Working Paper: NBER ID: w24210
Authors: 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.
Keywords: CPI; Prescription Drugs; Price Indexes; Generics; Healthcare Expenditures
JEL Codes: D04; I11; I18; L11; L65
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| IQVIA index increase (C43) | CPI underestimation of price increases (E31) |
| BLS reliance on cash transactions (E42) | CPI underestimation of price increases (E31) |
| shift to third-party payer systems (I18) | incomplete representation of price changes in CPI (E31) |
| IQVIA index increase (C43) | average annual increase of 7.1% (J39) |
| CPI increase (E31) | average annual increase of 3.1% (J39) |