Growth in drug spending reaches lowest rate in a decade: CIHI

Canada’s per person spending on prescribed and non-prescribed drugs remains among the highest in the OECD comparator countries

April 22, 2010 – Total drug spending in Canada is estimated to have reached $30.0 billion in 2009, about $1.5 billion more than in 2008, according to a new report released today by the Canadian Institute for Health Information (CIHI). This represents an estimated increase of 5.1%, the lowest annual growth rate observed in more than a decade. Drug Expenditure in Canada, 1985 to 2009 is Canada’s most comprehensive annual report on spending trends in prescribed and non-prescribed drugs and includes breakdowns by province and territory and by source of funds, as well as international comparisons.

CIHI’s report shows prescribed drugs continued to account for the majority (85%) of total drug spending in Canada, increasing at more than double the rate of non-prescribed drugs in 2009 (with estimated annual growth rates of 5.6% and 2.1%, respectively.) However, spending on prescribed drugs slowed down considerably from the early 2000s, when it was experiencing double-digit annual growth rates.

“Spending on pharmaceuticals has consistently remained one of the major components of total health expenditure over the last two decades,” says Michael Hunt, Director of Pharmaceuticals and Health Workforce at CIHI. “However, total drug spending now appears to be slowing down and is expected to experience its smallest growth in the past 10 years.”

In 2009, drugs represented the second-largest share of total health care spending after hospitals, accounting for an estimated 16.4% of the total health care bill in Canada.

Spending on prescribed drugs growing faster in the private sector

Over the past 20 years, the ratio of public-sector spending on prescribed drugs in Canada remained relatively stable, with approximately 45% of the total bill paid for by the public sector and 55% paid for by the private sector. In the past four years, however, growth in private-sector spending on prescribed drugs outpaced that of the public sector. Private-sector prescribed drug expenditure reached an estimated $14 billion in 2009, representing an annual growth rate of 7.0%, while public-sector expenditure on prescribed drugs is forecast to have reached $11.4 billion in 2009, a growth rate of 4.0%.

“Changes in the economy, as we have seen in recent years, may influence public and private drug expenditures,” adds Michael Gaucher, Manager of Pharmaceuticals at CIHI. “It will be important to continue to monitor the impact economic factors may have on public- and private-sector drug expenditures, including out-of-pocket drug spending in the years ahead.”

Drug spending in Canada higher than OECD average

When comparing 23 countries in the Organisation for Economic Co-operation and Development (OECD) with similar health reporting systems as Canada’s, in 2007 (latest available information) Canada had the second-highest level of total per capita drug spending (including prescribed and non-prescribed drugs). In 2007, the United States had the highest level of per capita spending ($1,062) followed by Canada ($836) and France ($711)-the position of Canada has been stable over the past few years.

In 2007, Canada was below the OECD median in terms of what proportion of total drug spending was publicly financed. The public share of total drug spending in Canada was 38.0%, compared to the OECD median of 56.3%. Among the 23 OECD comparator countries, Germany had the highest share of total drug spending funded by the public sector at 75.9%, followed by Spain at 72.6%. Germany also had the highest level of public drug spending per capita at $497, compared to Canada at $318.

“When looking at what we spend per person, international comparisons show Canada has consistently been one of the countries with the highest drug spending in the developed world,” says Gaucher. “However, it should be noted that the majority of our drug spending is privately financed compared to that of the European model.”

Provincial variations in prescribed drug spending

CIHI’s report shows variations in both the amount and growth of prescribed drug expenditure across the provinces. Spending per capita on prescribed drugs was highest in Newfoundland and Labrador, at an estimated $908 per person, followed by Nova Scotia ($903) and Quebec ($879), compared with the national average of $756 per person. Spending was lowest in B.C. ($596) and Alberta ($633). When measuring growth, Newfoundland and Labrador and P.E.I. had the highest estimated yearly increases in prescribed drug spending per capita in 2009 (10.4% and 8.8%, respectively), while Ontario (2.7%) and New Brunswick (4.1%) had the lowest.

There was also significant variation among the provinces in the public sector’s share of total prescribed drug expenditure, ranging from 31.8% in Newfoundland and Labrador and 33.6% in New Brunswick to 49.0% in Quebec and 54.5% in Saskatchewan. On average across Canada, 45.0% of the total prescribed drug bill is publicly financed. Among provinces, public-sector spending per person on prescribed drugs ranged from highs in Quebec ($431) and Saskatchewan ($397) to lows in New Brunswick ($269), P.E.I. ($264) and B.C. ($250).

Variations in spending 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 and differences in health care delivery.

About Drug Expenditure in Canada, 1985 to 2009

Drug Expenditure in Canada, 1985 to 2009 updates trends in drug spending in Canada between 1985 and 2009, 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.

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.

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