December 06, 2019
The Washington Post had an article telling readers “retail drug prices declined last year for the first time since 1973.” While the article refers to a study done by the Center for Medicare and Medicaid Services, it is not clear that this decline would have much meaning for anyone. As the piece notes, many people were still paying more for drugs in 2018 than 2017 because they faced higher deductibles and co-pays from insurance.
It is also important to note that this study only looked at the retail drug market. That excludes drugs purchases by hospitals, nursing homes, and other institutions. If their spending is included, total spending on prescription drugs rose by 4.0 percent in 2018. Furthermore, it is on a path to increase by more than 8.0 percent in 2019 (National Income and Product Accounts, Table 2.4.5U, Line 121).
The piece also notes a sharp increase in the cost of health insurance in 2018, which it speculates could have been due to an increase in taxes on insurance in 2018. That does not appear to be the cause since insurance costs have been increasing even more rapidly in 2019.
The Bureau of Labor Statistics reports that the cost of health care insurance (administrative expenses and profits — not premiums) increased by 20.1 percent over the last twelve months and rose 2.1 percent in October alone. This rise cannot be explained by a tax increase that took effect at the start of 2018.
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