This is What’s Cannibalizing the US Economy
The sector is booming, but it’s a costly boom.
In the sluggish US economy, the goods-producing sector has been in decline since late 2014, but sales in its biggest sub-sector are booming: medicines.
Drugs are a physically small part of the goods-producing economy. But in terms of dollars, they’re the elephant in the room: According to the wholesales report by the Commerce Department, total drug sales by manufacturers to pharmacies, hospitals, and others in the distribution chain jumped 11.3% from a year ago (not seasonally adjusted) to $54.3 billion.
That was the largest of the wholesale categories in the report: larger than “Groceries” ($51.5 billion), “Electrical” ($45.0 billion),”Petroleum” ($43.4 billion), and Automotive ($36 billion). Drug sales accounted for 12.2% of total wholesales. For the last 12 months, it was 12.0%.
In May a year ago, manufacturers sold $48.8 billion in drugs, or 11.3% of total wholesales. In May 2014, drugs accounted for 9.4% of total wholesales. In May 2013, it was 9.1%. In May 2012, it was 8.8%.
You get the idea. Drug sales at the wholesale level account for an ever larger portion of total wholesales.
Total wholesales rose 0.3% in May year over year. Without the $5.5 billion increase in sales of drugs, total wholesales would have fallen 0.9% year-over-year.
Are Americans really consuming that much more in pharmaceutical products? Hardly: According to the Producer Price Index, prices charged by manufacturers of pharmaceutical products jumped 9.8% in May from a year ago.
So the Wall Street Journal reviewed corporate filings and conference-call transcripts of the 20 largest members of Big Pharma in the US and found that over two-thirds had attributed their sales increases in the first quarter at least in part to jacking up prices. Among them:
Pfizer disclosed that price increases (and in some cases, higher volume of prescriptions) pushed up revenues for nine drugs that together reached $2 billion in the US.
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