Unlike the Medical Services component of CPI, replete with lags and other obfuscation, Medical Commodities is more straightforward because its largest and most influential driver, pharmaceuticals, appears in several public and private high frequency data sets. Annual CPI for Medical Commodities has been on a tear since late summer 2021 but things appeared to be quieting down until the latest print.
In one respect, CPI for Medical Commodities is doing what you would expect during period of high demand. After the Affordable Care Act when pent-up demand for health care services flooded the system with the newly or better insured. As we have seen in THC and HCA reports, utilization is accelerating. On the other Medical Commodities are also reflecting the implications of the Inflation Reduction Act - ironic, I know - which created an inflation regime in Medicare and will begin imposing price negotiations. Those looming changes argue for high price hikes.
Another factor and the one causing all kinds of heartburn at the White House is drug shortages. Reports of shortages due to higher demand, manufacturing problems and discontinuations accelerated in 2020 but since late 2021 have been more prevalent. Drug shortage of platinum-based chemotherapy drugs are a special concern.
Bloomberg reported yesterday that the White House has quietly convened a task force to review the problem because solutions, according to the report will require more than the FDA.
In other words, the Medical Commodities component of CPI-M may continue to have price disruptions for some time to come.
Let me know if you have any questions.
Emily Evans
Managing Director – Health Policy
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