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Growth in drug spending slows in Canada: study

While spending on drugs nudged up to $32-billion last year, the year-over-year increase was the lowest in a generation, a new study shows.

Total drug costs rose just 4 per cent between 2010 and 2011, the Canadian Institute for Health Information reports.

Michael Hunt, director of pharmaceuticals at CIHI, said this is a "far cry" from the double-digit increases that were commonplace through the 1990s and 2000s. In fact, it's the smallest annual increase since 1985, when national record-keeping began.

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"Spending is slowing down," Mr. Hunt said. He cited a number of inter-related factors:

* Patent expiration for some blockbuster drugs, such as Lipitor, have resulted in cheaper generic versions being available.

* Tough new generic pricing policies; Ontario for example sets the price of generics at 25 per cent of the brand name price, down from 50 per cent.

* Policies like generic substitution, where insurance plans cover only the price of the generic, not the brand name drug.

* Changing usage patterns – for example, re-thinking how cholesterol-lowering drugs like statins are prescribed.

* The number of new drugs brought to market has been falling steadily for the past decade.

The CIHI report shows that, between 1985 and 2011, drug expenditures have increased by an average of 8.5 per cent annually.

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However, since 2005 drug spending has grown more slowly than total health care spending and other areas such as hospital and physician costs.

While CIHI tracks costs, the data do not reveal whether increases in drug spending affect health outcomes or if drug spending has an impact in other sectors of health care. (It is often stated, for example, that spending on drugs can reduce the costs of hospitalization.)

In 2011, Canadians spent an estimated $200.5-billion on healthcare.

Hospitals are the biggest spending category at $58.4-billion (29 per cent of the total), followed by drugs at $32-billion (16 per cent) and physician services at $28-billion (14 per cent.)

Drug spending includes prescription drugs, $27.2-billion, over-the-counter drugs, $2.7-billion, and personal health supplies (from syringes to tampons), $2.1-billion.

While spending may be waning, Canadians remain among the most enthusiastic consumers of drugs in the world.

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In fact, only Americans, at $1,147 per capita, spend more on drugs than Canadians, at $890. By comparison, France, which is known as a country where drugs are prescribed liberally, spends $767 per capita.

The CIHI report notes that, unlike citizens of most other developed countries, Canadians pay for the majority of their prescription drugs with private insurance or out-of-pocket.

About 39 per cent of prescription drug costs are financed by the public sector in Canada, compared to 85 per cent in Britain.

Public spending on prescription drugs was $12.1-billion last year, up just 2.2 per cent; private spending was $15.1-billion, up 6.8 per cent.

The CIHI data also underscore that there are significant variations in drug spending across the country, particularly related to prescription drugs.

Per capita spending on prescribed drugs ranges from $576 a person in British Columbia to $985 a person in New Brunswick.

B.C. has the toughest rules in the country related to use of generic drugs, meaning provincial drug plans cover fewer brand name drugs. New Brunswick, meanwhile, has the least inclusive formulary (a list of prescription drugs covered by public plans), meaning citizens must sometimes resort to paying out-of-pocket, even for some cancer drugs.

The Canadian Institute for Health Information is a not-for-profit organization that collects, analyzes and publishes health data and information in a standardized way with the goal of improving the quality, safety and cost-efficiency of the health systems.

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