Kellogg World Winter 2010

Kellogg Insight: Vioxx and the workforce

Craig Garthwaite investigates the economic impact of drugs that improve quality of life

By Christopher Mims

  Craig Garthwaite

When pharmaceutical giant Merck voluntarily took the drug Vioxx off the market in 2004, few realized that one consequence would be a decrease in the number of near-elderly men in the workforce. Craig Garthwaite, an assistant professor of management and strategy, took note, and used the opportunity to address larger questions about the economic value of drugs that enhance quality of life.

The U.S. Food and Drug Administration does not routinely evaluate the impact a drug may have on the economy. But that might be a mistake, as an increasing number of drugs are designed to improve the quality of life rather than just extend its length, Garthwaite argues. The impact drugs have on the ability of aging Americans to stay in the workforce is a salutary effect that could have a range of consequences, from how an individual weighs a drug's risks to how employers structure their health plans.

Vioxx is an anti-inflammatory drug that provides relief to people with diseases that cause chronic pain and inflammation, such as osteoarthritis. When Vioxx was withdrawn from the market, studies show that many users did not switch to another anti-inflammatory drug. Garthwaite wondered how this sudden withdrawal of an apparently uniquely effective medication would impact workforce participation.

To unravel the effects of Vioxx on Americans aged 55 to 75, Garthwaite used data from the Medical Expenditure Panel Survey, a large-scale survey of individuals across time that records all of their prescriptions, as well as socio-economic data such as employment status.

"Qualitatively, it shows that Vioxx decreased the number of people in the labor force [aged 55 to 75 when it was pulled off the market in September 2004]," Garthwaite points out.

Garthwaite was able to control for the possibility of a reverse causality in the relationship between Vioxx and work. In other words, it is possible that patients were working so that they could obtain health insurance and consequently afford life-enhancing drugs such as Vioxx, which can cost patients upwards of $1,000 annually, rather than find themselves able to work because they were on Vioxx. To eliminate this possibility, Garthwaite examined a number of other relatively expensive life-enhancing drugs that did not affect patients' ability to work, such as the erectile-dysfunction drug Viagra or the cholesterol-lowering medication Lipitor, and found that they did not similarly correlate with employment.

Survey data about perceived quality of life are readily available for drugs like Vioxx, but Garthwaite says that workforce participation may be a better measure because it shows what is known as a "revealed preference."

"When we [economists] see your actions, we see your underlying preferences," Garthwaite says. "So if someone is working — for them, the benefits appear to outweigh the costs."

Garthwaite is careful to point out that his paper does not take a stand on whether Vioxx should again be made available to patients. Ultimately, he notes, the status of Vioxx is about society's tolerance for risk.

It is clear, however, that the increase in the number of medications that are aimed at improving a patient's quality of life may require more comprehensive measures of efficacy than those currently used by the FDA.


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