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As inflation has worsened, the Biden administration and its allies have focused attention on an old bogeyman: prescription drug prices. Democratic Sen. Joe Manchin of West Virginia recently told an AARP gathering that “If we do nothing more this year, that’s the one thing that must be done.” On NBC’s “Meet the Press,” former Treasury Secretary Lawrence Summers singled out government negotiation of drug prices as one of the “most important” policies to control inflation.
It’s time for a reality check. The consumer-price index rose 8.6% in May compared with a year earlier. Household spending on prescription drugs rose only 1.9% over the same period. In the last quarter of 2021, net prices for medicines—after subtracting rebates, discounts and fees—dropped 0.7%, the largest quarterly decline in 15 years. If other products such as eggs (up 32%), gasoline (up 49%) and used cars (up 16%) had behaved like drugs, inflation would be completely under control.
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