Editor’s note: This perspective was originally published in Health Affairs Forefront on Dec. 22, 2025.
Every few months a new analysis lands with the same headline: launch prices for new drugs outpace inflation. The latest reported that the median net launch price for 154 medicines rose 51 percent from 2022 to 2024, faster than list prices over the same period, and that many exceeded benchmarks set by the Institute for Clinical and Economic Review (ICER) for treatments such as CAR-T therapies and GLP-1 inhibitors. That sounds damning, but it largely answers the wrong question.
The Consumer Price Index (CPI) measures inflation in the price of the same basket of goods over time. It is designed for stability, not novelty. Medical innovation, by contrast, introduces different baskets—capabilities that did not exist last year. When the goal is to judge whether a therapy is worth its price, a different benchmark applies. The ICER, for example, evaluates treatments according to how much health benefit they deliver for their cost using cost-effectiveness thresholds such as $50,000 to $500,000 per quality-adjusted life-year (QALY) rather than inflation metrics. These thresholds reflect the value for money of health produced, not the movement of prices.
Comparing the increase in drug prices to the CPI, when the former captures the arrival of groundbreaking new technologies such as GLP-1 inhibitors, curative gene therapies, or first-in-class oncology agents, is like asking whether the first iPhone was “too expensive” because flip phones were cheaper. You can do that math, but you will miss the value.
Value, that is, the cost per health benefit, is the right denominator for evaluating the increasing prices of the drugs we consume. In cost-effectiveness terms, such as the cost per QALY used by the ICER and others to establish benchmarks, what we should be asking is: How much health benefit does society buy for each dollar spent? When value is rising faster than inflation, society is gaining ground even if launch prices climb. And in many categories, including cell and gene therapies, immuno-oncology, and selected rare diseases, the evidence suggests that health gained per dollar has grown faster than both the list price and the CPI.
In this article, I outline three primary considerations that should underpin the conversation about increasing drug prices.
Prices Are Not Outcomes
First, launch prices are not outcomes. The “list price” announced at launch is rarely the price paid. Most insurers and government programs negotiate substantial rebates, producing a much lower “net price” that reflects real spending. In that sense, launch prices are noisy proxies for what most payers actually spend in a market shaped by negotiated discounts, Medicare’s 340B program for hospital drug purchases, Medicaid best-price rules, and outcomes-based contracts. As Ed Silverman, a frequent observer of US pharmaceutical policy, recently noted in an analysis of more than 150 new medicines approved since 2022, median net launch prices rose substantially even after adjusting for inflation and manufacturer rebates. His reporting underscores how list and net prices diverge, and how those metrics can obscure the complex negotiations that determine what payers actually spend. Net spending should be benchmarked to health produced—not to CPI—or policy makers will confuse price turbulence for policy failure.
Our Understanding Of Value Has Evolved
Second, traditional cost-effectiveness analysis captures average health gains in terms of QALYs, a metric that combines life expectancy, survival, and health-related quality of life into a single index (for example, one year of life in perfect health equals 1.0 QALYs). QALYs underweights two elements that US patients and payers tell us matter: hope (the value of meaningful upside even with uncertainty) and equity (the value of reducing severe disease burden in underserved groups). In the GRACE family of cost-effectiveness frameworks, those values are explicit modifiers, not afterthoughts. GRACE, short for “generalized risk-adjusted cost-effectiveness” analysis, redefines how society values health by allowing the worth of a QALY to vary with severity, risk, and rarity of disease. If a gene therapy offers a one-and-done cure for a devastating pediatric disease, an analysis that only divides cost by average QALYs will systematically undervalue what families, clinicians, and the public actually prize. This matters for the broader debate about inflation because if we are going to judge whether rising drug prices are justified, we must quantify the benefit side of the equation with a measure that reflects what people actually value. Benchmarking prices to CPI tells us nothing about this; benchmarking them to value requires the right tool.
Value Growth Is Outpacing Inflation
Third, value growth has consistently outpaced inflation. When we regress cost-effectiveness ratios of new medicines against the CPI, the slope of innovation rises well above the 45-degree parity line (see exhibit 1). Each point in the exhibit represents a new medicine evaluated by the ICER or in published cost-effectiveness analyses, plotted as normalized cumulative value ($ per QALY) against cumulative inflation (CPI-U). The gray dashed line represents parity where value would equal inflation. The solid blue trendline shows that the cumulative value of innovation has risen faster than inflation across therapy classes, from CAR-T and GLP-1 agonists to gene therapies for rare diseases. While inflation increased steadily, the cumulative value index—the amount of health gained per dollar—grew faster, reflecting that each generation of therapies delivers more capability and longer life expectancy per dollar spent.
Exhibit 1: Value of selected new medicines versus inflation; cost-effectiveness evidence (2018–25)
Source: Author’s analysis based on published value assessments of: CAR-T (2018); Delandistrogene (2023); Exa-cel (2025); Lovo-cel (2024); Semaglutide injectable (2022); Semaglutide oral (2022); Tirzepatide (2022); Sickle Cell Disease (SCD) (2024).
The exhibit reflects what patients and clinicians already experience in real time: The health gains from each generation of therapy grow faster than prices. In that sense, rising launch prices are not evidence of runaway inflation—they are the price tag of progress.
The pattern extends across therapeutic classes. Cellular immunotherapies such as CAR-T transformed cancer care from palliative to potentially curative. GLP-1 agonists redefined obesity treatment and its downstream impact on diabetes and cardiovascular risk. And gene therapies are beginning to cure diseases that were once lifelong. Each wave of discovery produces a steeper return in health benefit per dollar spent, even when nominal prices appear high.
It’s Time For Policy To Catch Up With Reality
None of this means prices should rise unchecked or that every innovation merits a blank check. But it does mean we should retire lazy comparisons between drug prices and the CPI. The CPI tracks milk, rent, and shoes. Medicine tracks the expanding frontier of human capability. Holding pharmaceutical innovation to the same metric we use for breakfast cereal is not fiscal prudence, it’s conceptual confusion.
If the goal of health policy is to improve outcomes per dollar, then the relevant benchmark is value growth, not inflation control. Real progress lies in accelerating the ratio of benefit to cost, ensuring patients actually experience the gains implied by each new therapy. That requires better data, fair contracting, and a broader definition of value—one that includes not only QALYs but also hope, equity, and the long-term societal dividends of scientific advancement.
The better question is not whether drug prices are outpacing inflation, but whether value is. The evidence suggests it is. The challenge now is to make sure access and coverage, and the policies that expand them, catch up.
Author’s Note
Unrelated to the submitted work, Dr. Padula declares grants and contracts from: PhRMA Foundation, AbbVie, and Bristol Myers Squibb. He also receives personal fees and equity from Stage Analytics.
William Padula, “Benchmarking Drug Prices To Inflation Overlooks What Truly Matters: Value”, Health Affairs Forefront, December 22, 2025. https://www.healthaffairs.org/content/forefront/why-benchmarking-drug-prices-inflation-overlooks-truly-matters-value
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