The Issue
Canadians' spending on prescription drugs totaled an estimated $16 billion, or $500 per capita, in 2003, and it was growing by 10 percent per year—the world's highest rate. In this article, based on a Commonwealth Fund–supported study, the author explores the effects of price changes, therapeutic choices, and volume of drug utilization on the country's elevated rate of drug cost growth.
What the Study Found
- Volume of drug utilization was the largest contributor to drug-spending inflation. Changes in prescribing rates across treatment categories increased annual per capita drug expenditure by 44 percent between 1998 and 2002, the period of study.
- Changes in therapeutic choices had "a significant impact," accounting for 15 percent of the overall growth.
- Drug prices had a minimal impact on prescription drug spending; they increased at an annual rate of 0.5 percent, well below the 2.6 percent annual inflation rate in Canada over the period, mainly because of increased generic substitution in areas such as cardiovascular drugs, cholesterol therapies, and psychotherapeutic therapies.
Conclusions
Canada's efforts to control drug prices, including federal price regulations, provincial price freezes, and generic-substitution policies, were successful, but they were offset by increased drug utilization and changes in therapeutic choices, which were largely responsible for the increased spending on drugs. These results, say the author, illustrate "the potential pitfalls of cost-management strategies that focus primarily on price regulation."