Were Prescription Drug Prices the Fastest-Growing Commodity or Service in 2021?
Key takeaways:
Prescription medication prices are no longer the fastest-growing commodity or service. In 2021, the cost of car rentals, tobacco, beef, and moving expenses all outpaced the cost of prescription drugs.
However, prescription drug costs have still increased 1.8% since the start of the pandemic.
Prescription drug prices have also historically grown faster than the rate of inflation. Since 2014, drug prices have increased 35%, while the cost of all items and services has increased 21%.
It’s no secret that inflation is on the rise. The Consumer Price Index increased 7.5% in 2021 — the highest level of inflation since 1981. But not all inflation is equal. The costs of certain goods and services are skyrocketing while other costs are remaining stable or even trending down.
Recently, prescription drugs lost their distinction as the fastest-growing good or service, according to a recent GoodRx analysis. Prior to the pandemic, prescription medication prices were by far the fastest-growing good or service. But since the start of the pandemic, prescription drug costs have grown only 1.8%. Although drug prices are still on the rise, other goods and services have increased in price much more dramatically.
The cost of car rentals, moving expenses, beef, and tobacco all shot up significantly in 2021. The ripple effects of the COVID-19 pandemic played a key role in these steep price increases.
That said, the price of prescription medications has still increased at a far faster rate than inflation over the past 7 years. Since 2014, all goods and services have increased in price by 21%, while prescription drugs have increased in price by 35%. Prescription drug prices have also outpaced wages, gas, food, tuition, transportation, telephone and internet services, personal care, and new and used cars prices — just to name a few.
The below graph compares the price changes in all goods and services to the price changes in prescription drugs since 2014.
Below, we dive deeper into the recent numbers and give some head-to-head comparisons between prescription medications and other goods and services.
Prescription drug costs outpaced by car rental, moving, tobacco, and beef costs
Since the start of the pandemic, prescription medication costs have increased 1.8%. Typically, drug costs go up every January and July. This January, 810 drugs increased in price by an average of 5.1%. But this increase is mild compared to the jump in price of other goods since the pandemic.
The price of car rentals, beef, tobacco, and moving expenses have all risen more quickly than the price of prescription drugs. COVID-19 played a multifaceted role in these price increases — from supply chain interruptions, to production restrictions for safety, to shifts in demand. Both car rentals and beef products have faced large price swings since the start of the pandemic.
Car rentals have increased in price by 41% since the start of the pandemic. Rental costs dove down at the start of the pandemic as demand for travel dropped, but by June 2020 the price started picking back up rapidly. Car rental costs peaked in July 2021 at an 87% increase compared to 2014. Reasons for these steep prices include a shortage in semiconductors in the automobile industry and a reduction in the number of available cars after demand initially dropped due to COVID-19. However, since November car rental prices have been trending down. This could be due to a marginal easing up of supply chain disruptions in November.
Beef prices have gone up 22% since the start of the pandemic. Although not as dramatic as car rental prices, the cost of beef has also been volatile in the wake of COVID-19. Beef went down at the start of the pandemic but has been rising significantly since then. Following suit with car rentals, beef prices have also been decreasing since November. The Biden administration recently released a plan to deal with beef supply chain issues that are affecting prices.
Tobacco prices and moving expenses have also outpaced prescription medication prices. But these prices have been growing more steadily over time. For instance, the price of tobacco has increased 47% since 2014 and 12% since the start of the pandemic.
Moving expenses have increased 53% since 2014 and 14% since the start of the pandemic. The recent increase may be related to more people relocating during the pandemic. At the start of the pandemic, when remote work became more common, people could move out of the expensive cities they lived in for work. This increase in demand for moving and storage services may have caused the jump in price.
Hourly earnings can’t keep up with prescription drug costs
As drug prices continue to rise, wages aren’t keeping pace. Overall hourly earnings have increased 31% since 2014 compared to an increase of 35% for prescription drugs. But wages have increased at a faster rate in recent years.
Wages increased at the start of the pandemic but started heading back down in May 2020. By August 2020, though, wages began increasing again at a more typical rate.
This gap between prescription drug costs and average hourly earnings helps explain why so many Americans struggle to afford their medications — one-third of Americans report skipping a prescription due to cost.
Although wages aren’t quite keeping up with drug prices, fewer Americans are unemployed. Right now, the unemployment rate is close to the lowest it's been since the start of the pandemic: 4.0%.
Roller coaster gas prices still lag prescription drug prices
Gas prices have only increased 2.6% since 2014. But it feels like they have gone through the roof this year. That’s because gas prices have shot up 43% since the start of the pandemic.
Clearly motor fuel is a volatile price and is affected by many global events, shortages, and disruptions. In comparison, drug prices have been climbing at a relatively steady rate since 2014, with jumps every January and July.
Airline, telephone service, and clothing costs sink while prescription drug costs march up
Even though overall inflation is on the rise, some goods and services have been getting cheaper. Airline fares, clothing, and phone services are three areas where prices have been trending down.
Airline fares have decreased 30% since 2014. After a dramatic drop at the start of the pandemic, airline fares almost climbed back to pre-pandemic levels in June 2021. That same month, however, they faced another steep drop.
With COVID-related travel restrictions often changing and flight demand shifting, it’s no surprise that airline fares have been so up and down throughout the pandemic.
In contrast to prescription drug prices, the costs of clothing and phone services have also been declining since 2014.
Summing it all up
The cost of some goods and services went up faster than medication prices last year. But drug prices have still increased 1.8% since the start of the pandemic, and many Americans still struggle to afford their medications.
High drug prices have crippling effects on both patients and the healthcare system as a whole.
Close to 40% of Americans struggle to afford their medication and are forced to forgo treatment, borrow money, or skip out on food or housing. Even if patients are shielded from dramatic swings in price through insurance, high drug prices bloat overall healthcare spending. This can trickle down to consumers through higher insurance premiums, copays, and coinsurance.
There are no major drug price decreases in sight, so it is important to become an educated consumer and shop around for the best price for you.
Co-contributors: Sara Kim, MS
Methodology
For this analysis, GoodRx Research compared price change data from the Bureau of Labor Statistics' Consumer Price Index (CPI) to the GoodRx Drug List Price Index. While a medication’s list price isn’t usually the price that consumers pay at the pharmacy counter, it is the official price set by the drug manufacturers and can have long-lasting effects on a drug’s price. According to GoodRx Research, higher list prices are directly tied to higher costs for consumers. The CPI ends in December 2021 and the GoodRx list Price Index ends in January 2022.
The GoodRx List Price Index
The GoodRx List Price Index is used to track the price of prescription medications in the U.S. over time. This index is based on published list prices as set by the manufacturers of prescription drugs, and the prescription drug mix as dispensed by community retail pharmacies.
The list price index is calculated daily, taking into account day-to-day changes in list prices and quarterly changes in the prescription medication mix. The list price index starts on December 31, 2014 and ends on January 31, 2022. The index is based on the prescription drug mix as dispensed, so price changes in high-volume and high-cost drugs will have more impact on the index than low-volume and low-cost medications.
The GoodRx List Price Index uses a nationally representative sample of prescription medications from each quarter to estimate the drug mix across all community retail pharmacies for that time period. The drug mix is used to calculate the average price change of all drugs and is updated every quarter.
The Consumer Price Index
According to the Bureau of Labor and Statistics, “the Consumer Price Index (CPI) is a measure of the average change over time in the prices of consumer items — goods and services that people buy for day-to-day living.”
The CPI is estimated based on a representative sample of consumer purchases across the U.S., but it is not a complete measure of all price changes. The CPI also includes changes in sales tax and other taxes.
The following are the goods and services bucketed under each category referenced in our research:
Car rentals: Automobile and truck rental
Moving expenses: Moving, storage, freight expense
Beef: Uncooked beef and veal
Tobacco and smoking products: Cigarettes, tobacco products other than cigarettes, unsampled items
Rent: Rent of primary residence
School tuition: Educational books and supplies, tuition, other school fees, and childcare
Food: Cereals and bakery products; meats, poultry, and eggs; dairy and related products; fruits and vegetables; nonalcoholic beverages and beverage materials; other food at home; and food away from home
Personal care: Personal care products and personal care services
Alcohol: Alcoholic beverages at home, alcoholic beverages away from home
Motor fuel: Gasoline (all types), other motor fuels
Apparel: Men’s and boys’ apparel, women’s and girls’ apparel
Telephone services: Wireless telephone services, telephone services land-line
Public transportation: Airline fare, other intercity transportation, intra-city transportation, unsampled transportation
Airline fares: Airline fares
