Drug spending in Canada continues to increase and is closely watched by employers. However, a recent report from the Canadian Institute for Health Information (CIHI) has revealed some unexpected results.
According to the Drug Expenditure in Canada: 1985 to 2011 report—which updates trends in drug spending in Canada, primarily from retail establishments and using a variety of metrics, such as total expenditure, expenditure by public and private payers, expenditure by type of drug and a comparison of expenditures by province and territory—Canadian drug spending continues to increase and reached $32 billion in 2011.
However, the overall annual growth of drug spending is at its lowest rate in 15 years, according to the report. 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%.
According to Eckler’s recent GroupNews, which provided analysis on the report, CIHI estimates that the total share of health dollars spent on drugs in 2011 is 16%, the same percentage as was spent in 2001.
The slower pace of spending increase can be attributed to a variety of factors, says Eckler, including the expiry of patents for a number of highly prescribed brand-name drugs, as well as the implementation of generic drug pricing control legislation in a growing number of provinces.
A surprising detail from the report, writes Eckler, is that the drug cost trends for some provinces (such as Ontario) fall far below what is seen from the insurance industry. Many insurers have addressed this as the industry has been some movement toward lower trend factors.
The report also shows that 85% of total drug spending in Canada was on prescription drugs—for a total of $27.2 billion, which is an increase of 4.7% over 2010 figures. It is estimated that 45% of prescribed drugs are financed by the public sector, with the private sector financing the balance.
Prescription drug spending varies considerably by province. For example, per capita spending on prescribed drugs ranged from a low of $576 in British Columbia to a high of $985 in Nova Scotia. Growth in per capita drug spending also varied by province in 2011, from a low of 1.4% in British Columbia to a high of 9.4% in Newfoundland and Labrador.
While CIHI states that it must conduct further research to determine whether generic drug pricing policies are responsible for the lower costs seen in British Columbia and other jurisdictions, the press release for the report states that it appears these policies may be having an impact.
Despite the slowing of drug spending increases, the report notes that Canada still has the second-highest per capita drug spending among eight comparator countries in the Organisation for Economic Co-operation and Development (OECD). Only the U.S. has higher per capita drug spending, at $1,145 compared with Canada’s per capita spending of $890.
Canada also has the second-lowest share of drug expenditure financed by the private sector. In 2009 (the most recent year that OECD data is available), 38.8% of Canada’s drug expenditure was financed by the public sector, compared with 84.7% in the United Kingdom. Only the U.S., at 31.1%, had a lower percentage of public sector drug expenditure funding than Canada.