Wednesday, June 15, 2016

Producer Price Index: Pharma Prices Finally Tame

The Producer Price Index (PPI) for final demand goods grew 0.7 percent last month, or 0.3 percent less food and energy. Remarkably, prices for pharmaceutical preparations and medical devices grew less. Pharmaceutical prices were actually flat (Table I).

With respect to final demand services, for which prices rose 0.2 percent (or negative 0.2 percent, less trade, transportation, and warehousing), prices of most medical services grew a little more. Health and medical insurance was up 0.5 percent. However, prices for home health services dropped 0.9 percent.

With respect to goods for intermediate demand, which rose 0.8 percent, price increases for medicinal and biological chemicals, and biological products, were very tame. With respect to services for intermediate demand, which dropped 0.2 percent, prices for health insurance jumped 0.5 percent

Looking back over the 12-month period, the price increase of 9.8 percent for pharmaceutical preparations continues to stand out like a sore thumb. Political agitation against drug prices is unlikely to go away soon. Health insurance, having risen 2.0 percent in a flat or negative inflationary environment, is also beginning to stand out.

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