Capitol Report: Lost beneath headlines of five-figure drug costs — pharmaceutical price growth is weakening

A staff member sorts through drugs while filling a prescription at the Clay-Battelle Community Health Center’s pharmacy March 21, 2017 in Blacksville, West Virginia.

After months of headlines about astronomical drug prices, a funny thing’s happening — drug costs are plummeting.

One of the big surprises in the consumer price report for September released by the Labor Department was the big slowdown in medical-care costs.

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In the 12 months ending September, medical care “commodities” growth slowed to 1% from 2.4%. That’s the weakest growth in more than three years, and compares to 3.7% growth just two months ago.

The culprit was drug prices. Prescription drugs, which slowed from 2.7% to 1.4%, also the weakest growth in more than three years. And generic drug costs actually fell, sliding by 0.6% over 12 months, the biggest drop in nine months.

Generic drug makers like Teva TEVA, -2.90%   have already been reporting a tough pricing environment. The Food and Drug Administration has been accelerating its approvals of generic drugs, while the consolidation of the industry, through moves like the sourcing venture between McKesson MCK, -1.90%    and Wal-Mart Stores WMT, +0.34%  , has also added pressure.

It’s not clear whether the generic drug price environment has filtered over to the prescription side, or whether some other factors are at work. It’s also important to note that prescription drug price growth was quite high at the end of 2016, so it’s possible the data represent more a reversion to the mean than a sign of a new pricing environment.

Industry giants like Pfizer PFE, +0.09%   and MRK, -0.32%  are due to report results at the end of October.

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