Use Of Generic Prescription Drugs Prompts Decrease In Inflation

Armen Hareyan's picture

Annual inflation for prescription drug over the past 12 months totaled 1%, a decrease from 4.4% in 2005 and the lowest rate in the past 30 years, according to the Consumer Price Index released on Wednesday by the Bureau of Labor Statistics at the Department of Labor, the New York Times reports (Saul [1], New York Times, 9/21).


For prescription drugs, the CPI seeks to track changes over time in retail costs for average consumers -- including expenses paid by health insurers -- based on a sample of 300 retail stores (Saul [2], New York Times, 9/21). Economists in large part attribute the decrease in annual inflation to increased use of generic medications and the market entry of a number of generic versions of common treatments.

Last fall, Wal-Mart began to sell many generic medications for $4 per month, and a number of other retail chains since have expanded their programs or announced similar plans, all of which have led to increased use of such treatments. In addition, Medicare, employers and pharmacy benefit managers have promoted increased use of generic medications. Generic medications accounted for 63% of prescriptions dispensed in the last year, a 13% increase from 2005, with generic pharmaceutical company Teva Pharmaceutical as the largest supplier of treatments based on number of prescriptions filled, according to IMS Health.

Meanwhile, during the past 18 months, generic versions of the anticholesterol medication Zocor, the insomnia treatment Ambien, the hypertension medication Norvasc and other common treatments have reached the market. Robert Berenson, a fellow at the Brookings Institution, said that the decrease in annual inflation could provide credibility to the health care proposals of presidential candidates who have called for increased use of generics to reduce costs (Saul [1], New York Times, 9/21).

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