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Drug Prices Soar Most In The 21st Century
05-13-2016, 01:30 PM,
Drug Prices Soar Most In The 21st Century
Drug Prices Soar Most In The 21st Century

<p>Back in 1998, when Pfizer introduced Viagra it charged so much for the novelty, much needed drug (which millions of men would literally pay anything for) that it sent the entire pharma/drug price index soaring by nearly 15% for about a year. This can be seen, appropriately enough, in the spike on the chart below. </p>
<p>But, what is more troubling for Americans these days is while the 1998 Viagra "spike" came and went, in recent years, pharmaceutical preparation, i.e., drug prices have been soaring higher with every passing year, and according to today's PPI report, at the wholesale level, drug prices in April surged by 9.6% over the past year, the biggest increase since 1982 when excluding the Viagra outlier, <strong>and certainly the most in the 21st century</strong>.</p>
<p><a href=""><img src="" width="600" height="346" /></a></p>
<p>This is an issue, because while much of these prices are passed on to consumers at the individual level, this is not reflected in broader core inflation. In fact, when comparing core CPI with drug prices, one sees that while in the early 1980s the two series were both astronomically high, since then - according to the BLS - core inflation has been tame and subdued even as drug prices have been rising, initially slowly and in recent months, exponentially.</p>
<p><a href=""><img src="" width="600" height="368" /></a></p>
<p>And while one can debate how much of PPI has or should be reflected in CPI - in this case virtually none of it - despite exploding Obamacare premiums (which also magically are never accounted for in the CPI report even if <a href="">they certainly boost GDP</a>), we wonder: how long before the BLS at least admits that its shelter/rent inflation data is woefully inaccurate, because as the Census department itself admits, <strong>in recent months, the <a href="">increase in average asking rents </a>is about 4x higher than the core CPI peddled by the BLS</strong>. </p>
<p><a href=""><img src="" width="600" height="404" /></a></p>
<p>So yes, when one excludes soaring rents and astronomical drug prices (and non-processed food, and the cost of college, etc) core inflation sure is low enough - thanks to plunging prices of flat screen TVs and iPads - to desperately require many more years of near-0% rates. </p>

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