This report by Reuters may have been missed during the madness of the week between Christmas Eve and New Year’s Day. It states that more than 500 medications will be priced higher this month.
The cost of pharmaceuticals continues to rise (again) even though inflation has slowed down since the start of Biden’s administration. The 3 Axis Advisors who identified the drug price increase, point to a median increase of 5 percent per annum since 2019.
If you set the chart to the past 5 years and look at the U.S. Inflation rate, you’ll see that the inflation rate has been much lower than 5 percent since 2019. Long-term, the US inflation rate is around 3.3 percent. This is higher than current inflation. There have been many price increases above the average inflation since 2019. If the median price increase is 5 percent this year, it will be higher than the inflation rate.
What’s going on? This is happening for many reasons, and since we are now officially in an electoral year, the President will be able to come up with some excuses about why this problem got worse under his watch. Biden is likely to give a speech on Bidenomics, touting the failed Inflation Reduction Act, and then make some lip service regarding other solutions for this problem.
If you read Reuters’ article, it seems that the same Inflation Reduction Act could be a part of the issue. Trump supporters will likely wonder if this piecemeal approach of the Inflation Reduction Act, as opposed the the broader and industry-wide approach Trump wished to take, is an issue. Paul Ryan types may wonder if Medicare Drug Price Negotiation was the bad idea Paul Ryan types always claimed.
Understanding causes is great, but we normal people, who don’t spend our days debating healthcare policy, still have to deal with higher prices.
There are a few options. The 340B program, which is free to taxpayers and provides discounts on medications in rural areas (ahem… red), has been under attack by pharmaceutical companies who are trying to drastically reduce it while states such as Louisiana and Arkansas fight for its protection. Mark Cuban’s Cost Plus Drugs is keeping drug costs down for some customers and has doubled the number of medications that they offer as of this month. There is also the GOP-led campaign to fight against overcharging by pharmaceutical companies.
Insurance companies try to lower drug prices, but their efforts aren’t always successful. And they don’t benefit people who do not have insurance.
Collectively, this is not nothing. It’s unlikely that many Americans will find it to be enough, especially when they’ve seen price increases of 15 percent or more on almost everything since Biden became president, including prescription drugs, according to the analysis by 3 Axis Advisors. Many voters will also be unhappy that pharmaceutical companies make money on the famed weight loss drugs. If you haven’t heard yet, Novo Nordisk is the manufacturer of Wegovy, and Ozempic, and has a market capitalization that exceeds the GDP of Denmark, where the company hails from. It’s a great time to be alive.