Tag: "drugs"

PPI: Health Prices Mixed, Inflation Low

BLSFebruary’s Producer Price Index rose 0.3 percent. However, prices for many health goods and services grew slowly, if at all. Nine of the 16 price indices for health goods and services grew slower than their benchmarks.* Prices for medical lab and diagnostic imaging actually deflated in absolute terms.

Even  pharmaceutical preparations for final demand, for which prices increased most relative to their benchmark, increased by just 0.4 percent. Although 0.3 percentage points higher than the price change for final demand goods less food and energy (0.1 percent), this is still tame relative to the trend of pharmaceutical prices. Among services for final demand, only price for health insurance and nursing homes rose higher than their benchmark.

With respect to diagnosing whether health prices are under control, the February PPI is about as mixed as January’s was.

See Table I below the fold:

Pharmaceutical Profits And Capital Markets

captureAn interesting research article at the Health Affairs blog asserts there is no relationship between high U.S. prescription drug prices and drug companies’ research and development budgets.

The authors point out that U.S. prices for patented prescription drugs are significantly higher, in real dollars, than prices in other developed countries. (Most observers claim this is because foreign governments impose price controls. I think it is more attributable to price differentiation due to variation in national income per capita.)

The point of the article is to debunk the argument that research-based drug companies must earn high profits if they are going to reinvest in R&D. While the data are correct, the article misunderstands the nature of capital markets.

Medical Drug Tourism: An Odd Byproduct of High Drug Prices

Capture14On numerous occasions President Trump has lambasted drug companies for their high drug prices. He has suggested on more than one occasion Americans should be allowed to import medications from abroad where they are cheaper. Allowing private citizens to import their own drugs is a form of arbitrage. Arbitrage is when people are able to take advantage of discrepancies in prices in two different markets and bypass the higher prices by purchasing the lower-priced product in a cheaper market. For instance, you could argue that buying from Amazon is a form of arbitrage to avoid paying higher prices at your local brick & mortar store.

American Patients Have Much, Much Greater Access to New Cancer Drugs Than Others Do

captureNew research by scholars at the University of Pittsburgh shows how much better access American patients have to new cancer medicines than their peers in other developed countries:

Of 45 anticancer drug indications approved in the United States between January 1, 2009, and December 31, 2013, 64% (29) were approved by the European Medicines Agency; 76% (34) were approved in Canada; and 71% (32) were approved in Australia between January 1, 2009, and June 30, 2014. The U.S. Medicare program covered all 45 drug indications; the United Kingdom covered 72% (21) of those approved in Europe— only 47% (21) of the drug indications covered by Medicare. Canada and France covered 33% (15) and 42% (19) of the drug indications covered by Medicare, respectively, and Australia was the most restrictive country, covering only 31% (14).

(Y. Zhang, et al., “Comparing the Approval and Coverage Decisions of New Oncology Drugs in the United States and Other Selected Countries,” Journal of Managed Care and Specialty Pharmacy, 2017 Feb;23(2):247-254.)

PPI: Health Prices Mixed Amidst Inflation

blsJanuary’s Producer Price Index rose 0.6 percent. However, prices for many health goods and services grew slowly, if at all. Nine of the 16 price indices for health goods and services grew slower than their benchmarks.* Prices for six of the categories of health goods and services deflated in absolute terms.

The outlier was pharmaceutical preparations for final demand, which increased by 1.1 percent (0.7 percentage points more than final demand services (less trade, transportation, and warehousing.) The largest decline (relative to its benchmark) was for prices of health and medical insurance for intermediate demand, which declined by 0.8 percentage points versus services for intermediate demand (less trade, transportation, and warehousing).

With respect to diagnosing whether health prices are under control, the January PPI is more mixed than December’s was. Nevertheless, although pharmaceutical prices stand out, most excess inflation is in health services, not goods.

See Table I below the fold:

High Drug Prices? Don’t Fall for ‘Fake News’ Blaming the Middleman

The tab for Americans’ prescription drugs is rising. High drug prices have not escaped notice by politicians, from Bernie Sanders to Senator Ted Cruz — including President Trump. Not all drug prices are outrageous, it’s really just a handful of over-priced drugs that have given the rest a bad name. Most of the drugs Americans take are affordable, but prices for a few drugs exceed the average mortgage payment.

Advice to Trump: Leave Medicare Drug Prices to the Free Market

President-elect Donald Trump has bashed drug prices on numerous occasions. During his campaign, he championed the idea of having the government directly negotiate the price of Medicare drugs for Part D drug plans. Trump seemingly dropped the idea later in his campaign only to resurrect it again mid-January. Many Democrats also believe the government could secure a lower price for the drugs Medicare reimburses on seniors’ behalf. However, Republicans have long opposed the idea of government meddling in private markets and codified a non-interference clause in the Medicare Modernization Act of 2003.

PPI: Pharma Prices Are Dropping!

BLSDecember’s Producer Price Index rose 0.3 percent. However, prices for most health goods and services grew slowly, if at all. Fifteen of the 16 price indices for health goods and services grew slower than their benchmarks.*

The outlier was health and medical insurance for final demand, which increased by 0.2 percent, the same rate as final demand services (less trade, transportation, and warehousing.) The largest decline (relative to its benchmark) was for prices of new health care building construction, which declined twice as fast as prices of overall building construction did.

Prices of hospital outpatient care and nursing home care declined versus their final demand services (less trade, transportation, and warehousing) and also absolutely. Pharmaceutical prices decreased 0.1 percent, a 0.4 percent drop versus the price increase for final demand goods less food and energy.

See Table I below the fold:

Why Did The FDA Approve 57 Percent Fewer New Medicines Last Year Than 2015?

captureThe Food and Drug Administration has reported it approved only 19 innovative new medicines last year, versus 51 in 2015. To be sure, 2015 was a high-water mark. Nevertheless, such a dramatic drop signals a problem for patients eager for new treatments. These new drugs, though few, represent advances in the treatment of ovarian cancer, Hepatitis C, and multiple sclerosis, among other diseases.

The FDA excuses itself for the slowdown, claiming it is receiving fewer applications from drug makers. However, this is symptomatic of a vicious circle. The regulatory burden of approval has increased so much, it is contributing to a significant reduction in the rate of return on capital invested in pharmaceutical development. According to new research by Deloitte, the rate of return has collapsed from 10.1 percent in 2010 to 3.7 percent last year.

PPI: Most Health Prices Tame, Inflation Picks Up

blsNovember’s Producer Price Index rose 0.4 percent. However, prices for most health goods and services grew slowly, if at all. Nine of the 16 price indices for health goods and services grew slower than their benchmarks.*

The major exceptions were prices for pharmaceutical preparations, which increased 0.4 percentage points more than prices for final demand goods less food and energy; and nursing homes, for which prices increased 0.3 percentage points more than prices for final demand services less trade, transportation, and warehousing.

Prices of health goods for intermediate demand, were lower than their benchmark. Perhaps slow price increases for medicinal and botanical chemicals, and biological products will flow through to prices of pharmaceutical preparations but that has not previously been the case.

Over the last twelve months, prices of nine of the 16 health goods and services have increased slower than their benchmarks. Three stand out as having increased significantly more than their benchmarks: Pharmaceutical preparations (7.0 percentage points), biological products (1.8 percentage points), and dental care (1.7 percentage points).**

(See Table I below the fold.)