Drug spending in Canada: recent trends and causes

Area of Science:

• Health Economics
• Pharmaceutical Policy
• Public Health

Background:

• Canadians spent nearly $15 billion on prescription drugs in 2002, averaging over $460 per capita.
• Limited published evidence exists on the drivers of these substantial prescription drug expenditures.
• This study addresses the lack of data on the nature and causes of drug spending in Canada.

Purpose of the Study:

• To analyze the nature and determinants of prescription drug expenditures in Canada.
• To investigate the period of rapid expenditure inflation from 1998 to 2002.
• To identify key factors influencing rising drug costs.

Main Methods:

• Utilized nonstochastic index-theoretical methods to decompose expenditure trends.
• Analyzed overall expenditures and investment in specific therapeutic categories.
• Attributed changes in per capita spending on oral solid prescription drugs to six determinants across volume, price, and therapeutic choices.

Main Results:

• Spending was concentrated in five main therapeutic classes.
• Drug prices, adjusted for generic use, decreased during the study period.
• Increased prescription drug utilization accounted for over half of the per capita spending growth; therapeutic choices also contributed to rising costs.

Conclusions:

• Federal price regulations, provincial price freezes, and generic substitution policies effectively controlled price-related drug spending.
• Increased drug utilization and shifts in therapeutic choices present challenges for cost-management strategies.
• Future cost-management must consider factors beyond price, including utilization and prescribing patterns.