The Effect of Pharmaceutical Expenditures on Life Expectancy at Birth and Mortality Rates; Examples from Countries with the Highest Pharmaceutical Expenditures

Abstract

Expenditures on pharmaceuticals, one of the indispensable elements of medical treatment, have an important place in health expenditures. It is stated that pharmaceutical expenditures, like health expenditures, reduce mortality rates, prolong human life and improve the quality of life. The share of pharmaceutical expenditures in health expenditures in OECD countries, which grows by 3% each year, is approximately 16%. In the last decade, the use of pharmaceuticals has increased by 36% worldwide. This increase in drug use and expenditures is expected to slow down in the next five years, but will remain high in regions with high population growth rates. The aim of this study is to investigate the relationship between drug expenditures and mortality rates and life expectancy at birth in the 20 countries with the highest per capita drug expenditures using panel econometric methods. In the study, estimations are made using data on per capita pharmaceutical expenditures, crude mortality rates and life expectancy at birth variables for the period 1990-2021. Long-run cointegration estimations are performed using the AMG method developed by Eberhardt and Bond (2009). According to the results obtained, while the long-run coefficient of per capita pharmaceutical expenditure is not statistically significant for life expectancy at birth, the long-run coefficient for mortality rates is statistically significant. Accordingly, in the panel, a 1% increase in pharmaceutical expenditures increases mortality rates by 0.02%.