire European Union. In this book, leading health economists ask whether we are getting our money's worth.

From an economic perspective, they find, the answer is a resounding "yes": in fact, considering the extraordinary value of improvements to health, we may even be spending too little on medical research. The evidence these papers present and the conclusions they reach are both surprising and convincing: that growth in longevity since 1950 has been as valuable as growth in all other forms of consumption combined; that medical advances producing 10% reductions in mortality from cancer and heart disease alone would add roughly $10 trillion-a year's GDP-to the national wealth; or that the average new drug approved by the FDA yields benefits worth many times its cost of development.

The papers in this book are packed with these and many other surprising revelations, their sophisticated analysis persuasively demonstrating the massive economic benefits we can gain from investments in medical research. For anyone concerned about the cost and the value of such research-from policy makers to health care professionals and economists-this will be a landmark book.


Kevin M. Murphy is the George J. Stigler Professor of Economics in the Graduate School of Business and the Department of Economics at the University of Chicago. He is coauthor of Social Economics: Market Behavior in a Social Environment.

Robert H. Topel is the Isidore Brown and Gladys J. Brown Professor in Urban and Labor Economics in the Graduate School of Business at the University of Chicago. He is coeditor of The Welfare State in Transition and Labor Market Data and Measurement, both published by the University of Chicago Press.


- Kevin M. Murphy, Robert H. Topel
DOI: 10.7208/chicago/9780226551791.003.0001
[medical research, medical knowledge, healthier lives, national commitment, conference, Washington D.C.]
This introductory chapter discusses the coverage of this volume about the economics of improving health and the returns to medical research. The central issue addressed in the volume is whether this extraordinary national commitment to medical research is worthwhile. The chapters are from the Economics of Medical Research conference held in Washington D.C. in December 1999. This chapter argues that advances in medical knowledge, borne of medical research, are a major source of longer and healthier lives; that the value of gains in health over the past half century appears to have far outstripped the comparatively modest investments in medical research and development; and that it is plausible that future investments can yield “extraordinary returns.” (pages 1 - 8)
This chapter is available at:
    University Press Scholarship Online

- William D. Nordhaus
DOI: 10.7208/chicago/9780226551791.003.0002
[national income, health status, population, living standards, health care sector]
This chapter explores how measures of national income accounting might incorporate improvements in the health of a country's population. It discusses the theory of the measurement of national income, examines some of the shortcomings of traditional concepts, and proposes a new concept that can be used to incorporate improvements in health status in the U.S. The chapter argues that national income accounts would more accurately reflect changes in welfare if they properly measured the output of the health care sector. (pages 9 - 40)
This chapter is available at:
    University Press Scholarship Online

- Kevin M. Murphy, Robert H. Topel
DOI: 10.7208/chicago/9780226551791.003.0003
[medical research, economic benefits, health care delivery, heart disease, cancer, economic value]
This chapter evaluates the economic benefits of investing in medical research. It proposes a framework for valuing improvements in health and progress against disease, against which the costs of producing new medical knowledge and delivering health care can be compared. The analysis suggests that the potential gains from further improvements in health care are also extremely large. For example, it is estimated that reducing deaths from heart disease by 10 percent would generate approximately $5.1 trillion in economic value, while reducing cancer death rates would be worth roughly $4.4 trillion. (pages 41 - 73)
This chapter is available at:
    University Press Scholarship Online

- Frank R. Lichtenberg
DOI: 10.7208/chicago/9780226551791.003.0004
[pharmaceutical introductions, new drugs, life expectancy, heart attacks, clinical studies]
This chapter examines the effects of new pharmaceutical introductions on a direct measure of health: life years saved. It reviews some of the previous evidence on the impact of drugs on life expectancy, including anecdotal evidence, a case study of a specific disease (heart attacks), and data from a few clinical studies of specific drugs. The analysis reveals that the typical new drug approved in the period 1970–91 saves over 11,000 life-years annually. The chapter concludes that the estimated benefits of new drugs have vastly outweighed their costs of development. (pages 74 - 109)
This chapter is available at:
    University Press Scholarship Online

- David M. Cutler, Srikanth Kadiyala
DOI: 10.7208/chicago/9780226551791.003.0005
[medical research, health, medical treatments, behavioral change, cardiovascular disease mortality, invasive treatments, pharmaceuticals]
This chapter investigates the link between medical research and health, focusing on the dual effects of medical research on medical treatments and behavioral change. It discusses the broad factors leading to reduced cardiovascular disease (CVD) mortality, analyzes the factors leading to changes in medical treatments and behaviors, and considers the implications of these findings for medical research. The findings estimate that about one-third of the decline in CVD mortality is due to invasive treatments, one-third is due to the use of risk-reducing pharmaceuticals, and the remaining third stems from behavioral changes. (pages 110 - 162)
This chapter is available at:
    University Press Scholarship Online

- Paul Heidenreich, Mark McClellan
DOI: 10.7208/chicago/9780226551791.003.0006
[technological change, cardiovascular disease, heart attacks, applied research studies, biomedical knowledge, health care]
This chapter discusses the result of a detailed review of the literature on how technological change has actually occurred for one important component of treatment of cardiovascular disease: the care of heart attacks. The findings indicate that formal applied research studies alone cannot explain much of the observed changes in practice that accounted for declining heart attack mortality, and that clinical practices generally “lead” the results of the trials, sometimes by many years, and also “lag” behind the results of the trials, often responding only slowly to new formal research findings. The chapter highlights the importance of an understudied source of new biomedical knowledge and thus of technological change in health care. (pages 163 - 205)
This chapter is available at:
    University Press Scholarship Online

- David Meltzer
DOI: 10.7208/chicago/9780226551791.003.0007
[medical cost-effectiveness, biomedical research, empirical challenges, research, productivity costs, health care]
This chapter reviews the tools of medical cost-effectiveness analysis and examines the potential to use these tools to inform priorities for biomedical research. It has been suggested by some recent policy analysts that it is possible in principle to construct measures of the value of information that can describe the benefits of investing in research. The work required to move from what is theoretically possible to the actual application of these principles to produce valid and reliable estimates of the value of research involves a series of methodological and empirical challenges. This book has talked in detail about these challenges. Additional issues include ambiguities about how costs of illness may affect quality-of-life measurements and the implications of such effects for the measurement of productivity costs. The chapter ends by looking at the future of the value of medical research, considering the fact that health is a domain that people value very highly and in which great strides have been made in recent decades. (pages 206 - 248)
This chapter is available at:
    University Press Scholarship Online


Author Index

Subject Index