Canada’s health expenditure: Spending on prescribed drugs increases, total growth remains slow

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National Health Expenditure Trends, 1975 to 2016
Prescribed Drug Spending in Canada, 2016

December 15, 2016 — Health spending in Canada is forecast to reach $228 billion or $6,299 per Canadian in 2016, according to the Canadian Institute for Health Information (CIHI).

CIHI’s report National Health Expenditure Trends, 1975 to 2016 shows that the rate of growth of total health expenditure in 2016 is expected to be 2.7%. This increase will not keep pace with the rate of inflation and population growth combined — a continuation of a trend that began in 2011.

“The slow economic conditions Canada has experienced this decade have contributed to slower growth in health spending,” said Michael Hunt, CIHI’s director of Health Spending and Strategic Initiatives. “With population growth, an aging population and continuing health-sector inflation, the sustainability of Canada’s modest rate of growth in health spending remains an issue to monitor. Health care dollars need to be spent strategically to meet increasing demands on Canada’s systems.”

Compared with overall slow growth in health spending, public drug program spending increased 9.2% from 2014 to 2015, as the companion report Prescribed Drug Spending in Canada, 2016 shows. Almost two-thirds of the growth in 2015 was due to the introduction of new drugs used to treat hepatitis C. Drug program spending still increased by 3.6%, though, when spending on these drugs was excluded.

“In addition to the introduction of new drugs, we’re also seeing a reduced impact of patent expirations and generic pricing policies compared with previous years,” said Michael Gaucher, CIHI’s director of Pharmaceuticals and Health Workforce Information Services. “While the savings achieved persist, they are no longer leading to significant reductions in year-over-year growth.”

Inside the numbers

National Health Expenditure Trends, 1975 to 2016

  • Hospitals, drugs and physicians have been the top 3 categories of health spending in Canada over time. In 2014, the latest year for which actual expenditure data is available, they accounted for more than 60% of all health expenditures:
    • Hospital costs accounted for 29.5% of Canadian health expenditures;
    • Drugs made up 16.0% of health spending (prescribed drugs: 13.6%; non-prescribed drugs: 2.4%); and
    • Physician costs represented 15.3% of health expenditures.

Prescribed Drug Spending in Canada, 2016

  • In 2014, $12.5 billion (42.6%) of prescribed drug spending was financed by the public sector.
  • Individuals for whom public drug programs paid $10,000 or more toward drug costs represented 2.1% of beneficiaries but accounted for 33.5% of public drug spending.
  • Tumour necrosis factor alpha inhibitors (anti-TNF drugs), a biologic drug class used to treat conditions such as rheumatoid arthritis and Crohn’s disease, accounted for the highest proportion (8.2%) of public drug program spending.
  • Hepatitis C drugs accounted for 95.7% of spending on the “other antivirals” drug class, which ranked second in spending. Other antivirals contributed almost two-thirds (61.4%) of overall growth in public drug program spending even though significant claims for the new hepatitis C drugs did not appear until the second quarter of the year in most jurisdictions.

Across the provinces

National Health Expenditure Trends, 1975 to 2016

  • Total health expenditure per capita is expected to be highest in Newfoundland and Labrador ($7,256) and Manitoba ($7,120) in 2016.
  • The lowest per-person expenditures are forecast for Quebec ($5,822) and Ontario ($6,144).

Prescribed Drug Spending in Canada, 2016

  • In 2014, the public share of prescribed drug spending varied among provinces, ranging from 29.8% in New Brunswick and 33.0% in Prince Edward Island to 45.5% in Quebec and 49.9% in Saskatchewan.

International comparisons

National Health Expenditure Trends, 1975 to 2016

In 2014, the latest year for which internationally comparable data is available, Canada (CA$5,543) was one of the highest per-capita spenders on health care among countries in the Organisation for Economic Co-operation and Development (OECD), comparable to the Netherlands (CA$6,505), France (CA$5,384) and Australia (CA$5,187). The United States (CA$11,126) remained the highest-spending country on health care per person among OECD countries.

Canada’s per-capita spending and spending as a share of gross domestic product were both higher than the OECD average, while the public-sector share of total health expenditure was below the OECD average.

Drugs constitute a large category of health expenditure across OECD countries, accounting for, on average, almost a fifth of total health care spending. Canada spent CA$952 on drugs per capita in 2014, less than the United States (CA$1,371) but more than most other OECD countries. Canada, with a public share of 36%, was among the countries with the lowest share; this has been stable in recent years.

About CIHI

CIHI collects and analyzes information on health and health care in Canada and makes it publicly available. Canada’s federal, provincial and territorial governments created CIHI as a not-for-profit, independent organization dedicated to forging a common approach to Canadian health information. CIHI’s goal: to provide timely, accurate and comparable health information. CIHI’s data and reports inform health policies, support the effective delivery of health services and raise awareness about the factors that contribute to good health and health care.

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