SOURCE: Canadian Health Policy Institute


February 23, 2016 07:00 ET

Cost Is a Phony Excuse to Regulate Prices and Ration Access to New Drugs: Canadian Health Policy Institute Study

TORONTO, ON--(Marketwired - February 23, 2016) -  A new study published at Canadian Health Policy the online journal of Canadian Health Policy Institute (CHPI) has found that patented drugs directly accounted for only 6.4% of the $215.7 billion in total national, public and private sector spending on healthcare in Canada in 2014.

Dr. Brett J Skinner authored the study and said, "The facts show that there is no spending crisis regarding patented drugs in Canada, and heavy-handed government intervention to control the cost of new medicines is unnecessary and potentially harmful."

The study found that the costs directly attributable to patented drugs were $13.7 billion, representing a minor share of the $33.8 billion in total reported by the Canadian Institute for Health Information (CIHI) for all drugs related spending in 2014.

Skinner believes that federal and provincial government pharmaceutical policies are misguided and based on a short-sighted view of healthcare sustainability. He contends that, "The very small percentage of total health spending accounted for by patented drugs means even the most extreme cost-containment efforts will not return significant overall savings." He also noted that, "Other components of health spending are growing much faster and account for much larger shares of total costs."

The study used data from CIHI and the Patented Medicine Prices Review Board (PMPRB) to assess the economic burden of spending on patented drugs in Canada relative to population, inflation, GDP and other healthcare costs from 1990 to 2014 and found that:

  • In 2014 per capita spending on patented drugs was $385 accounting for less than 1 percent (0.69%) of per capita GDP ($55,566) and roughly the same percentage as in the year 2000 (0.67%).
  • Over the most recent five years from 2009 to 2014, per capita spending on patented drugs grew by only 0.5% in total over the entire period, while spending on all other healthcare (excluding patented drugs) grew by 13.1%.
  • Adjusting for general price inflation since 1990, per capita spending on patented drugs in 2014 was equal to $241 in constant 1990 dollars, declining -8.2% in real terms over the most recent 5 years from $260 in 2009.
  • Public drug plan spending on patented drugs was an estimated $5.0 billion or only 3.5% of the $142.1 billion total spent by Provincial and Territorial governments for healthcare in 2014.
  • Per capita public drug plan spending on patented drugs was estimated to be $140 in 2014, declining -8.2% from 2009 to 2014, while Provincial and Territorial government spending on all other healthcare increased by 14.2%.

Skinner said the study raises serious questions about whether it is economical to allocate costly administrative resources to controlling the prices of and access to patented drugs. He warned that, "Cost containment efforts that reduce access to new medicines are socially and economically counter-productive. Improving access to new medicines will return health and economic gains that far outweigh the upfront costs."

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The article, Spending on patented drugs in Canada 1990 to 2014, is available online at:

About CHPI
Canadian Health Policy Institute (CHPI) is an independent think-tank dedicated to providing information and ideas for a better health system. 

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