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Prescription Drug Prices: Official Index Overstates Producer Price Inflation

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Report Type Reports and Testimonies
Report Date April 28, 1995
Report No. HEHS-95-90
Subject
Summary:

During the 1980s and 1990s, the prices of prescription drugs rose on average at triple the rate of inflation, according to U.S. government statistics. As Congress debated whether to curb drug price increases, research questioning the accuracy of the price statistics--especially the producer price index for prescription drugs published by the Bureau of Labor Statistics--was in its early stages. Today, a body of research urges the reexamination of the accuracy of the producer price index for prescription drugs. This report (1) reviews the accuracy of the producer price index for prescription drugs as a measure of drug price inflation, (2) describes whether the index could be changed to more accurately measure changes in the cost of buying drugs, and (3) provides guidance on appropriate uses and common misuses of price indexes.

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