Ever-rising drug prices may distort economic data

Drugs and money.

The goods producing sector of the U.S. economy is looking pretty healthy these days, but skyrocketing drug prices distort the data. 

Pharmaceuticals now represent the largest portion of the wholesales sector, at $54.3 billion in May 2016, according to Seeking Alpha. That's nearly 6 percent larger than groceries and nearly a third larger than petroleum, according to data from the U.S. Commerce Department. It now comprises more than 12 percent of all wholesale transactions by dollar volume.

But as opposed to that growth being organic and driven due to consumer demand, Seeking Alpha has concluded that much of it is tied to drug companies simply raising prices for its products.

The drug companies have created significant problems for hospitals, including short shortages of needed drugs. In some instances, hospitals have had to make tough decisions as to how to ration and allocate specific drugs to patients. The Government Accountability Office had warned in 2014 that providers might need to "ration care or rely on less effective drugs" because of drug shortages.

Drug shortages in oncology units have led to higher costs and worst outcomes for come cancer patients, at least one study has concluded. It is costing hospitals at least $200 million annually in recent years to deal with the drug shortages. Such swift rises in the cost of drugs also erodes their bottom lines, sometimes to the tune of tens of millions of dollars a year.

“These soaring sales, based on soaring prices, look good for GDP that the government wants to tout. The price increases look good in the inflation figures that the Fed wants to tout,” Seeking Alpha said. “And investors are soaking up the money, unless a drug company crumbles under the weight of its own schemes, like Valeant.”

– read the Seeking Alpha article
– check out the Commerce Department data (.pdf)