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Public and private health spending is projected to rise more this year than last as provincial governments loosen their purse strings against the backdrop of a growing economy, according to a new report that shows drug expenditures are a particularly fast-increasing share of total spending.

In a report on national health expenditure trends dating back to 1975, the Canadian Institute for Health Information (CIHI) forecasts that individuals, private insurance companies and governments will collectively spend $242-billion on health care in 2017 – a nearly 4-per-cent increase over 2016, which had a more modest 2.7-per-cent rise over the year prior.

"Generally since the last decade, health expenditures have just about kept pace with the 2-per-cent inflation and aging that's gone on," said Michael Hunt, director of health spending, strategic initiatives and primary health care at CIHI, an independent agency that crunches numbers on Canada's health-care system. "You haven't recently had a lot of investment in health care … This is one of those first years where we're beginning to see a little extra money."

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The annual report, being released Tuesday, marks CIHI's last examination of expenditures under the financial terms of the 2004 Canada Health Accord, which increased the federal health-care transfer by 6 per cent annually. The Liberal government this year inked deals with each of the provinces and territories that mean the base federal transfer will rise by 3 per cent annually, or the equivalent of nominal GDP growth, whichever is higher. The provinces will also receive additional funding specifically for mental health and home care.

During the course of the negotiations, some provinces, particularly in the Maritimes, unsuccessfully tried to persuade Ottawa to adjust the transfer formula so that regions with a larger proportion of elderly residents receive extra money. The CIHI report states that while Canadians ages 65 and older constitute about 16 per cent of the population, they account for almost 46 per cent of all health-care dollars spent by the provinces and territories. Still, the agency said that aging is only a "modest driver" of increasing health-care costs, estimated at nearly 1 per cent annually.

Combined public and private per capita health expenditure in 2017 is slated to vary significantly from jurisdiction to jurisdiction. The report found that per-person spending is expected to range from a high of $17,150 in the Northwest Territories to a low of $6,321 in B.C. Mr. Hunt said the disparities lie largely in demographics, geography and differences in public-sector drug plans.

The report found that among the three largest spending categories – hospitals, drugs and physicians, which together account for more than 60 per cent of the overall expenditure – pharmaceutical costs continue to increase at the fastest pace. This has been true since 2015, due partly to the increased use of high-cost patented drugs.

Drug costs, of which nearly two-thirds are paid out-of-pocket or covered by private insurance plans, are expected to rise by 5.2 per cent in 2017. Public-sector drug plans vary from province to province, but in most places, the government picks up at least a portion of the tab for seniors, people on social assistance and patients who incur "catastrophic" drug bills.

Raisa Deber, a professor of health policy at the University of Toronto, said the continued increase in drug spending fits into the debate around the merits of any future national pharmacare program. In September, the federal Parliamentary Budget Officer released a report predicting that universal coverage for prescription drugs would reduce spending on pharmaceuticals in Canada by more than $4-billion annually. The savings would come from bulk purchases made by a federal government that would be in a much stronger position when it comes to negotiating drug prices. Increased use of generic drugs would also help reduce costs, the budget officer's report said.

Prof. Deber noted that, as indicated in the CIHI report, drug expenditures are even higher than the $1,086 a person forecast for 2017, since medications dispensed in hospitals or funded through cancer agencies are excluded from public drug tallies. Patients who are prescribed drugs in the hospital receive them free of charge, which might provide an incentive for costly and sometimes unnecessary hospital visits, she said.

In a separate CIHI report, also being released Tuesday, the agency dug deeper into what the provincial, territorial and federal governments are spending on prescription medicines.

The report concluded that a growing share of public-drug spending goes to the 2.2 per cent of patients who take drugs that cost more than $10,000 per year – a finding that underscores the need to rein in the cost of cutting-edge treatments, experts said. Most of those sky-high bills were for drugs that treat rheumatoid arthritis, inflammatory bowel disease and hepatitis C, a virus that can lurk silently in the body for decades before wreaking serious damage on the liver.

"A really expensive drug used to be thousands of dollars [a year] in the past, now it's tens of thousands of dollars," said Michael Law, a professor in the school of population and public health at the University of British Columbia. "It's probably going to get worse as more drugs like those come to market and the prices are particularly high on a per-patient basis."

Over all, the jurisdictions that shared their data with CIHI spent almost $9.2-billion on prescription drugs in 2016, a 4.5-per-cent increase over the year before. Last year's spending increase was not as steep as the 9.3-per-cent spike in 2015, when most of the country's public-drug programs began covering a new generation of direct-acting antivirals that can cure hepatitis C in three months at an average cost of about $47,000 a patient.

Top 10 drug classes by public drug program spending*, 2016

Drug classCommon usesTotal spending (millions)Spending per beneficiary
Tumour necrosis factor alpha inhibitors (anti-TNF drugs)Rheumatoid arthritis, inflammatory bowel disease, Crohn disease$801.40 $19,163
Other antivirals**Hepatitis C, HIV524.647,050
Antineovascularization agents***Age-related macular degeneration, secondary and diabetic macular edema411.49,001
HMG-CoA reductase inhibitors (statins)High cholesterol260.8130
Adrenergics in combination with corticosteroids or other drugs, excluding anticholinergicsAsthma, emphysema, chronic bronchitis233.9621
Other antipsychoticsSchizophrenia, bipolar disorder217.41,289
Proton pump inhibitors (PPIs)Gastroesophageal reflux disease, peptic ulcer disease198.2132
Angiotensin-converting enzyme (ACE) inhibitors,excluding combinationsCongestive heart failure, high blood pressure194.1173
Natural opium alkaloidsManagement of moderate to severe pain185.9203
Other antidepressantsDepression, anxiety179.9265
Combined top 103,207.60n/a


1. Does not include Quebec and NWT. Includes the First Nations and Inuit Health Branch;2. Spending on other antivirals in Prince Edward Island is not included in NPDUIS; 3. Spending on ranibizumab and aflibercept (which accounted for 99.9% of spending on antineovascularization agents) in N.S., Man., B.C., and the majority of this spending in Alta., is funded through special programs and is not included in NPDUIS.

Despite all the attention paid to hepatitis C drugs, another class of medications called tumour necrosis factor alpha inhibitors has accounted for the highest proportion of public drug-plan spending for the past five years. These drugs treat rheumatoid arthritis, Crohn's disease and ulcerative colitis and other chronic inflammatory conditions. They cost, on average, $19,163 a patient each year.

The best-known brand names in the category are Remicade, Humira and Enbrel.

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