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An Evaluation of the CPI Indexes for Prescription Drugs

Author

Listed:
  • Barry Bosworth
  • John Bieler
  • Michael Kleinrock
  • Eric Koepcke
  • Ernst R. Berndt

Abstract

The prescription drug component of the Consumer Price Index (CPI measures recent and past drug price changes, and provides the basis for projecting future price trends and health care expenditures. However, there are concerns about the adequacy of the price data because of recent changes in the structure of the market for prescription drugs. We compare the prescription drug data of the CPI with a large alternative data set from the IQVIA Institute for Human Data Science. We analyze the overall consistency if the data from the two sources, and examine the influence of the large shift from brand to generic drug sales and the increased reliance on third party insurance plans that are excluded from the CPI sampling frame.

Suggested Citation

  • Barry Bosworth & John Bieler & Michael Kleinrock & Eric Koepcke & Ernst R. Berndt, 2018. "An Evaluation of the CPI Indexes for Prescription Drugs," NBER Working Papers 24210, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:24210
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    References listed on IDEAS

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    1. Brent R. Moulton, 1996. "Bias in the Consumer Price Index: What Is the Evidence?," Journal of Economic Perspectives, American Economic Association, vol. 10(4), pages 159-177, Fall.
    2. Ernst Berndt & Murray Aitken, 2011. "Brand Loyalty, Generic Entry and Price Competition in Pharmaceuticals in the Quarter Century after the 1984 Waxman-Hatch Legislation," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 18(2), pages 177-201.
    3. Griliches, Zvi & Cockburn, Iain, 1994. "Generics and New Goods in Pharmaceutical Price Indexes," American Economic Review, American Economic Association, vol. 84(5), pages 1213-1232, December.
    4. Ana Aizcorbe & Nicole Nestoriak, 2010. "Price Indexes for Drugs: A Review of the Issues," BEA Working Papers 0050, Bureau of Economic Analysis.
    5. Danzon, Patricia M. & Nicholson, Sean (ed.), 2012. "The Oxford Handbook of the Economics of the Biopharmaceutical Industry," OUP Catalogue, Oxford University Press, number 9780199742998.
    6. A. J. Culyer & J. P. Newhouse (ed.), 2000. "Handbook of Health Economics," Handbook of Health Economics, Elsevier, edition 1, volume 1, number 1.
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    Cited by:

    1. Georges Siotis & Carmine Ornaghi & Micael Castanheira, 2023. "Evolving market boundaries and competition policy enforcement in the pharmaceutical industry," European Journal of Law and Economics, Springer, vol. 55(2), pages 313-348, April.
    2. Rachel Soloveichik, 2021. "Tracking Marijuana in the National Accounts," BEA Working Papers 0188, Bureau of Economic Analysis.

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    More about this item

    JEL classification:

    • D04 - Microeconomics - - General - - - Microeconomic Policy: Formulation; Implementation; Evaluation
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology; Plastics

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