August 31, 2018
That could be one conclusion from the Commerce Department’s release of consumption data for July. According to the release, spending on prescription drugs accounted for 24.7 percent of the growth in real consumption spending for the month. Before people get too nervous about the worsening of the opioid epidemic, it is worth noting that real spending on drugs actually declined in the prior two months. July’s figure was just 3.0 percent above the year-ago level.
It is worth noting that inflation in drug prices has been quite restrained over this period. The Commerce Department’s measure, which is somewhat different than the measure in the Consumer Price Index, shows drug prices rising by just 0.9 percent over the last year. The main reason that the cost of drugs has risen in the last four decades is that new drugs are put on the market at very expensive prices, not sharp price increases in existing drugs.
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