Monday, June 5, 1995
WASHINGTON - A General Accounting Office investigation of government drug price monitoring has raised doubt about the value of the official drug price inflation measure as a policy-making tool.
The GAO's report last week, "Prescription Drug Prices: Official Index Overstates Producer Price Inflation," not only concludes that the Bureau of Labor Statistics' PPI-Drugs Index overstates prescription drug inflation, but also is unsuitable for relating the benefit of drugs to prices.
The BLS measure, the official wholesale index of U.S. drug prices, was widely cited during the health care reform debate and was used to justify proposed price controls on prescription drugs.
However, according to the GAO report, the Producer Price Index for drugs has consistently overstated drug prices for at least 11 years for three reasons. Before 1994, BLS used a market basket of drugs that under-represented new and recently introduced drugs in the market. "This sampling problem alone led PPI-Drugs to overstate drug inflation between 1984 and 1991 by an