Author
Dr. Brett J Skinner, Ph.D.
Introduction
Non-factual assertions about the impact of drug costs (esp. patented medicines) on the growth of health spending have the potential to misinform important policy decisions of Canadian governments including pending proposals for national pharmacare, a centralized government-run bulk purchasing agency, and even Canada-Europe trade negotiations.
Objective
To examine: (1) the proportional impact of drug spending on the public cost of health care; (2) the relationship between proportional drug spending and the overall rate of growth in government health expenditures; (3) the change in the prices of patented medicines over time; and (4) the prices of patented medicines in Canada compared to international prices.
Data
Publicly available data was used from the Canadian Institute for Health Information (CIHI) 1974-1975 to 2011-2012, the Patented Medicines Price Review Board (PMPRB) 1988 to 2011 and Statistics Canada 1972 to 2011.
Findings
(1) drugs currently account for only 8.0% of provincial/territorial government health spending, (2) patented medicines account for 4.7% and this has been declining since 2004, (3) drug spending in Canada has increased steadily as a percentage of government health budgets (from 1.2% to 8.0%) over a 38-year period, yet there is no correlation with the rate of growth in government health spending, (4) provinces that spend more of their health budgets on drugs have not experienced higher rates of growth in health spending, (5) on average Canadian prices for patented medicines have grown 1.9 percentage points slower than the general rate of inflation since 1988, (6) prices of patented medicines in Canada have averaged .08 percentage points less than median international prices since 2001.
Conclusions
(1) the small percentage of health spending accounted for by drugs means even big efforts to cut drug costs will not return significant overall savings, (2) drug prices do not suggest there are significant savings to be gained by leveraging the bulk buying power of governments (3) arbitrarily restricting drug spending could be counter-productive: past expenditure on new drugs has likely been off-set by reductions in spending on other types of health care inputs over time suggesting that the rising share of spending going to drugs could simply reflect a shift to a more efficient mix of health care inputs.
