September 22, 2007


Helped by Generics, Inflation of Drug Costs Slows (Stephanie Saul, 9/21/2007, NY Times)

As overall health care costs continue to rise sharply, prescription drugs have emerged as a surprising exception.

Annual inflation in drug costs is at the lowest rate in the three decades since the Labor Department began using its current method of tracking prescription prices. The rate over the last 12 months is 1 percent, according to the government’s latest data, released Wednesday.

“The way the index is going, it looks like drug price increases are not going to be very painful this year,” said Daniel H. Ginsburg, a supervisory economist at the Bureau of Labor Statistics, where he is involved in compiling the Consumer Price Index.

As recently as 2005, inflation in drug prices was running at an annual rate of 4.4 percent.

Economists say the slowdown has come about because more people are turning to generics and because generic versions of some of the most common drugs have recently come on the market.

In the past year and a half alone, generic equivalents have become available for the cholesterol treatment Zocor, the sleeping pill Ambien and the blood pressure drug Norvasc.

Another factor could be the so-called Wal-Mart effect. Last fall, Wal-Mart began offering many generic prescriptions at $4 a month. Target quickly announced a similar plan, and Kmart expanded its program, which offers a 90-day supply of generic drugs for $15. Other retailers have followed with their variations. Publix, a grocery store chain with 684 pharmacies in five states in the Southeast, announced last month that it would not charge for prescriptions for seven commonly used antibiotics.

While they claim to want to make healthcare more affordable, if there's anything the Left hates it's markets generally and supermarkets, like Walmart, specifically. Thus, as so often, their ideologies and pathologies put them at war with reality.

Posted by Orrin Judd at September 22, 2007 10:33 AM

It would be nice if the media and the economic community learned to distinguish between health care costs and health care spending.

If Generic Drugs end up saving money, but demand for health care services is still unmet, then all the savings on generics will merely be allocated to that demand.

America spends more on health care than any other nation because IT CAN!!

We will continue to do so as long as we can as well.

Lawsuits, bureaucracy (third and single payer) and purchasing new technology may be costs, but SPENDING may be both cost increases AND new spending.

A little understanding of the "problem" goes a long way toward solving the problem.

Posted by: Bruno at September 22, 2007 10:56 AM

One is struck by the fact that the comparisons between health care expenditures between the
US and other countries are always offbase. When one compares Canada with the US; we're talking of
a 10-1 population disparity, with France or the UK; 4-5/1 difference, That's just starting. If the comparison was between Europe and the US, you would begin to see some basis for comparison.

Posted by: narciso at September 22, 2007 2:28 PM

It's be nice if everyone learned the difference between health care and health care insurance.

Posted by: erp at September 23, 2007 9:48 AM