More evidence that medicine prices are growing at slowest rate in decades

Holly Campbell
Holly Campbell October 4, 2019

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This week the White House Council of Economic Advisers (CEA) released yet another report showing that medicine prices are growing at the slowest rate in decades. The report, “Measuring Prescription Drug Prices: A Primer on the CPI Prescription Drug Index,” focuses on the Bureau of Labor Statistics’ (BLS) Consumer Price Index for prescription drugs (CPI-Rx).  According to the CEA, “list prices are perhaps the least important measure of price for prescription drugs” versus the CPI-Rx, which reflects actual prices received by pharmacies and accounts for changes in medicine utilization as new generic competitors enter the market.

Here are four key points from the report that you need to know:

  1. The CPI-Rx shows that retail medicine prices are increasing more slowly than general price inflation and that in the most recent period, prices have decreased. The CPI-Rx declined by 0.7% between August 2018 and August 2019.

  2. If we maintain the level of R&D investment needed to sustain the rate of new medicine approvals seen in 2017 and 2018, experts estimate the cumulative benefit to patients through 2027 will be between $175.6 billion and $300.1 billion.

  3. According to the report, stories that focus solely on brand medicines “miss the moderating effect of generics in general and the impact of a new generic entry in particular.” Ninety percent of all medicines dispensed in the United States are generics.

  4. While the CPI-Rx represents the gold standard for measuring retail medicine price inflation, the CEA believe it likely overestimates true retail medicine price inflation because it doesn’t account for the increase in value new medicines provide.

To learn more, visit LetsTalkAboutCost.org.

Topics: Drug Cost, Let's Talk About Cost