Health Insurance

Drug spending estimated at $30 billion in 2008

April 16, 2009 - Total drug spending in Canada is estimated to have reached $29.8 billion, or $897 per Canadian, in 2008, according to figures released today by the Canadian Institute for Health Information (CIHI). This represents an estimated annual growth rate of 8.3%, an increase that exceeds other major health-spending categories, such as hospitals and physicians. In 2008, spending on drugs accounted for 17.4% of total health spending—nearly doubling since 1985 (9.5%). Spending on prescribed drugs continues to grow faster (9.0%) than spending on non-prescribed drugs (4.6%). Prescribed drugs are estimated to have accounted for 84% of total drug spending in 2008.

“Over the last 20 years, drugs have consistently remained one of the major cost drivers in health care,” says Michael Hunt, Manager of Pharmaceutical Programs at CIHI. “Spending on pharmaceuticals has more than doubled over the past 10 years, outpacing growth in health spending by hospitals, physicians and other health professionals.”

Spending on prescribed drugs growing faster in the private sector

For the third consecutive year, private-sector spending on prescribed drugs grew at a faster rate than that in the public sector. Private-sector prescribed drug expenditure reached $12.6 billion in 2007, and is forecast to have reached $14.0 billion in 2008, representing annual growth rates of 11.4% and 11.0%, respectively. Public-sector expenditure on prescribed drugs reached $10.5 billion in 2007, and is forecast to have hit $11.2 billion in 2008, representing annual growth rates of 7.6% and 6.7%, respectively.

The public–private split for total prescribed drug spending remained relatively stable over the past 20 years, with approximately 45% financed by the public sector and 55% financed by the private sector. However, among private-sector spending on prescribed drugs, the share of spending shifted from out-of-pocket spending to private insurers. Spending by private insurers is estimated to have accounted for 67% of private-sector drug spending in 2008, compared to 55% in 1989.

“The economic downturn is resulting in many Canadians losing their jobs. Since many Canadians have private health insurance through their employment it may also mean a loss of private health insurance,” says Hunt. “In light of this situation, it will be important to document what the impact will be on both the public sector as well as out-of-pocket drug spending over the next few years.”

Variation among provinces on prescribed drug spending

Prescribed drug expenditure per person varies across Canada. In 2008, prescribed drug spending per person is estimated to have ranged from $651 in Alberta and $652 in British Columbia to $841 in Quebec and $865 in Nova Scotia.

There is also variation among the provinces in terms of the source of funding for drugs. On average across Canada in 2008, 44% of total spending on prescribed drugs was publicly financed. The proportion of public spending on prescribed drugs ranged from 32% in New Brunswick and 34% in Prince Edward Island to 50% in Quebec and 54% in Saskatchewan. Public-sector spending per person on prescribed drugs ranged from $236 in B.C. and $253 in P.E.I. to $377 in Saskatchewan and $420 in Quebec.

International comparison in drug spending

When comparing 23 countries in the Organisation for Economic Co-operation and Development (OECD) with similar health-reporting systems as Canada’s in 2006 (latest available information), Canada had the second-highest level of total per capita drug spending (including prescribed and non-prescribed drugs). The United States had the highest level of 2006 per capita spending ($1,015) followed by Canada ($770) and Belgium ($703)—the position of Canada has been stable over the past few years.

In 2006, 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 39%, compared to the OECD median of 59%. Among the 23 OECD comparator countries, the share of total drug spending funded by the public sector ranged from 15% in Mexico to 84% in Luxembourg.

About Drug Expenditure in Canada, 1985 to 2008

Drug Expenditure in Canada, 1985 to 2008 provides a descriptive overview of Canadian drug expenditure trends from 1985 to 2006 and includes estimates for 2007 and 2008. Drug expenditure consists of prescribed drugs and non-prescribed products purchased outside hospitals and other health care institutions. 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, as well as Statistics Canada and the OECD.