CIHI: Prescribed drug spending expected to surpass $21 billion in 2006

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Drug expenditure growing faster than total health spending but rate of growth slowest in a decade

May 15, 2007 — Spending on prescribed drugs in Canada is estimated to have reached $21.1 billion in 2006, an increase of $1.4 billion over the previous year, according to figures released today by the Canadian Institute for Health Information (CIHI) in its annual report on drug spending. While total health spending grew by an estimated 5.8% in 2006, the projected annual growth rate for prescribed drugs was 6.9%. In comparison, spending on prescribed drugs increased on average by 11.2% per year from 1997 to 2004.

“Prescribed drugs have been one of the fastest-growing components of total health spending over the past two decades and continue to outpace most other health sectors, including spending on hospitals,” says Michael Hunt, Manager of Pharmaceutical Programs at CIHI. “For the first time in recent years, spending on prescribed drugs now appears to be slowing down, and is expected to show its smallest growth in a decade.”

Provincial variations in prescribed drug spending

CIHI’s report shows important differences in both the level and growth of prescribed drug expenditure across the provinces. Spending on prescribed drugs was highest in Quebec, at an estimated $699 per person, followed by Ontario ($675) and Nova Scotia ($660), compared with the national average of $648 per person. Spending was lowest in Prince Edward Island ($559) and British Columbia ($567). When measuring growth, B.C. and Alberta had the highest estimated yearly increases in prescribed drug spending in 2006 (13.1% and 9.6%, respectively), while P.E.I. (3.9%) and Ontario (4.7%) had the lowest estimated annual growth rates.

There is also significant variation among the provinces in the public sector’s share of total prescribed drug expenditure, ranging from 37% in both P.E.I. and New Brunswick to 54% in Manitoba. On average across Canada, 46% of the total prescribed drug bill is publicly financed. Among provinces, public-sector spending per person on prescribed drugs ranged from highs in Quebec ($348) and Manitoba ($312) to lows in P.E.I. ($204), New Brunswick ($235) and B.C. ($238). In 2006, public-sector spending on prescribed drugs is expected to have grown in every province and territory except Ontario, which is projected to have experienced a slight (0.4%) decline.

“These variations are influenced by a number of factors, including differences in federal, provincial and territorial drug subsidy programs, variations in the age distributions and disease patterns across jurisdictions, as well as differences in health care delivery,” says Hunt.

Trends in total drug spending

Drug Expenditure in Canada, 1985 to 2006 examines trends in spending over two decades for both prescribed and non-prescribed drugs (which include over-the-counter drugs and personal healthsupplies). Total drug spending in Canada is estimated to have reached $25.2 billion in 2006, an increase of 6.0% over the previous year. Spending on non-prescribed drugs is expected to have reached $4.1 billion in 2006, an increase of 2.0% over the previous year.

Prescribed drugs continue to occupy the biggest share of total drug spending, accounting for an estimated 83.8% of total drug expenditure in 2006, up from 82.5% in 2004 and 67.5% in 1985.

Since 1997, drugs (including both prescribed and non-prescribed medications) have accounted for the second-largest share, after hospitals, among major categories of health spending. The share of drugs in total health spending has grown over the last two decades, rising from 9.5% in 1985 to an estimated 17.0% in 2005, a share that is expected to have remained the same in 2006.

International comparisons in drug spending

When comparing 17 countries in the Organisation for Economic Co-operation and Development (OECD) with a similar health reporting system to Canada’s in 2004 (latest available information), Canada had the third-highest level of total drug spending (including prescribed and non-prescribed drugs), at $699 per person, after the United States ($940) and France ($749).

Canada was below the OECD median when it came to how much of the total drug bill was publicly financed. In 2004, the public share of total drug spending in Canada was 37.8%. In comparison, at least 70% of the total drug bill in European countries, such as Luxembourg, Belgium, Spain, Austria, France and Germany, was financed by the public sector. Poland (36.5%), the United States (24.4%) and Mexico (11.6%) were the only OECD countries with shares of public drug expenditures smaller than those of Canada.

About Drug Expenditure in Canada, 1985 to 2006

Drug Expenditure in Canada, 1985 to 2006 provides a descriptive overview of Canadian drug expenditure trends from 1985 to 2004 and includes forecasts for 2005 and 2006. The report draws upon data compiled from CIHI’s National Health Expenditure Database—Canada’s most comprehensive source of information on health care financing and spending—Statistics Canada and the OECD.

About CIHI

The Canadian Institute for Health Information (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 information. CIHI’s data and reports inform health policies, support the effective delivery of health services and raise awareness among Canadians of the factors that contribute to good health.