Patent expiries and generic pricing policies may be factors in slower growth
Download the report: Drug Expenditure in Canada, 1985 to 2010
May 5, 2011—Although drugs remain an important cost driver in Canada’s health system, growth in spending has slowed to its lowest rate in 14 years, according to a new report released today by the Canadian Institute for Health Information (CIHI). Total drug expenditure is estimated to have reached $31.1 billion in 2010, an increase of $1.4 billion, or 4.8% since 2009. In comparison, the average annual growth rate in drug spending was nearly twice as high between 2000 and 2005, at 8.9%.
“Spending on drugs used to be the fastest growing category of health spending in Canada, but has slowed down considerably over the past five years,” says Michael Hunt, CIHI’s Director of Pharmaceuticals and Health Workforce Information Services. “Consumers have been hearing lately that a number of blockbuster brand name drugs—including some used to treat high cholesterol and hypertension—have just come off patent, allowing for lower-priced, generic alternatives to enter the marketplace. The implementation of generic pricing policies by some provincial drug programs may also be contributing to the slowdown in growth.”
Drug Expenditure in Canada, 1985 to 2010 is Canada’s most comprehensive report on spending trends in prescribed and non-prescribed drugs, including breakdowns by province and territory, source of funds (public versus private), as well as international comparisons.
CIHI’s report shows that spending on drugs (prescribed and non-prescribed) is forecast to reach $912 per Canadian in 2010. Prescribed drugs continue to account for the vast majority of total drug spending, representing an estimated $26.1 billion, or almost 84% of the total.
CIHI’s report shows total per capita spending (public and private) on prescribed drugs ranged from lows of $574 in British Columbia and $619 in Alberta, to highs of $838 in Nova Scotia and $883 in Quebec. Variations in spending are influenced by a number of factors, including differences in provincial, territorial and federal drug subsidy programs, variations in the health of the population and differences in health care delivery across jurisdictions.
Annual growth in spending was found to be increasing more quickly in some parts of the country than in others. The estimated annual growth in per capita spending on prescribed drugs was lowest in British Columbia and Ontario, at 1.8% and 2.3%, respectively. Higher annual growth rates were seen in Quebec (5.4%) and Newfoundland and Labrador (6.2%).
“While the governments of Ontario and British Columbia have taken measures to control spending on medicines—most notably by lowering the prices paid for generic drugs—more research is needed to understand why growth in overall spending has been so much slower there than in other provinces,” explains Steve Morgan, Associate Director, Centre for Health Services and Policy Research at the University of British Columbia. “Linkage of health and pharmaceutical datasets across Canada would go a long way toward answering such important questions.”
The public sector’s share of total prescribed drug spending varies depending on where you live in Canada. Public drug spending ranged from highs of 56% in Saskatchewan and 52% in Quebec to lows of 37% in Newfoundland and Labrador and 33% in New Brunswick. Nationally, 47% of spending on prescribed drugs is publicly financed.
The latest information available shows that in 2008, Canada’s level of total drug spending per person was second only to the United States, compared with 25 other countries in the Organisation for Economic Co-operation and Development (OECD) with similar accounting systems. Among the top three spending countries, per capita drug expenditure totalled $1,104 in the United States, followed by Canada at $863 and France at $747.
In 2007, the last year for which international data is available, Canada had, on average, the highest prices of generic drugs among OECD countries where data was available. Only the U.S. had higher average prices for patented drugs, while Germany’s patented prices were similar to Canada’s. Some changes in Canadian generic prices are anticipated, given the recent policy changes.
Drug Expenditure in Canada, 1985 to 2010 updates trends in drug spending in Canada between 1985 and 2010, primarily from retail establishments, in total, by public and private payers and by type of drug (prescribed and non-prescribed). Provincial and territorial comparisons are included. International trends are updated based on data from the OECD.
Established in 1994, CIHI is an independent, not-for-profit corporation that provides essential information on Canada’s health system and the health of Canadians. Funded by federal, provincial and territorial governments, CIHI is guided by a Board of Directors made up of health leaders across the country. Our vision is to improve Canada’s health system and the well-being of Canadians by being a leading source of unbiased, credible and comparable information that will enable health leaders to make better-informed decisions.