Thursday, February 07, 2008

Rx: Market Competition. Exhibit A: Inflation Rate for Prescription Drugs at 34-Year Low of 1.4%

Partly due to increasing generic-drug competition (generics were 63% of all prescriptions in 2006 vs. 50% in 2005) and the ongoing, fierce price war among drug retailers (see previous CD posts about $4 prescription drugs at Wal-Mart, Kmart, Publix, and Kroger), the inflation rate for prescription drugs fell to a 34-year low of 1.4% in 2007 (see graph above, click to enlarge), way below the average annual inflation rate of 4.12% for 2007, and way below the 34-year average drug inflation rate of 6.28%.

"The decline in drug prices shows that when things go right in health care -- when competitive markets are allowed to function -- prices respond favorably for consumers, just as they do in other sectors of the economy. So while politicians and pundits in Washington dream up the next grandiose health care reform, smart consumers know that the most effective health care solutions may be right around the corner at their local retailer."

Robert Goldberg, Vice-president of the Center for Medicine in the Public Interest

6 Comments:

At 2/07/2008 10:22 AM, Anonymous Anonymous said...

"So while politicians and pundits in Washington dream up the next grandiose health care reform, smart consumers know that the most effective health care solutions may be right around the corner at their local retailer."

It all sounds great until you realize that the key word in the above quoted sentence is, "may."

Mark you "forgot" to include the first sentence of the article you quoted from, I'll quote it for you here...

"The Labor Department recently reported that the inflation rate for prescription drugs dropped to 1 percent over the last year. That's a 30-year low, well below inflation and a salve for consumers who are used to extreme price hikes.

Mark you speak of "market competition" but this article is talking about large retailers fighting for turf using loss leaders--selling items below cost hoping to make up the difference by selling other profitable items.

How could anyone suggest that a big box retail marketing tactic is a possible "effective" health care solution?

 
At 2/07/2008 11:45 AM, Anonymous Machiavelli999 said...

After reading the previous post by anonymous, I got very very sad. I weep for America. The economic illiteracy of our nation is ASTOUNDING.

So, what you are suggesting anonymous, is that retailers are taking losses on ALL PHARMACEUTICAL products to get people into the store....

wow...Wow...WOWW!!! :(

This logic is just so sad. Essentially, you can make a case that anything being sold for cheap due to competition can be attributed as you say to "big box retail marketing tactics".

So, then my answer to you is YES, the high price of perscription drugs can be fixed by "big box retail marketing tactics".

Oh and let me assure you, that the retailers are still making good money off of the pharmaceutical products. They are not seeing the same margins they once did but thats because of intense competition and "big box retail marketing tactics".

 
At 2/07/2008 3:15 PM, Blogger juandos said...

Machiavelli999 absolutely nails it perfectly...

Thanks!

 
At 2/07/2008 3:31 PM, Blogger spencer said...

don't tell Tyler Cowen.

he argues that if anything happens to drug company profits the great drug research industry that those profits support will collapse and we'll never see another new drug developed.

 
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At 8/22/2009 6:21 AM, Anonymous rate said...

Only awareness from the citizens and responsibility from the authorities can help the economy boost right now. Handling the financial instruments, like interest rates, inflation rate and other, is the solution during an economic crisis.

 

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