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January 30, 2020

Nominal spending on prescription drugs rose at a 10.7 percent annual rate in the fourth quarter. Spending on prescription drugs has begun to increase rapidly as a share of GDP in the last year, after stabilizing at the end of 2015. Many observers have missed this rise in drug spending since they focus on the consumer price index (CPI) measure of inflation in prescription drug prices. This index only measures the increase in the price of drugs already on the market; most of the increase in drug costs comes from the entry of new and more expensive drugs. For more, checkout the latest GDP Byte.